3rd Nov 2005 07:00
Shanks Group PLC03 November 2005 3 November 2005 Company Announcement Shanks Group plc - Interim Results under IFRS Shanks Group plc ("Shanks"), a leading European independent waste managementcompany, announces its interim results for the half year ended 30 September2005. Financial highlights: • Headline profit (profit from continuing activities before exceptional items) increased by 27% to £17.6m (2004/5: £13.9m); • Turnover for continuing business increased by 10% to £239m (2004/5: £217m); • Profit after tax from continuing activities was £8.1m (2004/5: £0.4m); • Adjusted basic earnings per share were 5.0 pence per share (2004/5: 3.9 pence per share); • Maintained interim dividend at 1.9 pence per share. Business highlights: • UK: • £5m improvement in trading profit; • Continued progress with PFI projects; • Successful £34m disposal of hazardous waste business. • Belgium: • Robust landfill volumes; • Major ten year replacement contract with City of Liege; • Hazardous waste market challenging. • Netherlands: • Improved performance in contaminated soil; • Construction industry recovering; • Higher disposal costs due to cessation of exports to Germany. Commenting on the results, Michael Averill, Group Chief Executive of ShanksGroup plc said: "Shanks has achieved the objectives set out in its strategic review and is now afocused business with a much improved balance sheet and the financial resourcesto fund growth. Our landmark PFI projects are progressing well and, although the pipeline ofopportunities will not come to fruition in the short term, we have in placeprofit enhancing projects within our business to ensure the Group's futureperformance. As a result we remain confident in achieving expectations for thefull year". CHAIRMAN'S INTERIM REVIEW I am pleased to report a strong performance in the first half of the 2005/6year, principally due to improvements in the UK business. The Group's headlineprofit (profit from continuing activities before exceptional items and tax)improved 27% to £17.6m (2004/5: £13.9m). This figure compares favourably to the£17.5m declared last year, under UK GAAP, which included a c.£3m first quartercontribution from the disposed Landfill and Power business. The tax rate onheadline profit remained at 34%. Adjusted basic earnings per share (beforeexceptional items) were 5.0 pence (2004/5: 3.9 pence). Your Board maintained theinterim dividend at 1.9 pence per share. Reporting under International Financial Reporting Standards (IFRS) for the firsttime, Group turnover increased to £239m (2004/5: £217m) and profit after tax was£14.1m (2004/5: £66.8m). Basic earnings per share were 6.0p (2004/5: 28.5p).From continuing operations, profit before tax was £12.6m (2004/5: £3.4m), aftera £5.0m non-cash charge for the change in fair value of financial instruments,and profit after tax was £8.1m (2004/5: £0.4m). Profit after tax fromdiscontinued operations was £6.0m (2004/5: £66.4m) principally due to the £6.5mpre-tax profit on disposal of the UK hazardous waste business. Since 31 March 2005 principal Group borrowings relating to the core businessfell by £18m to £92m. Following capital expenditure, borrowings in the PrivateFinance Initiative (PFI) companies increased by £19m to £82m, bringing the totaldebt to £174m before inclusion of the fair value of financial instruments.Although the £82m PFI debt is non-recourse it is consolidated onto the Groupbalance sheet as the PFI companies are 100% owned. A reconciliation between UK GAAP and IFRS of selected comparative financialhighlights follows this review. Divisional Review UK Following a strategic review in 2003 the Group decided to focus its UKoperations on the emerging market for long term municipal waste contracts usingnew technologies, and on the recycling of non-hazardous industrial andcommercial waste as landfill tax increases. The hazardous waste business wastherefore identified as non-core. On 30 September these assets were divestedprincipally to Onyx Environmental Group for a cash consideration of £28m. Theexit from the business will be completed in March 2006 when the lease on ourGranton site is surrendered according to an agreement with Waterfront Edinburghalso executed on 30 September 2005. The agreement gives a phased total paymentof c.£6m ending when the site is given up for redevelopment. Trading profits from continuing UK activities increased by £5.0m to £3.9m (2004/5: £1.1m loss). Improvements in core activities accounted for £3.5m. The recentoverhead reduction programme contributed substantially to this turnround as didstrong performances from land remediation activities and joint ventures. Despiterising fuel costs overall waste collection results improved over those of lastyear and further new initiatives should maintain progress. PFI activities trading profit grew by £1.5m. The contribution from the EastLondon Waste Authority (ELWA) contract improved following the programmed annualprice increase which funds investment in the new higher technology wastetreatment capacity. There is a full six month contribution from the Dumfries &Galloway project. As all necessary planning consents were in place at financialclose, construction started immediately and is now well advanced. The Argyll &Bute contract is performing satisfactorily and nearing the end of its investmentphase. Belgium As previously highlighted, trading profit in Belgium