5 th October 2010 Investor Day To be Europe’s leading provider of sustainable waste management solutions Tom Drury Group Chief Executive
Objectives of the day 1. Explaining our business today 2. Bringing our strategy to life 3. Giving confidence in delivery group roup 4. Demonstrating our growth potential plc. 5. Meeting our Executive Team Clear Strategy, effective execution, future benefit 2
Agenda Time Item Presenter 10:05 Welcome, agenda & overview of investment case Tom Drury 10:30 UK Presentation Ian Goodfellow 10:55 Netherlands Presentation Michael van Hulst 11:15 AD animation group roup 11:20 Orgaworld Presentation Henk Kaskens plc. 11:45 Belgium Presentation Philippe Marcuz 12:10 Financial update Chris Surch 12:30 Q&A ALL 12:45 Close & Lunch 3
Shanks’ Executive Team Ian Goodfellow UK MD Philippe Marcuz Belgium MD Michael van Hulst Netherlands MD group roup plc. Chris Surch Tom Drury Group FD Group CEO 4
“Clear strategy, effective execution, future benefits” group roup plc. Clear Clear Effective Future Strategy Strategy execution benefits 5
Strategic framework Europe’s leading provider of sustainable waste management solutions Vision Strategic objectives group roup plc. Critical success factors KPI’s and KRI’s Organic growth strategy from recycling, organics and PFI 6
Strategic framework Europe’s leading provider of sustainable waste management solutions Strategic objectives Vision 1. INVEST to drive organic growth where returns are greatest 2. DEVELOP our infrastructure further to support sustainable Strategic objectives waste management and conversion of waste to renewable energy group roup 3. SHARE our core capabilities and technologies within the plc. Critical success factors Group 4. MAXIMISE asset utilisation and minimise unit costs KPI’s and KRI’s 5. CONTINUE to use acquisitions to improve asset utilisation and re-orient the portfolio to high growth markets Organic growth strategy from recycling, organics and PFI 7
Strategic framework Europe’s leading provider of sustainable waste management solutions Critical success factors Vision 1. ENTREPRENEURIAL and focussed on customer service, maintaining the local approach that distinguishes it from competitors 2. A COST LEADER that maximises productivity and asset utilisation with continuous improvement attitude throughout all levels of business Strategic objectives 3. WELL INFORMED, engaged and motivated employees who have a safe group roup and healthy workplace plc. 4. SYSTEMS & PEOPLE in place to maximise the development and Critical success factors exchange of technology, processes, knowledge & skills for the benefit of the whole Group 5. A CULTURE of executing well to maximise growth, margin & cash KPI’s and KRI’s 6. A GOOD CORPORATE CITIZEN including a commitment to high environmental standards and being green Organic growth strategy from recycling, organics and PFI 8
Strong drivers for strategy Landfill tax Landfill tax Landfill tax Legislative and Low Carbon Renewable Low Carbon Economy Economy Energy regulatory drivers… Waste Landfill Landfill Framework Directive Directive group roup Directive plc. …define our Municipal waste three growth Recycling Organics contracts areas. 9
Shanks portfolio evolution 2000 2005 2010 1998 1999 2001 2002 2003 2004 2006 2007 2008 2009 2011 2012 2013 Country Acquisition Harvest Investment in alternatives to B of Belgian Harvest returns from landfill returns on landfill business investment Acquisition Invest in acquisitions: tuck-ins plus Integrate acquisitions and NL of Dutch Smink and Orgaworld selective investment business group roup plc. Divest landfill & Reduce costs and UK Invest in growth strategy hazardous develop PFI waste Acquisition Canada of Orgaworld Invest in growth strategy business 10
Shanks distinct position in industry structure Reprocess Dispose Collect Sort / Reuse • Monostreams: • Landfill • Separate • MRF -Food waste • Incineration collections • Bulk transfer - Wood • Co-mingled - Plastics collections - Fuel Prep - etc High Low Medium Medium High group roup Capital requirement Capital requirement Capital requirement Capital requirement Capital requirement plc. Exploit high volume, Avoid highly capital Collect (or long term Develop certain automated sorting intensive, high fixed sub contract) monostreams with lines with cost disposal assets sufficient waste to strong regulatory entrepreneurial (unless lifetime provide base load drivers – food, wood outlet management guarantee e.g. PFI) Focus on alternatives to traditional disposal – waste derived fuel preparation for power plants, cement industry, high energy industrial users 11
