Interim Results

Shanks Group PLC 03 November 2005 3 November 2005 Company Announcement Shanks Group plc - Interim Results under IFRS Shanks Group plc ('Shanks'), a leading European independent waste management company, announces its interim results for the half year ended 30 September 2005. Financial highlights: • Headline profit (profit from continuing activities before exceptional items) increased by 27% to £17.6m (2004/5: £13.9m); • Turnover for continuing business increased by 10% to £239m (2004/5: £217m); • Profit after tax from continuing activities was £8.1m (2004/5: £0.4m); • Adjusted basic earnings per share were 5.0 pence per share (2004/5: 3.9 pence per share); • Maintained interim dividend at 1.9 pence per share. Business highlights: • UK: • £5m improvement in trading profit; • Continued progress with PFI projects; • Successful £34m disposal of hazardous waste business. • Belgium: • Robust landfill volumes; • Major ten year replacement contract with City of Liege; • Hazardous waste market challenging. • Netherlands: • Improved performance in contaminated soil; • Construction industry recovering; • Higher disposal costs due to cessation of exports to Germany. Commenting on the results, Michael Averill, Group Chief Executive of Shanks Group plc said: 'Shanks has achieved the objectives set out in its strategic review and is now a focused business with a much improved balance sheet and the financial resources to fund growth. Our landmark PFI projects are progressing well and, although the pipeline of opportunities will not come to fruition in the short term, we have in place profit enhancing projects within our business to ensure the Group's future performance. As a result we remain confident in achieving expectations for the full year'. CHAIRMAN'S INTERIM REVIEW I am pleased to report a strong performance in the first half of the 2005/6 year, principally due to improvements in the UK business. The Group's headline profit (profit from continuing activities before exceptional items and tax) improved 27% to £17.6m (2004/5: £13.9m). This figure compares favourably to the £17.5m declared last year, under UK GAAP, which included a c.£3m first quarter contribution from the disposed Landfill and Power business. The tax rate on headline profit remained at 34%. Adjusted basic earnings per share (before exceptional items) were 5.0 pence (2004/5: 3.9 pence). Your Board maintained the interim dividend at 1.9 pence per share. Reporting under International Financial Reporting Standards (IFRS) for the first time, Group turnover increased to £239m (2004/5: £217m) and profit after tax was £14.1m (2004/5: £66.8m). Basic earnings per share were 6.0p (2004/5: 28.5p). From continuing operations, profit before tax was £12.6m (2004/5: £3.4m), after a £5.0m non-cash charge for the change in fair value of financial instruments, and profit after tax was £8.1m (2004/5: £0.4m). Profit after tax from discontinued operations was £6.0m (2004/5: £66.4m) principally due to the £6.5m pre-tax profit on disposal of the UK hazardous waste business. Since 31 March 2005 principal Group borrowings relating to the core business fell by £18m to £92m. Following capital expenditure, borrowings in the Private Finance Initiative (PFI) companies increased by £19m to £82m, bringing the total debt to £174m before inclusion of the fair value of financial instruments. Although the £82m PFI debt is non-recourse it is consolidated onto the Group balance sheet as the PFI companies are 100% owned. A reconciliation between UK GAAP and IFRS of selected comparative financial highlights follows this review. Divisional Review UK Following a strategic review in 2003 the Group decided to focus its UK operations on the emerging market for long term municipal waste contracts using new technologies, and on the recycling of non-hazardous industrial and commercial waste as landfill tax increases. The hazardous waste business was therefore identified as non-core. On 30 September these assets were divested principally to Onyx Environmental Group for a cash consideration of £28m. The exit from the business will be completed in March 2006 when the lease on our Granton site is surrendered according to an agreement with Waterfront Edinburgh also executed on 30 September 2005. The agreement gives a phased total payment of c.£6m ending when the site is given up for redevelopment. Trading profits from continuing UK activities increased by £5.0m to £3.9m (2004/ 5: £1.1m loss). Improvements in core activities accounted for £3.5m. The recent overhead reduction programme contributed substantially to this turnround as did strong performances from land remediation activities and joint ventures. Despite rising fuel costs overall waste collection results improved over those of last year and further new initiatives should maintain progress. PFI activities trading profit grew by £1.5m. The contribution from the East London Waste Authority (ELWA) contract improved following the programmed annual price increase which funds investment in the new higher technology waste treatment capacity. There is a full six month contribution from the Dumfries & Galloway project. As all necessary planning consents were in place at financial close, construction started immediately and is now well advanced. The Argyll & Bute contract is performing satisfactorily and nearing the end of its