Final Results
Shanks Group PLC
31 May 2000
FINAL RESULTS 1999/2000 FROM SHANKS GROUP PLC
Shanks Group plc - Preliminary Results
Encouraging progress continues
Profit Before Tax and Goodwill : £37.5m : UP 7% from £35.1m
Amortisation
Turnover : £315m : UP 21% from £261m
Earnings Per Share (before : 11.5p : UP 3% from 11.2p
Goodwill Amortisation)
Final Dividend :3.5p (5.25p total) : UP 9% from 3.2p (4.8p)
Strong Performance in Belgium
£209m Netherlands acquisition completed
Strategically well placed for future growth
Announcing the Preliminary Results for 1999/2000 Group Chairman Mr G H Waddell
made the following statement:
The Group continued to make encouraging progress in the year to 4 April 2000.
Profits before taxation and goodwill amortisation rose to £37.5m (1998/9 :
£35.1m) an improvement of 7%. Group turnover increased by £54m to £315m as a
result of organic growth, acquisitions and the higher rate of UK landfill tax.
Profit after tax and goodwill amortisation amounted to £22.7m (1998/9 :
£22.5m).
A strong trading performance in Belgium, growth from acquisitions, and
contract gains were the major successes. Together these more than offset the
£3.2m loss of profits from expired contracts. Growth in profits, excluding
these contracts, would have been 18%. Caird Group PLC, acquired in June 1999
for £53m, has been successfully integrated.
Earnings per share before the amortisation of goodwill increased by 3% to 11.5
pence (1998/9 : 11.2 pence) on the greater number of shares in issue. Your
Board recommends a final dividend of 3.5 pence per share (1998/9 : 3.2 pence
per share). If approved by shareholders, aggregate dividends for the year will
be 5.25 pence per share, an increase of 9% on the 4.8 pence per share declared
last year.
The Group again generated a healthy cash flow from its operating activities of
£63.0m (1998/9 : £61.5m). Interest expense increased from £4.3m to £5.1m but
interest cover remained strong at eight times.
These results exclude any trading from the acquisition of the former Waste
Management Nederland (WMN) which was completed on the last working day of the
year and to which I refer below. However, the Group balance sheet reflects the
impact of the transaction and the debt of the enlarged Group at the year end
was £273m (1998/9 : £57m). This higher level of debt should be viewed within
the context of the enlarged Group's strong, and to a substantial degree,
predictable cash flows.
I am pleased to report that the Group was not affected by the millennium
computer issue.
DIVISIONAL PERFORMANCE
Waste Services - UK
UK Waste Services operating profit from continuing operations remained steady
at £30.2m, before the impact of acquisitions, despite the contract expires.
New contract gains benefited landfill profit, and both recycling losses and
administration costs were reduced. However, contributions from contaminated
land remediation and Scottish activities were lower than last year. Good
performances were achieved from acquisitions, notably Caird and Whites.
Chemical Services - UK
UK Chemical Services made an operating loss of £0.2m (1998/9 : £1.5m profit),
before the impact of the Caird acquisition. It has been a challenging year
with the UK hazardous waste market being particularly difficult with falling
volumes and prices. The original contract for the processing of meat and bone
meal (MBM) was extended for three months until March 2000. The overseas
incineration business was steady despite the banning of imports of hazardous
waste for disposal from most developed countries coming into full effect from
June 1999. Faced with these adverse market conditions, a number of cost saving
programmes have been initiated.
Waste Management - Belgium
Operating profits from our Belgium activities have grown in all three
geographic regions to £14.6m (1998/9 : £11.7m), an increase of 25%. Belgium
suffered from various health concerns over food which temporarily and
indirectly enhanced volumes, which have now ceased. Recycling activities have
benefited from higher commodity prices and inputs. The contract to collect
waste in Liege was renewed and its scope extended.
Other
Acquisitions, mainly Caird, contributed £2.4m before the amortisation of £1.4m
goodwill and £0.5m of exceptional costs. Exceptional profits of £0.5m from a
long outstanding claim and the disposal of a JV interest offset these
exceptional costs. Joint ventures, particularly Caird Bardon, performed well.
Central Services costs remained steady.
NETHERLANDS ACQUISITION
The acquisition of the former WMN represents a major step for the Group and
will expand its geographic presence in the Benelux.
The purchase price of £209m, subject to final closing balance sheet
adjustments, was financed by a vendor placement of 21m shares raising £36m net
and debt of £173m from a new banking facility.
