Update on Bank Re-Financing a

RNS Number : 3009Q

Shanks Group PLC

07 April 2009

 



Shanks Group plc

Update on Bank Re-Financing and Trading

7 April 2009

Shanks Group plc, a leading European environmental company focusing on the provision of sustainable waste management solutions, today gives an update on its bank refinancing and trading.  

The Group is pleased to announce that it has signed an agreement to re-finance its £250 million core bank facility. The new facility is a Euro 360 million facility expiring in April 2012 provided by a club comprising six banks.  The Group is particularly pleased to have expanded and strengthened its core relationship-banking group in such a difficult funding market.  

The new facility is denominated in Euros, but can also be drawn in Sterling or Canadian Dollars. The cost of the facility, both in terms of the up-front arrangement fees and interest margin over LIBOR, although significantly higher than in the past, is in line with current market norms.

In the quarter to 31 March trading in our Dutch Hazardous Waste business has remained buoyant. In the Dutch Solid Waste division, contribution over the same period has reduced. This has been due to the harsh weather conditions in January and February, a reduction in construction and demolition volumes and lower recyclable material prices. In mitigation we commenced a series of cost reduction activities during the quarter.

In Belgium, although operations were also interrupted by the harsh weather conditions, overall trading remained satisfactory.  Our landfill continues to benefit from new input streams and solid waste volumes have declined slightly year-on-year; Foronex performance has improved since our Interim Management Statement on 3 February. Total Hazardous Waste has continued to show year on year growth.

In the UK, the market has stabilised and trading conditions, whilst remaining challenging, have improved from the low in November.  The restructuring announced in January is delivering the expected ongoing cost savings and the Group can expect its recycling operations to benefit from the further increase of £8 in the landfill tax from the beginning of April.

Whilst commercial closure has been reached on the Cumbria municipal waste treatment contract, the final stages of negotiations with the funding banks are taking longer than envisaged due to the difficult financial markets. The Group is however confident of reaching financial close in the coming weeks.

In Canada our first Orgaworld plant in London, Ontario is operating well. The District of York has confirmed a 20,000 tonne increase in their annual contract volumes and extended the term of their contract from ten to fifteen years. Construction work on our second facility in Ottawa is progressing on schedule.

Despite the delay to Cumbria and the challenging economic conditions, the overall underlying result for the year to 31 March 2009 is expected to be within the range of expectations.

With the new finance in place the Company can now focus all its efforts on managing through what will continue to be a challenging macro economic environment. Capital expenditure plans are under constant review and are expected to be approximately 33% less than 2008/9 levels.  Maintenance capital expenditure will be held to around 50% of depreciation with the balance comprising our already committed highest priority growth projects. Operating cost savings will be implemented in each of our core territories to mitigate the impact of lower volumes.

In addition we are taking action to realise value from non-core activities and investments to further strengthen our balance sheet.  Overall, we will continue to manage the business tightly and prudently.

The Group's preliminary results announcement for the year ended 31 March 2009 will be published on Thursday 28 May 2009.

For further information please contact:

Tom Drury, Group Chief Executive

Fraser Welham, Group Finance Director

Shanks Group plc

Telephone [phone]

David Allchurch, Stephen Malthouse

Tulchan Communications

Telephone [phone]

 

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