Interim Results
Shanks Group PLC
07 November 2007
7 November 2007
Company Announcement: Interim Results 2007/8
Shanks Group plc a leading European waste management group announces its interim
results for the six months ended 30 September 2007.
Performance in line with our expectations. The Group is positioned within
attractive growth markets with the resources and skills in place to capitalise
on increasing market opportunities.
Financial Highlights:
• 10% increase in revenue to £271 million (2006: £247 million)
• 14% increase in trading profit(1) to £25.9m (2006: £22.7m)
• Headline Profit(2) rose 6% to £20.8m (2006: £19.7m) reflecting, in
particular, a strong performance in The Netherlands
• Adjusted Basic Earnings per Share(3) improved 7% to 6.0p (2006: 5.6p)
• Interim dividend up 5% to 2.0p per share (2006: 1.9p per share)
Business Highlights:
• Netherlands
o Recent acquisitions continue to add value
o Orgaworld acquisition brings expertise in composting and anaerobic
digestion with Group wide roll-out opportunities
o buoyant construction sector driving Solid Waste activity levels
• Belgium
o new growth projects to offset anticipated decline in landfill
• UK
o Phase II of ELWA operating at capacity
o interest in Solid Recovered Fuel (SRF) from MBT increasing
o DEFRA estimates £11 billion needs to be spent on waste infrastructure
to meet EU municipal waste landfill diversion targets
o industrial and commercial Solid Waste profitability increasing
(1) operating profit before exceptional items
(2) profit before exceptional items and tax
(3) excluding exceptional items and associated tax
Commenting on the results, Tom Drury, Group Chief Executive of Shanks Group plc
said:
'The Group has delivered good first half performance and is well positioned
within attractive growth markets. It has a well regarded brand, proven
technological offerings in MBT, anaerobic digestion and composting, a solid
balance sheet and the resources and skills to capitalise on increasing market
opportunities. The Board therefore is confident of achieving our expectations
for the current year and making further progress in the future.'
CHIEF EXECUTIVE'S STATEMENT
Financial Performance
I am pleased to report a good performance in the first half of the 2007/8 year
in line with our expectations. Headline Profit (profit before exceptional items
and tax) rose 6% to £20.8m (2006/7: £19.7m) driven by the continuing strong
performance in The Netherlands assisted by the Smink acquisition in June 2006.
Adjusted basic earnings per share improved 7% to 6.0p from last year's 5.6p
helped by a 2% reduction in the effective Headline tax rate to 32% (2006/7:
34%). As a result your Board is increasing the interim dividend 5% to 2.0p per
share (2006/7: 1.9p per share).
Revenue increased 10% to £271m (2006/7: £247m) and profit before tax was £23.1m
(2006/7: £22.0m) after a £1.1m exceptional profit on the disposal of surplus
property and a £1.2m non-cash gain (2006/7: £2.3m gain) on the change in the
fair value of interest rate swaps.
During the period borrowings relating to the core business increased by £18m to
£152m (31 March 2007: £134m) after acquisition expenditure of £22m (including
debt acquired). Private Finance Initiative (PFI) company debt also increased by
£9m to £132m (31 March 2007: £123m) following continued planned capital
investment in the East London Waste Authority (ELWA) project.
Divisional Review
The Netherlands
The Netherlands activities delivered a strong performance with operating profits
increasing 23% to £17.1m (2006/7: £13.9m). The largest contribution to this
improvement was the full six month contribution from the Smink business acquired
at the end of June 2006. Performance of this business continues to be in line
with our acquisition plans.
In April 2007 the Group completed two further acquisitions. The first was
Kluivers, a tuck-in solid waste business in the Randstad area, for a
consideration of £3m. More importantly, the company Orgaworld was purchased
for £21m (including debt acquired), £3m of which is deferred, with the potential
for further payments up to £14m (non discounted) dependent on future profits
growth. This company is involved in the composting and anaerobic digestion of
biodegradable waste and brings a new technology and expertise which can be
exploited across the Group over time. Both businesses are performing in line
with their acquisition plans.
Our hazardous waste divisions in total also delivered a better result than in
the prior year. Whilst underlying trading was better, some of the improvement
was due to the timing of the maintenance shutdown at our one million tonne per
annum integrated hazardous waste treatment facility, ATM, which fell in the
first half in 2006/7. The shutdown will occur in the second half in the current
year.
Belgium
Operating profit reduced 5% to £8.9m (2006/7: £9.4m). As expected the
contribution from our landfill reduced compared to a strong performance in the
prior year, when it benefited from household waste diverted from public sector
incinerators during non-routine shut downs.
Contributions from industrial and commercial (I&C) Solid Waste activities in all
geographic regions were considerably higher than last year reflecting the
general buoyant economic conditions and aided by a significant industrial
disposal contract.
