8th Nov 2006 07:00
Shanks Group PLC08 November 2006 8 November 2006 Company Announcement - Shanks Group plc Shanks Group plc ("Shanks") a leading European independent waste managementgroup, 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 inthe UK is starting to bear fruit. Regular increases in UK landfill tax, coupledwith the increasing impact of European legislation, will further stimulateprogress." CHIEF EXECUTIVE'S STATEMENT I am pleased to report a strong performance in the first half of the 2006/7year. The Group's Headline Profit (profit from continuing operations beforeexceptional items and tax) improved 13% to £19.7m (2005/6: £17.5m*). The taxrate 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 were6.3p (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 valueof 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 lowercontributions from Contaminated Land Services and the Private Finance Initiative(PFI) activities. Contaminated Land Services enjoyed a particularly strongtrading spell in the first half of last year. Collections, recycling and jointventures continued to improve. The recent addition of the waste management and recycling activities of John WHannay & Co Limited has considerably strengthened our position in Scotlandadding facilities which are already demonstrating their worth. More waste isbeing diverted from landfill to more cost effective outlets. All wastecollected in the region is now pre-treated prior to final disposal.Increasingly this business model will pervade as landfill tax increases and therequirement to pre-treat all waste prior to landfill in October 2007 approaches. Our landfill joint ventures have continued to perform well in the periodbenefiting from increased volumes. Progress is proceeding according to plan on the construction of our innovativeMechanical Biological Treatment (MBT) facilities, which are used on the EastLondon Waste Authority (ELWA) and the Dumfries & Galloway (D&G) PFI contracts.The first of the two facilities at ELWA is now fully operational with thesecond, and that at D&G, due for completion in 2007. Additionally the ELWAcontract will benefit from a price rise in summer 2007 which will address thecurrent predicted squeeze in profits. Stricter interpretation of landfill regulations by the Scottish EnvironmentalProtection Agency (SEPA) is causing costs to rise significantly on the formerlocal authority landfill sites now managed by the Group within the D&G andArgyll & Bute contracts. Lower investment returns will result and a mitigationprogramme has commenced. The MBT facility in the D&G contract is not affectedby 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 amarked improvement across all three regions. Our landfill in Wallonia continued to benefit from bonus volumes diverted frompublic sector incinerators experiencing operational difficulties. There wasalso a full six month benefit from the enlarged Liege municipal collectioncontract 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 geographicalcoverage eastwards from our strong presence in the Randstadt area. Theperformance in the first three months is encouraging with results ahead of ouracquisition plan. Profits from the existing solid waste businesses have improved. In June 2005disposal costs rose sharply as the result of the introduction of the landfillban in Germany, depressing results. The effect of these cost increases had beensubstantially mitigated by the start of the current year by increased recyclingand price increases. Both our industrial cleaning business, Reym, and our hazardous waste treatmentactivity, ATM, performed well. Reym generated a significant improvement onlast 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 aconsequence of an earlier major maintenance shut down. Central Services Central Services costs increased to £2.6m (2005/6: £2.3m) reflecting additionalcharges for share based payments. Financing Since 31 March 2006 principal Group borrowings relating to the core businessincreased by £45m to £121m (31 March 2006: £76m) due principally to theacquisitions of Smink Beheer BV in the Netherlands and the waste management andrecycling activities of John W Hannay & Co Limited in the UK. Followingcontinued 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 startup 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 iscontinuing, as predicted, with further rises in landfill tax and the requirementnext year to pre-treat all waste before landfill. We are confident that ourcontinental business model of high recycling and recovery will have growingrelevance in the UK. Contaminated Land Services activity is improving especially with the prospect ofremediation projects in East London ahead of the 2012 Olympic Games. The Group is pleased with its recent Dutch acquisition of Smink Beheer BV andcontinues to search for similar opportunities. Trading in the Benelux area isrobust and is expected to remain so for the balance of the year. Consequentlythe Board is confident in achieving its expectations for 2006/7. M C E AverillGroup 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 0383Adrian Auer; Chairman thereafter, telephone: 01628 554920Michael Averill; Group Chief ExecutiveFraser Welham; Group Finance Director Citigate Dewe Rogerson telephone: 020 7282 2945Ginny 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 operationsRevenue 2 246.8 224.7 442.5Cost 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 7.8Change 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 30.3Tax 3 (7.3) (4.5) (10.5)________________________________________________________________________________Profit after tax for the period from continuing operations 2 14.7 8.0 19.8 Discontinued operationsProfit after tax for the period from discontinued operations 2 - 5.8 10.6________________________________________________________________________________Profit for the period 14.7 13.8 30.4Dividends 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 isunaudited. 