Final Results
Financial Summary
· Revenue growth of 4% (1% at constant currency), driven by the Hazardous Waste Division and UK Municipal.
· Underlying profit before tax up by 14% from that reported last year to £30.2m, due to exit from UK Solid Waste, with profit before tax on continuing businesses broadly flat.
· Ongoing investment in Cumbria and good progress in construction at BDR and Wakefield has led to 25% increase in Directors' valuation of PFI portfolio to £110m.
· Ongoing focus on capital discipline delivered strong cash performance with lower than expected core net debt at £156m and net debt to EBITDA reduced to 1.9x. Final dividend maintained at 2.35p per share, reflecting confidence in medium term growth.
· Total Group exceptional and non-trading charges of £22.5m, principally reflecting non-cash goodwill impairment, and a loss on discontinued operations of £30.0m, being the cash generative exit from UK Solid Waste, partially offset by provision releases.
Business Overview
· Outperformed the industry in markets that remain very challenging.
· Successfully achieved exit from loss-making UK Solid Waste business generating cash and refocusing the Group.
· Delivered profit growth in Solid Waste Benelux, our biggest division by revenue, for the first time in five years and ahead of any market recovery.
· Delivered underlying growth in Hazardous Waste, while generating high returns and actively investing for further growth.
· UK Municipal Division performing well, with key build programmes and Derby project making good progress.
· Organics municipal pipeline progressing in Canada, with promising long-term contract opportunities, while Organics in Europe increasingly challenged by market over-capacity.
· Repositioned Group with leadership in core markets and are executing our clear growth strategies for each division.
Outlook
Notwithstanding markets which are expected to continue to be challenging in the year ahead, the Board's expectations for 2014/15 remain unchanged. In the coming year we expect to deliver growth in our Hazardous Waste and UK Municipal divisions. Our Solid Waste Benelux division is likely to deliver a broadly similar performance as the benefits of cost reduction will be offset by continued market headwinds. In the Organics division the outlook is impacted by price pressure and our investment in bidding costs for Canadian expansion.
Longer term, the growth drivers in our business remain attractive. There is a clear and growing need for cost-effective and sustainable waste management which Shanks is uniquely placed to meet. As a result of our active portfolio management, we now have leadership positions in all our core markets with a clear strategy to deliver profitable growth and attractive returns in each division. Furthermore, by building a focused and lean business, we are well positioned to benefit from operational gearing when markets recover.