The hazardous waste market was down on last year, but is showing signs of
stabilising.
United Kingdom
Trading profit (operating profit before exceptional items) increased by 25% to
£2.5m (2006/7: £2.0m) as increased contributions from PFI contracts and
logistics and recycling were offset by reduced Contaminated Land Services
profits. The prior year also benefited £0.3m from property disposal profits.
Phase II of the ELWA project is now operating at capacity. In addition a
scheduled price increase came into effect in July 2007 confirming the contract's
profitability. Both our ELWA and Dumfries and Galloway (D&G) contracts use the
innovative Mechanical Biological Treatment (MBT) technology developed with our
Italian partner Ecodeco. There continues to be significant interest from the
cement and other energy intensive industries in the Solid Recovered Fuel (SRF)
produced by the MBT process. Deliveries of SRF are increasing despite a
temporary interruption of inputs to a cement kiln in North Wales following a
problem at the plant unrelated to the processing of SRF. This has resulted in
an increase in disposal costs for our D&G contract, but it is expected that the
kiln will be functioning again by the start of our next financial year.
The low activity levels experienced by Contaminated Land Services in the latter
part of last year have persisted into the current year however there has been a
marked improvement in the final couple of months of the period. This is due in
part to the contribution from our recently opened 'soil hospital' facility
outside Edinburgh. As yet no decontamination work has come through from the
clean up of the sites for the 2012 London Olympics although we remain well
positioned to secure some of this work.
The logistics and recycling business has continued to show substantial increases
in trading profit particularly in the Central Belt of Scotland where the
integration of the two acquisitions, completed during the first half of last
year, is delivering significant improvements. Shanks is now the largest waste
management operator in the central belt of Scotland and we are able to realise
the benefits arising from these economies of scale.
Overall our landfill joint ventures have continued to trade well.
Central Services
Central Services costs were stable at £2.6m (2006/7: £2.6m).
Developments
The Netherlands
The current buoyant market conditions, particularly in the construction sector
which is a major client industry for our solid waste activities, are expected to
persist.
As mentioned above, the purchase of Orgaworld in April 2007 has brought
expertise and experience in the composting and anaerobic digestion of
biodegradable waste into the Group. This offering has opened up interesting
opportunities not only in the Netherlands but also in Belgium and the United
Kingdom.
Belgium
Landfill volumes are expected to continue to decline as the Walloon Region
introduces new restrictions on landfilling of municipal waste from 2008. At the
same time Landfill Tax will be extended to cover municipal as well as industrial
and commercial waste. To offset this decline the Group are investing in a
number of new organic growth projects, including refuse derived fuel (RDF)
production and anaerobic digestion capabilities mentioned above. We also
continue looking for acquisition opportunities, particularly in recycling and
reprocessing industries.
United Kingdom
In November 2006 the Group was appointed as preferred bidder for the 25-year
contract to manage the waste of Cumbria County Council. Negotiations continue
and it is expected that the contract will commence in mid 2008.
Tenders are also being made for similar local authority contracts as the Group
seeks to capitalise on progress already made with its licensed MBT technology in
this market. The UK Government estimates that at least £11 billion must be
spent on new infrastructure to process municipal waste if the requirements of
the European Union Landfill Directive are to be met. In February 2007, DEFRA
implemented a streamlined process for the granting of PFI credits to local
authorities whereby credits are granted in biannual award rounds. This should
ensure a more certain flow rate of contracts coming out to tender in the future.
The March 2007 Budget announced an increase in the Landfill Tax escalator;
from April 2008 it will increase from £3 per tonne per annum to £8 per tonne per
annum. Landfill Tax, currently £24 per tonne, will therefore rise to £32 per
tonne in 2008 and continue with a £8 per tonne annual increase until a rate of
£48 per tonne is reached in 2010. This change should accelerate the development
and demand for alternative technologies and waste treatment within the local
authority market.
Landfill Tax will also provide a substantial disincentive for the landfilling of
I&C waste. This change, together with the regulatory requirement to pre-treat
all waste prior to landfill which came into effect in October 2007, will provide
further stimulus to the Group's emerging I&C recycling activities. We have
launched a number of products to support our customers with new compliance
obligations and are pleased with the initial response.
Principal Risks and Uncertainties
The Group has set out the principal risks which could impact the performance of
the Group in its Annual Report and Accounts 2007 (available on our website at
www.shanks.co.uk). There has been no material change in these risks. The Group
operates a formal framework for the identification and evaluation of key risks
applicable to each area of the business. These along with any mitigation
actions are monitored on a continuing basis at both operating and Group Board
level.
