Shanks Group turns in better figures as market improves

The Shanks Group posted a better-than-expected six per cent rise in underlying pre-tax profit.

The company said it had seen an improvement in market conditions over the last few months.

In April, Shanks Group announced that its majority owned joint venture, 3SE, had been named preferred bidder for the Barnsley, Doncaster and Rotherham Waste Partnership, a 25-year Private Finance Initiative (PFI) residual waste management contract with a value of more than £750m.

The company, which is one of Europe’s biggest waste management businesses, plans to build a plant to turn household rubbish into fuel, which can be used to generate electricity at the Ferrybridge power station near Pontefract.

Shanks will manage more than 265,000 tonnes of municipal waste per year.

Up to 250,000 tonnes of this will be treated at Bolton Road in Rotherham, which is the site of a proposed mechanical biological treatment plant. This process will extract recyclable materials including metals, plastics and aggregates and will also convert the residual waste into a solid recovered fuel.

The fuel will be transported to a proposed multi-fuel plant being developed by SSE (Scottish and Southern Energy) at Ferrybridge.

Building work on the plants, which is subject to planning permission, is expected to begin in the spring of 2013 with the facilities due to open in 2015.

Ian Goodfellow, the company’s UK managing director, said the scheme would create between 60 and 70 full time roles over the period of the contract, with around 200 jobs being supported during the two-year construction phase.

Mr Goodfellow said it would also make people more aware of the need to address waste generation issues.

The scheme is expected to generate enough electricity to power the equivalent of 250,000 homes.

Commenting on the results for the year ended March 31 2011, Tom Drury, the group chief executive of Shanks, said yesterday: “We are pleased to have achieved strong underlying growth at constant currency with revenue up eight per cent at £717m and profit before tax up 10 per cent at £35.2m.

“Our strategy to deliver sustainable alternatives to landfill and incineration for our customers is proving successful, with the award of new long term municipal contacts and rising volumes at our new organics sites at Greenmills in the Netherlands and Cumbernauld in Scotland. Overall we anticipate trading for 2011/12 to be in line with our expectations.”

Underlying profit before tax rose by six per cent to £35.2m. The company said management actions were continuing to offset challenging market conditions. Shanks has achieved cost reductions of £36m in the last two years. It has also started a three-year investment programme of around £150m.

Around half of these investments will be made in the UK.

Richard Hickinbotham, an analyst at Charles Stanley Securities Research, said yesterday: “Trading in the final quarter and early into the new financial year lend weight to the assertion that the market for Shanks’s services is improving.

“Our existing full year 2012 forecast is for underlying PBT (profits before tax) of £37.7m.”