investment phase. Belgium As previously highlighted, trading profit in Belgium declined from last year's exceptionally high level of £9.1m to £8.3m. Our landfill in Wallonia continues to trade well but results in Brussels decreased following the one-off benefit accruing in 2004 from the temporary closure of the city's household waste incinerator for maintenance. Markets in Flanders, especially for hazardous waste, were more difficult than in recent years reflecting the general economic situation. Significantly a revised ten year contract was won for waste collection and street cleaning serving the City of Liege. This contract, which has only recently started, should provide predictable revenues and cash flows for the future. A small accretive acquisition, Slibontwatering, was completed in Flanders for £0.4m. Netherlands Trading profit in the Netherlands improved to £11.9m (2004/5: £11.3m). Volumes of contaminated spoil processed at ATM increased, following recent investments in additional capacity. Reym's profits recovered from last year when performance was negatively impacted by a sole poorly performing contract. Although there has been a recovery in the construction industry, our solid waste businesses have experienced higher disposal costs as a result of changes in the German landfill regulatory regime which came into effect in June. These cost increases, together with higher fuel charges, are being progressively mitigated through price increases and recycling efficiency improvements. Central Services Central Services costs have returned to a more normal level at £2.3m (2004/5: £1.1m). Outlook Following the disposal of the UK hazardous waste activities the Group structural reorganisation is largely complete and, as a result, it has a much improved balance sheet. With the 5 year £250m syndicated loan facility concluded in May 2005, together with the existing £30m private placement facility, the Group has the financial resources necessary to fund growth. Our landmark PFI projects are progressing well and, although the pipeline of opportunities will not come to fruition in the short term, we have in place profit enhancing projects within our business to ensure the Group's future performance. As a result the Board remains confident in achieving its expectations for the full year. Reconciliation between UK GAAP and IFRS of selected comparative financial highlights Six months to 30 September 2004 Adjusted earnings Profit Headline per before Net Net Turnover profit share tax assets debt £m £m pence £m £m £m -------------------------------------------------------------------------------- As reported under UK GAAP 269.7 17.5 4.9 54.4 196.9 (127.8) Discontinued activities: Landfill and power (37.9) (3.0) (0.8) (55.5) - - Other (20.3) (0.7) (0.3) (0.7) - - -------------------------------------------------------------------------------- UK GAAP - continuing 211.5 13.8 3.8 (1.8) 196.9 (127.8) Intangible/goodwill amortisation - - - 5.2 5.2 - Pensions - 0.1 0.1 0.1 (19.9) - Share based payments - - - (0.1) - - Leases - - - - - (10.6) Joint ventures 5.0 - - - - (1.4) Dividends - - - - 4.4 - Deferred tax - - - - (2.8) - -------------------------------------------------------------------------------- As reported under IFRS 216.5 13.9 3.9 3.4 183.8 (139.8) ================================================================================ Year ended 31 March 2005 Adjusted earnings Profit Headline per before Net Net Turnover profit share tax assets debt £m £m pence £m £m £m -------------------------------------------------------------------------------- As reported under UK GAAP 503.6 33.3 9.4 64.4 194.7 (162.3) Discontinued activities: Landfill and power (37.9) (3.0) (0.8) (54.1) - - Other (40.6) (0.1) - (0.1) - - -------------------------------------------------------------------------------- UK GAAP - continuing 425.1 30.2 8.6 10.2 194.7 (162.3) Intangible/goodwill amortisation - (0.2) (0.1) 9.4 9.4 - Pensions - (0.7) (0.2) (0.7) (18.9) - Share based payments - - - (0.1) - - Leases - 0.1 - 0.1 0.1 (9.6) Joint ventures 10.2 - - - - (1.5) Dividends - - - - 8.9 - Deferred tax - - - - (2.9) - -------------------------------------------------------------------------------- As reported under IFRS 435.3 29.4 8.3 18.9 191.3 (173.4) =============================================================================== Notes: 1. Management will be holding an analyst presentation at 9:30 am today, 3 November at ABN AMRO's offices at 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 2005, 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 website. 