Looking forward over the remainder of the year, the main areas of uncertainty
are the impact of January 2008 legislative changes on landfilling in the Walloon
Region of Belgium, and the magnitude and timing of contaminated soil disposal
work related to the clean up of the sites for the 2012 London Olympics.
Directorate
On 1 October 2007 I took over from Michael Averill as Group Chief Executive.
Michael will continue to act in an advisory capacity until May 2008.
At the AGM in July 2007 both Philippe Delaunois and Barry Pointon retired from
the Group Board, and the Board thanks them for their commitment and personal
contributions. Philippe Delaunois will continue to advise our Belgium business
on a consultancy basis.
Outlook
The Group is well positioned within attractive growth markets. It has a well
regarded brand, proven technological offerings in MBT, anaerobic digestion and
composting, a solid balance sheet and the resources and skills are in place to
capitalise on increasing market opportunities. The Board is therefore confident
of achieving our expectations for the current year and making further progress
for the future.
Tom Drury
Group Chief Executive
Notes:
1. Management will be holding an analyst presentation at 9:30 a.m. today,
7 November at the offices of ABN AMRO: 250 Bishopsgate, London, EC2M 4AA.
2. A copy of this announcement is available on the Company's website
(www.shanks.co.uk) as will the presentation being made today to financial
institutions.
3. Copies of the Interim Report will be posted to shareholders by 21 November
2007, after which they will be available, on request from the Company at
Astor House, Station Road, Bourne End, Buckinghamshire, SL8 5YP, or on the
Company's website.
4. The interim dividend of 2.0 pence per share will be paid on 9 January 2008
to shareholders on the register at close of business on 14 December 2007.
For further information contact:
Shanks Group plc on 7 November: telephone 020 7678 0383
Tom Drury; Group Chief Executive thereafter, telephone: 01628 554920
Fraser Welham; Group Finance Director
Citigate Dewe Rogerson telephone: 020 7282 2945
Ginny Pulbrook
Consolidated Income Statement
First Half ended 30 September 2007
2007/8 2006/7 2006/7
First First Full
Half Half Year
Note £m £m £m
______________________________________________________________________________________________________
Continuing operations
Revenue 2 271.1 246.8 508.5
Cost of sales (220.0) (200.4) (412.9)
______________________________________________________________________________________________________
Gross profit 51.1 46.4 95.6
______________________________________________________________________________________________________
Administrative expenses before exceptional items (25.2) (23.7) (49.4)
Exceptional profit on disposal of property 1.1 - -
______________________________________________________________________________________________________
Total administrative expenses (24.1) (23.7) (49.4)
______________________________________________________________________________________________________
Operating profit 2 27.0 22.7 46.2
______________________________________________________________________________________________________
Finance charges:
Interest payable (11.4) (8.1) (18.2)
Interest receivable 6.3 5.1 11.2
Change in fair value of interest rate swaps 1.2 2.3 6.9
______________________________________________________________________________________________________
Total finance charges 2 (3.9) (0.7) (0.1)
______________________________________________________________________________________________________
Profit before tax 2 23.1 22.0 46.1
Tax 3 (7.1) (7.3) (14.8)
______________________________________________________________________________________________________
Profit after tax for the period 16.0 14.7 31.3
______________________________________________________________________________________________________
Dividend per share 4 2.0p 1.9p 5.9p
Earnings per share
- basic 5 6.8p 6.3p 13.3p
- diluted 5 6.8p 6.2p 13.3p
______________________________________________________________________________________________________
The interim financial information and related comparative information is
unaudited.
The notes on pages 9 to 14 form an integral part of this condensed consolidated
half yearly financial information.
Consolidated Statement of Recognised Income and Expense
First Half ended 30 September 2007
2007/8 2006/7 2006/7
First First Full
Half Half Year
£m £m £m
__________________________________________________________________________________________________________
Exchange gain (loss) on translation of foreign operations 4.4 (4.2) (3.9)
Actuarial gain (loss) on defined benefit pension schemes 4.5 (1.0) 0.5
__________________________________________________________________________________________________________
8.9 (5.2) (3.4)
Deferred tax in respect of defined benefit pension schemes (1.3) 0.3 (0.1)
__________________________________________________________________________________________________________
Net income (expense) recognised directly in equity 7.6 (4.9) (3.5)
Profit for the period 16.0 14.7 31.3
__________________________________________________________________________________________________________
Total recognised income and expense for the period 23.6 9.8 27.8
__________________________________________________________________________________________________________
The interim financial information and related comparative information is
unaudited.
The notes on pages 9 to 14 form an integral part of this condensed consolidated
half yearly financial information.
