Waste management group Shanks has continued to defy lower prices in its core market by cutting costs and focusing on higher-margin new business. Underlying profits rose by an impressive 24 per cent rise in the first half of the year as Shanks continues with its six-year, £250m investment programme. The reported profit for the period included a one-off £4.3m tax settlement with Belgian authorities.
The company also revealed that Peter Dilnot will join as new chief executive in February, having previously been with Boston Consulting Group and Danaher. With £100m of the investment programme completed, he will focus on the next £150m phase, half of which will be deployed in the UK to build new recycling facilities. Trading profits in the UK climbed 60 per cent to £3m on strong growth in municipal waste contracts.
The Netherlands and Belgium, with revenues of £201m and £91m respectively, are the group's core markets. Here, waste volumes rose but pricing continued to come under pressure. This caused the Belgian division's operating profit to slip 17 per cent, but strong trading in hazardous waste in the Netherlands – volumes were 22 per cent higher – led to a 15 per cent increase in operating profit there.
Broker Peel Hunt expects full-year adjusted EPS of 7.7p, up from 6.5p.
SHANKS (SKS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 113p | MARKET VALUE: | £448.4m | |
| TOUCH: | 112-113p | 12-MONTH HIGH: | 132p | LOW: 99p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 95p* | NET DEBT: | 58% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 348.4 | 10.5 | 4.30 | 1.00 |
| 2011 | 397.7 | 17.9 | 4.40 | 1.10 |
| % change | +14 | +70 | +2 | +10 |
Ex-div: 7 Dec Payment: 13 Jan *Includes intangible assets of £281m, or 71p a share. | ||||