4. The interim dividend of 1.9 pence per share will be paid on 11 January 2006 to shareholders on the register at close of business on 16 December 2005. For further information contact: Shanks Group plc on 3 November: telephone 020 7678 0383 Ian Clubb; Chairman thereafter, telephone: 01628 524523 Michael Averill; Group Chief Executive Fraser Welham; Group Finance Director Citigate Dewe Rogerson telephone: 020 7282 2945 Ginny Pulbrook Consolidated Income Statement. First Half ended 30 September 2005 2005/6 2004/5 2004/5 Note First Half First Half Full Year restated restated £m £m £m -------------------------------------------------------------------------------- Continuing operations Revenue 2 239.2 216.5 435.3 -------------------------------------------------------------------------------- Cost of sales - ongoing (192.9) (170.7) (346.8) Cost of sales - restructuring costs 3 - (5.2) (5.2) ------------------------------------------ Total cost of sales (192.9) (175.9) (352.0) -------------------------------------------------------------------------------- Gross profit 46.3 40.6 83.3 -------------------------------------------------------------------------------- Administrative expenses - ongoing (24.5) (27.6) (51.2) Administrative expenses - restructuring costs 3 - (5.3) (5.3) ------------------------------------------ Total administrative expenses (24.5) (32.9) (56.5) -------------------------------------------------------------------------------- Operating profit 2 21.8 7.7 26.8 -------------------------------------------------------------------------------- Finance charges - net interest payable and other (4.2) (4.3) (7.9) Finance charges - change in fair value of financial instruments (5.0) - - ------------------------------------------ Total finance charges 2 (9.2) (4.3) (7.9) -------------------------------------------------------------------------------- Profit before tax from continuing operations 2 12.6 3.4 18.9 Tax 4 (4.5) (3.0) (6.8) -------------------------------------------------------------------------------- Profit after tax for the period from continuing operations 2 8.1 0.4 12.1 Discontinued operations Profit after tax for the period from discontinued operations 2 6.0 66.4 65.0 -------------------------------------------------------------------------------- Profit for the period 14.1 66.8 77.1 ================================================================================ Earnings per share - basic 6 6.0p 28.5p 32.9p - diluted 6 6.0p 28.5p 32.9p Earnings per share from continuing operations - basic 6 3.5p 0.2p 5.2p - diluted 6 3.4p 0.2p 5.2p ================================================================================ The interim financial information and related comparative information is provisional and unaudited. 2004/5 comparative figures have been restated to reflect the reclassification of the results of activities discontinued in 2005/6. Consolidated Balance Sheet. At 30 September 2005 At 30 At 30 At 31 September September March 2005 2004 2005 Note £m £m £m -------------------------------------------------------------------------------- Non-current assets Intangible assets 160.0 150.8 160.7 Property, plant and equipment 246.9 227.3 250.3 Loans to joint ventures 1.1 1.8 1.6 Other investments 1.0 1.1 1.0 Deferred tax assets 17.8 9.8 14.2 -------------------------------------------------------------------------------- 426.8 390.8 427.8 -------------------------------------------------------------------------------- Current assets Inventories 6.3 7.5 9.3 Trade and other receivables 118.4 124.5 113.8 Current tax assets 6.0 2.5 3.0 Cash and cash equivalents 54.7 47.2 32.5 -------------------------------------------------------------------------------- 185.4 181.7 158.6 -------------------------------------------------------------------------------- Total assets 612.2 572.5 586.4 -------------------------------------------------------------------------------- Current liabilities Borrowings (3.1) (4.9) (4.0) Trade and other payables (114.3) (131.4) (125.7) Current tax liabilities (8.5) (0.5) (4.2) Provisions 7 (10.8) (10.9) (11.9) -------------------------------------------------------------------------------- (136.7) (147.7) (145.8) -------------------------------------------------------------------------------- Non-current liabilities Borrowings (234.7) (182.1) (201.9) Other non-current liabilities (1.1) (1.9) (1.0) Deferred tax liabilities (15.2) (17.2) (15.6) Provisions 7 (14.0) (10.7) (13.9) Retirement benefit obligations (19.2) (29.1) (16.9) -------------------------------------------------------------------------------- (284.2) (241.0) (249.3) -------------------------------------------------------------------------------- Total liabilities (420.9) (388.7) (395.1) -------------------------------------------------------------------------------- Net assets 191.3 183.8 191.3 ================================================================================ Equity Share capital 23.4 23.4 23.4 Share premium 93.4 93.1 93.2 Exchange reserve 1.8 3.0 3.1 Retained earnings 72.7 64.3 71.6 -------------------------------------------------------------------------------- Total equity 191.3 183.8 191.3 ================================================================================ The interim financial information and related comparative information is provisional and unaudited. Consolidated Cash Flow Statement. First Half ended 30 September 2005 2005/6 2004/5 2004/5 Note First Half First Half Full Year £m £m £m -------------------------------------------------------------------------------- Net cash from operating activities 8 20.4 38.9 63.9 -------------------------------------------------------------------------------- Investing activities Purchases of property, plant and equipment (39.3) (26.3) (64.6) Disposal of property, plant and equipment 0.8 3.8 6.9 Acquisition of subsidiary and other businesses (1.1) (0.2) (4.8) Net proceeds from disposal of subsidiary and other businesses 30.1 184.8 175.0 Income received from other investments - - 0.1 -------------------------------------------------------------------------------- Net cash used in investing activities (9.5) 162.1 