Sale of interest in Avondale

RNS Number : 3016S

Shanks Group PLC

15 May 2009

 



Shanks Group plc

Sale of interest in Avondale

Further to the trading update on 7 April 2009, in which Shanks Group plc ('Shanks') stated that it was taking action to realise value from non-core activities, Shanks today announces that it has reached agreement for the sale of its 50% interest in Avondale Environmental Limited ('Avondale') to Landmedia Limited ('Landmedia'), its joint venture partner. As part of the transaction, Shanks is also selling to Landmedia its interest in the soil treatment facility at Kinneil Kerse for £0.5 million.  Avondale currently operates approximately 5.4m³ of consented landfill void, generating approximately 8MWh of electricity from landfill gas.

The transaction values the whole of Avondale, together with the soil treatment facility, at £61.8m. After deducting Shanks' share of net debt and site restoration provisions, and adjusting for normalised working capital, Shanks will receive cash consideration of up to £27.5 million which is payable as follows:

• £15.5 million on completion;

• £3 million on the first anniversary of completion;

• £3 million contingent on the outcome of two applications for the development of additional void at Avondale. Landmedia expects both applications to be resolved positively during 2009; and

• £6 million which will be paid over seven years, the first instalment falling due on the first anniversary of completion and in equal instalments every six-months thereafter. After the first year, Shanks will also receive a fixed rate of interest on the outstanding balance for four years, rising substantially in the final two years.

As part of the transaction, Shanks has entered into a five-year supply agreement with Avondale which guarantees a certain minimum waste tonnage at a pre-agreed price which increases annually by RPI.

The sale of Avondale is consistent with Shanks' longer-term strategy of being the preferred alternative to landfill. Shanks believes that the landfill tax regime in the UK, which is now set to continue rising until 2013, will increase the opportunities for investing in recycling and energy-from-waste projects which offer greater long-term return and growth prospects than those offered by landfill. The proceeds from the sale of Avondale reduce net debt levels and increase the financial resources available to re-invest in targeted landfill diversion projects.

In the year to 31 March 2009, Avondale made an estimated profit before tax of 

£7.9 million with net assets (unaudited) of £10.3 million.  In the year to 31 March 2009, Shanks received total dividends of £1.5 million from Avondale, including a dividend of £0.75 million which was paid on 31 March 2009.  

Enquiries:

Tom Drury, Group Chief Executive

Chris Surch, Group Finance Director

Shanks Group plc

Telephone [phone]

David Allchurch, Stephen Malthouse

Tulchan Communications

Telephone [phone]

 

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