declined from last year'sexceptionally high level of £9.1m to £8.3m. Our landfill in Wallonia continues to trade well but results in Brusselsdecreased following the one-off benefit accruing in 2004 from the temporaryclosure of the city's household waste incinerator for maintenance. Markets in Flanders, especially for hazardous waste, were more difficult than inrecent years reflecting the general economic situation. Significantly a revised ten year contract was won for waste collection andstreet cleaning serving the City of Liege. This contract, which has onlyrecently started, should provide predictable revenues and cash flows for thefuture. A small accretive acquisition, Slibontwatering, was completed inFlanders for £0.4m. Netherlands Trading profit in the Netherlands improved to £11.9m (2004/5: £11.3m). Volumesof contaminated spoil processed at ATM increased, following recent investmentsin additional capacity. Reym's profits recovered from last year when performancewas negatively impacted by a sole poorly performing contract. Although there has been a recovery in the construction industry, our solid wastebusinesses have experienced higher disposal costs as a result of changes in theGerman landfill regulatory regime which came into effect in June. These costincreases, together with higher fuel charges, are being progressively mitigatedthrough price increases and recycling efficiency improvements. Central Services Central Services costs have returned to a more normal level at £2.3m (2004/5:£1.1m). Outlook Following the disposal of the UK hazardous waste activities the Group structuralreorganisation is largely complete and, as a result, it has a much improvedbalance sheet. With the 5 year £250m syndicated loan facility concluded in May2005, together with the existing £30m private placement facility, the Group hasthe financial resources necessary to fund growth. Our landmark PFI projects are progressing well and, although the pipeline ofopportunities will not come to fruition in the short term, we have in placeprofit enhancing projects within our business to ensure the Group's futureperformance. As a result the Board remains confident in achieving itsexpectations for the full year. Reconciliation between UK GAAP and IFRS of selected comparative financialhighlights Six months to 30 September 2004 Adjusted earnings Profit Headline per before Net Net Turnover profit share tax assets debt £m £m pence £m £m £m -------------------------------------------------------------------------------- As reported under UK GAAP 269.7 17.5 4.9 54.4 196.9 (127.8) Discontinued activities: Landfill and power (37.9) (3.0) (0.8) (55.5) - - Other (20.3) (0.7) (0.3) (0.7) - - -------------------------------------------------------------------------------- UK GAAP - continuing 211.5 13.8 3.8 (1.8) 196.9 (127.8) Intangible/goodwill amortisation - - - 5.2 5.2 - Pensions - 0.1 0.1 0.1 (19.9) - Share based payments - - - (0.1) - - Leases - - - - - (10.6) Joint ventures 5.0 - - - - (1.4) Dividends - - - - 4.4 - Deferred tax - - - - (2.8) - -------------------------------------------------------------------------------- As reported under IFRS 216.5 13.9 3.9 3.4 183.8 (139.8) ================================================================================ Year ended 31 March 2005 Adjusted earnings Profit Headline per before Net Net Turnover profit share tax assets debt £m £m pence £m £m £m -------------------------------------------------------------------------------- As reported under UK GAAP 503.6 33.3 9.4 64.4 194.7 (162.3) Discontinued activities: Landfill and power (37.9) (3.0) (0.8) (54.1) - - Other (40.6) (0.1) - (0.1) - - -------------------------------------------------------------------------------- UK GAAP - continuing 425.1 30.2 8.6 10.2 194.7 (162.3) Intangible/goodwill amortisation - (0.2) (0.1) 9.4 9.4 - Pensions - (0.7) (0.2) (0.7) (18.9) - Share based payments - - - (0.1) - - Leases - 0.1 - 0.1 0.1 (9.6) Joint ventures 10.2 - - - - (1.5) Dividends - - - - 8.9 - Deferred tax - - - - (2.9) - -------------------------------------------------------------------------------- As reported under IFRS 435.3 29.4 8.3 18.9 191.3 (173.4) =============================================================================== Notes: 1. Management will be holding an analyst presentation at 9:30 am today, 3 November at ABN AMRO's offices at 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 21 November 2005, 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 website. 4. The interim dividend of 1.9 pence per share will be paid on 11 January 2006 to shareholders on the register at close of business on 16 December 2005. For further information contact: Shanks Group plc on 3 November: telephone 020 7678 0383Ian Clubb; Chairman thereafter, telephone: 01628 524523Michael Averill; Group Chief ExecutiveFraser Welham; Group Finance Director Citigate Dewe Rogerson telephone: 020 7282 2945Ginny Pulbrook Consolidated Income Statement.First Half ended 30 September 2005 2005/6 2004/5 2004/5 Note First Half First Half Full Year restated restated £m £m £m-------------------------------------------------------------------------------- Continuing operationsRevenue 2 239.2 216.5 435.3--------------------------------------------------------------------------------Cost of sales - ongoing (192.9) (170.7) (346.8)Cost of sales - restructuring costs 3 - (5.2) (5.2) ------------------------------------------Total cost of sales (192.9) (175.9) (352.0)--------------------------------------------------------------------------------Gross profit 46.3 40.6 83.3--------------------------------------------------------------------------------Administrative expenses - ongoing (24.5) (27.6) (51.2)Administrative expenses - restructuring costs 3 - (5.3) (5.3) ------------------------------------------Total administrative expenses (24.5) (32.9) (56.5)--------------------------------------------------------------------------------Operating profit 2 21.8 7.7 26.8--------------------------------------------------------------------------------Finance charges - net interest payable and other (4.2) (4.3) (7.9)Finance charges - change in fair value of financial instruments (5.0) - - ------------------------------------------Total finance charges 2 (9.2) (4.3) (7.9)--------------------------------------------------------------------------------Profit before tax fromcontinuing operations 2 12.6 3.4 18.9Tax 4 (4.5) (3.0) (6.8)--------------------------------------------------------------------------------Profit after tax forthe period from continuing operations 2 8.1 0.4 12.1 Discontinued operationsProfit after tax forthe period from discontinued operations 2 6.0 66.4 65.0-------------------------------------------------------------------------------- Profit for the period 14.1 66.8 77.1================================================================================ Earnings per share- basic 6 6.0p 28.5p 32.9p- diluted 6 6.0p 28.5p 32.9p Earnings per share fromcontinuing operations- basic 6 3.5p 0.2p 5.2p- diluted 6 3.4p 0.2p 5.2p================================================================================ The interim financial information and related comparative information isprovisional and unaudited.2004/5 comparative figures have been restated to reflect the reclassification ofthe results of activities discontinued in 2005/6. Consolidated Balance Sheet.At 30 September 2005 At 30 At 30 At 31 September September March 2005 2004 2005 Note £m £m £m--------------------------------------------------------------------------------Non-current assetsIntangible assets 160.0 150.8 160.7Property, plant and equipment 246.9 227.3 250.3Loans to joint ventures 1.1 1.8 1.6Other investments 1.0 1.1 1.0Deferred tax assets 17.8 9.8 14.2-------------------------------------------------------------------------------- 426.8 390.8 427.8--------------------------------------------------------------------------------Current assetsInventories 6.3 7.5 9.3Trade and other receivables 118.4 124.5 113.8Current tax assets 6.0 2.5 3.0Cash and cash equivalents 54.7 47.2 32.5-------------------------------------------------------------------------------- 185.4 181.7 158.6-------------------------------------------------------------------------------- Total assets 612.2 572.5 586.4--------------------------------------------------------------------------------Current liabilitiesBorrowings (3.1) (4.9) (4.0)Trade and other payables (114.3) (131.4) (125.7)Current tax liabilities (8.5) (0.5) (4.2)Provisions 7 (10.8) (10.9) (11.9)-------------------------------------------------------------------------------- (136.7) (147.7) (145.8)--------------------------------------------------------------------------------Non-current liabilitiesBorrowings (234.7) (182.1) (201.9)Other non-current liabilities (1.1) (1.9) (1.0)Deferred tax liabilities (15.2) (17.2) (15.6)Provisions 7 (14.0) (10.7) (13.9)Retirement benefit obligations (19.2) (29.1) (16.9) -------------------------------------------------------------------------------- (284.2) (241.0) (249.3)--------------------------------------------------------------------------------Total liabilities (420.9) (388.7) (395.1)--------------------------------------------------------------------------------Net assets 191.3 183.8 191.3================================================================================ EquityShare capital 23.4 23.4 23.4Share premium 93.4 93.1 93.2Exchange reserve 1.8 3.0 3.1Retained earnings 72.7 64.3 71.6--------------------------------------------------------------------------------Total equity 191.3 183.8 191.3================================================================================The interim financial information and related comparative information isprovisional and unaudited. Consolidated Cash Flow Statement.First Half ended 30 September 2005 2005/6 2004/5 2004/5 Note First Half First Half Full Year £m £m £m--------------------------------------------------------------------------------Net cash from operatingactivities 8 20.4 38.9 63.9--------------------------------------------------------------------------------Investing activitiesPurchases of property, plant and equipment (39.3) (26.3) (64.6)Disposal of property, plant and equipment 0.8 3.8 6.9Acquisition of subsidiary and other businesses (1.1) (0.2) (4.8)Net proceeds from disposal of subsidiary and other businesses 30.1 184.8 175.0Income received from other investments - - 0.1--------------------------------------------------------------------------------Net cash used in investing activities (9.5) 162.1 112.6--------------------------------------------------------------------------------Financing activitiesInterest paid (5.1) (7.8) (12.4)Interest received 0.6 1.3 2.1Proceeds from issue of shares 0.2 - 0.1Dividends paid (8.9) (8.9) (13.3)Increase (repayment) of borrowings 26.1 (168.9) (151.3)Increase in obligations under finance leases - 0.7 2.5Repayments of obligations under finance leases (1.6) (1.0) (2.5)--------------------------------------------------------------------------------Net cash flow from financing activities 11.3 (184.6) (174.8)--------------------------------------------------------------------------------Net increase in cash and cash equivalents 22.2 16.4 1.7Cash and cash equivalents at beginning of period 32.5 30.8 30.8--------------------------------------------------------------------------------Cash and cash equivalents at end of period 54.7 47.2 32.5================================================================================ The interim financial information and related comparative information isprovisional and unaudited. Consolidated Movement in Net Debt.First Half ended 30 September 2005 2005/6 2004/5 2004/5 First Half First Half Full Year £m £m £m--------------------------------------------------------------------------------Net increase in cash and cashequivalents 22.2 16.4 1.7(Increase) repayment of borrowings and finance leases (24.5) 169.2 151.3Amortisation of loan fees (0.3) (0.2) (0.3)Exchange gain (loss) 1.6 (3.6) (4.5)Change in fair value of financial instruments (8.7) - ---------------------------------------------------------------------------------Movement in net debt (9.7) 181.8 148.2Net debt at beginning of period (173.4) (321.6) (321.6)--------------------------------------------------------------------------------Net debt at end of period (183.1) (139.8) (173.4)================================================================================ The interim financial information and related comparative information isprovisional and unaudited. Analysis of Net Debt.At 30 September 2005 At 30 At 30 At 31 September September March 2005 2004 2005 £m £m £m-------------------------------------------------------------------------------- Principal Group net debt 92.4 103.9 110.6Private Finance Initiative net debt 82.0 35.9 62.8--------------------------------------------------------------------------------Total Group net debt before fair value of interest rate swaps 174.4 139.8 173.4Fair value of Private FinanceInitiative interest rate swaps 8.7 - ---------------------------------------------------------------------------------Total Group net debt 183.1 139.8 173.4================================================================================ The interim financial information and related comparative information isprovisional and unaudited. Consolidated Statement of Recognised Income and Expense.First Half ended 30 September 2005 2005/6 2004/5 2004/5 First Half First Half Full Year £m £m £m --------------------------------------------------------------------------------Prior year adjustment: - loss on fair value of financial instruments at 1 April 2005 (3.7) - -- deferred tax asset thereon 1.1 - -Exchange (loss) gain on translation offoreign operations (1.3) 3.0 3.1Actuarial (loss) gain on defined benefitpension schemes (1.6) (1.4) 0.1Share based payments 0.1 - 0.1--------------------------------------------------------------------------------Net (expense) income recognised directlyin equity (5.4) 1.6 3.3Profit for the period 14.1 66.8 77.1--------------------------------------------------------------------------------Total recognised income and expense forthe period 8.7 68.4 80.4================================================================================ The interim financial information and related comparative information isprovisional and unaudited. Consolidated Statement of Changes in Equity.First Half ended 30 September 2005 Share Share Exchange Retained Total capital premium reserve earnings £m £m £m £m £m--------------------------------------------------------------------------------Balance carried forward at 31 March 2005 23.4 93.2 3.1 71.6 191.3Prior year adjustment(see note 9): - loss on fair value of financial instruments at 1 April 2005 - - - (3.7) (3.7)- deferred tax asset thereon - - - 1.1 1.1-------------------------------------------------------------------------------- Balance brought forward at 1 April 2005 23.4 93.2 3.1 69.0 188.7Issue of share capital - 0.2 - - 0.2Exchange loss on translation of foreign operations - - (1.3) - (1.3)Profit for the period - - - 14.1 14.1Actuarial loss on defined benefit pension schemes - - - (1.6) (1.6)Share based payments - - - 0.1 0.1Dividends paid in the period (see note 5) - - - (8.9) (8.9)-------------------------------------------------------------------------------- Balance at 30 September 2005 23.4 93.4 1.8 72.7 191.3================================================================================ The interim financial information and related comparative information isprovisional and unaudited. The prior year adjustment arises on the adoption ofIAS39 - Measurement of Financial Instruments (see note 9 for details). Notes to the Interim Financial Statements. 