Shanks Group PLC Trading Update (1546W)
07 February 2017 - 6:00PM
UK Regulatory
TIDMSKS
RNS Number : 1546W
Shanks Group PLC
07 February 2017
THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION
7 February 2017
Trading Update
Shanks Group plc (LSE:SKS), the international waste-to-product
business, today issues its trading update for the period from 1
October 2016 to date.
Shanks trading performance
In the third quarter, trading has continued in line with that in
the first half, with strong underlying performances from the
Commercial and Hazardous Waste Divisions offset by continuing
market and operational challenges in the UK Municipal business.
The Commercial Division has continued to perform well. Pricing
pressure remains in end markets, but volumes have continued to show
encouraging growth compared to prior year. In addition, recyclate
prices have stabilised in general, and energy prices have shown
some improvement. The new Vliko facility, which was commissioned on
schedule in October, is performing well.
The Hazardous Waste Division has also delivered a strong
performance since the half year. Soil, water and packed chemical
waste intake volumes and throughput remained above last year.
Construction work has started on a new intake warehouse at the ATM
facility in Moerdijk that will improve both capacity and compliance
for packed chemical waste operations. The Reym industrial cleaning
business has also remained productive during the quieter winter
season with cleaning activity in line with our expectations.
The Municipal Division had a very difficult third quarter, with
the impact of both the mix and prices of the fuels that we produce
being worse than expected, particularly at ELWA. The Barnsley,
Doncaster and Rotherham (BDR) facility was also temporarily closed
to allow the main contractor to make modifications to the plant to
improve future performance. Management continue to focus closely on
this division: the recovery initiatives announced with the interim
results in November are being implemented and further plans are
being developed by the new divisional management team to improve
performance. We believe that these actions will turnaround the
business, with the benefits starting to be seen in 2017/18.
Cash levels continue to be managed closely. Core net debt
decreased by GBP109m from 30 September 2016 to GBP134m as at 31
December 2016, with the benefit of the equity raise being partly
offset by capital investment in Municipal and by settlement of
transaction costs.
Van Gansewinkel trading performance
On 29 September 2016, Shanks and Van Gansewinkel Groep BV (VGG)
announced their agreed merger. VGG has today announced a very
strong performance in its unaudited preliminary trading update for
the twelve months ended 31 December 2016, with self-help
initiatives delivering a significant increase in adjusted EBITDAE.
Revenues fell slightly, primarily due to the sale of non-core
businesses.
As with our Commercial Division, VGG experienced a slight
improvement in market conditions driven by the improving economy in
the Benelux which has more than offset the weakness in recyclate
and product prices. VGG delivered a range of cost reduction
initiatives during the year as well as initiating a top-line
revitalisation project to improve margins and the quality of
earnings. After adjustments made to align with Shanks' accounting
policies, VGG estimates it achieved a 23% increase in adjusted
EBITDAE* to EUR91.0m on revenues(#) down 3% to EUR882.5m.
Merger progress
Progress with the VGG merger continues as announced with our
interim results. The shareholders of Shanks and VGG have approved
the merger including the associated equity issue which was
completed by Shanks in November 2016. Competition clearance has
been received from the Belgian competition authorities, as
announced on 25 January 2017. We are making good progress with the
Netherlands filing and expect to complete in line with our previous
expectations.
In depth planning for the integration phase of the merger is
also underway. Works Council approval has been sought and received
for the top structure of the new organisation which will be
implemented at deal close. Both companies are finalising plans for
a successful "Day 1" of the merger and a blueprint for the first
100 days. A new brand will be launched on completion which reflects
both the history and the aspirations of the combined Group.
Outlook
The Board believes that the ongoing strong performance of
Shanks' Commercial and Hazardous Waste Divisions will continue to
offset the weaker performance from the Municipal Division. As a
result, the Board continues to expect the Group to deliver a result
for the year ending 31 March 2017 in line with its
expectations.
The Board believes that the combination of Shanks and VGG is an
excellent strategic and operational fit, bringing two strong
companies together to create a new industry leader which is focused
on the emerging circular economy. The importance of recycling and
its role in managing the world's limited resources is increasingly
recognised, with companies and governments setting stretching new
targets. The combined Group will be well positioned to meet these
needs and will be supported by underlying end markets that are
expected to improve. This positive market backdrop and the
anticipated delivery of aggregate annual risk-weighted cost
synergies of approximately EUR40m is expected to underpin strong
growth for the combined Group over the medium and long term.
Footnotes:
* Adjusted EBITDAE is defined as the VGG Group's EBITDA adjusted
to show the result before the impact of certain items that the VGG
Group considers to be non-recurring costs and exceptional
items.
(#) Note that the VGG press release refers to values on a going
concern basis which excludes businesses sold in the prior year.
For further information:
Shanks Group plc +44 1908 650582
Peter Dilnot
Toby Woolrych
Brunswick Group +44 207 404 5959
Carole Cable
Fiona Micallef-Eynaud
Notes to editors
Shanks Group is a leading international waste to product
business.
The Group uses a range of cost-effective sustainable
technologies to make valuable products from what is thrown away. We
produce green energy, recovered fuel, recycled commodities and
organic fertiliser.
Shanks meets the growing need from public and private sectors to
manage waste sustainably without damaging the environment. Our
solutions reduce greenhouse gas emissions, recycle natural
resources and limit fossil fuel dependency.
Shanks operates in three divisions that reflect its markets:
Hazardous, Commercial and Municipal. It has operations in the
Netherlands, Belgium, UK and Canada and employs around 3,500
people.
For more information, visit: www.shanksplc.com
This information is provided by RNS
The company news service from the London Stock Exchange
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