Shanks Group pre-close trading update
Waste management business Shanks Group plc has announced its pre-close trading update for the six months ending 30 September 2014, ahead of its interim results which will be released on 6 November 2014.
Shanks outlined that its Solid Waste Benelux division has faced market conditions which have deteriorated further, with weak volumes in particular in the Netherlands construction and demolition sector. It added that the competitive environment remains 'intense', with market participants seeking to gain volumes by 'aggressive pricing' in order to offset pressure on gate fees, lower volumes and prices of recyclates.
Shanks said it was 'broadly maintaining inbound volumes, albeit with an adverse mix'.
Of the other three divisions, Shanks outlined that its Hazardous Waste 'continues to invest in increased processing and storage capacity to drive sustainable growth in its ATM treatment facility'. It has recently comissioned a new unit to scrub exhaust gases from the soil plant, is set to have new water storage tanks completed by year end and the group has broken ground on its new Theemsweg site in Rotterdam. However, 'one-off operational challenges' prior to commissioning will reportedly have 'some impact on first half performance and will likely result in a broadly flat year on year performance for Hazardous Waste'.
The Organics division 'had a good first half year' and is performing as expected. Highlights include the renewal of a long-term contract with five municipalities in Flevoland using the Biocel dry anaerobic digestion (AD) facility. The group also expectes to expand capacity at its Cumbernauld AD facility in Scotland 'to meet strong local demand' and boost volumes in its London, Ontario, facility. Shanks is also bidding on two growth opportunities in Canada.
Lastl, the UK Municipal division 'performed well', and construction projects at Barnsley, Doncaster and Rotherham (BDR), and Wakefield remain on time and on budget. Shanks recently secured funding for the Derby project, where construction work has now commenced.
Cash continues to be managed 'in line with our expectations'm and net debt at the end of September 2014 is expected to be around £185 million.
Looking forward, the group says it will continue 'invest significantly' in Hazardous Waste and in its UK PFI infrastructure, and its two bids for long-term organic contracts in Canada.
It added that the Benelux Solid Waste markets are 'likely to remain challenging in the near term and will impact the Group’s financial performance in 2014/15', although the group said it was 'confident' that the actions it is taking to address these market pressures will 'support a stronger second half'.
Overall, the Board anticipates that the group’s full year results will be around 15 per cent below management’s previous expectations.
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