1 Basis of preparation of financial statements and status of financialinformation The interim financial information and all comparative information, which wasapproved by the Directors on 3 November 2005, is provisional and unaudited. Theauditors have reviewed the interim financial information for the six months to30 September 2005 and their report is set out below. The interim financial statements have been prepared in accordance with theInternational Financial Reporting Standards (IFRS) expected to be applicable at31 March 2006 but some changes to these policies may be necessary as a result ofchanges to IFRS, IFRIC interpretations and endorsements by the EuropeanCommission. For these interim financial statements, the Group has appliedaccounting policies consistent with those amendments required by IFRS, as setout in 'Adoption of International Financial Reporting Standards', a separateannouncement published by the Group on the London Stock Exchange on 17 October2005. No other accounting policy has been amended from those disclosed in theaudited financial statements for the year ended 31 March 2005. The reconciliations concerning the transition from UK GAAP to IFRS for the sixmonths ended 30 September 2004 and the year ended 31 March 2005 are set out innote 10 of this report. 2 Segmental analysis The Group operates in one segment, Waste Management, in the United Kingdom,Belgium and the Netherlands. 2005/6 2004/5 2004/5 First Half First Half Full Year restated restated £m £m £m--------------------------------------------------------------------------------(a) Continuing operations Revenue United Kingdom 76.4 67.3 130.0 Belgium 55.4 50.5 102.2 Netherlands 107.4 98.7 203.1 -------------------------------------- Total revenue 239.2 216.5 435.3 ====================================== Group 232.8 211.5 425.1 Share of joint ventures 6.4 5.0 10.2 -------------------------------------- Total revenue 239.2 216.5 435.3================================================================================ Trading United Kingdom 3.9 (1.1) (0.2) profits* Belgium 8.3 9.1 16.6 Netherlands 11.9 11.3 24.3 Central Services (2.3) (1.1) (3.4) -------------------------------------- Total trading profit 21.8 18.2 37.3 ====================================== Group 19.7 16.9 35.4 Share of joint ventures 2.1 1.3 1.9 -------------------------------------- Total trading profit 21.8 18.2 37.3 Restructuring costs (United Kingdom) - (10.5) (10.5) -------------------------------------- Total operating profit 21.8 7.7 26.8-------------------------------------------------------------------------------- Operating United Kingdom 3.9 (11.6) (10.7) profits Belgium 8.3 9.1 16.6 Netherlands 11.9 11.3 24.3 Central Services (2.3) (1.1) (3.4) -------------------------------------- Total operating profit 21.8 7.7 26.8-------------------------------------------------------------------------------- Finance Net external interest (3.7) (3.8) (7.1) charges Share of joint venture interest (0.1) (0.1) (0.2) Discount unwind and loan fee amortisation (0.4) (0.4) (0.6) Change in fair value of financial instruments (5.0) - - -------------------------------------- Total finance charges (9.2) (4.3) (7.9)-------------------------------------------------------------------------------- Profit before tax from continuing operations 12.6 3.4 18.9 Tax (4.5) (3.0) (6.8)-------------------------------------------------------------------------------- Profit after tax and profit for the period from continuing operations 8.1 0.4 12.1================================================================================ (b) Discontinued operations (United Kingdom) Revenue 18.4 58.2 78.5================================================================================ Operating profit 0.7 6.4 7.1 Profit on disposal of operations 6.5 61.2 59.4-------------------------------------------------------------------------------- Finance Net external interest (0.6) (3.0) (3.5) charges Discount unwind and loan fee amortisation - (0.5) (0.5) -------------------------------------- Total finance charges (0.6) (3.5) (4.0)-------------------------------------------------------------------------------- Profit before tax from discontinued operations 6.6 64.1 62.5 Tax (0.6) 2.3 2.5-------------------------------------------------------------------------------- Profit after tax and profit for the period from discontinued operations 6.0 66.4 65.0================================================================================ * operating profits before restructuring costs. 2004/5 comparative figures have been restated to reflect the reclassification ofthe results of activities discontinued in 2005/6. Net external interest has been allocated to discontinued operations by applyingthe external interest rate to the net operating assets employed. (c) Analysis of net assets At 30 At 30 At 31 September September March 2005 2004 2005 £m £m £m-------------------------------------------------------------------------------- United Gross assets 161.4 142.0 160.8 Kingdom Gross liabilities (67.9) (88.7) (73.2) --------------------------------------- Net operating assets 93.5 53.3 87.6 --------------------------------------- Belgium Gross assets 73.0 66.9 70.0 Gross liabilities (42.5) (35.7) (39.2) --------------------------------------- Net operating assets 30.5 31.2 30.8 --------------------------------------- Netherlands Gross assets 296.0 298.0 302.3 Gross liabilities (39.3) (41.9) (50.5) --------------------------------------- Net operating assets 256.7 256.1 251.8 --------------------------------------- Central Gross assets 3.3 6.1 3.6 Services Gross liabilities (9.7) (17.7) (6.5) --------------------------------------- Net operating assets (6.4) (11.6) (2.9)-------------------------------------------------------------------------------- Total