Consolidated Balance Sheet
At 30 September 2007
At 30 At 30 At 31
September September March
2007 2006 2007
Note £m £m £m
__________________________________________________________________________________________________________
Non-current assets
Intangible assets 226.6 199.7 198.3
Property, plant and equipment 232.4 194.3 209.0
Other investments and loans to joint 1.5 2.0 1.8
ventures
Trade and other receivables 146.5 138.2 141.9
Deferred tax assets 7.8 13.7 10.8
__________________________________________________________________________________________________________
614.8 547.9 561.8
__________________________________________________________________________________________________________
Current assets
Inventories 5.9 5.2 5.4
Trade and other receivables 126.8 105.5 119.4
Current tax receivable 2.1 1.4 2.1
Cash and cash equivalents 10 35.4 63.1 42.7
__________________________________________________________________________________________________________
170.2 175.2 169.6
__________________________________________________________________________________________________________
Total assets 785.0 723.1 731.4
__________________________________________________________________________________________________________
Current liabilities
Borrowings 10 (33.7) (6.0) (28.9)
Trade and other payables (131.3) (118.9) (127.3)
Current tax payable (16.4) (13.3) (13.4)
Provisions 7 (5.6) (7.7) (6.3)
__________________________________________________________________________________________________________
(187.0) (145.9) (175.9)
__________________________________________________________________________________________________________
Non-current liabilities
Borrowings 10 (284.5) (304.3) (271.2)
Other non-current liabilities (14.2) (0.1) (2.3)
Deferred tax liabilities (31.7) (30.6) (27.4)
Provisions 7 (23.9) (21.5) (22.5)
Retirement benefit obligations (3.4) (10.8) (8.4)
__________________________________________________________________________________________________________
(357.7) (367.3) (331.8)
__________________________________________________________________________________________________________
Total liabilities (544.7) (513.2) (507.7)
__________________________________________________________________________________________________________
Net assets 240.3 209.9 223.7
__________________________________________________________________________________________________________
Equity
Share capital 23.7 23.5 23.5
Share premium 97.2 93.8 94.0
Exchange reserve 5.5 0.8 1.1
Retained earnings 113.8 91.8 105.1
__________________________________________________________________________________________________________
240.2 209.9 223.7
Minority interest 0.1 - -
__________________________________________________________________________________________________________
Total equity 8 240.3 209.9 223.7
__________________________________________________________________________________________________________
The interim financial information and related comparative information is
unaudited.
The notes on pages 9 to 14 form an integral part of this condensed consolidated
half yearly financial information.
Consolidated Cash Flow Statement
First Half ended 30 September 2007
2007/8 2006/7 2006/7
First First Full
Half Half Year
Note £m £m £m
__________________________________________________________________________________________________________
Net cash from operating activities 9 35.8 26.4 71.3
__________________________________________________________________________________________________________
Investing activities
Purchases of intangible assets (0.1) (0.5) (1.1)
Purchases of property, plant and equipment (18.2) (14.0) (39.3)
Disposal of property, plant and equipment 1.9 1.4 2.7
Financial asset capital advances (9.6) (13.2) (30.9)
Financial asset capital repayments 2.9 1.1 1.4
Acquisition of subsidiary and other businesses (21.6) (54.7) (65.3)
Income received from other investments 0.2 0.2 1.1
__________________________________________________________________________________________________________
Net cash used in investing activities (44.5) (79.7) (131.4)
__________________________________________________________________________________________________________
Financing activities
Interest paid (10.5) (7.6) (17.1)
Interest received 6.3 5.1 11.2
Proceeds from issue of shares 2.1 0.1 0.3
Dividends paid (9.5) (8.9) (13.4)
Increase in borrowings 12.5 67.5 64.6
Increase in obligations under finance leases 1.8 2.3 0.9
Repayments of obligations under finance leases (1.4) (1.5) (3.0)
__________________________________________________________________________________________________________
Net cash flow from financing activities 1.3 57.0 43.5
__________________________________________________________________________________________________________
Net (decrease) increase in cash and cash equivalents (7.4) 3.7 (16.6)
Cash and cash equivalents at beginning of period 42.8 59.4 59.4
__________________________________________________________________________________________________________
Cash and cash equivalents at end of period 35.4 63.1 42.8
__________________________________________________________________________________________________________
The interim financial information and related comparative information is
unaudited.
The notes on pages 9 to 14 form an integral part of this condensed consolidated
half yearly financial information.
Notes to the Condensed Consolidated Interim Financial Statements
1 Basis of preparation and status of financial information
This condensed consolidated half-yearly financial information for the half year
ended 30 September 2007 has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Services Authority and with IAS 34, Interim
Financial Reporting as adopted by the European Union. The half-yearly condensed
consolidated financial report should be read in conjunction with the Annual
Report and Accounts 2007, which have been prepared in accordance with the
International Financial Reporting Standards (IFRS) as adopted by the European
Union.