The eight businesses purchased provide solid and hazardous waste collection,
treatment, recycling and industrial cleaning services to a wide range of
customers. It is expected that changes in the UK and Belgian regulations will
represent an opportunity to apply these acquired advanced technologies across
the Group.
These companies have a successful record of developing their activities and
are expected to expand further.
DEVELOPMENTS
In addition to the major WMN and Caird acquisitions, five smaller acquisitions
were completed during the year at a total cost of £13m. Since the year end,
the Group has acquired, subject to competition clearance, a waste business in
Belgium for £9m cash.
The £20m investment in 32MW of further electricity generating contracts
(NFFO5) underway at six locations is expected to be substantially completed
during 2000/1. Profits will begin to flow as each plant is commissioned.
The new £16m waste to energy plant to fulfil the contract for a further
190,000 tonnes of MBM is under construction at Fawley. This plant is expected
to be on stream in the 2001/2 year.
OUTLOOK
The strategic moves made by the Group during the year are entirely consistent
with European Union waste policies and clearly anticipated the recently
published National Waste Strategy for England and Wales. The Group now has a
substantial presence in mainland Europe and should benefit significantly from
these initiatives in the current year and for many years to come.
G H Waddell
CHAIRMAN
Note:
Copies of the Annual Report and Accounts for Shanks Group plc will be posted
to shareholders prior to the Annual General Meeting on 27 July 2000 and will
be available to the public from the company, on request. Subject to approval
at the AGM, the proposed final dividend of 3.5 pence per share will be paid on
7 August 2000 to shareholders on the register at close of business on 14 July
2000.
For further information contact:
Gordon Waddell; Chairman, Shanks Group plc
Michael Averill; Group Chief Executive
David Downes; Group Finance Director
or John Shaughnessy; Group Head of External Relations
On 31 May 2000, telephone: 020 7678 8000
Thereafter, telephone: 01628 524523
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Consolidated Profit and Loss Account
Year ended 4 April 2000
Note Cont Total Total
Ops Acqns 99/00 98/99
£m £m £m £m
Turnover: Group and share of jvs 302.5 18.1 320.6 263.9
Less: share of turnover of jvs (5.0) (1.1) (6.1) (3.2)
------- ------ ------ -------
Group turnover 2 7.5 17.0 314.5 260.7
Cost of sales (231.6) (15.0) (246.6) (195.6)
------- ------ ------ -------
Gross profit 65.9 2.0 67.9 65.1
Group operating profit before goodwill
and exceptional items 41.3 1.7 43.0 39.9
Exceptional costs 0.0 (0.5) (0.5) -
Goodwill amortisation 0.0 (1.4) (1.4) -
------- ------ ------ ------
Group operating profit 41.3 (0.2) 41.1 39.9
Share of operating profit of jvs 0.1 0.7 0.8 0.2
------- ------ ------ ------
Total operating profit 2 1.4 0.5 41.9 40.1
------- ------
Exceptional profit on disposal of ops 0.5 0.3
------ -------
Profit before finance charges 42.4 40.4
Finance charges - interest (5.1) (4.3)
Finance charges - unwinding of discount (1.2) (1.0)
------ -------
Profit on ordinary activities
before taxation 36.1 35.1
------ -------
Taxation 3 (13.4) (12.6)
------ -------
Profit after taxation 22.7 22.5
Equity minority interests (0.1) -
------ -------
Profit for the period 22.6 22.5
Equity dividends paid and proposed 4 (12.2) (9.6)
------ -------
Retained profit transferred to reserves 10.4 12.9
------ -------
Earnings per share
- basic 5 10.8p 11.2p
- basic before goodwill amortisation 5 11.5p 11.2p
- diluted 5 10.7p 11.1p
Dividends per share 4 5.25p 4.80p
----------------------------------------------------------------------------
Consolidated Balance Sheet
4 April 2000
Note 2000 1999
£m £m
Fixed assets
Intangible assets 173.8 1.9
Tangible assets 71.1 160.6
Investments 0.3 0.2
Investments in joint ventures:
Share of gross assets 12.9 3.2
Share of gross liabilities (10.7) (3.2)
------- -------
2.2 -
Loans to joint ventures 4.0 -
------- -------
Total investment in joint ventures 6.2 -
------- -------
451.4 163.7
Current asset
Stocks 4.4 3.0
Debtors 122.8 74.0
Cash at bank and in hand 9.3 11.5
------- -------
136.5 88.5