2005/6 first half comparative information has been restated to reflect thereclassification of operations discontinued in the second half of 2005/6 and thechange in the accounting treatment of PFI contracts made between interim andfinal 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) 1.9Actuarial loss on defined benefit pension schemes (1.0) (2.4) (0.6)________________________________________________________________________________ (5.2) (3.7) 1.3Deferred tax in respect of the above 0.3 0.8 0.2________________________________________________________________________________Net (expense) income recognised directly in equity (4.9) (2.9) 1.5Profit 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 isunaudited. 2005/6 first half comparative information has been restated to reflect thechange in the accounting treatment of PFI contracts made between interim andfinal 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 assetsIntangible assets 199.7 139.3 144.4Property, plant and equipment 194.3 175.5 183.6Loans to joint ventures - 1.1 0.6Other investments 2.0 1.0 2.3Trade and other receivables 138.2 100.1 120.1Deferred tax assets 13.7 13.0 15.0________________________________________________________________________________ 547.9 430.0 466.0________________________________________________________________________________Current assetsInventories 5.2 6.3 9.0Trade and other receivables 105.5 116.8 97.3Current tax receivable 1.4 6.0 1.4Cash and cash equivalents 63.1 54.7 59.4________________________________________________________________________________ 175.2 183.8 167.1________________________________________________________________________________Total assets 723.1 613.8 633.1________________________________________________________________________________Current liabilitiesBorrowings (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 liabilitiesBorrowings (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================================================================================EquityShare capital 23.5 23.4 23.5Share premium 93.8 93.4 93.7Exchange reserve 0.8 1.8 5.0Retained earnings 91.8 72.7 86.4________________________________________________________________________________Total equity 8 209.9 191.3 208.6================================================================================ The interim financial information and related comparative information isunaudited. 2005/6 first half comparative information has been restated to reflect thechange in the accounting treatment of PFI contracts made between interim andfinal 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 activitiesPurchases 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 3.1Financial asset capital advances (13.2) (21.4) (48.8)Financial asset capital repayments 1.1 0.6 1.9Acquisition 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 34.0Income received from other investments - - 0.7________________________________________________________________________________Net cash used in investing activities (79.7) (4.8) (45.4)________________________________________________________________________________Financing activitiesInterest paid (7.6) (6.2) (12.6)Interest received 5.1 3.0 7.8Proceeds from issue of shares 0.1 0.2 0.6Dividends paid (8.9) (8.9) (13.4)Increase in borrowings 67.5 26.1 32.2Increase in obligations under finance leases 2.3 - 1.8Repayments 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 26.9Cash 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 isunaudited. 2005/6 first half comparative information has been restated to reflect thereclassification of operations discontinued in the second half of 2005/6 and thechange in the accounting treatment of PFI contracts made between interim andfinal 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 26.9Increase 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 isunaudited. 2005/6 first half comparative information has been restated to reflect thereclassification of operations discontinued in the second half of 2005/6 and thechange in the accounting treatment of PFI contracts made between interim andfinal 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 75.9Private Finance Initiative net debt 121.3 83.6 105.5________________________________________________________________________________Total Group net debt before fair value of interest rate swaps 242.1 176.0 181.4Fair 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 isunaudited. 2005/6 first half comparative information has been restated to reflect thechange in the accounting treatment of PFI contracts made between interim andfinal 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 8November 2006, is unaudited but has been reviewed by the auditors and theirreport is set out at the end of this report. The interim financial statementshave been prepared in accordance with the listing rules of the FinancialServices Authority and use the International Financial Reporting Standards(IFRS) accounting policies set out in the published financial statements of theGroup for the year ended 31 March 2006. The financial information for the year ended 31 March 2006 does not comprisefinancial statements within the meaning of section 240 of the Companies Act1985, and has been extracted from the Group's 2006 published financialstatements which have been filed with the Registrar of Companies. The auditors'opinion on these accounts was unqualified and did not contain a statement madeunder section 237(2) or (3) of the Companies Act 1985. The comparative information for the six months ended 30 September 2005 has beenrestated 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 IFRSrestatement issued on 17 October 2005. There was a change from the provisionalrestatement in relation to the accounting treatment of PFI contracts, which arenow accounted for as financial assets. For continuing operations for the sixmonths ended 30 September 2005, operating profit was reduced by £1.7m, netinterest 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, plantand equipment was reduced by £71.4m, non-current trade and other receivableswere increased by £100.1m, deferred tax assets were reduced by £4.8m, currenttrade and other receivables were reduced by £1.6m and borrowings were reduced by£1.6m. Overall retained earnings brought forward at 31 March 2005 wereincreased by £0.3m and closing net assets and total equity were unchanged. The comparative information for the six months ended 30 September 2005 has alsobeen restated to reflect the reclassification of operations discontinued in thesecond half of 2005/6. For continuing operations, operating profit and profitbefore tax have been increased by £0.3m and profit after tax increased by £0.2m.Equivalent information for discontinued operations has been restatedaccordingly. There is no impact on the balance sheet. 