Interim Results
Shanks Group PLC
08 November 2006
8 November 2006
Company Announcement - Shanks Group plc
Shanks Group plc ('Shanks') a leading European independent waste management
group, announces its interim results for the six months ended September 2006
Financial highlights: solid performance
• 10% increase in turnover to £247m (2005/6: £225m*);
• 13% increase in Headline Profit (profit from continuing operations before
exceptional items and tax) to £19.7m (2005/6: £17.5m*);
• Profit before tax from continuing operations of £22.0m (2005/6: £12.5m*)
reflecting a £2.3m non-cash credit (2005/6: £5.0m non-cash charge) for the
exceptional change in fair value of financial instruments;
• 14% increase in adjusted basic earnings per share (from continuing
operations before exceptional items) to 5.6p (2005/6: 4.9p*);
• Maintained interim dividend of 1.9p per share.
Business highlights:
• Innovative Mechanical Biological Treatment (MBT) facilities at East London
Waste Authority (ELWA) and Dumfries & Galloway (D&G) proceeding to plan;
• ELWA is a landmark project for treating domestic waste in an
environmentally friendly manner whilst producing secondary fuel;
• Acquisitions of both Smink Beheer BV in the Netherlands and the waste and
recycling activities of John W Hannay in the UK performing to our plans;
• Improved operating profits in Belgium and the Netherlands;
• Reduced contribution from Scottish PFI landfills;
• Improved results from UK collections and recycling.
Commenting on the results, Michael Averill, Group Chief Executive, said:
'This strong performance in the first half of 2006/7, particularly in Benelux,
gives us confidence in achieving our expectations for the full year.
'Our strategy of employing technologies for increased recycling and recovery in
the UK is starting to bear fruit. Regular increases in UK landfill tax, coupled
with the increasing impact of European legislation, will further stimulate
progress.'
CHIEF EXECUTIVE'S STATEMENT
I am pleased to report a strong performance in the first half of the 2006/7
year. The Group's Headline Profit (profit from continuing operations before
exceptional items and tax) improved 13% to £19.7m (2005/6: £17.5m*). The tax
rate on Headline Profit remained at 34%. Adjusted basic earnings per share
(from continuing operations before exceptional items) were up 14% to 5.6p (2005/
6: 4.9p*). Your Board has maintained the interim dividend at 1.9p per share.
For continuing operations, Group turnover increased to £247m (2005/6: £225m*),
profit after tax was £14.7m (2005/6: £8.0m*) and basic earnings per share were
6.3p (2005/6: 3.4p*). In total, profit after tax was £14.7m (2005/6: £13.8m*
including discontinued operations) and basic earnings per share were 6.3p (2005/
6: 5.9p*). Profit before tax from continuing operations was £22.0m (2005/6:
£12.5m*) after an exceptional £2.3m non-cash credit for the change in fair value
of financial instruments (2005/6: £5.0m non-cash charge).
Divisional Review
United Kingdom
Operating profit was down £0.2m at £2.0m (2005/6: £2.2m*) following lower
contributions from Contaminated Land Services and the Private Finance Initiative
(PFI) activities. Contaminated Land Services enjoyed a particularly strong
trading spell in the first half of last year. Collections, recycling and joint
ventures continued to improve.
The recent addition of the waste management and recycling activities of John W
Hannay & Co Limited has considerably strengthened our position in Scotland
adding facilities which are already demonstrating their worth. More waste is
being diverted from landfill to more cost effective outlets. All waste
collected in the region is now pre-treated prior to final disposal.
Increasingly this business model will pervade as landfill tax increases and the
requirement to pre-treat all waste prior to landfill in October 2007 approaches.
Our landfill joint ventures have continued to perform well in the period
benefiting from increased volumes.
Progress is proceeding according to plan on the construction of our innovative
Mechanical Biological Treatment (MBT) facilities, which are used on the East
London Waste Authority (ELWA) and the Dumfries & Galloway (D&G) PFI contracts.
The first of the two facilities at ELWA is now fully operational with the
second, and that at D&G, due for completion in 2007. Additionally the ELWA
contract will benefit from a price rise in summer 2007 which will address the
current predicted squeeze in profits.
Stricter interpretation of landfill regulations by the Scottish Environmental
Protection Agency (SEPA) is causing costs to rise significantly on the former
local authority landfill sites now managed by the Group within the D&G and
Argyll & Bute contracts. Lower investment returns will result and a mitigation
programme has commenced. The MBT facility in the D&G contract is not affected
by this issue.
Belgium
Operating profit improved 13% on last year's already strong performance to £9.4m
(2005/6: £8.3m). Both non-hazardous and hazardous waste activities showed a
marked improvement across all three regions.
