UK Municipal Strategy Future Growth Drivers Strategy Additional secure income streams from new 1 Sustain margin with authority partnership operational contracts • BDR and Wakefield facilities • Derby PFI including gasification 2 Commission assets under construction Further financial income due to attractive returns from subordinated debt investments 3 Achieve Financial Close on new contracts • BDR and Wakefield 2015, Derby 2017 Incremental margin from continuous 4 Win new volume to utilise full capacity improvement and improving productivity • Improved value from fuel production • Impact of incremental volumes 29
UK Municipal Progress Aug Mar Derby 2041 Argyll & Bute 14 17 Jun Nov Sep Wakefield 2038 13 14 15 Dumfries & Galloway Feb Nov Jul BDR 2040 13 14 15 Cumbria 2034 Cumbria Wakefield (in construction) 2026 A&B BDR D&G 2029 (in construction) Derbyshire 2027 ELWA (construction starting) Elstow 2021 Elstow Financial Build Comm- Full Contract ELWA Close Phase issioning Operation duration = Achieved = Major changes in = In progress H1 14/15 = To start 30
UK Municipal Investment FC Date GMT Technology Capital Funding FSC Date Notes Spend Banks BDR Mar 180kt Residual £69m Lloyds Jul 2015 190kt plant; 2011 Biodrying SMBC 3SE is SPV (75% Dry AD Shanks/25% SSE); Shanks act as EPC Contractor Wakefield Jan 120kt Residual £97m Barclays Sep 2015 145kt plant; 2012 Presort MRF Bayern Shanks are SPV and Autoclave & AD LB EPC Contractor Mixed Dry SMBC Recyclates GIB Dry MRF Composting Enclosed windrow Derby Aug 149kt Residual £145m Bayern Mar 2017 190kt plant; 2014 Biodrying LB RRS is SPV (50% Gasification SMBC Shanks/50% ICL) GIB ICL is EPC Contractor 31
UK Municipal Investment Aerial Photo of Wakefield – Aug 14 32
UK Municipal Investment BDR Video – Aug 14 33
Group Trajectory Recent Profit Evolution… …Future Profit Trajectory Continued growth in high-quality earnings 60 from Hazardous Waste and UK Municipal 50 More long-term contract based 40 Higher returns on assets Trading Profit £m Reduced cyclicality 30 20 Organics set for strong mid-term growth 10 from new assets 0 Solid Waste profit on track for sustained -10 2010 2011 2012 2013 2014 mid-term growth Commercial gains = Hazardous Waste Structural cost action = UK Municipal Macro recovery = Organics = Solid Waste Benelux 34
Key Messages We have refocused our Shanks vision to reflect and harness our 1 competitive advantages 2 NL SW continues to face extremely tough market headwinds, but positive medium-term recovery drivers remain 3 Our three growth divisions continue to perform robustly Our growth strategy is robust, differentiated and being implemented 4 successfully We continue to invest in infrastructure that will deliver high-quality 5 earnings growth in the years ahead 35
Appendices 36
Strategy in Action Organics Strategic Lever Recent Progress (H1 15) • Record results at Cumbernauld AD, planning to invest ~£4M in additional capacity (H2 15) Ramp-up new EU assets profitably 1 • Westcott Park now operational (Sep 14) • Preparing final bids with large city projects in H2 (ongoing) 2 Capture NA opportunity • Good progress on other major opportunities (ongoing) • Albert Heijn contract now fully operational (Apr 14) Co-processing with NL – A-brand 3 • New funnel of opportunities progressing (ongoing) customers • Received EU subsidy to support breakthrough bio-ethanol conversion (Aug 14) Maintaining technology leadership 4 • Assessed rubber organic processing (Jul 14) Outlook: step-down due to NL price, new facilities provide mid-term profit growth 37
Strategy in Action UK Municipal Strategic Lever Recent Progress (H1 15) • Delivered record diversion levels to reduce landfill costs Sustain margin in partnership with 1 • Instigated lean initiatives on transport and procurement local authorities • Ongoing programmes with authorities for mutual gains • Good progress at BDR and Wakefield with both construction projects on track (ongoing) Commission assets under 2 • Hiring operational and commissioning teams, with key construction leaders now appointed (Aug 14) • Derby PFI deal reached Financial Close with Interserve Plc Achieve Financial Close on new 3 providing EPC wrap (20 Aug 14) contracts • ROC application now submitted and construction underway • Current capacity in core contracts fully utilised • Negotiating deals to “top - up” capacity at BDR/Wakefield 4 Win new volume to utilise full capacity and Derby (ongoing) Outlook: on track to double profit as contracts ramp-up over next 5 years* 38 * Excluding win fees
