Revenue at Viridor grew 3.4% to £410.1 million as increased operating revenue from ERFs was offset by lower construction revenue from service concession arrangements as facilities come on-stream, and lower landfill tax receipts as volumes continue to decline.
Pennon announced that, “its strategic priority is to move towards a more homogenous Group risk profile, by increasing the proportion of contracted long-term index-linked revenue at Viridor.”
Viridor’s strategic orientation around ‘Energy’ and ‘Recycling and Resources’ is now delivering results according to Pennon. The six months performance was in-line with management expectations, said the company, with underlying earnings before tax increasing by 64.4% compared to the first half of 2014/15 as a result of progress in the ERF business.
ERFs
A focus will continue on optimising performance at the company’s seven ERFs, which will be carried out with the operated ramp-up of the five of these which were brought on stream in the last financial year.
Ian McAulay, chief executive of Viridor, said: “We are increasingly well-positioned as ERFs come on-stream delivering significant earnings growth. Long-term drivers for recycling remain compelling and in the short-term we are working through a restructuring of parts of that business alongside renegotiation of contracts to make it a more profitable activity.
“Landfill energy remains a significant cash generator and we are developing alternative uses for sites as we continue to manage the move away from landfill towards energy recovery.”
In its statement accompanying the results, Viridor noted that councils are increasingly looking to form groups for larger, multi-service contracts for “resource management”, and gave examples of a contract it had signed for Tomorrow’s Valley in Wales and also highlighted its preferred bidder status for Clyde Valley in Scotland.
Recycling
“We are increasingly well-positioned as ERFs come on-stream delivering significant earnings growth.”
Ian McAulay, chief executive
Viridor
During the half year, Viridor’s recycling volumes traded increased by 32,000 tonnes (3.8%) to 900,000 tonnes. Recyclate prices were slightly lower for the first half year of 2015/16 compared to the first half of 2014/15.
Despite lower recyclate prices, Viridor’s average revenues per tonne (recyclate sales plus gate fees) for the half year rose to £87 per tonne (from £86 per tonne in 2014/15).
“Viridor is focused on giving resources new life through recycling and renewable and decentralised energy. Investment in technology and operational practices, including ITOO, continues to enhance recyclate quality to differentiate Viridor from its competitors and to position it strongly within a consolidating sector,” said the report.
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