Our landfill in Wallonia continued to benefit from bonus volumes diverted from
public sector incinerators experiencing operational difficulties. There was
also a full six month benefit from the enlarged Liege municipal collection
contract which commenced in July 2005.
The Netherlands
Operating profit in the Netherlands improved 14% to £13.9m (2005/6: £12.2m*).
The acquisition of Smink Beheer BV on 30 June 2006 has expanded our geographical
coverage eastwards from our strong presence in the Randstadt area. The
performance in the first three months is encouraging with results ahead of our
acquisition plan.
Profits from the existing solid waste businesses have improved. In June 2005
disposal costs rose sharply as the result of the introduction of the landfill
ban in Germany, depressing results. The effect of these cost increases had been
substantially mitigated by the start of the current year by increased recycling
and price increases.
Both our industrial cleaning business, Reym, and our hazardous waste treatment
activity, ATM, performed well. Reym generated a significant improvement on
last year in part due to increased activity in the petrochemical sector,
stimulated by high oil prices. The result from ATM was down on last year as a
consequence of an earlier major maintenance shut down.
Central Services
Central Services costs increased to £2.6m (2005/6: £2.3m) reflecting additional
charges for share based payments.
Financing
Since 31 March 2006 principal Group borrowings relating to the core business
increased by £45m to £121m (31 March 2006: £76m) due principally to the
acquisitions of Smink Beheer BV in the Netherlands and the waste management and
recycling activities of John W Hannay & Co Limited in the UK. Following
continued investment, borrowings in the PFI companies increased by £15m to £121m
(31 March 2006: £106m), bringing total debt to £242m (31 March 2006: £182m),
before adjustment for the fair value of financial instruments.
Outlook
Although UK local authority contract tender flow was slow in the period,
activity has recently increased. Interest in our innovative MBT technology,
developed with Italian partner Ecodeco, is high following the successful start
up of the ELWA facilities and confirmed demand for the Secondary Recovered Fuel
(SRF) from the MBT process.
The evolution of the UK market for commercial and industrial waste is
continuing, as predicted, with further rises in landfill tax and the requirement
next year to pre-treat all waste before landfill. We are confident that our
continental business model of high recycling and recovery will have growing
relevance in the UK.
Contaminated Land Services activity is improving especially with the prospect of
remediation projects in East London ahead of the 2012 Olympic Games.
The Group is pleased with its recent Dutch acquisition of Smink Beheer BV and
continues to search for similar opportunities. Trading in the Benelux area is
robust and is expected to remain so for the balance of the year. Consequently
the Board is confident in achieving its expectations for 2006/7.
M C E Averill
Group Chief Executive
* restated (see Note 1 to the interim financial statements)
Notes:
1. Management will be holding an analyst presentation at 9:30 am today, 8
November at the offices of ABN AMRO: 250 Bishopsgate, London, EC2M 4AA.
2. A copy of this announcement is available on the Company's website
(www.shanks.co.uk) as will the presentation being made today to financial
institutions.
3. Copies of the Interim Report will be posted to shareholders by 24 November
2006, after which they will be available, on request from the Company at
Astor House, Station Road, Bourne End, Buckinghamshire, SL8 5YP, or on the
Company's website.
4. The interim dividend of 1.9 pence per share will be paid on 10 January 2007
to shareholders on the register at close of business on 15 December 2006.
For further information contact:
Shanks Group plc on 8 November: telephone 020 7678 0383
Adrian Auer; Chairman thereafter, telephone: 01628 554920
Michael Averill; Group Chief Executive
Fraser Welham; Group Finance Director
Citigate Dewe Rogerson telephone: 020 7282 2945
Ginny Pulbrook
Consolidated Income Statement.
First Half ended 30 September 2006
2006/7 2005/6 2005/6
First First Full
Half Half Year
restated
Note £m £m £m
________________________________________________________________________________
Continuing operations
Revenue 2 246.8 224.7 442.5
Cost of sales (200.4) (180.8) (358.6)
________________________________________________________________________________
Gross profit 46.4 43.9 83.9
________________________________________________________________________________
Administrative expenses (23.7) (23.5) (45.0)
________________________________________________________________________________
Operating profit 2 22.7 20.4 38.9
________________________________________________________________________________
Finance charges:
Interest payable and other (8.1) (7.0) (12.7)
Interest receivable 5.1 4.1 7.8
Change in fair value of financial instruments 2.3 (5.0) (3.7)
________________________________________________________________________________
Total finance charges 2 (0.7) (7.9) (8.6)
________________________________________________________________________________
Profit before tax from continuing operations 2 22.0 12.5 30.3
Tax 3 (7.3) (4.5) (10.5)
________________________________________________________________________________
Profit after tax for the period from
continuing operations 2 14.7 8.0 19.8
Discontinued operations
Profit after tax for the period from
discontinued operations 2 - 5.8 10.6
________________________________________________________________________________
Profit for the period 14.7 13.8 30.4
Dividends 4 (8.9) (8.9) (13.4)
________________________________________________________________________________
Retained profit for the period 5.8 4.9 17.0
================================================================================
Dividend per share 4 1.9p 1.9p 5.7p
Earnings per share 5
- basic 6.3p 5.9p 13.0p
- diluted 6.2p 5.9p 12.9p
Earnings per share from continuing operations 5
- basic 6.3p 3.4p 8.5p
- diluted 6.2p 3.4p 8.4p
================================================================================
The interim financial information and related comparative information is
unaudited.
