Waste management firm Viridor experienced a 28.8% leap in profit before tax with strategic purchases and a rise in the price for recovered material in the second half of 2009/10, its parent company Pennon Group's announced today (November 25).
Viridor's earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 1% from £55 million to £55.6 million. And, Viridor's profits before deduction of interest and tax also increased, rising to £33.4 million up from £32 million.
This performance helped to counter a 0.6% fall in profit before tax for Pennon's other business interest South West Water. Pennon as a whole saw profit before tax rise by 0.7% to £96.2 million for the six-month period.
Commenting on the results, Ken Harvey, chairman of Pennon Group, said: “I am pleased to report another successful half year for the Group. South West Water continues to improve its performance and Viridor has once again delivered excellent profit growth.
He added: “Viridor expects to continue to deliver strong long-term growth through successfully leading the way in exploiting opportunities arising from the government's landfill diversion, recycling and renewable energy targets.”
Purchases
The cuts outlined in the government's spending review may lead to some delays or changes in the nature of the waste contracts [that had PFI funding withdrawn]
Pennon Group, Half-Year Report to September 30 2010
One element cited as helping increase Viridor's overall revenue to £363.1 million – a rise of 17% from £309.8 million for the same period in 2009 – was strategic purchases undertaken by the company in the past six months.
The acquisition of London Recycling and Intercontinental Recycling in 2009, as well as the purchase of paper recycling firm Reconomy in July 2010, accounted for £17.8 million of the increase in revenue.
And, with regards to the purchases, Viridor said it had become the “largest operator” of materials recycling facilities in the UK following the purchase of Reconomy (see letsrecycle.com story) and Norfolk-based Pearsons Group earlier this month (see letsrecycle.com story).
It said: “Both acquisitions have an excellent geographic and business fit with Viridor's existing operations in the East of England and are expected to be earnings enhancing before amortisation of intangibles in their first full year.”
The firm's capital expenditure for the half year was £30.5 million – compared to £26.4 million for the 2009/10 period. In addition, it invested £7.2 million into its joint venture projects.
Recyclate
In addition, Viridor stated that the price for recovered material was “very strong” in the six-month period, and were “back to the peak levels seen in the first half of 2008/09”. The increase in price was linked to a rise in the volumes of recyclate traded, which increased by 175,000 tonnes to 900,000 tonnes – 119,000 tonnes of this was attributed to the company's existing business.
On landfill, Viridor highlighted that the amount of material sent for disposal via this method had fallen by 300,000 tonnes (12%) over this period. Viridor claimed this was achieved partly by recessionary effects but also due to increased recycling and landfill diversion among Viridor's third party industrial and commercial customers.
In the same period, the average price of landfill gate fees at Viridor sites increased by 0.4% to £21.76 per tonnes.
Energy
In its half-year figures for 2009 Viridor had outlined a plan to increase its energy generation three-fold (see letsrecycle.com story). And, the most recent financial data indicates increased moves towards this goal.
Landfill gas power generation output increased by a further 3% to 280 Gigawatt hours, while Viridor's total operational capacity has now reached 130MW with around a further 110MW consented by not operational. However, average revenues per Megawatt hour fell by 15% to £69 per MWh in September 2010 from £82 per MWh in September 2009.
Viridor also used its financial results to address the withdrawal of PFI funding from seven projects under the government's Comprehensive Spending Review (see letsrecycle.com story).
It stated: “Viridor is bidding for some of these [affected projects] and believes that steeply increasing Landfill Tax is the fundamental driver of the proposed investments which will be needed, with or without PFI credits. The cuts outlined in the government's spending review may lead to some delays or changes in the nature of the contracts.”
“Rotten”
Speaking to letsrecycle.com, Colin Drummond, chief executive of Viridor, said he deemed the withdrawal of PFI funding from local authorities a “rotten situation”.
He said: “We are certainly still working with the local authorities and the authorities are still continuing with the procurement. I think it is a rotten situation for the authorities as they have to make these plans to continue to recycle more and avoid Landfill Tax.
“I feel sympathy with them in feeling upset over this. One way or another the authorities have to find ways of recycling more or getting rid of residual waste away from landfill. The big problem means we will have to rescope projects. Not clear for the moment what that will involve.”
In other comments on the results, Mr Drummond said that the results showed that the company was still on course to achieve 300MW of energy generation over the course of the next five years and recognised the importance of the recovery of the recycled material market in Viridor's strong performance.
Mr Drummond said: “It is something we have expected for a long time and I said that we expected continued profit growth in Viridor and we predict value growth in the future. What I was doing in the results was highlighting that 29% profit growth has happened and we will see further growth. Twenty-nine per cent in a recession is incredible.”
TV
The announcement of the half-year financial figures coincided with the launch of ViridorTV – a dedicated YouTube channel intended to offer an insight into the operations and day-to-day activities of the waste management firm and a selection of its 280 treatment sites.
The channel, which was officially launched yesterday (November 24), hosts a series of ‘mini-films' such as its materials recycling facilities, glass recycling operations and its energy-from-waste operations, such as the Lakeside energy recovery plant in Berkshire.
Commenting on the launch, Colin Drummond, Viridor chief executive, said: “Our YouTube channel and films provide an instant and accessible resource for anyone interested in recycling and waste management as we move towards a more resource efficient society.
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