In its six-month interim results for 2002-3, the waste management company has seen its turnover increase by 8m from the same period last year to 275m, but profits have fallen by as much as 15%, hit particularly hard by its UK operations including a 7.2m decrease in landfill profits compared to this time last year.
Speaking to letsrecycle.com after the company announced its results to the financial sector, chief executive Mike Averill said that he was optimistic the company would turn the corner and strengthen its UK operations, although he said it would “not be tomorrow or the day after but in the medium term”.
“The industry is in a transition phase, and it is obvious that landfill is not the future,” he explained. “We're waiting for the Strategy Unit review to come out, we think that will bring about a lot of opportunities for recycling, and we are well placed to take advantage of that and make use of the successful technology we have working in the Netherlands and Belgium.”
Commenting a few weeks after the company had a proposal for an incinerator turned down by Milton Keynes planning authorities (see letsrecycle.com story), Mr Averill said that since landfill regulations were tightening and incineration was so unpopular, the company would be taking advantage of its expertise in recycling.
He said: “There will be huge interest amongst local authorities for our technology, especially with the mandatory landfill diversion targets.”
Windfall
Part of the reason for the drop in profits this year was the effect of the UK foot and mouth crisis on last year's figures. The 2.7m windfall from the collection and disposal of the hazardous agricultural waste in 2001-02 meant an inevitable difficulty sustaining the profit level in this year's figures.
But in his statement to investors, Shanks chairman Ian Clubb said that waste collection activities in some areas of the country were suffering from “intense competitor activity”, and that landfill regulations were also taking their toll.
He explained: “Core landfill volumes were lower, contaminated land projects declined and certain special wastes were diverted away by the Landfill Directive. Prices were higher but this improvement has been more than offset by increased regulatory, insurance and other costs which have eroded margins.”
Shanks have also seen their debts mounting by 6m to 295m because of unfavourable exchange rates between the pound and the euro.
However, on the plus side Shanks has seen its profits from the generation of electricity from landfill gas grow by 1.5m to 4.2m, with a further 25MW of capacity expected to come online later this year or early 2003. Losses at its Chemical Services division – handling hazardous wastes – have been improved by 800,000 compared to this period last year.
New Contracts
The company also has a number of possible contracts lined up for the future. Negotiations are continuing for the East London Waste Authority contract, to handle 500,000 tonnes of waste a year, and also with the local authorities of Dumfries and Galloway in a 100,000 tonnes a year contract.
Chief executive Mike Averill also told letsrecycle.com that they had undergone management improvements in order to cope with the difficult market conditions.
He said: “We've had a cost reduction programme and heads have gone. There are some vacancies still to be filled, but we've become more geographically spread with a regional focus so that we can work much more closely with our customers.”
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