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Cumbria contract hits Shanks trading

The latest business update from Shanks indicates the challenging state of the local authority market, with a £5m write-off on its contract with Cumbria County Council.

The move was included in ‘exceptional items’ as part of a trading update ahead of the company’s preliminary results being released on 19 May.

In general, the group says it has performed in line with the board’s expectations following the previous statement on 3 February.

But it notes that, following previous announcements regarding market pressures in its municipal division, “we shall account for the operating contract relating to our Cumbria PPP facilities as an onerous contract from 1 October 2015”.

Shanks says this will result in an exceptional charge of up to £5m.

A spokesman says the contract is expected to be loss-making ”for a period of time and the company was taking an accounting provision up front to recognise that”.

The 25-year, £720m contract signed in 2009 included two 75,000-tonne per annum mechanical biological treatment facilities and management of Cumbria’s household waste recycling centres.

There were problems at one of the sites in August 2013 following an infestation of flies.

However, the loss on the sale of Shanks’ Wakefield PFI assets will be £5m better than previously announced due to money rates improving ahead of completion.

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