The condensed half-yearly financial information is unaudited and was approved by
the Board of Directors on 6 November 2007.
These interim financial results do not comprise statutory accounts within the
meaning of Section 240 of the Companies Act 1985. Statutory accounts for the
year ended 31 March 2007 were approved by the Board of directors on 30 May 2007
and delivered to the Registrar of Companies. The report of the auditors on
those accounts was unqualified, did not contain an emphasis of matter paragraph
and did not contain any statement under Section 237 of the Companies Act 1985.
The accounting policies adopted are consistent with those of the annual
financial statements for the year ended 31 March 2007, as described in those
annual financial statements, with the exception of exceptional items. Items are
classified as exceptional and disclosed separately due to their size or
incidence to enable a better understanding of performance and this policy has
been adopted during the six month period.
The Group's financial statements for the year ended 31 March 2008 will be
impacted by IFRS 7 Financial Instruments: Disclosures which will increase the
amount of disclosure in the full financial statements. The accounting, income
and net assets will remain unchanged. No other new mandatory accounting
standards, amendments to standards or interpretations are expected to materially
impact the 31 March 2008 financial statements.
2 Segmental analysis
Waste management business shown by management responsibility and geographical area:
2007/8 2006/7 2006/7
First First Full
Half Half Year
£m £m £m
__________________________________________________________________________________________________________
(a) Profit for the period
__________________________________________________________________________________________________________
Revenue Netherlands 137.6 116.0 252.4
Belgium 61.7 61.8 122.9
United Kingdom 71.8 69.0 133.2
______________________________________
Total revenue 271.1 246.8 508.5
______________________________________
Group 263.6 239.5 494.0
Share of joint ventures 7.5 7.3 14.5
__________________________________________________________________________________________________________
Total revenue 271.1 246.8 508.5
__________________________________________________________________________________________________________
Trading profit*
Netherlands 17.1 13.9 31.0
Belgium 8.9 9.4 17.3
United Kingdom 2.5 2.0 3.2
Central services (2.6) (2.6) (5.3)
______________________________________
Total trading profit 25.9 22.7 46.2
______________________________________
Group 23.8 20.7 42.2
Share of joint ventures 2.1 2.0 4.0
__________________________________________________________________________________________________________
Total trading profit* 25.9 22.7 46.2
Exceptional profit On disposal of property (United Kingdom) 1.1 - -
__________________________________________________________________________________________________________
Total operating profit 27.0 22.7 46.2
__________________________________________________________________________________________________________
Finance charges Interest payable (11.4) (8.1) (18.2)
Interest receivable 6.3 5.1 11.2
Change in fair value of interest rate 1.2 2.3 6.9
swaps
__________________________________________________________________________________________________________
Total finance charges (3.9) (0.7) (0.1)
__________________________________________________________________________________________________________
Profit before tax 23.1 22.0 46.1
Tax (7.1) (7.3) (14.8)
__________________________________________________________________________________________________________
Profit after tax for the period 16.0 14.7 31.3
__________________________________________________________________________________________________________
Intersegment sales are not
significant.
*Trading profit excludes profits on disposal of property which have been
classified as exceptional due to their size and incidence. Their
exclusion allows for better comparability between the years presented.
At 30 At 30 At 31
September September March
2007 2006 2007
£m £m £m
__________________________________________________________________________________________________________
(b) Analysis of net assets
__________________________________________________________________________________________________________
Netherlands Gross assets 435.2 365.8 384.0
Gross liabilities (83.4) (59.4) (67.3)
______________________________________
Net operating assets 351.8 306.4 316.7
______________________________________
Belgium Gross assets 78.7 72.8 74.2
Gross liabilities (49.3) (43.8) (47.6)
______________________________________
Net operating assets 29.4 29.0 26.6
______________________________________
United Kingdom Gross assets 224.8 204.7 216.6
Gross liabilities (34.4) (46.8) (34.5)
______________________________________
Net operating assets 190.4 157.9 182.1
______________________________________
Central Services Gross assets 1.0 1.6 0.9
Gross liabilities (11.3) (9.0) (17.3)
______________________________________
Net operating liabilities (10.3) (7.4) (16.4)
__________________________________________________________________________________________________________
Total Gross assets 739.7 644.9 675.7
Gross liabilities (178.4) (159.0) (166.7)
__________________________________________________________________________________________________________
Net operating assets 561.3 485.9 509.0
Current tax (14.3) (11.9) (11.3)
Deferred tax (23.9) (16.9) (16.6)
Net debt (282.8) (247.2) (257.4)
__________________________________________________________________________________________________________
Net assets 240.3 209.9 223.7
__________________________________________________________________________________________________________
3 Tax
2007/8 2006/7 2006/7
First First Full
Half Half Year
£m £m £m
__________________________________________________________________________________________________________
Current tax UK corporation tax at 30% (2006/7:30%)
- Current year 3.9 1.4 5.2
- Prior year - - (0.4)
Double tax relief (1.9) (1.4) (2.0)
Overseas tax
- Current year 5.5 5.3 8.0
- Prior year - (0.1) 1.0
__________________________________________________________________________________________________________
Total current tax charge 7.5 5.2 11.8
__________________________________________________________________________________________________________
Deferred tax
- Current year (1.1) 2.2 2.1
- Prior year 0.7 (0.1) 0.9
__________________________________________________________________________________________________________
Total deferred tax (credit) charge (0.4) 2.1 3.0
__________________________________________________________________________________________________________
Tax charge for the period 7.1 7.3 14.8
__________________________________________________________________________________________________________
The tax rate for the first half of the current year is based on the estimated
charge for the full year.
