The news came today (November 6) as the firm announced it had progressed through the initial selection stages for three PFI-funded waste treatment contracts in the Yorkshire area in partnership with Scottish and Southern Energy – a deal which would involve it providing solid recovered fuel from MBT plants for a combined heat and power facility developed by SSE.
We believe that we are well positioned going forward due to the broad based nature of our portfolio and our focus on new technologies
Tom Drury, group chief executive, Shanks
In its results, Shanks revealed an increase in its revenue, group trading profit and group operating profit for the first six months of the 2008-09 financial year, and expressed confidence that it would continue to prosper in the future, despite the economic slowdown.
And, with an emphasis on new technologies as a key factor in that assessment, Shanks confirmed plans to launch its Orgaworld organic waste technology operations in the UK during 2009 – comprising composting and anaerobic digestion.
The company described its first half performance, until the end of September 2008, as being “slightly ahead of our expectations”, with revenue increasing by 30% from £271 million to £351 million, while its group trading profit increased by 23%, from £27 million to £33.3 million.
At the same time, group operating profit increased by 22%, from £27 million to £33 million, and the underlying earning per share rose by 16%, from 6.3 pence to 7.3 pence.
After the results were announced, the company's share price – which had fallen markedly in recent weeks following turbulence in the market – rallied this morning on the London Stock Exchange, and at midday it was up 4.82% at 146.75 pence a share.
As well as its UK operations, Shanks has a presence in Belgium, the Netherlands and Canada, and the firm's group chief executive, Tom Drury, explained that “we got a strong performance from all three geographies”.
In the UK, the company's trading profit increased by 27% to £3.8 million, which Shanks said was “a result of continued strong growth in our solid waste business”.
Orgaworld
Shanks also revealed that is now looking to bring its Orgaworld organic treatment business to the UK, and Mr Drury confirmed that it “expects” to launch it here in 2009.
Explaining that the business “embraces all organic waste technologies”, he told letsrecycle.com that “all the drivers are there in the UK market” for the offering – pointing to the government's support for the sector, the favourable situation with regards ROCs, and the environmental benefits it offered.
“We're fully committed to it,” he explained. “The potential for adding growth is substantial.”
He also highlighted growing support from businesses such as Sainsbury's and an increasing interest from local authorities as helping to make the business attractive.
Slowdown
Citing its moves into PFI – where it aims to build its share of the market from dealing with 0.6 million tonnes a year to 1.5 million tonnes – and organics waste as examples, Mr Drury explained that, with the economic slowdown in mind, “we've aligned ourselves deliberately with high-growth sub-sectors”.
The downturn in the UK construction market particularly affected Shanks' hazardous waste activities, with a “substantial” reduction in the number of site decontamination jobs it undertakes from general construction activities.
However, it cited the 120,000 tonnes of soil it handled from cleaning up sites for the 2012 London Olympics as “offsetting the decline in profit from the underlying business”.
Commenting on the uncertainty regarding markets for recyclables once they have been collected, Mr Drury explained: “Like all others we can't escape completely from that, but we've worked hard with developing strong relationships with end markets.”
Providing an overall assessment of the company's prospects in the current economic climate, he said: “A less certain economic environment is a challenge we all have to meet and therefore we continue to manage our businesses appropriately and invest only in those areas which will deliver attractive returns.
“On balance our businesses have remained robust during the first half and we believe that we are well positioned going forward due to the broad based nature of our portfolio and our focus on new technologies offering more sustainable waste management solutions.
“The Board therefore remains confident of meeting our expectations for the current year and making further progress for the future,” he added.
PFI
Under Shanks's partnership with Scottish and Southern Energy (SSE), the company explained that it had bid for contracts in Bradford, Leeds and a Barnsley/Doncaster/Rotherham consortium, which have, between them, received £208.1 million in PFI credits.
The arrangement means that, if Shanks secures the PFI-backed contracts, the company would send the solid recovered fuel produced by mechanical biological treatment (MBT) facilities to a combined heat and power plant that SSE plans to build at one of its existing sites within the Yorkshire region.
This arrangement would be in place for the length of the PFI contracts, and speaking to letsrecycle.com today about the partnership, Mr Drury, said: “I think it complements our MBT solution very well, the energy companies are, I feel, the natural people for us to work with”.
In a statement announcing the link-up with SSE, Shanks said: “The tie up between the two companies would provide a complete solution for the region's residual household waste, enabling the local authorities to optimise levels of recycling and recovery whilst minimising the amount of waste destined for landfill.
“Furthermore, the flexibility of the technical solution for the locally produced fuel would ensure a robust long term offering which can respond to technological changes,” it added.
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