Shanks Group
Edison | Feb 05, 2016 06:45AM ET
The trading statement on 3 February highlighted further progress in the Commercial division. However, this was offset by impacts from the global commodity crisis, leaving results likely to be slightly below expectations, and we are lowering our 2016 EPS forecasts by 7%. With the disposal of the Wakefield assets the first stage in value realisation from the PFI portfolio and the shares drifting below our valuation range (unchanged at 106-130p/share), a yield over 4% should provide support before more tangible evidence from the cost management programmes shows in results.
Netherlands Commercial progress encouraging
Continuing the trend seen at the interim stage, Netherlands was again the star performer, with the self-help initiatives more than offsetting lower recyclate prices. However, the ongoing global commodity crisis had a number of direct and indirect impacts on the Hazardous Waste and Municipal divisions. Shanks has been affected in three main areas: lower waste oil prices, lower electricity generation receipts and lower recyclate prices as it sells by-products from recycling back into the market. While the recent volatility in commodity prices is outside its control, it again demonstrates the clear need for self-help programmes, leaving Shanks a more resilient business and better placed to benefit from an economic recovery.
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