Interim Management Statement

RNS Number : 6556A

Shanks Group PLC

04 February 2011

 



Shanks Group plc, Europe's largest listed independent waste management business, today provides an update on trading for the period to 31 January 2011. It also announces progress with its refinancing and the securing of preferred bidder status for a significant Public-Private-Partnership (PPP) contract in the Belgian municipal waste market. ·      Full year underlying profit before tax (PBT) is expected to be around market consensus with strong underlying PBT performance offsetting the expected one off decline in the Belgian landfill operations and adverse currency movements ·      Management actions to deliver strong returns from the investment programme, £15m cost reductions and PFI margin improvement all remain on track ·      Strong underlying cash flow with year end debt anticipated to be lower than market expectations ·      Successful refinancing of €200m of short term debt with medium term financing at a lower cost ·      Preferred bidder status on significant PPP contract in the Belgian municipal waste market with expected total revenue of approximately €500m over its 20 year life Trading performance to 31 January 2011 Although the severe weather conditions in December impacted all of our European based businesses, we expect the impact on trading profit to be offset by lower financing costs. PBT for the full year is expected to be around market consensus.1 As anticipated, underlying market conditions have remained difficult; although volumes have now stabilised, pricing conditions in the Benelux remain challenging. For the Group, excluding the impact of the one off decline in Belgian landfill and adverse currency movements, the market impacts have been broadly offset by improvements in recyclate prices and management actions. The plan to improve PFI margins remains on track as does continued actions to achieve £15m of cost savings in the full year. The Group remains committed to continue its investment in operations that can deliver attractive returns and sustainable growth, as demonstrated by the recent announcement of being granted planning permission for our Bicester Anaerobic Digestion facility and the achievement of planning permission for the Kettering recycling centre. Progress towards achieving planning permission for other recycling and organics facilities remains on track. The London Ontario facility in Canada is now performing well and should ramp up to full capacity by March. 1 Current market expectations for Shanks' PBT for the year ending 31 March 2011 are £33.0m based on the forecasts of 6 equity analysts (source Bloomberg). Borrowings We remain focused on maximising free cash flow through the close control of working capital and replacement capital expenditure.  At 31 December 2010 the ratio of core net debt to EBITDA was 1.7x and the core net debt was £160m. We anticipate the debt at 31 March 2011 to be below this level. Following the successful completion of our Benelux retail bond, an additional €200m of short term bank financing has been refinanced into medium term (June 2015) bank finance at a lower cost than the existing arrangements. Municipal Waste As part of the strategy to increase long term municipal contracts we are pleased to announce our selection as preferred bidder for a significant PPP municipal contract in Wallonia, Belgium. The contract, which is subject to final negotiations, is expected to have total revenue of approximately €500m over 20 years and is expected to commence late in 2011. The UK PFI bid pipeline continues to be strong and we remain confident of achieving our strategic target of 1.5 million tonnes under management. Tom Drury, Group Chief Executive of Shanks Group plc, commented: "Being selected as preferred bidder for the long term Wallonian municipal contract is a significant step forward in achieving our municipal waste strategy. We also continue to invest in the other two elements of our strategy, recycling and organic processing. The re-positioning of the Group's long term funding together with the ongoing focus on cash flow generation and maintaining a strong balance sheet provides a robust platform to continue to invest in projects which can deliver attractive returns and sustainable growth. For the financial year 2010/11 we expect underlying profit before tax to be around market consensus. Despite remaining cautious about the macro economic outlook for the financial year 2011/12, we are confident in our ability to continue to offset any adverse financial impact through a continuation of the management actions we have taken so far. The earnings from the investment programme have demonstrated that the business has the ability to grow and this growth potential will be enhanced as market conditions improve." Enquiries: Tulchan Communications                               [phone] John Sunnucks/David Allchurch Shanks Group plc Tom Drury/Chris Surch                                     [phone]

 

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