112.6 -------------------------------------------------------------------------------- Financing activities Interest paid (5.1) (7.8) (12.4) Interest received 0.6 1.3 2.1 Proceeds from issue of shares 0.2 - 0.1 Dividends paid (8.9) (8.9) (13.3) Increase (repayment) of borrowings 26.1 (168.9) (151.3) Increase in obligations under finance leases - 0.7 2.5 Repayments of obligations under finance leases (1.6) (1.0) (2.5) -------------------------------------------------------------------------------- Net cash flow from financing activities 11.3 (184.6) (174.8) -------------------------------------------------------------------------------- Net increase in cash and cash equivalents 22.2 16.4 1.7 Cash and cash equivalents at beginning of period 32.5 30.8 30.8 -------------------------------------------------------------------------------- Cash and cash equivalents at end of period 54.7 47.2 32.5 ================================================================================ The interim financial information and related comparative information is provisional and unaudited. Consolidated Movement in Net Debt. First Half ended 30 September 2005 2005/6 2004/5 2004/5 First Half First Half Full Year £m £m £m -------------------------------------------------------------------------------- Net increase in cash and cash equivalents 22.2 16.4 1.7 (Increase) repayment of borrowings and finance leases (24.5) 169.2 151.3 Amortisation of loan fees (0.3) (0.2) (0.3) Exchange gain (loss) 1.6 (3.6) (4.5) Change in fair value of financial instruments (8.7) - - -------------------------------------------------------------------------------- Movement in net debt (9.7) 181.8 148.2 Net debt at beginning of period (173.4) (321.6) (321.6) -------------------------------------------------------------------------------- Net debt at end of period (183.1) (139.8) (173.4) ================================================================================ The interim financial information and related comparative information is provisional and unaudited. Analysis of Net Debt. At 30 September 2005 At 30 At 30 At 31 September September March 2005 2004 2005 £m £m £m -------------------------------------------------------------------------------- Principal Group net debt 92.4 103.9 110.6 Private Finance Initiative net debt 82.0 35.9 62.8 -------------------------------------------------------------------------------- Total Group net debt before fair value of interest rate swaps 174.4 139.8 173.4 Fair value of Private Finance Initiative interest rate swaps 8.7 - - -------------------------------------------------------------------------------- Total Group net debt 183.1 139.8 173.4 ================================================================================ The interim financial information and related comparative information is provisional and unaudited. Consolidated Statement of Recognised Income and Expense. First Half ended 30 September 2005 2005/6 2004/5 2004/5 First Half First Half Full Year £m £m £m -------------------------------------------------------------------------------- Prior year adjustment: - loss on fair value of financial instruments at 1 April 2005 (3.7) - - - deferred tax asset thereon 1.1 - - Exchange (loss) gain on translation of foreign operations (1.3) 3.0 3.1 Actuarial (loss) gain on defined benefit pension schemes (1.6) (1.4) 0.1 Share based payments 0.1 - 0.1 -------------------------------------------------------------------------------- Net (expense) income recognised directly in equity (5.4) 1.6 3.3 Profit for the period 14.1 66.8 77.1 -------------------------------------------------------------------------------- Total recognised income and expense for the period 8.7 68.4 80.4 ================================================================================ The interim financial information and related comparative information is provisional and unaudited. Consolidated Statement of Changes in Equity. First Half ended 30 September 2005 Share Share Exchange Retained Total capital premium reserve earnings £m £m £m £m £m -------------------------------------------------------------------------------- Balance carried forward at 31 March 2005 23.4 93.2 3.1 71.6 191.3 Prior year adjustment (see note 9): - loss on fair value of financial instruments at 1 April 2005 - - - (3.7) (3.7) - deferred tax asset thereon - - - 1.1 1.1 -------------------------------------------------------------------------------- Balance brought forward at 1 April 2005 23.4 93.2 3.1 69.0 188.7 Issue of share capital - 0.2 - - 0.2 Exchange loss on translation of foreign operations - - (1.3) - (1.3) Profit for the period - - - 14.1 14.1 Actuarial loss on defined benefit pension schemes - - - (1.6) (1.6) Share based payments - - - 0.1 0.1 Dividends paid in the period (see note 5) - - - (8.9) (8.9) -------------------------------------------------------------------------------- Balance at 30 September 2005 23.4 93.4 1.8 72.7 191.3 ================================================================================ The interim financial information and related comparative information is provisional and unaudited. The prior year adjustment arises on the adoption of IAS39 - Measurement of Financial Instruments (see note 9 for details). Notes to the Interim Financial Statements. 