Shanks Group plc Interim Results 2016/17 17 November 2016 1 - PowerPoint PPT Presentation

Shanks Group plc Interim Results 2016/17 17 November 2016 1

Disclaimer This presentation contains certain forward-looking statements with respect to the operations, performance and financial condition of the Group. These forward-looking statements are subject to risks, uncertainties and other factors which as a result could cause Shanks Group’s actual future financial condition, performance and results to differ materially from the plans, goals and expectations set out in the forward-looking statements. Such statements are made only as at the date of this presentation and, except to the extent legally required, Shanks Group undertakes no obligation to revise or update such forward-looking statements. 2

Agenda Peter Dilnot Introduction [Insert text] Group Chief Executive Toby Woolrych Operational Review Group Finance Director Peter Dilnot Outlook Group Chief Executive 3

Highlights 1 Good Group trading with revenue and underlying profit growth at constant currency 2 Benelux-based divisions performing strongly and ahead of expectations 3 Municipal Division challenged in the UK by previously disclosed market and operational issues 4 Shanks management expectations for positive full year performance unchanged Proposed transformational merger with Van Gansewinkel to create leading Benelux waste-to-product 5 business progressing well Well positioned to deliver long-term sustainable growth and attractive returns – both as Shanks and as an 6 enlarged group post-merger 4

2016/17 Interim Results* • Revenue up 7% in line with expectations Revenue & Profits • Trading profit up 3% • Commercial Division trading profit up 20%, primarily driven by Commercial and improved market conditions and self-help initiatives Hazardous • Hazardous Division trading profit up 38% • Municipal trading profit down significantly as a result of UK market Municipal and operational challenges • Canada trading profit up 38% • Core net debt in line at constant currency Cash Flow & • Net debt: EBITDA 3.0x Financing • EPS up 23% EPS & Dividend • Interim dividend maintained at 0.95p adjusted for the rights issue bonus factor, reflecting confidence in medium term growth * at constant exchange rates 5

Market Overview: H1 Developments Market Driver Example Metric Comment • NL construction up 4.5% since • 22 of 23 months growth in NL Volumes beginning of 2016 construction • NL/ BE GDP up 2.3% & 1.2%* • Further decline in metal prices • Remains volatile within a low • Commodities Oil price +20% from March to range September • Incinerator gate fees increasing • Off-take Impact mostly in UK • Specialist fuels (SRF) market contracting • Positive translation on reported results • Fall in GBP from € 1.26 to € 1.16 FX • Negative transaction exposure for UK * Year on Year Q2 June 16 6

Merger Highlights Transaction Integration 1 1 Deal signed 29 September 2016 Day 1 planning programme Shareholder approval both sides Integration activities defined & resourced 2 2 Delivered Placing & rights issue completed New Group structure designed and 3 3 communicated Works Council approvals for the 4 transaction & financing 1 Anti-trust process NL & BE on track 1 New brand development Re-admission prospectus Day One Governance 2 2 In Progress 3 Works Council approvals for Detailed integration planning 3 organisation structure Van Gansewinkel trading positively 7

Operational Review Toby Woolrych 8

Income Statement Excluding Sep 15 Sep 16 Change % currency £m £m £m change % Revenue 348.4 297.0 51.4 17% 7% Trading Profit 20.7 17.4 3.3 19% 3% Net Interest (6.2) (7.1) Income from associates and JVs 0.9 0.4 Underlying profit before tax 15.4 10.7 4.7 44% 23% Non-trading and exceptional items (16.3) (8.1) (8.2) (Loss) profit before tax (0.9) 2.6 (3.5) Taxation (2.5) (1.5) (Loss) profit after tax (3.4) 1.1 (4.5) Discontinued operations - 0.3 (Loss) profit for the period (3.4) 1.4 (4.8) Continuing operations: Basic earnings per share (p) (0.7) 0.2 (0.9) Underlying earnings per share (p) 2.7 1.8 0.9 43% 23% Interim dividend (pence per share) 0.95p 1.1p 9