As a result of changes announced in the 2007 Budget UK corporation tax will
reduce from 30% to 28% effective from 6 April 2008 and the deferred tax impact
of this has been included above. There will also be a phased withdrawal of
industrial buildings allowances over a period of 4 years and a reduction in
general pool writing down allowances from 25% to 20% which will be enacted in
the Finance Act 2008. It is estimated that this will result in a £10 million
exceptional tax charge in the year ending 31 March 2009. This principally
relates to the non discounted value of tax relief that would have been available
on the PFI infrastructure towards the end of the 25 year PFI contracts.
4 Dividends
2007/8 2006/7 2006/7
First First Full
Half Half Year
£m £m £m
__________________________________________________________________________________________________________
Amounts recognised as distributions to equity holders in the
period:
Interim dividends - - 4.5
Final dividends 9.5 8.9 8.9
__________________________________________________________________________________________________________
Total dividends 9.5 8.9 13.4
__________________________________________________________________________________________________________
An interim dividend of 2.0p per share (2006/7: 1.9p per share) was approved by
the Board on 6 November 2007 and will be paid on 9 January 2008 to shareholders
on the register at close of business on 14 December 2007. The final dividend for
2006/7 of 4.0p per share (2005/6: 3.8p per share) was approved by the
shareholders at the Annual General Meeting on 26 July 2007 and was paid on 3
August 2007.
5 Earnings per share
2007/8 2006/7 2006/7
First First Full
Half Half Year
__________________________________________________________________________________________________________
Number of shares
Weighted average number of ordinary shares for basic 235.8m 234.7m 234.8m
earnings per share
Effect of share options in issue 0.7m 0.6m 0.8m
__________________________________________________________________________________________________________
Weighted average number of ordinary shares for diluted 236.5m 235.3m 235.6m
earnings per share
__________________________________________________________________________________________________________
(a) Calculation of basic and adjusted basic earnings per
share
Earnings for basic earnings per share being profit for 16.0 14.7 31.3
the period (£m)
Change in fair value of interest rate swaps (net of tax) (0.9) (1.6) (4.8)
(£m)
Other exceptional items (£m) (1.1) - -
__________________________________________________________________________________________________________
Earnings for adjusted basic earnings per share (£m) 14.0 13.1 26.5
__________________________________________________________________________________________________________
Basic earnings per share (pence) 6.8p 6.3p 13.3p
Adjusted basic earnings per share (pence) (see note 6.0p 5.6p 11.3p
below)
__________________________________________________________________________________________________________
(b) Calculation of diluted earnings per share
Earnings for basic earnings per share being profit for 16.0 14.7 31.3
the period (£m)
Effect of dilutive potential ordinary shares (£m) - - -
__________________________________________________________________________________________________________
Earnings for diluted earnings per share (£m) 16.0 14.7 31.3
__________________________________________________________________________________________________________
Diluted earnings per share (pence) 6.8p 6.2p 13.3p
__________________________________________________________________________________________________________
The Directors believe that adjusting earnings per share for the effect of
exceptional items enables comparison with historical data calculated on the same
basis. Exceptional items are those that need to be disclosed separately on the
face of the income statement because of their size or incidence. Changes in the
fair values of interest rate swaps that the Group is required to enter into in
relation to its PFI arrangements are excluded as they do not reflect commercial
reality.
6 Business Combinations
(a) On 13 April 2007 the Group acquired 70% of the share capital of
Orgaworld B.V. in the Netherlands, for an initial consideration of £7.4m
and will acquire the remaining 30% over the next five years. Orgaworld is
involved in the composting and anaerobic digestion of biodegradable waste.