1 Basis of preparation of financial statements and status of financial information The interim financial information and all comparative information, which was approved by the Directors on 3 November 2005, is provisional and unaudited. The auditors have reviewed the interim financial information for the six months to 30 September 2005 and their report is set out below. The interim financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) expected to be applicable at 31 March 2006 but some changes to these policies may be necessary as a result of changes to IFRS, IFRIC interpretations and endorsements by the European Commission. For these interim financial statements, the Group has applied accounting policies consistent with those amendments required by IFRS, as set out in 'Adoption of International Financial Reporting Standards', a separate announcement published by the Group on the London Stock Exchange on 17 October 2005. No other accounting policy has been amended from those disclosed in the audited financial statements for the year ended 31 March 2005. The reconciliations concerning the transition from UK GAAP to IFRS for the six months ended 30 September 2004 and the year ended 31 March 2005 are set out in note 10 of this report. 2 Segmental analysis The Group operates in one segment, Waste Management, in the United Kingdom, Belgium and the Netherlands. 2005/6 2004/5 2004/5 First Half First Half Full Year restated restated £m £m £m -------------------------------------------------------------------------------- (a) Continuing operations Revenue United Kingdom 76.4 67.3 130.0 Belgium 55.4 50.5 102.2 Netherlands 107.4 98.7 203.1 -------------------------------------- Total revenue 239.2 216.5 435.3 ====================================== Group 232.8 211.5 425.1 Share of joint ventures 6.4 5.0 10.2 -------------------------------------- Total revenue 239.2 216.5 435.3 ================================================================================ Trading United Kingdom 3.9 (1.1) (0.2) profits* Belgium 8.3 9.1 16.6 Netherlands 11.9 11.3 24.3 Central Services (2.3) (1.1) (3.4) -------------------------------------- Total trading profit 21.8 18.2 37.3 ====================================== Group 19.7 16.9 35.4 Share of joint ventures 2.1 1.3 1.9 -------------------------------------- Total trading profit 21.8 18.2 37.3 Restructuring costs (United Kingdom) - (10.5) (10.5) -------------------------------------- Total operating profit 21.8 7.7 26.8 -------------------------------------------------------------------------------- Operating United Kingdom 3.9 (11.6) (10.7) profits Belgium 8.3 9.1 16.6 Netherlands 11.9 11.3 24.3 Central Services (2.3) (1.1) (3.4) -------------------------------------- Total operating profit 21.8 7.7 26.8 -------------------------------------------------------------------------------- Finance Net external interest (3.7) (3.8) (7.1) charges Share of joint venture interest (0.1) (0.1) (0.2) Discount unwind and loan fee amortisation (0.4) (0.4) (0.6) Change in fair value of financial instruments (5.0) - - -------------------------------------- Total finance charges (9.2) (4.3) (7.9) -------------------------------------------------------------------------------- Profit before tax from continuing operations 12.6 3.4 18.9 Tax (4.5) (3.0) (6.8) -------------------------------------------------------------------------------- Profit after tax and profit for the period from continuing operations 8.1 0.4 12.1 ================================================================================ (b) Discontinued operations (United Kingdom) Revenue 18.4 58.2 78.5 ================================================================================ Operating profit 0.7 6.4 7.1 Profit on disposal of operations 6.5 61.2 59.4 -------------------------------------------------------------------------------- Finance Net external interest (0.6) (3.0) (3.5) charges Discount unwind and loan fee amortisation - (0.5) (0.5) -------------------------------------- Total finance charges (0.6) (3.5) (4.0) -------------------------------------------------------------------------------- Profit before tax from discontinued operations 6.6 64.1 62.5 Tax (0.6) 2.3 2.5 -------------------------------------------------------------------------------- Profit after tax and profit for the period from discontinued operations 6.0 66.4 65.0 ================================================================================ * operating profits before restructuring costs. 2004/5 comparative figures have been restated to reflect the reclassification of the results of activities discontinued in 2005/6. Net external interest has been allocated to discontinued operations by applying the external interest rate to the net operating assets employed. (c) Analysis of net assets At 30 At 30 At 31 September September March 2005 2004 2005 £m £m £m -------------------------------------------------------------------------------- United Gross assets 161.4 142.0 160.8 Kingdom Gross liabilities (67.9) (88.7) (73.2) --------------------------------------- Net operating assets 93.5 53.3 87.6 --------------------------------------- Belgium Gross assets 73.0 66.9 70.0 Gross liabilities (42.5) (35.7) (39.2) --------------------------------------- Net operating assets 30.5 31.2 30.8 --------------------------------------- Netherlands Gross assets 296.0 298.0 302.3 Gross liabilities (39.3) (41.9) (50.5) --------------------------------------- Net