2005/6 first half comparative information has been restated to reflect the
reclassification of operations discontinued in the second half of 2005/6 and the
change in the accounting treatment of PFI contracts made between interim and
final reporting in 2005/6.
Consolidated Statement of Recognised Income and Expense.
First Half ended 30 September 2006
2006/7 2005/6 2005/6
First First Full
Half Half Year
restated
£m £m £m
________________________________________________________________________________
Exchange (loss) gain on translation of
foreign operations (4.2) (1.3) 1.9
Actuarial loss on defined benefit pension schemes (1.0) (2.4) (0.6)
________________________________________________________________________________
(5.2) (3.7) 1.3
Deferred tax in respect of the above 0.3 0.8 0.2
________________________________________________________________________________
Net (expense) income recognised directly in equity (4.9) (2.9) 1.5
Profit for the period 14.7 13.8 30.4
________________________________________________________________________________
Total recognised income and expense for the period 9.8 10.9 31.9
================================================================================
The interim financial information and related comparative information is
unaudited.
2005/6 first half comparative information has been restated to reflect the
change in the accounting treatment of PFI contracts made between interim and
final reporting in 2005/6.
Consolidated Balance Sheet.
At 30 September 2006
At 30 At 30 At 31
September September March
2006 2005 2006
restated
Note £m £m £m
________________________________________________________________________________
Non-current assets
Intangible assets 199.7 139.3 144.4
Property, plant and equipment 194.3 175.5 183.6
Loans to joint ventures - 1.1 0.6
Other investments 2.0 1.0 2.3
Trade and other receivables 138.2 100.1 120.1
Deferred tax assets 13.7 13.0 15.0
________________________________________________________________________________
547.9 430.0 466.0
________________________________________________________________________________
Current assets
Inventories 5.2 6.3 9.0
Trade and other receivables 105.5 116.8 97.3
Current tax receivable 1.4 6.0 1.4
Cash and cash equivalents 63.1 54.7 59.4
________________________________________________________________________________
175.2 183.8 167.1
________________________________________________________________________________
Total assets 723.1 613.8 633.1
________________________________________________________________________________
Current liabilities
Borrowings (6.0) (3.1) (10.9)
Trade and other payables (118.9) (114.3) (114.1)
Current tax payable (13.3) (8.5) (8.3)
Provisions 7 (7.7) (10.8) (9.1)
________________________________________________________________________________
(145.9) (136.7) (142.4)
________________________________________________________________________________
Non-current liabilities
Borrowings (304.3) (236.3) (237.3)
Other non-current liabilities (0.1) (1.1) (0.7)
Deferred tax liabilities (30.6) (15.2) (17.5)
Provisions 7 (21.5) (14.0) (16.3)
Retirement benefit obligations (10.8) (19.2) (10.3)
________________________________________________________________________________
(367.3) (285.8) (282.1)
________________________________________________________________________________
Total liabilities (513.2) (422.5) (424.5)
________________________________________________________________________________
Net assets 209.9 191.3 208.6
================================================================================
Equity
Share capital 23.5 23.4 23.5
Share premium 93.8 93.4 93.7
Exchange reserve 0.8 1.8 5.0
Retained earnings 91.8 72.7 86.4
________________________________________________________________________________
Total equity 8 209.9 191.3 208.6
================================================================================
The interim financial information and related comparative information is
unaudited.
2005/6 first half comparative information has been restated to reflect the
change in the accounting treatment of PFI contracts made between interim and
final reporting in 2005/6.
Consolidated Cash Flow Statement.