Gross assets 533.7 513.0 536.7 Gross liabilities (159.4) (184.0) (169.4)-------------------------------------------------------------------------------- Net operating assets 374.3 329.0 367.3 Corporation tax (2.5) 2.0 (1.2) Deferred tax 2.6 (7.4) (1.4) Net debt (183.1) (139.8) (173.4)-------------------------------------------------------------------------------- Net assets 191.3 183.8 191.3================================================================================ 3 Restructuring costs The restructuring costs of £10.5m in the six months to 30 September 2004 and theyear to 31 March 2005 arose on the integration and reorganisation of the Group'sbusiness in the United Kingdom. The effect of this item was to reduce the taxcharge for the year by £3.1m. 4 Taxation 2005/6 2004/5 2004/5 First Half First Half Full Year £m £m £m--------------------------------------------------------------------------------Current taxUK corporation tax at 30% (2004/5: 30%) Current year - 1.0 2.6 Prior year 1.0 - -Double tax relief - (3.4) (2.8)Overseas tax Current year 4.6 3.8 7.6 Prior year - - 1.2Joint ventures 0.5 0.3 0.6Deferred tax (1.0) (1.0) (4.9)--------------------------------------------------------------------------------Total tax charge for the period 5.1 0.7 4.3================================================================================Total tax charge - continuing operations 4.5 3.0 6.8Total tax charge - discontinued operations 0.6 (2.3) (2.5)--------------------------------------------------------------------------------Total tax charge for the period 5.1 0.7 4.3================================================================================ The tax rate for the first half of the current year is based on the estimatedcharge for the full year. 5 Dividends 2005/6 2004/5 2004/5 First Half First Half Full Year £m £m £m--------------------------------------------------------------------------------Interim dividend for this year - - 4.4Final dividend for prior year 8.9 8.9 8.9--------------------------------------------------------------------------------Total dividends 8.9 8.9 13.3================================================================================ An interim dividend of 1.9p per share (2004/5: 1.9p per share) was approved bythe Board on 3 November 2005 and will be paid on 11 January 2006 to shareholderson the register at close of business on 16 December 2005. The final dividend of3.8p per share (2004/5: 3.8p per share) was approved by the Shareholders at theAnnual General Meeting on 28 July 2005 and was paid on 5 August 2005. 6 Earnings per share Basic earnings per share are calculated by dividing the profit for the period bythe average number of shares in issue during the period. 2005/6 2004/5 2004/5 First Half First Half Full Year--------------------------------------------------------------------------------Number of sharesWeighted average number of ordinary shares for basic earnings per share 234.2m 234.0m 234.1mEffect of share options in issue 1.0m 0.4m 0.6m--------------------------------------------------------------------------------Weighted average number of ordinaryshares for diluted earnings per share 235.2m 234.4m 234.7m================================================================================Calculation of basic and adjusted basic earnings per shareEarnings for basic earnings per share being profit for the period (£m) 14.1 66.8 77.1Earnings from discontinued operations (£m) (6.0) (66.4) (65.0)--------------------------------------------------------------------------------Earnings for basic earnings per share from continuing operations (£m) 8.1 0.4 12.1Restructuring costs (net of tax) (£m) - 8.7 7.4Change in fair value of financial instruments (net of tax) (£m) 3.5 - ---------------------------------------------------------------------------------Earnings for adjusted basic earnings per share (£m) 11.6 9.1 19.5--------------------------------------------------------------------------------Basic earnings per share (pence) 6.0p 28.5p 32.9pBasic earnings per share from continuing operations (pence) 3.5p 0.2p 5.2pAdjusted basic earnings per share (pence) 5.0p 3.9p 8.3p================================================================================Calculation of diluted earnings per shareEarnings for basic earnings per share being profit for the period (£m) 14.1 66.8 77.1Effect of dilutive potential ordinary shares (£m) - - --------------------------------------------------------------------------------- Earnings for diluted earnings per share(£m) 14.1 66.8 77.1-------------------------------------------------------------------------------- Diluted earnings per share (pence) 6.0p 28.5p 32.9pDiluted earnings per share on continuing operations (pence) 3.4p 0.2p 5.2p================================================================================ 7 Provisions for liabilities and charges Site restoration and aftercare Other Total £m £m £m--------------------------------------------------------------------------------At 31 March 2005 17.8 8.0 25.8Provided- cost of sales 0.3 - 0.3- finance charges 0.1 - 0.1- discontinued businesses - 2.6 2.6Reclassified from other payables 0.5 - 0.5Utilised (2.8) (1.6) (4.4)Exchange rate movements (0.1) - (0.1)--------------------------------------------------------------------------------At 30 September 2005 15.8 9.0 24.8================================================================================Current 