Wakefield • 145kt Residual Plant • Financial Close: 14 January 2013 • GMT: 120kt Residual Waste • Technology: - MRF • Capital spend: £97m - Autoclave - AD facility • FSC date: 1 September 2015 - Composting plant - HWRCs • Funding banks: Shanks are SPV and EPC Contractor 39
BDR • 190kt Residual Plant • Financial Close: 2 April 2012 • GMT: 180kt Residual Waste • Technology: - MBT • Capital spend: £69m - AD • FSC date: 1 July 2015 • Funding banks: 3SE is a SPV (75% Shanks, 25% SSE) - Shanks are EPC Contractor 40
Derby • 190kt Residual Plant • Financial Close: 21 August 2014 • GMT: 149kt Residual Waste • Residual Waste Treatment: - MBT • Capital spend: £145m - Gasification • FSC date: 1 April 2017 • Funding banks: RRS is a SPV (50% Shanks, 50% Interserve) - Interserve are EPC Contractor 41
Capital Markets Day Introduction to Solid Waste Netherlands 42
Our Markets Shanks Main Focus I&C C&D Municipal • • • Municipal waste “owned” Collection and processing Collection and processing of industrial and of rubble, soil, green waste, by municipalities • commercial waste wood and metal Collection partly privatised: • • #3 in market: Sita and VGG #3 in market: Sita and VGG and Sita leading major competitors VGW major competitors providers • • • Linked to GDP Linked to construction Low margin and often • Proportion goes to activity linked directly to • incineration Mostly recycled or sorted incinerators In depth review of current market in next presentation 43
Our Activities Key Facts • 3m tons per annum • 50%: C&D waste • 45%: I&C, plus other (soil, glass, paper, green) • 5%: landfill • 90% of income from gate fee, 10% from recyclates • 88% recycling rate We create value by receiving a gate fee, extracting valuable recyclates and then minimising the cost of the residual through making reusable products 44
Our Locations Focused on Randstad: • Shanks’ core market • Majority of NL GDP, 4th biggest urban region in Europe (after Paris, London & Milan) • Strong position in C&D and I&C • 22 site locations • 4 C&D lines: Amsterdam, Rotterdam, The Hague and Utrecht • Local brands with strong brand identity Randstad • Competitive scale in target regions Glass: • National activity, with production line in Gameren Wood: • National activity, with production line in Utrecht Green / Composting: • The Hague area Outside Randstad: • Service via partners Landfill: Amersfoort Market leader in C&D Concentrated in Randstad area 45
Our Financials Mar 14 Mar 13 Change Year ended € m € m € m % • Volume flat (share gain) Revenue 223.3 231.0 (7.7) (3%) • Revenue down (price and mix) Cost 211.5 222.1 • Cost out (operational and Trading profit structural) Operating units 14.2 11.9 2.3 19% Central services (2.4) (3.0) 0.6 • Headcount out (structural 11.8 8.9 2.9 33% change) Fiscal year 15 is very challenging as market conditions have continued to deteriorate 46
Our Team Managing Director Michael van Hulst Director VVC Director Central Benelux Finance/ IT/ Legal Procurement Marc Van Buijtene Damy Story Henk Rogiers Revenue € 54.3 Revenue: € 81.7 Eric Hazelberg Director North Director Klok HR Health and Safety TBC Rick Van Vliet Mark Cowan Jan Thewissen Revenue € 72.9 Revenue: € 23.1 Business Director Vliko Improvement Louis Sciarli Dieter Avonds Revenue € 30.5 Good balance between local autonomy and central functions 47