Commercial Waste Sep 16 Sep 15 Change Netherlands % € m € m € m • Growth in construction and commercial waste volumes Revenue and favourable conditions in organics NL Commercial Waste 132.0 126.5 5.5 4% BE Commercial Waste 72.5 75.4 (2.9) -4% • Recyclate pricing lower, offset by increased volumes Total Revenue 204.5 201.9 2.6 1% • Self-help initiatives continue to deliver benefits – 166.7 145.5 21.2 15% Total Revenue (£m) commercial effectiveness, continuous improvement & off-take management Trading Profit NL Commercial Waste 10.0 8.2 1.8 22% • Portfolio management – City of Leiden commercial BE Commercial Waste 3.6 3.1 0.5 16% waste activities & sale of Groundworks business Total Trading Profit 13.6 11.3 2.3 20% Total Trading Profit (£m) 11.1 8.1 3.0 37% Belgium • Revenue down due to exit from loss-making Industrial Trading Margin NL Commercial Waste 7.6% 6.5% Cleaning Wallonia in 2015 and suspension of wood dust BE Commercial Waste 5.0% 4.1% sales Total Trading Margin 6.7% 5.6% • Core business performed well - new organisation and Return on operating assets margin enhancement programmes NL Commercial Waste 8.6% 7.2% • Strong SRF demand and operational performance at BE Commercial Waste 25.3% 15.0% Gent due to self-help initiatives Total Return on 11.1% 8.7% operating assets The return on operating assets in Belgium excludes all landfill related provisions 10

Hazardous Waste Industrial Cleaning Sep 16 Sep 15 Change % € m € m € m • Core oil and gas markets broadly flat at subdued levels Revenue 98.9 89.4 9.5 11% • Increased activity in the south west boosted by Total Revenue (£m) 80.5 64.4 16.1 25% Care Centre in Theemsweg and the ultrasonic cleaning unit Trading Profit 13.9 10.1 3.8 38% • Reduced customer activity in the northern region Trading Profit (£m) 11.4 7.3 4.1 56% Water treatment Trading Margin 14.1% 11.3% • Increased water volumes and higher throughput Return on • Joint venture with local partners to provide water 27.6% 23.2% operating assets storage and treatment capabilities Soil performance • Encouraging soil intake from import market • Higher throughput compared to challenging period last year Seveso III classification achieved 11

Municipal UK external market impacts Sep 16 Sep 15 Change % € m € m € m • Ongoing and significant pressure on output prices • Constrained UK SRF market and increased costs of disposing Revenue RDF across Europe worsened by weakness of sterling UK Municipal 87.9 80.4 7.5 9% • Shortage of available organic waste for Westcott Park AD facility Canada Municipal 14.5 9.8 4.7 48% Total Revenue* 102.4 90.2 12.2 14% Operational factors Total Revenue (£m) 104.1 90.2 13.9 15% • Slower than anticipated ramp up at both BDR and Wakefield following commissioning last year Trading Profit • Strong growth at EBG JV in Scotland UK Municipal (0.7) 4.2 (4.9) -117% • Good performance at London and Ottawa – modest volume Canada Municipal 1.8 1.3 0.5 38% growth and strong cost control Bid costs (0.1) (0.3) 0.2 Construction Total Trading Profit* 1.0 5.2 (4.2) -81% • Six month delay at Derby waste-to-energy facility due to Total Trading Profit (£m) 1.1 5.2 (4.1) -79% contractor insolvency – resulting in liquidated damages charge of £1.7m Trading Margin • Canadian Surrey contract construction progressing well with full UK Municipal -0.8% 5.2% service in 2017 Canada Municipal** 25.0% 19.3% Directors’ Valuation reduced to £100m to reflect current Total Trading Margin** 0.7% 5.8% challenges * Canada at constant currency ** Trading margins exclude Surrey construction Improvement programmes being implemented with benefits coming through in second half 12

Non-trading and Exceptional Items • Portfolio management: Sep 16 Sep 15 £m £m • VGG acquisition related expenditure incurred in the first half Acquisition related costs: VGG merger 10.2 - • Net loss of £0.2m following the sale of Others - 0.1 groundworks business and surplus land Portfolio management 0.2 - and other assets Restructuring charges 0.9 0.1 • Restructuring : relating to structural cost Others 4.1 7.0 Amortisation of acquisition intangibles 0.8 0.9 reduction programmes announced last Fair value derivatives 0.1 - year • Others: Total non-trading and exceptional items 16.3 8.1 Continuing operations only • New: liquidated damages on the Derby contract • Historic: costs at Wakefield relating to 2015 subcontractor insolvency and unrecoverable costs relating to the 2014 fire at ELWA 13