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Shanks swings into the black at the operating level

The waste management group delivered a mixed bag for its March year-end
May 23, 2016

Headline losses narrowed appreciably at Shanks Group (SKS) despite what the waste management group's boss described as "tough macro markets". Shanks swung into the black at the operating level, although the turnaround from its March 2015 year-end was largely attributable to heavier impairments on assets and goodwill in the earlier period.

IC TIP: Hold at 80.8p

Still, we needn't be too churlish; revenues were on the up, and there were certainly signs that Shanks' markets might have troughed in one key area. With more than half of its revenues linked to oil and gas markets, there were concerns that the hazardous waste division would drag on group profitability. In the event, with new capacity coming online the division more or less flatlined - something of an accomplishment given the external factors at play.

Elsewhere, the group's commercial waste division delivered an encouraging trading performance on the back of improving end markets, particularly in the Netherlands. The going was much tougher for the municipal division, where trading profits contracted by 15 per cent at constant currencies due to recycling and other commodity pricing pressures, although prospects have been enhanced by the successful commissioning of two flagship assets in Yorkshire through private finance initiatives.

Peel Hunt expects adjusted pre-tax profits of £25m for the year to March 2017, giving EPS of 4.8p (up from £21m and 4.7p in FY2016).

NB: Subsequent to these results, Shanks confirmed that it was considering a takeover offer for Van Gansewinkel Groep BV, a rival operating in the Netherlands and Belgium. Shanks requested a suspension of its shares as the deal would represent a reverse takeover.

SHANKS GROUP (SKS)
ORD PRICE:80.8pMARKET VALUE:£322m
TOUCH:80.8p-82p12M HIGH / LOW:114p69p
DIVIDEND YIELD:4.3%PE RATIO:NA
NET ASSET VALUE:46p*NET DEBT:104%

Year to 31 MarTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201275029.96.53.45
2013615-10.10.43.45
20146337.6-7.13.45
2015599-20.5-4.63.45
2016614-2.5-1.03.45
% change+2---

Ex-div: 30 Jun

Payment: 29 Jul

*Includes intangible assets of £195m, or 49p a share