The job losses were announced today in an interim management statement, where they were described as “restructuring” that would deliver annual cost savings of £2 million “to help mitigate the current challenging trading conditions”.
It entails a reduction in the UK headcount of 55 people
Tom Drury, chief executive
Following the announcement of the job cuts, Shanks' share value fell by 13.5% to 81.5 pence at lunchtime today (February 3).
Speaking to letsrecycle.com today, the company's group chief executive, Tom Drury, said that the change “entails a reduction in the UK headcount of 55 people, that's 1/6th of our UK headcount”.
Mr Drury confirmed that the staff affected – of whom 50% would come from admin roles and 50% from operational positions – had been informed, and Shanks was “in full consultation” with them.
The company aims to complete that consultation process before the end of the current financial year, and Mr Drury confirmed that no further restructuring was planned.
Challenging
Outlining the reasons for the job cuts, the company said in its trading update: “In the UK, trading since November has been challenging due to the sharp fall in the value of recyclable materials and a slowdown in volumes.”
“Swift action has been taken to reduce the cost base and this will lead to a restructuring charge of around £1.5 million in our final quarter,” it added, with the £2 million cost savings expected “going forward”.
Commenting on the impact of the fall in prices for recovered materials on Shanks business, Mr Drury explained that it had impacted on its deals with end customers “where recycling income is part of the agreement”.
But, he added that Shanks had “generally found markets for materials, just not at the prices we used to get”.
Growth
Despite the difficulties experienced by Shanks' UK business, which provides 15% of its profits, the company revealed that it's overall year-on-year organic sales growth in the nine months to the end of December 2008 ran at 5.6%.
“Overall results from trading remain broadly in line with our expectations before the restructuring costs in the UK and a small increase in projected current year finance charges associated with the refinancing,” it said in the statement.
In particular, it described trading in both its Dutch and Belgian operations as having been “satisfactory”, since it published an interim trading announcement in November 2008 (see letsrecycle.com story).
And, the company highlighted the beneficial impact of the “favourable” exchange rate for the majority of its business, which is conducted in Euros, and Mr Drury acknowledged that “it improves our profit”.
Referring to the overall situation in Belgium and Holland, he commented: “There's some softening over there, but it's compensated for by the exchange rate.”
PFI
Mr Drury also commented on Shanks' PFI-funded waste treatment contract with Cumbria county council, which has had its financial close delayed by two months until April 2009 due to the current financial situation (see letsrecycle.com story).
“We're well-advanced in the financial process with the banks,” he commented, explaining that, while “larger deals are very difficult to close at the moment”, the Cumbria deal was a more manageable size.
Future
Looking towards the future, Shanks' emphasised its “broad-based” portfolio and technologies, claiming this would “provide resilience during the difficult economic outlook and position us to deliver good growth once conditions improve”.
“During 2009, we will balance continued investment in our strategy against a strong focus on cash generation,” it added.
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