Our Strategy Strategic Lever Recent Progress (H1 15) • Structural cost programme lowering fixed costs (ongoing) Lowest cost position through scale • Continuous improvement launched in pilot sites (Sep 14) 1 and productivity advantages • Implementation of Shared Service Centres (H1 live) • Renegotiation of key offtake contracts (ongoing) High quality, innovative products for 2 • New contract in final stages for Icopower pellets target markets • Selective price increases launched (1 Jul) 3 Commercial effectiveness to increase • Action to terminate or fix ‘bleeder accounts ( ongoing) share and margin • New segmentation in Icova, Klok and VVC (Sep 14) • Tuck-in acquisition of Marcelis at VVC (Sep 14) Actively managing portfolio to 4 increase returns • Actively monitoring markets for value-accretive deals 48
Our Key Profit Levers Commercial Commercial Continuous effectiveness effectiveness improvement Winning in Structural cost Procurement programme tough markets Plant Route / fleet productivity optimisation Well positioned to capture value from market recovery 49
Capital Markets Day 2014 Dutch SW Market Overview Peter Dilnot, Group Chief Executive 50
Key Messages NL SW market continues to be under significant strain 1 Volumes are depressed and not set to rise significantly, except in C&D 2 Over-capacity and intense competition has led to sustained price reductions 3 Dutch legislation and waste imports are already leading to price increases 4 Company rationalisation and consolidation will lead to reduced capacity 5 Shanks has unique market position and is well placed to emerge strongly 6 We have a clear market oriented strategy and are focused on its execution 51
Agenda Market Dynamics Competitive Landscape Shanks Strategy 52
NL SW Segments and Drivers Destination & Recycling Vol (1) Segment Drivers Outlook Rate (2) Collection Municipal -0.7% • Population growth • Significant CAGR • ‘ Diftar ’ tariffs to reduce proportion goes arising waste 50% in 2012 ~5MT direct to EfW --- • Recycling incentives 65% target • Collection through Higher • Source segregation separate contracts recycling schemes (local) rate I&C +1% • Linkage to GDP • Significant CAGR • Companies segregating proportion goes arising waste to get recyclate direct to EfW 55% in 2012 Shanks Focus ~22MT ------ • Collection typically value 85% target Higher • “Producer pays” by sorter/recycler recycling obligations or logistics player rate C&D +3% • Construction activity • Most waste CAGR (household, commercial sorted/recycled or arising & infrastructure) 90% in 2012 ~25MT reprocessed ----- • Companies segregating 99% target • Collection typically Stable waste to get recyclate by sorter/recycler recycling value rate (1) Estimated total market volume 2012 (2) Destination that is not incineration or landfill 53
Stable I&C Outlook Dutch Waste Volumes GDP in constant prices ( € bn) 800 1,0% 600 400 Waste volume (Mton) 200 80 0 -1,2% 60 1990 1995 2000 2005 2010 2015 Commercial 40 Waste intensity (kg/ € k GDP) 0,0% 20 Municipal 150 0 -2,2% 1990 1995 2000 2005 2010 2015 100 Commercial 50 -1,1% Municipal 0 1990 1995 2000 2005 2010 2015 Decoupling of I&C volumes from GDP due to waste prevention efforts Source: Compendium voor de Leefomgeving; CBS; Deloitte analysis 54
Positive C&D Outlook Dutch Construction Activity Currently at 60 year low Three core construction segments all at extremely low levels Netherlands Construction Growth (%) • Housing/domestic 2009 2010 2011 2012 2013 • Commercial property 10 5 • Infrastructure 0 -5 -10 Housing construction showing promising -15 signs of growth -20 -25 • 44% increase in houses sold (2) Annual Growth Cumulative • 30% increase in new homes (2) • Greater certainty on mortgage tax relief Growth forecast (1) 1 2013 2014 2015 2019 Commercial and infrastructure activity still (EIB) (Rabo) (Rabo) (Rabo) low with industry overcapacity Homes -9% -0.5% 5.0% 6.5% • BAM, Ballast Nedam and Volker Wessels Utilities -4% 0.0% 2.0% 2.5% poor recent results • Claims of “irresponsibly low pricing” Infra -3% -1.0% 1.5% 2.0% • Likely to take two years to unwind due to Sub Con -4.5% 0.0% 3.0% 3.0% lead times Total -4.5% 0.0% 2.5% 3.0% (1) EIB data, plus Rabobank number and trends forecast, published 24 Sep 2014 . 55 (2) Dutch Land Registry annual date @ July 2014