First Half ended 30 September 2006
2006/7 2005/6 2005/6
First First Full
Half Half Year
restated
Note £m £m £m
________________________________________________________________________________
Net cash from operating activities 9 26.4 14.4 58.9
________________________________________________________________________________
Investing activities
Purchases of intangible assets (0.5) - (0.2)
Purchases of property, plant and equipment (14.0) (14.5) (31.9)
Disposal of property, plant and equipment 1.4 0.8 3.1
Financial asset capital advances (13.2) (21.4) (48.8)
Financial asset capital repayments 1.1 0.6 1.9
Acquisition of subsidiary and other businesses
(net of cash and debt) (54.7) (0.4) (4.2)
Net proceeds from disposal of subsidiary and
other businesses 0.2 30.1 34.0
Income received from other investments - - 0.7
________________________________________________________________________________
Net cash used in investing activities (79.7) (4.8) (45.4)
________________________________________________________________________________
Financing activities
Interest paid (7.6) (6.2) (12.6)
Interest received 5.1 3.0 7.8
Proceeds from issue of shares 0.1 0.2 0.6
Dividends paid (8.9) (8.9) (13.4)
Increase in borrowings 67.5 26.1 32.2
Increase in obligations under finance leases 2.3 - 1.8
Repayments of obligations under finance leases (1.5) (1.6) (3.0)
________________________________________________________________________________
Net cash flow from financing activities 57.0 12.6 13.4
________________________________________________________________________________
Net increase in cash and cash equivalents 3.7 22.2 26.9
Cash and cash equivalents at beginning of period 59.4 32.5 32.5
________________________________________________________________________________
Cash and cash equivalents at end of period 63.1 54.7 59.4
================================================================================
The interim financial information and related comparative information is
unaudited.
2005/6 first half comparative information has been restated to reflect the
reclassification of operations discontinued in the second half of 2005/6 and the
change in the accounting treatment of PFI contracts made between interim and
final reporting in 2005/6.
Consolidated Movement in Net Debt.
First Half ended 30 September 2006
2006/7 2005/6 2005/6
First First Full
Half Half Year
restated
£m £m £m
________________________________________________________________________________
Net increase in cash and cash equivalents 3.7 22.2 26.9
Increase in borrowings and finance leases (68.3) (24.5) (31.0)
Amortisation of loan fees (0.2) (0.3) (0.4)
Exchange gain (loss) 4.1 1.6 (1.9)
Change in fair value of interest rate swaps 2.3 (5.0) (3.7)
________________________________________________________________________________
Movement in net debt (58.4) (6.0) (10.1)
Net debt at beginning of period (188.8) (178.7) (178.7)
________________________________________________________________________________
Net debt at end of period (247.2) (184.7) (188.8)
================================================================================
The interim financial information and related comparative information is
unaudited.
2005/6 first half comparative information has been restated to reflect the
reclassification of operations discontinued in the second half of 2005/6 and the
change in the accounting treatment of PFI contracts made between interim and
final reporting in 2005/6.
Consolidated Analysis of Net Debt.
At 30 September 2006
At 30 At 30 At 31
September September March
2006 2005 2006
restated
£m £m £m
________________________________________________________________________________
Core Business net debt 120.8 92.4 75.9
Private Finance Initiative net debt 121.3 83.6 105.5
________________________________________________________________________________
Total Group net debt before fair value of
interest rate swaps 242.1 176.0 181.4
Fair value of Private Finance Initiative
interest rate swaps 5.1 8.7 7.4
________________________________________________________________________________
Total Group net debt 247.2 184.7 188.8
================================================================================
The interim financial information and related comparative information is
unaudited.
2005/6 first half comparative information has been restated to reflect the
change in the accounting treatment of PFI contracts made between interim and
final reporting in 2005/6.
Notes to the Interim Financial Statements.
1 Basis of preparation of the interim financial statements and status of
financial information
The interim financial information, which was approved by the Directors on 8
November 2006, is unaudited but has been reviewed by the auditors and their
report is set out at the end of this report. The interim financial statements
have been prepared in accordance with the listing rules of the Financial
Services Authority and use the International Financial Reporting Standards
(IFRS) accounting policies set out in the published financial statements of the
Group for the year ended 31 March 2006.
The financial information for the year ended 31 March 2006 does not comprise
financial statements within the meaning of section 240 of the Companies Act
1985, and has been extracted from the Group's 2006 published financial
statements which have been filed with the Registrar of Companies. The auditors'
opinion on these accounts was unqualified and did not contain a statement made
under section 237(2) or (3) of the Companies Act 1985.
The comparative information for the six months ended 30 September 2005 has been
restated to reflect the final impact of the transition from UK GAAP to IFRS.
The Group issued its Interim Report 2005/6 based on the provisional IFRS
restatement issued on 17 October 2005. There was a change from the provisional
restatement in relation to the accounting treatment of PFI contracts, which are
now accounted for as financial assets. For continuing operations for the six
months ended 30 September 2005, operating profit was reduced by £1.7m, net
interest expense was reduced by £1.3m, profit before tax was reduced by £0.4m;
profit after tax and the retained profit for the period were reduced by £0.3m.