operating assets 256.7 256.1 251.8 --------------------------------------- Central Gross assets 3.3 6.1 3.6 Services Gross liabilities (9.7) (17.7) (6.5) --------------------------------------- Net operating assets (6.4) (11.6) (2.9) -------------------------------------------------------------------------------- Total Gross assets 533.7 513.0 536.7 Gross liabilities (159.4) (184.0) (169.4) -------------------------------------------------------------------------------- Net operating assets 374.3 329.0 367.3 Corporation tax (2.5) 2.0 (1.2) Deferred tax 2.6 (7.4) (1.4) Net debt (183.1) (139.8) (173.4) -------------------------------------------------------------------------------- Net assets 191.3 183.8 191.3 ================================================================================ 3 Restructuring costs The restructuring costs of £10.5m in the six months to 30 September 2004 and the year to 31 March 2005 arose on the integration and reorganisation of the Group's business in the United Kingdom. The effect of this item was to reduce the tax charge for the year by £3.1m. 4 Taxation 2005/6 2004/5 2004/5 First Half First Half Full Year £m £m £m -------------------------------------------------------------------------------- Current tax UK corporation tax at 30% (2004/5: 30%) Current year - 1.0 2.6 Prior year 1.0 - - Double tax relief - (3.4) (2.8) Overseas tax Current year 4.6 3.8 7.6 Prior year - - 1.2 Joint ventures 0.5 0.3 0.6 Deferred tax (1.0) (1.0) (4.9) -------------------------------------------------------------------------------- Total tax charge for the period 5.1 0.7 4.3 ================================================================================ Total tax charge - continuing operations 4.5 3.0 6.8 Total tax charge - discontinued operations 0.6 (2.3) (2.5) -------------------------------------------------------------------------------- Total tax charge for the period 5.1 0.7 4.3 ================================================================================ The tax rate for the first half of the current year is based on the estimated charge for the full year. 5 Dividends 2005/6 2004/5 2004/5 First Half First Half Full Year £m £m £m -------------------------------------------------------------------------------- Interim dividend for this year - - 4.4 Final dividend for prior year 8.9 8.9 8.9 -------------------------------------------------------------------------------- Total dividends 8.9 8.9 13.3 ================================================================================ An interim dividend of 1.9p per share (2004/5: 1.9p per share) was approved by the Board on 3 November 2005 and will be paid on 11 January 2006 to shareholders on the register at close of business on 16 December 2005. The final dividend of 3.8p per share (2004/5: 3.8p per share) was approved by the Shareholders at the Annual General Meeting on 28 July 2005 and was paid on 5 August 2005. 6 Earnings per share Basic earnings per share are calculated by dividing the profit for the period by the average number of shares in issue during the period. 2005/6 2004/5 2004/5 First Half First Half Full Year -------------------------------------------------------------------------------- Number of shares Weighted average number of ordinary shares for basic earnings per share 234.2m 234.0m 234.1m Effect of share options in issue 1.0m 0.4m 0.6m -------------------------------------------------------------------------------- Weighted average number of ordinary shares for diluted earnings per share 235.2m 234.4m 234.7m ================================================================================ Calculation of basic and adjusted basic earnings per share Earnings for basic earnings per share being profit for the period (£m) 14.1 66.8 77.1 Earnings from discontinued operations (£m) (6.0) (66.4) (65.0) -------------------------------------------------------------------------------- Earnings for basic earnings per share from continuing operations (£m) 8.1 0.4 12.1 Restructuring costs (net of tax) (£m) - 8.7 7.4 Change in fair value of financial instruments (net of tax) (£m) 3.5 - - -------------------------------------------------------------------------------- Earnings for adjusted basic earnings per share (£m) 11.6 9.1 19.5 -------------------------------------------------------------------------------- Basic earnings per share (pence) 6.0p 28.5p 32.9p Basic earnings per share from continuing operations (pence) 3.5p 0.2p 5.2p Adjusted basic earnings per share (pence) 5.0p 3.9p 8.3p ================================================================================ Calculation of diluted earnings per share Earnings for basic earnings per share being profit for the period (£m) 14.1 66.8 77.1 Effect of dilutive potential ordinary shares (£m) - - - -------------------------------------------------------------------------------- Earnings for diluted earnings per share(£m) 14.1 66.8 77.1 -------------------------------------------------------------------------------- Diluted earnings per share (pence) 6.0p 28.5p 32.9p Diluted earnings per share on continuing operations (pence) 3.4p 0.2p 5.2p ================================================================================ 7 Provisions for liabilities and charges Site restoration and aftercare Other Total £m £m £m -------------------------------------------------------------------------------- At 