NL SW ‘Mass Balance’ Waste generation Recycling Incineration 62 MT 51 MT 8 MT Direct Collection Municipal Segregated Minimal post-treatment or • Plastic HWRCs • Recycling Metal landfill (~3 MT) • Paper including • Wood Incinerators monostreams • Aggregates+ (EfW) Segregated I&C Collected Sorting C&D Collected Municipal and I&C closely linked to EfW, while C&D mostly recycled 56
Excess NL Incinerator Capacity Dutch Incinerator Market Capacity per Processor 7,5 8 8 Capacity 7,5 7,1 Omrin Imports 6,9 7 6,7 0,3 SITA Supply 7 6,4 0,3 EON 5,4 0,3 5,9 5,8 ARN 6 6 5,4 5,5 5,5 0,7 5,4 5,4 Twence 5,0 5,0 5,0 0,3 5 1,1 HVC 5 0,3 0,7 Mton 4 4 1,4 AEB 0,9 3 3 1,5 AVR 2,1 2 2 1 1 1,6 Attero 1,1 0 0 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12F 2005 2013 38% increase in capacity while volumes declined Source: Compendium voor de Leefomgeving, FOD Economie, Deloitte analysis 57
Recent Gate Fees Declines Dutch Incinerator Prices for Municipal Tenders Pre 06 Post 11 125 115 115 111 110 99 100 75 70 65 64 58 53 52 48 50 40 25 0 Utrecht De Haag Hoeksche Maassluis Arnhem Zoetermeer Avalex Limburg Waard AVR SITA Twence Attero Overcapacity has led to significantly lower gate fees Source: Deloitte analysis 58
Gate Fee Outlook More Positive EU Demand Curve for Combustible Waste (2017) Likely Market Developments • Under-capacity of c. 18MT in UK, BE, Overcapacity NL (~1,5 Mton) 180 IE & IT Expiring contracts NL (~1,5 Mton) • Overcapacity in NL and DE c. 4.5MT 150 Overcapacity DE (~3,5 Mton) Willingness to pay ( € /ton) (1) 124 • Net capacity shortage ~ 13.5MT 120 109 95 • NL more competitive due to water access High 95 65 • UK EfW capacity under construction, but 90 gradual commissioning and not all accessible 60 • NL EfW plus transport cost remains less 81 80 than UK local landfill, so importing 30 Low attractive 28 • Gate fees in NL likely to be set by landfill 0 alternative in UK, IE & IT 0 5 10 15 20 UK IE BE IT Available volume (Mton) Gate fees increasing due to imports, expected to reach > € 80 per ton (1) Local rates minus transport costs to NL 59 Source: Wrap Gate Fee report; Deloitte analysis
Legislation to Increase Recycling Dutch Policy Measures (1) • “Green deal” • New incinerator with EfW tax (1/1/15) companies Separation Taxes & grants • Recent landfill tax • Awareness • R&D subsidies Circular campaigns with households Economy > Less waste • Ecodesign • Lower targets > More recycling legislation for residuals • “Green deals” Design & Measurement • New KPIs and with retailers consumption measurement • Green government methods procurement High impact flows • Green deals • Plastics, chemicals & biomass (1) Source: VANG (2014); 60 Note: Drive to Circular economy is clear stated objective by Minister Mansveld; with new laws passed in Sep 2014
Shanks Positioned to Benefit Our Core Activities Inputs Sort Produce Dispose Collect or receive Sort waste into Produce valuable Dispose of waste inputs to waste specific recyclates products from through management and streams for segregated waste incineration or facilities further treatment streams landfill Shanks activity when Shanks Shanks activity where required for non-recyclable needed to secure volume output Making more from waste Alternative route of mass incineration or landfill will be taxed from 1 Jan 2015 61
Agenda Market Dynamics Competitive Landscape Shanks Strategy 62
NL SW Market Structure Waste Collection Volumes by Segment and Company (%) 100% State companies • Shanks is number 3 Regional public parties nationally in I&C and 90% construction 80% State • However, Shanks is companies Other private Other private market leader in dense 70% companies companies Randstat area 60% • Highly fragmented local Local public parties market beyond Sita, 50% VGW and Shanks 40% Other private • Conditions for companies consolidation are ripe 30% given pressures 20% • State-linked companies mostly linked to 10% household 0% Industrial & Household Construction Commercial Source: Waardevol Afval, Frank Hopstaken/Ffact presentation, PwC analysis 63