On the balance sheet, intangible assets were reduced by £20.7m, property, plant
and equipment was reduced by £71.4m, non-current trade and other receivables
were increased by £100.1m, deferred tax assets were reduced by £4.8m, current
trade and other receivables were reduced by £1.6m and borrowings were reduced by
£1.6m. Overall retained earnings brought forward at 31 March 2005 were
increased by £0.3m and closing net assets and total equity were unchanged.
The comparative information for the six months ended 30 September 2005 has also
been restated to reflect the reclassification of operations discontinued in the
second half of 2005/6. For continuing operations, operating profit and profit
before tax have been increased by £0.3m and profit after tax increased by £0.2m.
Equivalent information for discontinued operations has been restated
accordingly. There is no impact on the balance sheet.
2 Segmental analysis
Waste management business shown by management responsibility and geographical
area:
2006/7 2005/6 2005/6
First First Full
Half Half Year
restated
£m £m £m
________________________________________________________________________________
(a) Continuing operations
Revenue United Kingdom 69.0 66.8 126.1
Belgium 61.8 55.4 110.2
Netherlands 116.0 102.5 206.2
___________________________
Total revenue 246.8 224.7 442.5
___________________________
Group 239.5 218.3 429.9
Share of joint ventures 7.3 6.4 12.6
________________________________________________________________________________
Total revenue 246.8 224.7 442.5
================================================================================
Operating profit United Kingdom 2.0 2.2 4.1
Belgium 9.4 8.3 15.7
Netherlands 13.9 12.2 23.5
Central Services (2.6) (2.3) (4.4)
___________________________
Total operating profit 22.7 20.4 38.9
___________________________
Group 20.7 18.6 35.7
Share of joint ventures 2.0 1.8 3.2
________________________________________________________________________________
Total operating profit 22.7 20.4 38.9
================================================================================
Finance charges Interest payable and other (8.1) (7.0) (12.7)
Interest receivable 5.1 4.1 7.8
Change in fair value of
financial instruments 2.3 (5.0) (3.7)
________________________________________________________________________________
Total finance charges (0.7) (7.9) (8.6)
________________________________________________________________________________
Profit before tax from continuing operations 22.0 12.5 30.3
Tax (7.3) (4.5) (10.5)
________________________________________________________________________________
Profit after tax for the period from continuing
operations 14.7 8.0 19.8
================================================================================
Intersegment sales are not significant.
2006/7 2005/6 2005/6
First First Full
Half Half Year
restated
£m £m £m
________________________________________________________________________________
(b) Discontinued operations
Revenue United Kingdom - 18.4 18.4
Netherlands - 4.9 4.9
________________________________________________________________________________
Total revenue - 23.3 23.3
================================================================================
Operating profit (loss) United Kingdom - 0.7 0.7
Netherlands - (0.3) (0.3)
________________________________________________________________________________
Total operating profit - 0.4 0.4
________________________________________________________________________________
Profit on disposal of operations (United Kingdom) - 6.5 8.7
________________________________________________________________________________
Finance charges Interest payable - (0.6) (0.6)
________________________________________________________________________________
Profit before tax from discontinued operations - 6.3 8.5
Tax - (0.5) 2.1
________________________________________________________________________________
Profit after tax for the period from discontinued
operations - 5.8 10.6
================================================================================
Interest payable has been allocated to discontinued operations by applying the
external interest rate to the net operating assets employed.
(c) Analysis of net assets At 30 At 30 At 31
September September March
2006 2005 2006
restated
£m £m £m
________________________________________________________________________________
United Kingdom Gross assets 204.7 167.8 175.0
Gross liabilities (46.8) (67.9) (50.9)
___________________________
Net operating assets 157.9 99.9 124.1
___________________________
Belgium Gross assets 72.8 73.0 73.8
Gross liabilities (43.8) (42.5) (42.4)
___________________________
Net operating assets 29.0 30.5 31.4
___________________________
Netherlands Gross assets 365.8 296.0 307.9
Gross liabilities (59.4) (39.3) (47.8)
___________________________
Net operating assets 306.4 256.7 260.1
___________________________
Central Services Gross assets 1.6 3.3 0.6
Gross liabilities (9.0) (9.7) (9.4)
___________________________
Net operating assets (7.4) (6.4) (8.8)
________________________________________________________________________________
Total Gross assets 644.9 540.1 557.3
Gross liabilities (159.0) (159.4) (150.5)
________________________________________________________________________________
Net operating assets 485.9 380.7 406.8
Corporation tax (11.9) (2.5) (6.9)
Deferred tax (16.9) (2.2) (2.5)
Net debt (247.2) (184.7) (188.8)
________________________________________________________________________________
Net assets 209.9 191.3 208.6
================================================================================
2005/6 first half comparative information has been restated to reflect the
reclassification of operations discontinued in the second half of 2005/6 and the
change in the accounting treatment of PFI contracts made between interim and
final reporting in 2005/6.