2.8 8.0 10.8Non-current 13.0 1.0 14.0--------------------------------------------------------------------------------At 30 September 2005 15.8 9.0 24.8================================================================================Current 4.9 7.0 11.9Non-current 12.9 1.0 13.9--------------------------------------------------------------------------------At 31 March 2005 17.8 8.0 25.8================================================================================Current - 10.9 10.9Non-current 10.3 0.4 10.7--------------------------------------------------------------------------------At 30 September 2004 10.3 11.3 21.6================================================================================ 8 Net cash flow 2005/6 2004/5 2004/5 First Half First Half Full Year £m £m £m--------------------------------------------------------------------------------(a) Continuing operations Operating profit from continuing operations 21.8 7.7 26.8 Amortisation of intangible assets 0.5 0.3 0.7 Impairment loss on intangible assets - 0.5 0.5 Depreciation of property, plant and equipment 15.9 13.2 26.9 Impairment loss on property, plant and equipment - 2.8 2.8 Gain on disposal of property, plant and equipment - - (1.4) Net decrease in provisions (1.5) (0.1) 1.5 Share based payments 0.2 0.1 0.1-------------------------------------------------------------------------------- Operating cash flows before movements in working capital 36.9 24.5 57.9 Decrease (increase) in inventories 2.3 (1.0) (2.8) Increase in receivables (5.7) (25.1) (15.0) (Decrease) increase in payables (11.7) 17.3 16.1-------------------------------------------------------------------------------- Cash generated by operations 21.8 15.7 56.2 Income taxes paid (5.7) (2.4) (6.4)-------------------------------------------------------------------------------- Net cash from operating activities 16.1 13.3 49.8================================================================================ Investing activities Purchases of property, plant and equipment (37.9) (22.9) (63.2) Disposal of property, plant and equipment 0.8 3.8 6.6 Acquisitions of subsidiary and other businesses (1.1) (0.2) (4.8) Net proceeds from disposal of subsidiary and other businesses 30.1 184.8 175.0 Income received from other investments - - 0.1-------------------------------------------------------------------------------- Net cash used in investing activities (8.1) 165.5 113.7================================================================================ (b) Discontinued operations Operating profit from discontinued operations 0.7 6.4 7.1 Depreciation of property, plant and equipment 2.1 8.3 10.8 Increase (decrease) in provisions - 1.2 (9.0)-------------------------------------------------------------------------------- Operating cash flows before movements in working capital 2.8 15.9 8.9 Increase in inventories (0.4) (0.2) (0.2) Decrease in receivables 1.4 1.6 2.3 Increase in payables 0.5 8.3 3.1-------------------------------------------------------------------------------- Cash generated by operations 4.3 25.6 14.1-------------------------------------------------------------------------------- Net cash from operating activities 4.3 25.6 14.1================================================================================ Investing activities Purchases of property, plant and equipment (1.4) (3.4) (1.4) Disposal of property, plant and equipment - - 0.3-------------------------------------------------------------------------------- Net cash used in investing activities (1.4) (3.4) (1.1)================================================================================ (c) Total Group operations Operating profit from all operations 22.5 14.1 33.9 Amortisation of intangible assets 0.5 0.3 0.7 Impairment loss on intangible assets - 0.5 0.5 Depreciation of property, plant and equipment 18.0 21.5 37.7 Impairment loss on property, plant and equipment - 2.8 2.8 Gain on disposal of property, plant and equipment - - (1.4) (Decrease) increase in provisions (1.5) 1.1 (7.5) Share based payments 0.2 0.1 0.1-------------------------------------------------------------------------------- Operating cash flows before movements in working capital 39.7 40.4 66.8 Decrease (increase) in inventories 1.9 (1.2) (3.0) Increase in receivables (4.3) (23.5) (12.7) (Decrease) increase in payables (11.2) 25.6 19.2-------------------------------------------------------------------------------- Cash generated by operations 26.1 41.3 70.3 Income taxes paid (5.7) (2.4) (6.4)-------------------------------------------------------------------------------- Net cash from operating activities 20.4 38.9 63.9================================================================================ Investing activities Purchases of property, plant and equipment (39.3) (26.3) (64.6) Disposal of property, plant and equipment 0.8 3.8 6.9 Acquisitions of subsidiary and other businesses (1.1) (0.2) (4.8) Net proceeds from disposal of subsidiary and other businesses 30.1 184.8 175.0 Income received from other investments - - 0.1-------------------------------------------------------------------------------- Net cash used in investing activities (9.5) 162.1 112.6================================================================================ 9 Prior year adjustment - adoption of IAS39 The Group has applied the exemption given in