Waste treatment specialist Nature Group delivered a pretty robust performance last year which saw both turnover and operating profits double to £15.1m and £6.1m respectively, following the ISD acquisition. But pre-tax profits were little changed at £1.52m, mainly due to higher costs associated with last year’s explosion at the group’s Gibraltar facility, with the real blow landing in January this year when insurers refused to recognise a £3.1m claim for loss of business and property damage. The shares have suffered as a result, but the underlying business remains strong, and we remain buyers.
Clean-up costs have yet to be recouped, and together with other related expenses Nature Group is £3.5m out of pocket. This is a shame, because the underlying business is developing strongly. Interest in the group’s compact treatment units (CTUs) – where a treatment unit is placed on an oil rig support vessel, thus saving the considerable costs associated with transporting waste to a port facility for processing – continues to grow significantly, and two new units are due for delivery in July. And as well as extending its Rotterdam port reception facilities to Amsterdam, Nature has also established a joint venture to build a waste logistics and processing facility for ships using the Panama Canal. Great strides have also been made integrating slop disposal group ISD into the group, and a number of tankers have been bought to support the group’s expansion plans.
WH Ireland reckons that the shares could come under pressure in the short term, reflecting uncertainty over Gibraltar and pressure on global shipping volumes. But longer term the shares retain their attraction, with the CTUs a potential game changer. The broker is forecasting pre-tax profits of £3m for this year and EPS of 3.1p, rising to £4.5m and 4.6p for 2013.