The goodwill recognised is attributable to Orgaworld's strong market
position and technological know-how. From acquisition to 30 September 2007,
Orgaworld has contributed £3.9m to revenue and £0.3m to profit after tax.
The aggregate book value of the assets and liabilities acquired and the
provisional fair value to the Group, pending completion of the evaluation
of the business, were as follows:
Fair Provisional
Book Value Fair
Value Adjustment Value
£m £m £m
________________________________________________________________________________________________
Intangible assets - 6.7 6.7
Property, plant and equipment 13.9 1.0 14.9
Trade receivables 0.9 - 0.9
Current tax receivable 0.3 - 0.3
Cash 0.6 - 0.6
Trade payables (1.9) - (1.9)
Other payables (1.3) - (1.3)
Borrowings (11.3) - (11.3)
Deferred tax liabilities (0.9) (2.0) (2.9)
Provisions (0.1) - (0.1)
Minority interest (0.1) - (0.1)
________________________________________________________________________________________________
0.1 5.7 5.8
Provisional goodwill 14.0
________________________________________________________________________________________________
19.8
________________________________________________________________________________________________
Satisfied by:
Cash consideration 7.1
Deferred consideration (including £10.6m which is 12.4
conditional)
Costs incurred 0.3
________________________________________________________________________________________________
Total consideration 19.8
________________________________________________________________________________________________
(b) On 5 April 2007 the Group acquired 100% of the share capital of Kluivers
Totaal Recycling en Vernietiging B.V., a company specialising in the
collecting and recycling of wastepaper in the Netherlands, for a total
consideration of £3.3m. The goodwill recognised is attributable to Kluivers
profitability and the synergies expected to arise post acquisition. From
acquisition to 30 September 2007, Kluivers has contributed £2.1m to revenue
and £0.1m to profit after tax. The aggregate book value of the assets and
liabilities acquired and the provisional fair value to the Group, pending
completion of the evaluation of the business, were as follows:
Fair Provisional
Book Value Fair
Value Adjustment Value
£m £m £m
________________________________________________________________________________________________
Intangible assets - 2.0 2.0
Property, plant and equipment 0.6 0.1 0.7
Trade receivables 0.5 - 0.5
Cash 0.1 - 0.1
Trade payables (0.4) - (0.4)
Other current payables (0.5) 0.1 (0.4)
Deferred tax liabilities - (0.5) (0.5)
________________________________________________________________________________________________
0.3 1.7 2.0
Provisional goodwill 1.3
________________________________________________________________________________________________
3.3
________________________________________________________________________________________________
Satisfied by:
Cash consideration 2.7
Deferred consideration 0.6
________________________________________________________________________________________________
Total consideration 3.3
________________________________________________________________________________________________
(c) If all the acquisitions had been completed on 1 April 2007 instead of the
dates above, total Group revenue and Group profit for the period would not
have been materially different on a pro-forma basis.
(d) For acquisitions completed in the year to 31 March 2007 there have been
no amendments to the provisional fair values.
7 Provisions
Site
restoration
and aftercare Other Total
£m £m £m
_____________________________________________________________________________________________________
At 31 March 2007 21.0 7.8 28.8
Provided - cost of sales 0.4 - 0.4
- finance charges 0.5 - 0.5
Acquired with acquisition of businesses - 0.1 0.1
Utilised (0.4) (0.4) (0.8)
Exchange rate movements 0.5 - 0.5
_____________________________________________________________________________________________________
At 30 September 2007 22.0 7.5 29.5
_____________________________________________________________________________________________________
Current 0.4 5.2 5.6
Non-current 21.6 2.3 23.9
_____________________________________________________________________________________________________
At 30 September 2007 22.0 7.5 29.5
_____________________________________________________________________________________________________
Current 0.8 5.5 6.3
Non-current 20.2 2.3 22.5
_____________________________________________________________________________________________________
At 31 March 2007 21.0 7.8 28.8
_____________________________________________________________________________________________________
Current 1.3 6.4 7.7
Non-current 20.3 1.2 21.5
_____________________________________________________________________________________________________
At 30 September 2006 21.6 7.6 29.2
_____________________________________________________________________________________________________
8 Reconciliation of changes in total equity
2007/8 2006/7 2006/7
First First Full
Half Half Year
£m £m £m
_____________________________________________________________________________________________________
Opening total equity as at 31 March 223.7 208.6 208.6
Recognised income and expense for the period 23.6 9.8 27.8
Dividends paid (see note 4) (9.5) (8.9) (13.4)
Share-based payments 0.3 0.3 0.6
Tax on share-based payments (0.1) - (0.2)
Minority interest arising on acquisitions in the period 0.1 - -
Other reserves movement (1.1) - -
Issue of share capital 3.3 0.1 0.3
_____________________________________________________________________________________________________
Closing total equity 240.3 209.9 223.7
_____________________________________________________________________________________________________
9 Cash flows from operating activities
