Shanks performing in line as merger with Van Gansewinkel continues

7th Feb 2017 12:43

(ShareCast News) - International waste-to-product business Shanks Group issued its trading update for the period from 1 October to date on Tuesday, saying trading continued in line with that in the first half during the third quarter, with strong underlying performances from the commercial and hazardous waste divisions offset by continuing market and operational challenges in the UK municipal business.The London-listed firm said its commercial division continued to perform well, though pricing pressure remained in end markets while volumes continued to show "encouraging growth" compared to prior year."In addition, recyclate prices have stabilised in general, and energy prices have shown some improvement," the board explained in its statement."The new Vliko facility, which was commissioned on schedule in October, is performing well."Shanks said the hazardous waste division also delivered a strong performance since the half year, with soil, water and packed chemical waste intake volumes and throughput remaining above last year.Construction work was started on a new intake warehouse at the ATM facility in Moerdijk that will improve both capacity and compliance for packed chemical waste operations, the board confirmed.It said the Reym industrial cleaning business also remained productive during the quieter winter season with cleaning activity in line with expectations."The municipal division had a very difficult third quarter, with the impact of both the mix and prices of the fuels that we produce being worse than expected, particularly at ELWA," the board said."The Barnsley, Doncaster and Rotherham facility was also temporarily closed to allow the main contractor to make modifications to the plant to improve future performance."Shanks said it continued to focus closely on the division, with the recovery initiatives announced in November being implemented and further plans developed by the new divisional management team to improve performance."We believe that these actions will turnaround the business, with the benefits starting to be seen in 2017/18."Cash levels were also being managed closely, the board said, with core net debt decreasing by £109m from 30 September to £134m as at 31 December, with the benefit of the equity raise being partly offset by capital investment in municipal and by settlement of transaction costs. Shanks also flagged the trading performance of Van Gansewinkel Group, having announced an agreed merger on 29 September."VGG has today announced a very strong performance in its unaudited preliminary trading update for the twelve months ended 31 December, with self-help initiatives delivering a significant increase in adjusted EBITDAE."Revenues fell slightly, primarily due to the sale of non-core businesses."As with Shanks' commercial division, VGG reportedly experienced a slight improvement in market conditions driven by the improving economy in the Benelux which more than offset the weakness in recyclate and product prices.VGG delivered a range of cost reduction initiatives during the year, it said, as well as initiating a top-line revitalisation project to improve margins and the quality of earnings."After adjustments made to align with Shanks' accounting policies, VGG estimates it achieved a 23% increase in adjusted EBITDAE to €91.0m on revenues down 3% to €882.5m."Progress with the VGG merger continued as announced with Shanks' interim results, the board reported.The shareholders of Shanks and VGG approved the merger - including the associated equity issue which was completed by Shanks in November.Competition clearance had also been received from the Belgian competition authorities, as announced on 25 January, and Shanks said it was making good progress with the Netherlands filing and expected to complete that in line with previous expectations."In depth planning for the integration phase of the merger is also underway."Works council approval has been sought and received for the top structure of the new organisation which will be implemented at deal close."Both companies were reportedly finalising plans for a successful day one of the merger and a blueprint for the first 100 days.A new brand would also be launched on completion, which Shanks said reflected both the history and the aspirations of the combined group."The board believes that the ongoing strong performance of Shanks' commercial and hazardous waste divisions will continue to offset the weaker performance from the municipal division," it said of the group's outlook."As a result, the board continues to expect the Group to deliver a result for the year ending 31 March 2017 in line with its expectations."