3 Tax
2006/7 2005/6 2005/6
First First Full
Half Half Year
restated
£m £m £m
________________________________________________________________________________
Current tax UK corporation tax at 30% (2005/6: 30%)
- Current year 1.4 0.5 1.9
- Prior year - 1.0 (3.2)
Double tax relief (1.4) - (2.2)
Overseas tax
- Current year 5.3 4.6 10.7
- Prior year (0.1) - (0.1)
________________________________________________________________________________
Total current tax charge 5.2 6.1 7.1
________________________________________________________________________________
Deferred tax
- Current year 2.2 (1.1) 1.6
- Prior year (0.1) - (0.3)
________________________________________________________________________________
Total deferred tax charge (credit) 2.1 (1.1) 1.3
________________________________________________________________________________
Tax charge for the period 7.3 5.0 8.4
================================================================================
Total tax charge - continuing operations 7.3 4.5 10.5
Total tax charge (credit) - discontinued operations - 0.5 (2.1)
________________________________________________________________________________
Total charge for period 7.3 5.0 8.4
================================================================================
The tax rate for the first half of the current year is based on the estimated
charge for the full year.
4 Dividends
2006/7 2005/6 2005/6
First First Full
Half Half Year
£m £m £m
________________________________________________________________________________
Amounts recognised as distributions to equity
holders in the period:
Interim dividends - - 4.5
Final dividends 8.9 8.9 8.9
________________________________________________________________________________
Total dividends 8.9 8.9 13.4
================================================================================
An interim dividend of 1.9p per share (2005/6: 1.9p per share) was approved by
the Board on 8 November 2006 and will be paid on 10 January 2007 to shareholders
on the register at close of business on 15 December 2006. The final dividend
for 2005/6 of 3.8p per share (2004/5: 3.8p per share) was approved by the
Shareholders at the Annual General Meeting on 27 July 2006 and was paid on 4
August 2006.
5 Earnings per share
2006/7 2005/6 2005/6
First First Full
Half Half Year
restated
________________________________________________________________________________
Number of shares
Weighted average number of ordinary shares for
basic earnings per share 234.7m 234.2m 234.3m
Effect of share options in issue 0.6m 1.0m 0.8m
________________________________________________________________________________
Weighted average number of ordinary shares for
diluted earnings per share 235.3m 235.2m 235.1m
================================================================================
(a) Calculation of basic and adjusted basic earnings per share
Earnings for basic earnings per share being
profit for the period (£m) 14.7 13.8 30.4
Earnings from discontinued operations being
profit for the period from discontinued
operations (£m) - (5.8) (10.6)
________________________________________________________________________________
Earnings for basic earnings per share being
profit for the period from continuing
operations (£m) 14.7 8.0 19.8
Change in fair value of interest rate swaps
(net of tax) (£m) (1.6) 3.5 2.6
________________________________________________________________________________
Earnings for adjusted basic earnings per share (£m) 13.1 11.5 22.4
________________________________________________________________________________
Basic earnings per share (pence) 6.3p 5.9p 13.0p
Basic earnings per share from continuing
operations (pence) 6.3p 3.4p 8.5p
Basic earnings per share from discontinued
operations (pence) - 2.5p 4.5p
Adjusted basic earnings per share from continuing
operations (pence) (see note below) 5.6p 4.9p 9.6p
================================================================================
(b) Calculation of diluted earnings per share
Earnings for basic earnings per share being profit
for the period (£m) 14.7 13.8 30.4
Effect of dilutive potential ordinary shares (£m) - - -
________________________________________________________________________________
Earnings for diluted earnings per share (£m) 14.7 13.8 30.4
Earnings from discontinued operations (£m) - (5.8) (10.6)
________________________________________________________________________________
Earnings for diluted earnings per share from
continuing operations (£m) 14.7 8.0 19.8
________________________________________________________________________________
Diluted earnings per share (pence) 6.2p 5.9p 12.9p
Diluted earnings per share on continuing
operations (pence) 6.2p 3.4p 8.4p
Diluted earnings per share on discontinued
operations (pence) - 2.5p 4.5p
================================================================================
2005/6 first half comparative information has been restated to reflect the
reclassification of operations discontinued in the second half of 2005/6 and the
change in the accounting treatment of PFI contracts made between interim and
final reporting in 2005/6.
The Directors believe that adjusting earnings per share for the effect of
exceptional items enables comparison with historical data calculated on the same
basis. Exceptional items are those items that need to be disclosed separately
on the face of the income statement because of their size or incidence. Changes
in the fair values of financial instruments on interest rate swaps that the
Group is required to enter into in relation to its PFI arrangements are excluded
as they do not reflect commercial reality.
