21st Jul 2014 08:46
LONDON (Alliance News) - Shanks Group PLC said Monday that it expects its full-year results to be broadly in line with expectations despite a mixed start to the year which is expected to impact first-half results.
The international waste-to-product business said its three growth divisions started the year well but that it faces increased challenges in its Solid Waste Benelux division due to deteriorating market conditions.
"This, together with a strengthening of sterling, will impact first half reported results," said Group Chief Executive Peter Dilnot in an interim management statement.
"We are taking decisive action to address these market pressures and, provided there is no material deterioration in the Benelux solid waste markets, we expect the full year results to be broadly in line with expectations," added Dilnot.
The Solid Waste Benelux business has experienced increased market pressure in the first quarter, especially in the Netherlands, said Shanks. While overall volumes have been maintained, a further reduction in the volume and prices of key recyclates, as well as aggressive market pricing, has resulted in increased margin pressure. While hitting the company, Shanks said it believes these pressures are being felt across the market, and that it remains well positioned to gain further market share.
Faring better is Shanks' Hazardous Waste business, which is on track to deliver growth in the full-year as work to increase long-term capacity took place, and the Organics division, which has had an encouraging start following the successful renewal of a long-term contract. The UK Municipal business has also performed in line with expectations in the first quarter with all operating contracts performing to plan, said Shanks.
Net debt at the end of June 2014 had increased by GBP14 million to GBP170 million, said the company, which added that a GBP2.5 million non-cash charge will be realised in its first-half after the arbitrator this month released his ruling concerning the company's long-running dispute with the City of Ottawa concerning the interpretation of our put or pay contract with the City.
Longer term, Dilnot said Shanks Group remains well placed to deliver profitable growth through its ongoing investment programme and any market recovery in the Benelux.
The company also noted that it continues to invest in the Hazardous Waste business and in its UK PFI construction programmes which is expects to underpin sustainable future growth.
While market headwinds in the Benelux solid waste market are likely to remain challenging and will result in pressure on financial performance in the first half of 2014/15, Shanks said it is confident that its actions to address these market pressures will support a stronger second-half.
"Provided there is no further material deterioration in the Benelux solid waste markets, full-year results are anticipated to be broadly in line with management expectations," said Shanks Group.
A research note from Investec Monday said whilst the group expects full-year 2015 results to be ?broadly? on track, the combination of the further strength of sterling, and a tough market has caused it to lower its forecasts for the company.
Shares in the company were trading 2.56% lower at 104.50 pence Monday morning.
By Alice Attwood; [email protected]; @AliceAtAlliance
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