Sustained Margin Pressure Revenue & EBITDA Margin Development 2010-2013 8,000 25% 7,000 20% 6,000 Revenues ( € in millions) EBITDA margin (%) 5,000 15% 4,000 10% 3,000 2,000 5% 1,000 - 0% 2010 2011 2012 2013 2010 2011 2012 2013 2010/11 2011/12 2012/13 2013/14 2010 2011 2012 2013 Suez Environmental Van Gansewinkel Group Shanks Group Dusseldorp Group Waste Europe Revenue EBITDA margin Large players also hampered by long-term incinerator prices above spot fees available to smaller players Source: Annual reports; * Note that Shanks’ financial year ends 31 -March and as a result, 2013 reflects 9 months of 2012 and 3 months of 2013; 64 PWC Analysis``
Customers Focus on Price Waste management key purchasing criteria by type of customer Multi-site • National coverage • Reliability ‘Major ‘Chemical 1 1 bank’ company’ • Consistent quality • Price • Price • Consistent quality • Reliability • National coverage 2 2 • Innovation & sustainability • Flexibility • Full-service • Innovation & sustainability • Flexibility • Personal relations 3 3 • Personal relations • Full-service Commercial Industrial • Flexibility • Price 1 1 • Price • Reliability • Consistent quality • Consistent quality • Reliability • Reliability 2 2 • Full-service • Full-service • Personal relations • Personal relations • Innovation & sustainability • Innovation & sustainability ‘Small ‘Machine 3 3 • National coverage • National coverage retailer’ shop’ Single site Source: Deloitte waste management customer survey 65
Cost Structure Critical Component Driver(s) Competitive Advantages Commercial effectiveness (1) Margin Pricing capability Recyclate sales Off-take management Disposal Incinerator gate fees Long-term contracts cost Scale/purchasing power Processing Processing productivity Scale and throughput cost Utilisation rates Technology capability Plant uptime Continuous improvement Transport Route density Local market share cost Fleet optimisation Route planning capability Fleet capex/investment Overhead/ Central costs Scale (and lean approach) SG&A Selling costs Optimal organisation design SW P&L Components (1) Ability to segment market and sell based on waste value and/or differentiated service 66
Agenda Market Dynamics Competitive Landscape Shanks Strategy 67
NL SW Strategy Future Growth Drivers Strategy and Execution Lowest cost position through scale and Top and bottom line impact from commercial 1 productivity advantages effectiveness & business model advantages • Structural cost plans on track Share gain in target segments • Continuous improvement projects Price improvements High quality, innovative products for target Operational gearing with any recovery 2 • markets Structural cost savings embedded • New export and offtake contracts Incremental volume flow-through Product developments on track Returns from investment in focused areas where 3 Commercial effectiveness to secure Shanks advantaged • volume and sell product profitably and On-going capital investments • internationally Potential bolt-on acquisitions 68
Shanks Advantaged Cost Position Indicative Future Supply Structure Demand • Incineration rates assumed to go up to € 80 per ton (excluding tax) • Shanks should be able to contract lower than that price Cost/ton ( € ) • Locals will be stuck with higher gate fees to match imports (with no tax) • Shanks scale will be an advantage, while retaining local intimacy • Route density matched with smaller players due to concentrated footprint Shanks Majors Locals Minors Overhead Disposal Profit Cumulative collection capacity Collection Price level Local and minor players will be under sustained pressure as disposal fees no longer an advantage 69
Shanks Unique Heritage 70
Shanks Total Care 71
Key Messages NL SW market continues to be under significant strain 1 Volumes are depressed and not set to rise significantly, except in C&D 2 Over-capacity and intense competition has led to sustained price reductions 3 Dutch legislation and waste imports are already leading to price increases 4 Company rationalisation and consolidation will lead to reduced capacity 5 Shanks has unique market position and is well placed to emerge strongly 6 We have a clear market oriented strategy and are focused on its execution 72
Capital Markets Day 73