2007/8 2006/7 2006/7
First First Full
Half Half Year
£m £m £m
_____________________________________________________________________________________________________
Net cash from operating activities
Operating profit from continuing operations 27.0 22.7 46.2
Amortisation of intangible assets 1.8 0.7 2.3
Depreciation of property, plant and equipment 16.1 14.5 30.0
Charge for long term landfill provisions 0.4 1.0 2.1
Gain on disposal of property, plant and equipment (1.5) (0.6) (1.0)
_____________________________________________________________________________________________________
Earnings before interest, tax, depreciation and amortisation 43.8 38.3 79.6
(EBITDA)
Net decrease in provisions (0.9) (2.7) (4.3)
Share based payments 0.4 0.3 0.6
_____________________________________________________________________________________________________
Operating cash flows before movement in working capital 43.3 35.9 75.9
(Increase) decrease in inventories (0.5) 3.9 3.7
Increase in receivables (4.3) (7.9) (7.3)
(Increase) decrease in payables (0.1) (2.8) 8.9
_____________________________________________________________________________________________________
Cash generated by operations 38.4 29.1 81.2
Income taxes paid (2.6) (2.7) (9.9)
_____________________________________________________________________________________________________
Net cash from operating activities 35.8 26.4 71.3
_____________________________________________________________________________________________________
10 Net debt
Consolidated movement in net debt
2007/8 2006/7 2006/7
First First Full
Half Half Year
£m £m £m
_____________________________________________________________________________________________________
Net (decrease) increase in cash and cash equivalents (7.4) 3.7 (16.6)
Increase in borrowings and finance leases (12.9) (68.3) (62.5)
Amortisation of loan fees (0.4) (0.2) (0.4)
Exchange (loss) gain (5.9) 4.1 4.0
Change in fair value of interest rate swaps 1.2 2.3 6.9
_____________________________________________________________________________________________________
Movement in net debt (25.4) (58.4) (68.6)
Net debt at beginning of period (257.4) (188.8) (188.8)
_____________________________________________________________________________________________________
Net debt at end of period (282.8) (247.2) (257.4)
_____________________________________________________________________________________________________
Net debt represented by:
At 30 At 30 At 31
September September March
2007 2006 2007
£m £m £m
_____________________________________________________________________________________________________
Cash and cash equivalents 35.4 63.1 42.7
Current borrowings (33.7) (6.0) (28.9)
Non-current borrowings (284.5) (304.3) (271.2)
_____________________________________________________________________________________________________
Total Group net debt (282.8) (247.2) (257.4)
_____________________________________________________________________________________________________
Consolidated analysis of net debt
At 30 At 30 At 31
September September March
2007 2006 2007
£m £m £m
_____________________________________________________________________________________________________
Core Business net debt (151.8) (120.8) (134.0)
Private Finance Initiative net debt (131.7) (121.3) (122.9)
_____________________________________________________________________________________________________
Total Group net debt before fair value of interest rate (283.5) (242.1) (256.9)
swaps
Fair value of Private Finance Initiative interest rate swaps 0.7 (5.1) (0.5)
_____________________________________________________________________________________________________
Total Group net debt (282.8) (247.2) (257.4)
_____________________________________________________________________________________________________
11 Related party transactions
There have been no additional significant or unusual related party transactions
to those disclosed in the Group's Annual Report for 31 March 2007.
Statement of directors' responsibilities
The directors confirm that this condensed set of financial statements has been
prepared in accordance with IAS 34 as adopted by the European Union, and that
the interim management report herein includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8.
The directors of Shanks Group plc are listed in the Shanks Group plc Annual
Report and Accounts 2007, with the exception of the following changes in the
period. Mr R B Pointon and Mr P Delaunois retired on 26 July 2007, Mr M Averill
retired on 30 September 2007 and Mr T Drury was appointed on 1 October 2007. A
list of current directors is maintained on the Shanks Group plc website:
www.shanks.co.uk.
By order of the Board
T W Drury F A N Welham
Group Chief Executive Group Finance Director
Independent Review Report to Shanks Group plc
Introduction
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2007, which comprises the income statement, balance sheet, statement
of recognised income and expense, cash flow statement and related notes. We
have read the other information contained in the half-yearly financial report
and considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with the IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, 'Interim Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. This report, including the conclusion, has been prepared for and only
for the company for the purpose of the Disclosure and Transparency Rules of the
Financial Services Authority and for no other purpose. We do not, in producing
this report, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set of financial statements in the half-yearly financial
report for the six months ended 30 September 2007 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
London
6 November 2007
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