Shanks says its municipal division is continuing to cause problems, with managers seeking new measures to turn around the business.
The latest trading update indicates that “strong underlying performances from the commercial and hazardous waste divisions [were] offset by continuing market and operational challenges in the UK municipal business”.
The report says: “The municipal division had a very difficult third quarter, with the impact of both the mix and prices of the fuels that we produce being worse than expected, particularly at the East London Waste Authority.”
Shanks kicked off the 25-year contract in 2002, serving the London Boroughs of Barking & Dagenham, Havering, Newham and Redbridge. The company has invested around £100m in the operation, which includes two mechanical biological treatment facilities, a MRF and a reuse and recycling centre for non-core and bulk materials.
There have also been problems with the Barnsley, Doncaster and Rotherham (BDR) facility at the heart of a partnership between Shanks and SSE. The plant was opened in September 2015 but Shanks says it had to be closed temporarily last year for modifications to improve performance. BDR was a category winner at MRW’s National Recycling Awards in 2016.
The trading update adds: “Management continues to focus closely on this division: the recovery initiatives announced with the interim results in November are being implemented and further plans are being developed by the new divisional management team to improve performance.
“We believe that these actions will turn around the business, with the benefits starting to be seen in 2017-18.”
The proposed merger between Shanks Group and Dutch and Belgian waste business Van Gansewinkel Group (VGG) is said to be progressing, and clearance from the Belgian competition authorities was achieved on 25 January 2017.
“We are making good progress with the Netherlands filing and expect to complete in line with our previous expectations,” Shanks said, adding that the merger would be marked by a new branding.
The deal, announced in July and originally due to be completed by the end of 2016, will be a reverse takeover by Shanks, with a partner firm twice its size.