History KLOK Containers Take over by Two brothers 1932 1993 Waste start a transport 1 5 Management company 35FTE start Transporting 1995 1955 Aqusition strategy coal and fuel 2 6 for growth using one truck 45FTE 3FTE 2000 7 1974 3 Part of Shanks Entering the Group waste business 20FTE 115FTE 2014 1989 4 40th anniversary in Installs one of waste business the first sorting lines in the 30FTE Netherlands 140FTE 74
Activities and key financials KLOK Steady tonnage created by: • New business • Focus on bulk waste • Entering the roof material and wood market Started up an efficiency program for operations: • Reduction of trucks • Creating new transfer hubs • Connect sales strategy with logistics Financial performance: • Significant drop in prices • Reduction on breakeven by cost savings and efficiency • Trading profit % up 75
Sales and customer strategy Total Care 4700 active customers; • Joint venture solid and • 46 A = 50k > hazardous waste • 52 B = 30-50k • Petrochemical industry • 352 C = 7,5-30k • Total Cost of ownership • 4250 D = < 7,5k.. Added value New business 2013-14 • Long- term partnership • 980 new clients • Trust and knowledge • € 1,055k revenue • Close to the customer • Focus on profitability • Operational • Defined segments performance Focus on commercial and operational delivery 76
Site KLOK Containers 77
Summary Klok has grown over the years into a professional, safety conscious 1 organisation We have steady tonnage, an efficient programme of operations and the 2 ability to maintain our results in a highly competitive market Our sales and customer strategy utilises our deep local knowledge and 3 part in Shanks Group through the Total Care offering 78
Capital Markets Day Commercial Effectiveness 79
Changing role of the waste provider From waste handler to trusted partner • Advise the clients on new technology and optimisation • Consultancy on reducing waste at source, supporting our customers’ business efficiency • Total Cost of Ownership • Alternative is commoditisation Waste-to-product company • Energy pellets as a substitute for fuel • Wood chips for the plywood industry • Compost for local farmers and growers • New paper streams out of waste Leading role in sustainability • Innovation to reduce energy and optimize the process handling • Socially responsible by creating work for the local community • Open with the communities around our sites and being in contact with them • Pride in our socially and legislative responsibilities 80
Our historic strength in a dynamic and highly competitive market Operational strengths • Experienced colleagues • Dedicated and willing workforce, working hard in a demanding market • Strong skills in operational effectiveness and continued operational cost reduction Commercial edge • Knowledge of the local market: waste is a very local market. • Using our operational distinctiveness to our advance • Close and intimate contact with the costumers • Long-term relationships • Leveraging the strength and capabilities of other Shanks businesses Knowledgeable and experienced colleagues 81
We have a new opportunity We now need to LEAP in 82
Commercial Effectiveness Goals: • To grow existing revenue streams and target new revenue segments with strong margins • To blend our businesses’ deep industry knowledge and experience with a data approach to target segments with highest potential opportunity and margin. • To implement processes, procedures and key performance indicators to embed and manage ongoing improvements Key levers: • Existing customer analysis • Waste stream margin analysis • Market potential • Sectors customer product demands • Customer’s service profile • Customers revenue profile 83
Introducing excellent capabilities to support local teams Build segmentation profiles and prospect lists for each OpCo 1 Implement sales key performance indicators 2 Pricing and product restructure and realignment 3 4 Construct target prospect lists, marketing plans and organisational options Improved sales processes and procedures 5 Tools to identify and rectify outliers (negative margin customers) 6 Executing on knowledge and data to improve our business 84
