Norse Group has reported a “difficult year” in 2017/18 in regards to profitability, which has been put down in part to challenging conditions in the recycling market.
The local authority-owned trading company provides a range of services, including waste management and recycling, through Norse Commercial Services Ltd, usually via joint ventures with councils. It has recently published its annual accounts for the financial year ending April 2018.
The joint ventures, which cover waste collection, management and recycling services, include Norse South East Limited, Wellingborough Norse Limited, GYB Services Limited and Suffolk Coastal Norse Limited.
In terms of local authority trading companies, Norse is believed to be among the largest, according to Grant Thornton accountants.
Norse Commercial Services Limited saw its profits fall from £3.6 million to £299,108 in 2017/18. Meanwhile, revenue remained fairly static at £165 million.
In Norse Commercial Services’ annual accounts, the drop in profitability is particularly linked to a joint venture with a number of Norfolk councils – Norse Environmental Waste Services Limited (NEWS). Norse Commercial Services Limited has a stake of 50-75% in NEWS.
While revenue from NEWS remained at the previous year’s level, but “despite increased volumes being processed” … “the processing cost per tonne increased as a result of the higher quality output required to satisfy the market.”
In total, Norse Environmental Waste Services Limited reported a loss of £555,550 after tax for the financial year ending April 2018.
The loss is put down to the “challenging operating environment,” particularly with regard to “fluctuating commodity prices” for recycled materials. It follows a loss of £27,735 for the previous year.
According to the document, continuing uncertainty in the UK economic environment following the Brexit decision, the local elections in May 2017, and the General Election on 8 June 2017, have all contributed to a “higher than usual degree of uncertainty” in the markets.
Despite the challenges, Norse Commercial Services Limited said it is confident that its subsidiaries will continue to bid effectively for local authority contracts going forward. And, new opportunities could add £37 million, to an existing forward order book in excess of £2 billion.
With the exception of recycling, plans for 2018/19 indicate strong confidence in improved margin.
Dean Wetteland, managing director of the Norse Group, said: “Although we achieved an underlying profit of just over £2 million in 2017-18, it was undoubtedly a difficult year with profitability affected by a number of one-off items as well as a significant downturn in the market for recyclable materials. Despite these challenging market conditions, the Norse Group year-on-year increased its balance sheet and cash balances and achieved an improvement in many key financial metrics.
“Although we achieved an underlying profit of just over £2 million in 2017-18, it was undoubtedly a difficult year with profitability affected by a number of one-off items as well as a significant downturn in the market for recyclable materials.”Dean Wetteland
“Recent transformation projects such as the merger of our support service teams, have resulted in significant cost reductions. The Group has already achieved half year results in line with our ambitious business plan for this year, clearly demonstrating that the actions taken last year were key to strong financial development. The Group provides an annual return to the public purse of around £5.5 million each year.”
Looking forward, he added: “Our optimism for the future is borne out by the positive trading results achieved so far during 2018-19. With a number of new income streams coming to fruition shortly, we are looking forward to the future with confidence.
“We have 36 joint ventures around the country and are in advanced discussions with two authorities for two more which have the potential to generate turnover well in excess of £50m over ten years. We are confident the Group will continue to go from strength-to-strength, not only in its work with local authorities, but we also envisage significant growth with our commercial contracts. These are truly exciting times for the Group.”