31 March 2005 17.8 8.0 25.8 Provided - cost of sales 0.3 - 0.3 - finance charges 0.1 - 0.1 - discontinued businesses - 2.6 2.6 Reclassified from other payables 0.5 - 0.5 Utilised (2.8) (1.6) (4.4) Exchange rate movements (0.1) - (0.1) -------------------------------------------------------------------------------- At 30 September 2005 15.8 9.0 24.8 ================================================================================ Current 2.8 8.0 10.8 Non-current 13.0 1.0 14.0 -------------------------------------------------------------------------------- At 30 September 2005 15.8 9.0 24.8 ================================================================================ Current 4.9 7.0 11.9 Non-current 12.9 1.0 13.9 -------------------------------------------------------------------------------- At 31 March 2005 17.8 8.0 25.8 ================================================================================ Current - 10.9 10.9 Non-current 10.3 0.4 10.7 -------------------------------------------------------------------------------- At 30 September 2004 10.3 11.3 21.6 ================================================================================ 8 Net cash flow 2005/6 2004/5 2004/5 First Half First Half Full Year £m £m £m -------------------------------------------------------------------------------- (a) Continuing operations Operating profit from continuing operations 21.8 7.7 26.8 Amortisation of intangible assets 0.5 0.3 0.7 Impairment loss on intangible assets - 0.5 0.5 Depreciation of property, plant and equipment 15.9 13.2 26.9 Impairment loss on property, plant and equipment - 2.8 2.8 Gain on disposal of property, plant and equipment - - (1.4) Net decrease in provisions (1.5) (0.1) 1.5 Share based payments 0.2 0.1 0.1 -------------------------------------------------------------------------------- Operating cash flows before movements in working capital 36.9 24.5 57.9 Decrease (increase) in inventories 2.3 (1.0) (2.8) Increase in receivables (5.7) (25.1) (15.0) (Decrease) increase in payables (11.7) 17.3 16.1 -------------------------------------------------------------------------------- Cash generated by operations 21.8 15.7 56.2 Income taxes paid (5.7) (2.4) (6.4) -------------------------------------------------------------------------------- Net cash from operating activities 16.1 13.3 49.8 ================================================================================ Investing activities Purchases of property, plant and equipment (37.9) (22.9) (63.2) Disposal of property, plant and equipment 0.8 3.8 6.6 Acquisitions of subsidiary and other businesses (1.1) (0.2) (4.8) Net proceeds from disposal of subsidiary and other businesses 30.1 184.8 175.0 Income received from other investments - - 0.1 -------------------------------------------------------------------------------- Net cash used in investing activities (8.1) 165.5 113.7 ================================================================================ (b) Discontinued operations Operating profit from discontinued operations 0.7 6.4 7.1 Depreciation of property, plant and equipment 2.1 8.3 10.8 Increase (decrease) in provisions - 1.2 (9.0) -------------------------------------------------------------------------------- Operating cash flows before movements in working capital 2.8 15.9 8.9 Increase in inventories (0.4) (0.2) (0.2) Decrease in receivables 1.4 1.6 2.3 Increase in payables 0.5 8.3 3.1 -------------------------------------------------------------------------------- Cash generated by operations 4.3 25.6 14.1 -------------------------------------------------------------------------------- Net cash from operating activities 4.3 25.6 14.1 ================================================================================ Investing activities Purchases of property, plant and equipment (1.4) (3.4) (1.4) Disposal of property, plant and equipment - - 0.3 -------------------------------------------------------------------------------- Net cash used in investing activities (1.4) (3.4) (1.1) ================================================================================ (c) Total Group operations Operating profit from all operations 22.5 14.1 33.9 Amortisation of intangible assets 0.5 0.3 0.7 Impairment loss on intangible assets - 0.5 0.5 Depreciation of property, plant and equipment 18.0 21.5 37.7 Impairment loss on property, plant and equipment - 2.8 2.8 Gain on disposal of property, plant and equipment - - (1.4) (Decrease) increase in provisions (1.5) 1.1 (7.5) Share based payments 0.2 0.1 0.1 -------------------------------------------------------------------------------- Operating cash flows before movements in working capital 39.7 40.4 66.8 Decrease (increase) in inventories 1.9 (1.2) (3.0) Increase in receivables (4.3) (23.5) (12.7) (Decrease) increase in payables (11.2) 25.6 19.2 -------------------------------------------------------------------------------- Cash generated by operations 26.1 41.3 70.3 Income taxes paid (5.7) (2.4) (6.4) -------------------------------------------------------------------------------- Net cash from operating activities 20.4 38.9 63.9 ================================================================================ Investing activities Purchases of property, plant and equipment (39.3) (26.3) (64.6) Disposal of property, plant and equipment 0.8 3.8 6.9 Acquisitions