Segmentation and Sales Strategy Segmentation strategy: • Identify segments with strong margins and growth with product and service needs matched to our regional Opco’s • Increase focus on targeted segments to maximise revenue and margins for Opco’s Current situation Create long list of Evaluation Narrowed it down (experience & segments based on criteria based on facts facts) current base and and data to Margin market insights selected segments Revenue Waste stream Market Industry Tonnage customer Strengths and weaknesses Industry Capability Trading profit Beat competition Market Waste Competitors stream Sales effort Positioning Focused target Segment risk segments Legislation / Customer Strategic with high size restrictions potential importance Brand xx segments recognition Geography 85
Customer Profitability Analysis 86
Pricing Tool Pricing and Margin tool: • Provides analysis of current customer base from various groupings to individual customer analysis • Identification of outlier customers and deep dive analysis to quickly target customers to move to higher margins Deep dive options Potential outliers 87
Combination of local experience and technology • Local operating brands in the Netherlands • Deep sector knowledge • Embedding data-lead technology in customer and sales tactics • Analytical insight to categorise and maximise sales approach Data-lead technology maximises the efficiency of our regional operating model 88
Summary Investing in commercial effectiveness to take advantage of market 1 opportunities in a tough environment Using local knowledge and experience, with data and analytics to 2 maximise higher margin new business and retention of high value customers. Embedding repeatable processes to grow overall revenue and retain 3 valuable customers. 89
Capital Markets Day Profit & Continuous Improvement 90
NL SW Strategy Strategic Levers 1 Lowest cost position through scale and productivity advantages High quality, innovative products for target markets 2 Commercial effectiveness to increase share and margin 3 4 Actively managing portfolio to increase returns 91
Different Cost Levers € benefit Lever Cost/ Comment Effort € 10m Structural Med Delivered: one off action, recurring savings Increasing sustainability € 1-2m pa Profit improvement Low Ongoing business: harder to achieve plans without different approach € 1-3m pa Procurement I Med Complex cross-trading and long term contracts limits short term gains € 1-2m pa Lean/systematic Med Quick wins based on data driven projects analytical projects € 3-4m Shared Service High Control improvements, enabler of Centres other projects, long term CI > € 2m pa Procurement II High to Next generation supply chain Med management € ?? Full lean conversion: High Embedded sustainable world-class “The Shanks Way” processes and efficiency drivers Transitioning effort to programmes that will build sustainable advantage
Agenda 1. Profit Improvement Plans – Henk Rogiers 2. Shared Service Centres – Pim te Riele 3. Continuous Improvement - Dieter Avonds 93
Strategy to be a cost leader We have a strategy to position ourselves as lowest cost operator in our core markets. We do that by: 1 Managing our offtake costs (fuel and Icopower) Optimising recyclate income (volume, price & quality) 2 Installing central procurement 3 Rolling-out Shared Service Centres (SSCs) 4 5 Business Portfolio Management 6 Cost management programmes: rightsizing, increase asset utilisation, route management, cost reduction programmes (financial grip, bench- marking, cut overhead), capital allocation improvement, closing sites We take structural costs out by planned measures & processes and install a cost awareness culture 94
Progress update Delivered Savings Targets • 218 heads out 20.0 • All facilities to be closed now complete 15.0 • Portfolio actions completed Benefit ( € m) • Offtake rebalanced 10.0 • SSC’s live & stabilising, performance improvement 5.0 initiated • Procurement fundamentals in place 0.0 12/13 13/14 14/15 15/16 Restructuring SSC Portfolio Procurement Structural cost programme progressing well 10 € m cost out yearly (achieved 13/14), excluding continuous improvement projects. Quick wins done, back office processes being simplified 95