Creditors: amounts falling due within one year
Borrowings 14.3 2.7
Other creditors 112.1 72.1
------- -------
126.4 74.8
Net current assets 10.1 13.7
------- -------
Total assets less current liabilities 461.5 176.4
Creditors: amounts falling due after
more than one year
Borrowings 267.8 65.9
Other creditors 1.1 1.8
------- -------
268.9 67.7
Provisions for liabilities and charges 7 50.1 36.4
------- -------
142.5 72.3
------- -------
Capital and reserves
Called up share capital 23.2 20.0
Share premium account 91.7 35.7
Profit and loss account 27.3 16.4
------- -------
Equity shareholders' funds 142.2 72.1
Equity minority interests 0.3 0.2
------- -------
142.5 72.3
------- -------
-----------------------------------------------------------------------------
Consolidated Cash Flow Statement
Year ended 4 April 2000
Note 2000 1999
£m £m
Net cash inflow from operating activities 8(a) 63.0 61.5
Returns on investments and servicing
of finance
Interest paid (5.4) (3.4)
Interest received 0.3 0.3
Finance costs incurred in raising debt (1.8) -
------- -------
Net cash outflow from returns on investments and
servicing of finance (6.9) (3.1)
Tax paid (15.0) (15.8)
Capital expenditure and financial investment
Purchase of tangible fixed assets (33.1) (21.2)
Sale of tangible assets 2.9 1.7
------- -------
Net cash outflow from capital expenditure and
financial investment (30.2) (19.5)
Acquisitions and disposals
Purchase of subsidiary undertakings
and businesses 8(b) (229.5) (5.7)
Overdrafts acquired with purchase of
subsidiary undertakings (1.2) -
Purchase of and investment in jvs (2.5) -
Sale of subsidiaries and joint ventures 8(c) 0.5 0.4
------- -------
Net cash outflow from acquns and disposals (232.7) (5.3)
Equity dividends paid (10.4) (8.8)
------- -------
Net cash (outflow) inflow before use of
liquid resources and financing (232.2) 9.0
Management of liquid resources
Amounts returned from (placed on) deposit 4.7 (4.7)
Financing
Issue of ordinary share capital 22.8 0.9
Debt financing 8(d) 205.2 (3.8)
------- -------
Increase in cash 0.5 1.4
------- -------
Reconciliation of net cash flow to
movement in net debt 8(e)
Increase in cash in the year 0.5 1.4
Cash (inflow)from decrease in liquid resources (4.7) 4.7
Debt financing (including finance costs) 8(d) (203.4) 3.8
------- -------
Change in net debt resulting from cash flows (207.6) 9.9
Financing acquired with subsidiaries (3.1) -
Loan notes issued (8.8) -
Finance leases entered into - (0.7)
Exchange rate gain (loss) on net debt 3.8 (2.0)
------- -------
Movement in net debt in the year (215.7) 7.2
Net debt at 27 March 1999 (57.1) (64.3)
------- -------
Net debt at 4 April 2000 (272.8) (57.1)
------- -------
-----------------------------------------------------------------------------
Reconciliation of Movements in Shareholders' Funds
At 4 April 2000
Note 2000 1999
£m £m
Profit on ordinary activities after taxation 22.7 22.5
Equity dividends 4 (12.2) (9.6)
Minority interests (0.1) -
------- -------
10.4 12.9
Currency translation (losses) gains (4.1) 0.9
Issue of share capital 59.2 0.8
Goodwill written off to reserves on acqns 7(b) - (2.4)
Currency translation adjustment 4.6 (1.8)
------- -------
Movements in goodwill 4.6 (4.2)
------- -------
Net addition to (reduction in)equity
shareholders' funds 70.1 (10.4)
Opening equity shareholders' funds 72.1 61.7
------- -------
Closing equity shareholders' funds 142.2 72.1
------- -------
Statement of Total Recognised Gains and Losses
2000 1999
£m £m
Profit on ordinary activities after taxation 22.7 22.5
Currency translation (losses) gains on
net investments (including goodwill) (7.9) 2.5
Currency translation gains (losses) on borrowings 3.8 (1.6)
------- -------
Total recognised gains and losses relating
to the period 18.6 23.4
------- -------
-----------------------------------------------------------------------------
Notes to the Accounts
1 Status of financial statements
The figures and financial information for the year ended 4 April 2000 are
extracted from but do not constitute the statutory financial statements for
that year. Those financial statements have not yet been delivered to the
Registrar, but include the auditors' report which was unqualified and did not
contain a statement under Section 237 (2) or (3) of the Companies Act 1985.
