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Shanks to focus on PFI as trading profit drops 17%

UK waste PFI is one of the key growth areas Shanks Group will continue to focus on going forward after it revealed its trading profit dropped by 17% in 2009/10, while its profit before tax dropped by 24%.

Published in its annual report today (20 May), the Group’s results show its trading profit fell from £61.7m to £51.1m over the past year. Unique weather conditions experienced last winter and a “deep recession” - which is estimated to have had a profit impact of £20-25m - have been blamed for the fall in profit.  But the company said it had still delivered a “robust performance”. The decline in Belgian landfill due to increases in taxes has also had an effect.

Shanks Group chief executive Tom Drury said: “We are encouraged by preliminary indications towards the end of our final quarter that we are through the worst of the downturn in waste volumes with recyclate prices also on an upward trend. However we expect conditions to remain challenging in the near term for our construction related businesses.

“In the medium term, we remain confident that a combination of returns from our strategic investments and relatively high margins on incremental volumes arising from the economic recovery will generate strong growth.”

Drury added that recycling and organic processing, along with UK waste PFI will remain key focus areas.

In March, Shanks ended buyout talks with Carlyle but it has been tipped as a possible bid target again as analysts renew their interest in the firm.

The financial statement also announced the value of its PFI activities for the first time. These have been realised at £65m to £80m.

Of its UK operations the report showed that waste volumes fell by 8% but the profit impact was mitigated by price increases and cost reductions. Hazardous waste also fell due to a downturn in the construction industry. As a result of this, Shanks has had to reduce its workforce in this area. Its PFI portfolio has also performed well because its Cumbria PFI project reached financial close during the past year. Currently, Shanks has received planning permission to build to MBT plants and it has started construction on its Hespin Wood facility. It has also been shortlisted for six further PFI projects.

A joint venture with Energen Biogas will also see Shanks growing its anaerobic digestion arm, Orgaworld, beginning with a 60,000 tonnes of waste per year plant in Scotland.

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