Introducing the SSCs SSC will enable Shanks to focus on their core business and safeguard the entrepreneurial spirit, keep close to the customer while performing administrative processes more efficiently Shared Services allows to shift towards business partnering, while reducing overall 1 cost structurally improving performance Successful SSC is created by ensuring the right mix between quality and cost via: 2 • Centralisation (e.g. economies of scale) and • Decentralisation (e.g. customer focus) Governance board to ensure the right balance between quality of service having lower 3 cost Finance & HR Today Business Partnering Finance & HR Tomorrow Measuring and Controlling Financial Accounting Risk “Adding more value Costs of execution Finance Function Business Partnering at a lower cost” Measuring and Controlling Business Accounting Risk Transaction Processing and Reporting Transaction Processing and Reporting 96
Lift & Shift: the transition process Several transition strategies can be used: “Lift and Shift” Reengineer in Shared Services New To • Distinct Shared Services location(s) set • Distinct Shared Services location(s) set Location up up • Staff report to Shared Services • Staff report to Shared Services 1 • Work carried out in new location(s) • Work carried out in new location(s) • Processes remain the same • Processes are reengineered and standardized Location 2 Change “Badge Over” Reengineer Locally • Local Staff report to Shared Services • Local Staff report to Shared Services • Work is still carried out locally • Work is carried out locally • Processes remain the same • Processes are reengineered and standardized 3 • Consolidation From Current Location Process Current Processes Reengineered Processes Change 97
Lift & Shift: the transition process New To Location Milestones in preparation for the transition: • Delivered the Transition Plan. • Designed the standard processes, policies and procedures • Prepared the business for the upcoming change • Built the team and managed the HR transition Location Change • Implemented IT infrastructure to enable the SSC • Set up the Governance structure and Service Level Agreement From Current Location Process Current Processes Reengineered Processes Change 98
The journey to first class SSC The SSC forms a major part of our transformational journey which will maximise efficiency and economies of scale. We have brought these key business functions together, we will drive more efficient people and technology processes to create a first-class SSC which brings real benefit to our business. Vision Optimise the service value delivery from the centre through automation, process efficiencies, best-in-class Processing and Build the SSC: Deliver the SSC: Continuous Improvement • Reduce complexity • Balanced team with • Stabilized migrations projects • Roll out efficient and experienced- and new • Standardise transparent reporting staff • Implement • Start Continuous • Migrated 3 regions (17 foundations (clean up Improvement projects entities) into SSC master data, • Migration delivered in consistent use of 4 months on time and chart of accounts) in budget • GL/AP/AR/HR Admin & Payroll From 99
Introducing CI to SKS • Research shows that company’s with CI programs have better growth, operating income and cash flow. Continuous Improvement (CI) is a value creator. • Shanks beliefs that a CI program creates a competitive advantage : improved communication – faster problem solving based on data – understanding customer – long term focus – better enterprise understanding. • Shanks perceives CI not as a new buzz-word for cost- cutting. It can support cost cutting but is about: customer value and satisfaction, quality, speed to market, flexibility and reduced cost/waste. • Shanks is convinced that CI program can unlock energy at all levels of the organisation • It is our ambition to grow to a higher level of maturity and make CI part of our DNA. Change is not an option in our market – it’s essential 100
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