The figures and financial information for the year ended 27th March 1999
included in the preliminary announcement are extracted from but do not
constitute the financial statements for that year. Those financial statements
have been delivered to the Registrar and included the auditors' report which
was unqualified and did not contain a statement under Section 237 (2) or (3)
of the Companies Act 1985.
2 Segmental analysis
The Group operates in one segment, Waste Management, in the UK, Belgium, and
from 4 April 2000, the Netherlands. As in previous years,the Directors are of
the opinion that it is beneficial for the user of these financial statements
to disclose the UK Waste Services and Chemical Services businesses separately.
98/99
Cont 99/00 Cont
Ops Acqns Total Ops
£m £m £m £m
(a) Turnover
Waste Services - UK 202.3 14.8 217.1 169.5
Chemical Services - UK 20.4 2.2 22.6 23.4
Waste Management - Belgium 75.5 - 75.5 68.7
------- ------- ------- -------
298.2 17.0 315.2 261.6
Intersegmental turnover (0.7) - (0.7) (0.9)
------- ------- ------- -------
297.5 17.0 314.5 260.7
------- ------- ------- -------
Share of joint venture turnover 5.0 1.1 6.1 3.2
------- ------- ------- -------
(b) Geographical analysis of turnover by customer location
United Kingdom 219.7 17.0 236.7 189.6
Europe 75.5 - 75.5 68.7
Europe and Rest of World sales by
UK Chemical Services 2.3 - 2.3 2.4
------- ------- ------- -------
297.5 17.0 314.5 260.7
(c) Operating profits
Waste Services - UK 30.2 2.1 32.3 30.2
Chemical Services - UK (0.2) 0.3 0.1 1.5
Waste Management - Belgium 14.6 - 14.6 11.7
Central Services (3.2) - (3.2) (3.3)
------- ------- ------- -------
Total operating profit before goodwill
and exceptional costs 41.4 2.4 43.8 40.1
Exceptional costs - (0.5) (0.5) -
Goodwill amortisation - (1.4) ( 1.4) -
------- ------- ------- -------
Total operating profit 41.4 0.5 41.9 40.1
------- ------- ------- -------
Waste Services - UK 30.2 0.7 30.9 30.2
Chemical Services - UK (0.2) 0.2 - 1.5
Waste Management - Belgium 14.6 - 14.6 11.7
Central Services (3.2) (0.4) (3.6) (3.3)
------- ------- ------- -------
Total operating profit 41.4 0.5 41.9 40.1
------- ------- ------- -------
-----------------------------------------------------------------------------
2 Segmental analysis (continued) At At
4 April March
2000 1999
£m £m
(d) Net assets
Waste Services - UK 155.8 92.6
Chemical Services - UK 25.4 22.0
Waste Management - Belgium 25.0 27.5
Waste Management - Netherlands 216.6 -
------- -------
Net operating assets 422.8 142.1
Unallocated net assets (liabilities):
Assets under course of construction 16.8 6.2
Net debt (272.8) (57.1)
Other unallocated net liabilities (24.3) (18.9)
------- -------
142.5 72.3
------- -------
Other unallocated net liabilities include debtors and creditors relating to
taxation and dividends, and an element of goodwill relating to the Caird
acquisition.
3 Taxation 2000 1999
£m £m
The taxation charge based on the profits for the year is made up as follows:
Corporation tax - current year
- UK 30% (1999: 31%) 7.3 7.6
- Overseas 40% (1999: 40%) 5.9 4.6
Deferred tax - current year (0.1) 0.3
Joint ventures 0.3 0.1
------- -------
13.4 12.6
------- -------
4 Equity dividends 2000 1999
£m £m
Interim dividend of 1.75p per ordinary
share (1999: 1.6p) 3.7 3.2
Proposed final dividend of 3.5p per
ordinary share (1999: 3.2p) 8.2 6.4
Dividend not provided in previous year's
financial statements 0.3 -
------- -------
12.2 9.6
------- -------
The £0.3m charge to the profit and loss account relates to last year's final
dividend on the shares issued to fund the Caird acquisition. This dividend
was not provided in the financial statements to 27 March 1999 as at that date
the shares had not been allotted.