2 Segmental analysis Waste management business shown by management responsibility and geographicalarea: 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 theexternal 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 thereclassification of operations discontinued in the second half of 2005/6 and thechange in the accounting treatment of PFI contracts made between interim andfinal 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 10.5Total 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 estimatedcharge 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 - - 4.5Final 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 bythe Board on 8 November 2006 and will be paid on 10 January 2007 to shareholderson the register at close of business on 15 December 2006. The final dividendfor 2005/6 of 3.8p per share (2004/5: 3.8p per share) was approved by theShareholders at the Annual General Meeting on 27 July 2006 and was paid on 4August 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 thereclassification of operations discontinued in the second half of 2005/6 and thechange in the accounting treatment of PFI contracts made between interim andfinal reporting in 2005/6. The Directors believe that adjusting earnings per share for the effect ofexceptional items enables comparison with historical data calculated on the samebasis. Exceptional items are those items that need to be disclosed separatelyon the face of the income statement because of their size or incidence. Changesin the fair values of financial instruments on interest rate swaps that theGroup is required to enter into in relation to its PFI arrangements are excludedas they do not reflect commercial reality. 6 Acquisitions (a) On 30 June 2006 the Group acquired 100% of the share capital of SminkBeheer B.V. in the Netherlands, for a total consideration of £61.1m. Theaggregate book value of the assets and liabilities acquired and the provisionalfair 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 26.9Property, plant and equipment 9.5 3.6 13.1Inventories 0.1 - 0.1Trade receivables 6.3 - 6.3Cash 16.8 - 16.8Trade 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 36.5Provisional goodwill 24.6________________________________________________________________________________ 61.1================================================================================Satisfied by:Cash consideration (including costs) 59.5Deferred 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 totalconsideration of £9.0m. The aggregate book value of the assets and liabilitiesacquired and the provisional fair value to the Group, pending completion of theevaluation 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 2.8Borrowings (0.5) - (0.5)________________________________________________________________________________ 1.6 0.7 2.3Provisional goodwill 6.7________________________________________________________________________________Cash consideration (including costs) 9.0================================================================================ (c) During the period the Group completed the acquisition of other tuck-inbusinesses. The aggregate book value of the assets and liabilities acquired andthe provisional fair value to the Group, pending completion of the evaluation ofthe businesses, were as follows: Book Fair Provisional value value fair adjustment value £m £m £m________________________________________________________________________________Property, plant and equipment 0.7 - 0.7________________________________________________________________________________ 0.7Provisional 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 25.4Provided - cost of sales 1.0 - 1.0 - finance charges 0.3 - 0.3Acquisitions 5.0 0.1 5.1Utilised (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 7.7Non-current 20.3 1.2 21.5________________________________________________________________________________At 30 September 2006 21.6 7.6 29.2================================================================================Current 2.3 6.8 9.1Non-current 14.9 1.4 16.3________________________________________________________________________________At 31 March 2006 17.2 8.2 25.4================================================================================Current 2.8 8.0 10.8Non-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 208.6 189.0 189.0Profit for the period 14.7 13.8 30.4Dividends paid (see note 4) (8.9) (8.9) (13.4)Exchange (loss) gain on translation of foreign operations (4.2) (1.3) 1.9Loss on defined benefit pension schemes (net of tax) (0.7) (1.6) (0.4)Share based payments 0.3 0.1 0.5Issue 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 forthe six months ended 30 September 2006 which comprises the consolidated balancesheet as at 30 September 2006 and the related consolidated income statement,consolidated statement of recognised income and expense, consolidated cash flowstatement, consolidated movement in net debt, consolidated analysis of net debtand related 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 ListingRules of the Financial Services Authority require that the accounting policiesand presentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. This interim report has been prepared in accordance with the basis set out inNote 1 to the interim financial statements. 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 2006. PricewaterhouseCoopers LLPChartered AccountantsLondon8 November 2006 Notes: (a) The maintenance and integrity of the Shanks Group plc web site is theresponsibility of the Directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site. (b) Legislation in the United Kingdom governing the preparation anddissemination of financial information may differ from legislation in otherjurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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