of subsidiary and other businesses (1.1) (0.2) (4.8) Net proceeds from disposal of subsidiary and other businesses 30.1 184.8 175.0 Income received from other investments - - 0.1 -------------------------------------------------------------------------------- Net cash used in investing activities (9.5) 162.1 112.6 ================================================================================ 9 Prior year adjustment - adoption of IAS39 The Group has applied the exemption given in IFRS1 - First-time Adoption of International Financial Reporting Standards not to apply IAS39 - Measurement of Financial Instruments to comparative period information. As permitted by IFRS1, the effect of first-time adoption of IAS39 is shown as a prior year adjustment to the opening balance sheet. The impact at 1 April 2005 is to include a £3.7m loss on the fair value of financial instruments against long term borrowings with recognition of a £1.1m deferred tax asset thereon. The net charge to the opening retained earnings was £2.6m. 10 Reconciliation of UK GAAP to IFRS As stated in note 1, the Group previously prepared its financial statements in accordance with UK Generally Accepted Accounting Principles (UK GAAP). As a result of adopting IFRS in respect of the year ending 31 March 2006, the Group has restated comparative information for 2004/5. As required by IFRS1 - First-time Adoption of International Financial Reporting Standards, the reconciliation between previously reported UK GAAP based information and their IFRS equivalents is set out below. Profit 30 September 2004 Share Share Exchange Retained Total for the capital premium reserve earnings equity period £m £m £m £m £m £m ---------------------------------------------------------------------------------------------------- Previously reported under UK GAAP 23.4 93.1 - 80.4 196.9 49.3 IFRS2 - Share based payments - - - - - (0.1) IFRS3 - Business combinations (net of tax) - - - 5.2 5.2 12.5 IAS10 - Events after the balance sheet date (dividends) - - - 4.4 4.4 4.4 IAS19 - Employee benefits (net of tax) - - - (19.9) (19.9) 0.7 IAS12 - Deferred tax - - - (2.8) (2.8) - IAS21 - Foreign currencies - - 3.0 (3.0) - - ---------------------------------------------------------------------------------------------------- Reported now under IFRS 23.4 93.1 3.0 64.3 183.8 66.8 ==================================================================================================== Profit 31 March 2005 Share Share Exchange Retained Total for the capital premium reserve earnings equity period £m £m £m £m £m £m ---------------------------------------------------------------------------------------------------- Previously reported under UK GAAP 23.4 93.2 - 78.1 194.7 46.9 IFRS2 - Share based payments - - - - - (0.1) IFRS3 - Business combinations (net of tax) - - - 9.4 9.4 16.7 IAS10 - Events after the balance sheet date (dividends) - - - 8.9 8.9 13.3 IAS19 - Employee benefits (net of tax) - - - (18.9) (18.9) 0.2 IAS17 - Leases - - - 0.1 0.1 0.1 IAS12 - Deferred tax - - - (2.9) (2.9) - IAS21 - Foreign currencies - - 3.1 (3.1) - - ---------------------------------------------------------------------------------------------------- Reported now under IFRS 23.4 93.2 3.1 71.6 191.3 77.1 ==================================================================================================== Independent Auditors' Review Report to Shanks Group plc. Introduction We have been instructed by the company to review the financial information for the six months ended 30 September 2005 which comprises the consolidated interim balance sheet as at 30 September 2005 and the related consolidated interim statements of income, cash flow, movement in net debt, recognised income and expense, and changes in shareholders' equity for the six months then ended and related notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority. As disclosed in note 1, the next annual financial statements of Shanks Group plc will be prepared in accordance with IFRS adopted for use in the European Union. This interim report has been prepared in accordance with the basis set out in note 1. The accounting policies are consistent with those that the Directors intend to use in the next annual financial statements. As explained in note 1, there is, however, a possibility that the Directors may determine that some changes are necessary when preparing the full annual financial statements for the first time in accordance with IFRS adopted for use in the European Union. The IFRS standards and IFRIC interpretations that will be applicable and adopted for use in the European Union at 31 March 2006 are not known with certainty at the time of preparing this interim financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of Shanks Group plc management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the disclosed accounting policies have been applied. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance. Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Listing 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. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2005. PricewaterhouseCoopers LLP Chartered Accountants London 3 November 2005 Notes: (a) The maintenance and integrity of the Shanks Group plc web site is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock Exchange

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