IFRS1 - First-time Adoption ofInternational Financial Reporting Standards not to apply IAS39 - Measurement ofFinancial Instruments to comparative period information. As permitted by IFRS1,the effect of first-time adoption of IAS39 is shown as a prior year adjustmentto the opening balance sheet. The impact at 1 April 2005 is to include a £3.7mloss on the fair value of financial instruments against long term borrowingswith recognition of a £1.1m deferred tax asset thereon. The net charge to theopening retained earnings was £2.6m. 10 Reconciliation of UK GAAP to IFRS As stated in note 1, the Group previously prepared its financial statements inaccordance with UK Generally Accepted Accounting Principles (UK GAAP). As aresult of adopting IFRS in respect of the year ending 31 March 2006, the Grouphas restated comparative information for 2004/5. As required by IFRS1 -First-time Adoption of International Financial Reporting Standards, thereconciliation between previously reported UK GAAP based information and theirIFRS equivalents is set out below. Profit30 September 2004 Share Share Exchange Retained Total for the capital premium reserve earnings equity period £m £m £m £m £m £m----------------------------------------------------------------------------------------------------Previously reported under UK GAAP 23.4 93.1 - 80.4 196.9 49.3IFRS2 - Share based payments - - - - - (0.1)IFRS3 - Business combinations (net of tax) - - - 5.2 5.2 12.5IAS10 - Events after the balance sheet date (dividends) - - - 4.4 4.4 4.4IAS19 - Employee benefits (net of tax) - - - (19.9) (19.9) 0.7IAS12 - Deferred tax - - - (2.8) (2.8) - IAS21 - Foreign currencies - - 3.0 (3.0) - -----------------------------------------------------------------------------------------------------Reported now under IFRS 23.4 93.1 3.0 64.3 183.8 66.8==================================================================================================== Profit31 March 2005 Share Share Exchange Retained Total for the capital premium reserve earnings equity period £m £m £m £m £m £m----------------------------------------------------------------------------------------------------Previously reported under UK GAAP 23.4 93.2 - 78.1 194.7 46.9IFRS2 - Share based payments - - - - - (0.1)IFRS3 - Business combinations(net of tax) - - - 9.4 9.4 16.7IAS10 - Events after the balance sheet date (dividends) - - - 8.9 8.9 13.3IAS19 - Employee benefits (net of tax) - - - (18.9) (18.9) 0.2IAS17 - Leases - - - 0.1 0.1 0.1IAS12 - Deferred tax - - - (2.9) (2.9) -IAS21 - Foreign currencies - - 3.1 (3.1) - -----------------------------------------------------------------------------------------------------Reported now under IFRS 23.4 93.2 3.1 71.6 191.3 77.1==================================================================================================== Independent Auditors' Review Report to Shanks Group plc. Introduction We have been instructed by the company to review the financial information forthe six months ended 30 September 2005 which comprises the consolidated interimbalance sheet as at 30 September 2005 and the related consolidated interimstatements of income, cash flow, movement in net debt, recognised income andexpense, and changes in shareholders' equity for the six months then ended andrelated notes. We have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the Directors. The Directors areresponsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority. As disclosed in note 1, the next annual financial statements of Shanks Group plcwill be prepared in accordance with IFRS adopted for use in the European Union.This interim report has been prepared in accordance with the basis set out innote 1. The accounting policies are consistent with those that the Directors intend touse in the next annual financial statements. As explained in note 1, there is,however, a possibility that the Directors may determine that some changes arenecessary when preparing the full annual financial statements for the first timein accordance with IFRS adopted for use in the European Union. The IFRSstandards and IFRIC interpretations that will be applicable and adopted for usein the European Union at 31 March 2006 are not known with certainty at the timeof preparing this interim financial information. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of Shanks Group plc management andapplying analytical procedures to the financial information and underlyingfinancial data and, based thereon, assessing whether the disclosed accountingpolicies have been applied. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit and therefore provides a lower levelof assurance. Accordingly we do not express an audit opinion on the financialinformation. This report, including the conclusion, has been prepared for andonly for the company for the purpose of the Listing Rules of the FinancialServices Authority and for no other purpose. We do not, in producing thisreport, accept or assume responsibility for any other purpose or to any otherperson to whom this report is shown or into whose hands it may come save whereexpressly agreed by our prior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2005. PricewaterhouseCoopers LLPChartered AccountantsLondon3 November 2005 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. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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