6 Acquisitions
(a) On 30 June 2006 the Group acquired 100% of the share capital of Smink
Beheer B.V. in the Netherlands, for a total consideration of £61.1m. The
aggregate book value of the assets and liabilities acquired and the provisional
fair value to the Group, pending completion of the evaluation of the business,
were as follows:
Book Fair Provisional
value value fair
adjustment value
£m £m £m
________________________________________________________________________________
Intangible assets 1.9 25.0 26.9
Property, plant and equipment 9.5 3.6 13.1
Inventories 0.1 - 0.1
Trade receivables 6.3 - 6.3
Cash 16.8 - 16.8
Trade payables (11.6) 3.3 (8.3)
Deferred tax liabilities (1.0) (12.3) (13.3)
Provisions (5.2) 0.1 (5.1)
________________________________________________________________________________
16.8 19.7 36.5
Provisional goodwill 24.6
________________________________________________________________________________
61.1
================================================================================
Satisfied by:
Cash consideration (including costs) 59.5
Deferred consideration 1.6
________________________________________________________________________________
Total consideration (including costs) 61.1
================================================================================
(b) On 1 July 2006 the Group acquired the waste management and recycling
activities of John W Hannay & Co Limited in the United Kingdom, for a total
consideration of £9.0m. The aggregate book value of the assets and liabilities
acquired and the provisional fair value to the Group, pending completion of the
evaluation of the business, were as follows:
Book Fair Provisional
value value fair
adjustment value
£m £m £m
________________________________________________________________________________
Property, plant and equipment 2.1 0.7 2.8
Borrowings (0.5) - (0.5)
________________________________________________________________________________
1.6 0.7 2.3
Provisional goodwill 6.7
________________________________________________________________________________
Cash consideration (including costs) 9.0
================================================================================
(c) During the period the Group completed the acquisition of other tuck-in
businesses. The aggregate book value of the assets and liabilities acquired and
the provisional fair value to the Group, pending completion of the evaluation of
the businesses, were as follows:
Book Fair Provisional
value value fair
adjustment value
£m £m £m
________________________________________________________________________________
Property, plant and equipment 0.7 - 0.7
________________________________________________________________________________
0.7
Provisional goodwill 1.8
________________________________________________________________________________
Cash consideration (including costs) 2.5
================================================================================
7 Provisions
Site restoration
and aftercare Other Total
£m £m £m
________________________________________________________________________________
At 31 March 2006 17.2 8.2 25.4
Provided - cost of sales 1.0 - 1.0
- finance charges 0.3 - 0.3
Acquisitions 5.0 0.1 5.1
Utilised (1.5) (0.7) (2.2)
Exchange rate movements (0.4) - (0.4)
________________________________________________________________________________
At 30 September 2006 21.6 7.6 29.2
================================================================================
Current 1.3 6.4 7.7
Non-current 20.3 1.2 21.5
________________________________________________________________________________
At 30 September 2006 21.6 7.6 29.2
================================================================================
Current 2.3 6.8 9.1
Non-current 14.9 1.4 16.3
________________________________________________________________________________
At 31 March 2006 17.2 8.2 25.4
================================================================================
Current 2.8 8.0 10.8
Non-current 13.0 1.0 14.0
________________________________________________________________________________
At 30 September 2005 15.8 9.0 24.8
================================================================================
8 Reconciliation of changes in total equity
2006/7 2005/6 2005/6
First First Full
Half Half Year
restated
£m £m £m
________________________________________________________________________________
Opening total equity as at 31 March 208.6 189.0 189.0
Profit for the period 14.7 13.8 30.4
Dividends paid (see note 4) (8.9) (8.9) (13.4)
Exchange (loss) gain on translation of foreign
operations (4.2) (1.3) 1.9
Loss on defined benefit pension schemes (net of tax) (0.7) (1.6) (0.4)
Share based payments 0.3 0.1 0.5
Issue of share capital 0.1 0.2 0.6
________________________________________________________________________________
Closing total equity 209.9 191.3 208.6
================================================================================
9 Net cash flow
2006/7 2005/6 2005/6
First First Full
Half Half Year
restated
£m £m £m
________________________________________________________________________________
(a) Continuing operations
Net cash from operating activities
Operating profit from continuing operations 22.7 20.4 38.9
Amortisation of intangible assets 0.7 0.3 0.5
Depreciation of property, plant and equipment 14.5 15.0 28.7
Charge for long term landfill provisions 1.0 0.2 0.5
________________________________________________________________________________
Earnings before interest, tax, depreciation and
amortisation (EBITDA) 38.9 35.9 68.6
Gain on disposal of property, plant and equipment (0.6) - (1.3)
Net decrease in provisions (2.7) (1.7) (4.4)
Share based payments 0.3 0.2 0.5
________________________________________________________________________________
Operating cash flows before movement in working
capital 35.9 34.4 63.4
Decrease (increase) in inventories 3.9 2.0 (1.2)