What will deliver from the portfolio • Recover the 2% operating margin lost in the recession NL • Organic Growth >GDP • Generate strong free cashflow • Harvest the returns from investments already made BE • Replace the profits lost from the landfill and grow >GDP thereafter group roup • Grow margin to at least 7-8% UK plc. • Double-digit organic revenue growth • Step change growth from PFI with minimal capital CAN • Deliver strong ROIC on up to four organics plants Overall portfolio delivers good organic growth and improved ROIC 12
“Clear strategy, effective execution, future benefits” group roup plc. Clear Effective Effective Future strategy execution execution benefits 13
We have delivered – rights issue promises Reduce debt and hold below 2.5x debt: EBITDA 1.8x at 31st March 2010 Achieve cost savings of £10m per annum. £20m achieved 2009/10 Reduce maintenance capex as % of depreciation to 50%, actual 53% group roup plc. Realise £60m from disposals. Disposal of Avondale and PFI equity completed. Invest in focused growth strategy. £100m invested 2007-2010 14
Developing our culture A decentralised structure with Group as a hands off financial A culture of investor entrepreneurialism within a clear group roup plc. central direction & framework Group develops strategy, manages risk, monitors performance and holds countries to account 15
Effective execution – Fit for the Future Risk New Group Risk Management role. Mandatory risk registers Management for all investments. Embedding into operating units. Strategic Investment Programme created. Hiring of Project experienced Project Managers. Programme Offices created Management in each country. Performance New MIS and KPI Project. Full Potential planning. Focus on Management utilisation, unit costs, mass balance. Developing central coordination in the Benelux. Technology Exchange – organics, recycling, wood, SRF. Knowledge Collaboration Management forums. group roup Financial Focus on ROIC. Forward looking. plc. Discipline Communication Greater transparency. Talent HR Directors, performance management, succession Development planning Delivered through effective leadership and teamwork 16
“Clear strategy, effective execution, future benefits” group roup plc. Clear Effective Future Future strategy execution benefits benefits 17
Drivers of value Two fundamental growth drivers: Economic recovery Strategic investments • • £20m-£25m impact £60m invested to of recession date, £30m-£40m planned for 2010/11 • A good proportion • should return Target Return on group roup Investment 15% • Average Solid Waste plc. • variable margin Average 2 to 3 years c.35% to reach target return • • Majority of £10m cost 8-9% margin from programme should new PFI projects be maintained 18
Future shape of Shanks Canada UK Belgium Netherlands group roup plc. 2010 2015 19
Summary • Clear vision with focused and consistent strategy • Compelling regulatory and legislative growth drivers offer good returns for early movers • Operationally geared for economic upturn • Strong focus on effective execution of the £100m investment programme. • Powerful combination of professional group roup management and entrepreneurial waste plc. expertise • Strong cash flow and balance sheet and focus on improving ROIC In a strong position for growth 20
A zero waste policy means a larger market opportunity for recycling and processing Maximum value Zero waste policy United Kingdom 1
UK overview United Kingdom UK UK 4% 21% Rest of Rest Group of 96% Group 79% Revenue Trading profit Business based on strong regional positions in collection, recycling, processing and fuels production 2
Service offering United Kingdom Anaerobic Digestion Recycling MBT treatment Waste collections Solid Recovered Fuel Soil treatment 3
Market overview United Kingdom Regional Markets Shanks’ Sector Market size (ktpa) Position C&I 5,137 #3 C&D 14,796 >#5 National Markets Shanks’ Sector Market size Position Household PFI £966m* #3 Organics 5,621 ktpa #4 *Includes contracts that are both already let and which are in the pipeline as of Feb 2010 Well placed to take advantage of market growth opportunities 4
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