----------------------------------------------------------------------------
5 Earnings per share
Basic earnings per share are calculated by dividing the profit for the year by
the average number of shares in issue during the year
2000 1999
Average number of shares in issue during the year 209.3m 00.0m
Basic earnings per share (eps)
£m eps £m eps
Profit for the year 22.6 10.8p 22.5 11.2p
Goodwill amortisation 1.4 0.7p - -
------- ------- ------- -------
Adjusted earnings for basic eps before
goodwill amortisation 24.0 11.5p 22.5 11.2p
Diluted earnings per share
Average number of shares in issue
during the year 209.3m 200.0m
Effect of share options in issue
during the year 1.9m 2.9m
------- -------
Adjusted average number of shares in
issue during the year 211.2m 202.9m
Diluted earnings per share 10.7p 11.1p
6 Acquisitions
Caird WMN Other Total
£m £m £m £m
Original book value 24.0 109.7 3.1 136.8
Accounting policy adjustment (1.5) (22.4) - (23.9)
Fair value adjustments (7.0) (4.1) (0.4) (11.5)
------- ------- ------- -------
Provisional fair value 15.5 83.2 2.7 101.4
Goodwill 37.2 126.0 10.1 173.3
------- ------- ------- -------
Total consideration 52.7 209.2 12.8 274.7
------- ------- ------- -------
7 Provision for liabilities and charges
Group Site Aftercare Onerous Deferred Total
restoration lease tax
£m £m £m £m £m
At 27 March 1999 14.0 16.7 0.7 5.0 36.4
Utilised (1.9) - (0.1) - (2.0)
Acquired companies 1.9 1.4 - 8.1 11.4
Provided - cost of sales 1.3 2.2 - - 3.5
- financial items 0.4 0.8 - - 1.2
- taxation - - - (0.1) (0.1)
Exchange rate movements - (0.2) - (0.1) (0.3)
------- ------- ------- ------- -------
15.7 20.9 0.6 12.9 50.1
------- ------- ------- ------- -------
8 Notes to the cash flow statement 2000 1999
£m £m
Net cash inflow from operating activities
Operating profit 41.1 39.9
Amortisation of intangible assets 1.4 -
Depreciation of fixed assets 26.3 25.8
Gain on sale of fixed assets (0.3) (0.3)
Decrease (increase) in stocks 0.1 (0.2)
(Increase) in debtors (14.0) (4.4)
Increase (decrease) in creditors 7.0 (3.1)
Increase in aftercare and site restoration provision 1.6 3.5
Other non cash movements (0.2) 0.3
------- -------
Net cash inflow from operating activities 63.0 61.5
------- -------
b) Subsidiary undertakings and businesses purchased during year
2000 1999
Total estimated consideration (274.7) (5.7)
Fair value of shares issued 36.4 -
Fair value of loan notes issued 8.8 -
------- -------
Net cash consideration (229.5) (5.7)
------- -------
c) Sale of subsidiaries and joint ventures (see note 3)
2000 1999
£m £m
Proceeds of sale less costs of sale 0.2 0.4
Claims received 0.3 -
------- -------
0.5 0.4
The settlements comprised cash.
d) Analysis of financing 2000 1999
£m £m
Long term loan advances 261.2 -
Long term loan repayments (55.0) (3.6)
Finance lease net repayments (1.0) (0.2)
------- -------
Net cash inflow (outflow)from debt 205.2 (3.8)
Finance costs (1.8) -
------- -------
203.4 (3.8)
------- -------
e) Analysis of net debt in the balance sheet
At Other At
27 March Cash Acqns non cash 4 April
1999 flows changes 2000
£m £m £m £m £m
Cash at bank and in hand 6.8 2.5 - - 9.3
Overdrafts (2.0) (2.0) - - (4.0)
--------- ------- ------- ------- ------
0.5
Short term deposits 4.7 (4.7) - - -
Debt due within one year - - (10.0) - (10.0)
Debt due after one year (65.6) (204.4) (1.5) 3.8 (267.7)
Finance leases (1.0) 1.0 (0.4) - (0.4)
-------
(203.4)
-------- ------- ------- ------- ------
Total (57.1) (207.6) (11.9) 3.8 (272.8)
-------- ------- ------- ------- ------
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