(Increase) decrease in receivables (7.9) (8.8) 7.9
Decrease in payables (2.8) (11.6) (10.9)
________________________________________________________________________________
Cash generated by operations 29.1 16.0 59.2
Income taxes paid (2.7) (5.7) (1.5)
________________________________________________________________________________
Net cash from operating activities 26.4 10.3 57.7
================================================================================
Investing activities
Purchases of intangible assets (0.5) - (0.2)
Purchases of property, plant and equipment (14.0) (13.0) (30.7)
Disposal of property, plant and equipment 1.4 0.8 3.1
Financial asset capital advances (13.2) (21.5) (48.8)
Financial asset capital repayments 1.1 0.7 1.9
Acquisitions of subsidiary and other businesses
(net of cash and debt) (54.7) (0.4) (4.2)
Net proceeds from disposal of subsidiary and
other businesses 0.2 30.1 34.0
Income received from other investments - - 0.7
________________________________________________________________________________
Net cash used in investing activities (79.7) (3.3) (44.2)
================================================================================
(b) Discontinued operations
Net cash from operating activities
Operating profit from discontinued operations - 0.4 0.4
Depreciation of property, plant and equipment - 2.0 2.1
Net decrease in provisions - - (2.8)
________________________________________________________________________________
Operating cash flows before movement in working
capital - 2.4 (0.3)
Increase in inventories - (0.1) (0.4)
Decrease in receivables - 1.4 1.4
Increase in payables - 0.4 0.5
________________________________________________________________________________
Cash generated by operations - 4.1 1.2
________________________________________________________________________________
Net cash from operating activities - 4.1 1.2
================================================================================
Investing activities
Purchases of property, plant and equipment - (1.5) (1.2)
________________________________________________________________________________
Net cash used in investing activities - (1.5) (1.2)
================================================================================
(c) Total Group operations
Net cash from operating activities
Operating profit from all operations 22.7 20.8 39.3
Amortisation of intangible assets 0.7 0.3 0.5
Depreciation of property, plant and equipment 14.5 17.0 30.8
Charge for long term landfill provisions 1.0 0.2 0.5
________________________________________________________________________________
Earnings before interest, tax, depreciation and
amortisation (EBTIDA) 38.9 38.3 71.1
Gain on disposal of property, plant and equipment (0.6) - (1.3)
Net decrease in provisions (2.7) (1.7) (7.2)
Share based payments 0.3 0.2 0.5
________________________________________________________________________________
Operating cash flows before movement in working
capital 35.9 36.8 63.1
Decrease (increase) in inventories 3.9 1.9 (1.6)
(Increase) decrease in receivables (7.9) (7.4) 9.3
Decrease in payables (2.8) (11.2) (10.4)
________________________________________________________________________________
Cash generated by operations 29.1 20.1 60.4
Income taxes paid (2.7) (5.7) (1.5)
________________________________________________________________________________
Net cash from operating activities 26.4 14.4 58.9
================================================================================
Investing activities
Purchases of intangible assets (0.5) - (0.2)
Purchases of property, plant and equipment (14.0) (14.5) (31.9)
Disposal of property, plant and equipment 1.4 0.8 3.1
Financial asset capital advances (13.2) (21.5) (48.8)
Financial asset capital repayments 1.1 0.7 1.9
Acquisitions of subsidiary and other businesses
(net of cash and debt) (54.7) (0.4) (4.2)
Net proceeds from disposal of subsidiary and
other businesses 0.2 30.1 34.0
Income received from other investments - - 0.7
________________________________________________________________________________
Net cash used in investing activities (79.7) (4.8) (45.4)
================================================================================
Independent Auditors' Review Report to Shanks Group plc.
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 September 2006 which comprises the consolidated balance
sheet as at 30 September 2006 and the related consolidated income statement,
consolidated statement of recognised income and expense, consolidated cash flow
statement, consolidated movement in net debt, consolidated analysis of net debt
and related notes. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Listing
Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
This interim report has been prepared in accordance with the basis set out in
Note 1 to the interim financial statements.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of Shanks Group plc management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the disclosed accounting
policies have been applied. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit and therefore provides a lower level
of assurance. Accordingly we do not express an audit opinion on the financial
information. This report, including the conclusion, has been prepared for and
only for the Company for the purpose of the Listing Rules of the Financial
Services Authority and for no other purpose. We do not, in producing this
report, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2006.
PricewaterhouseCoopers LLP
Chartered Accountants
London
8 November 2006
Notes:
(a) The maintenance and integrity of the Shanks Group plc web site is the
responsibility of the Directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of financial information may differ from legislation in other
jurisdictions.
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