Shanks Group plc. Interim Report and Accounts 2007/8

Transcription

1 Shanks Group plc Interim Report and Accounts 2007/8

2 One of Europe s largest independent waste management companies, Shanks Group plc has operations in the United Kingdom, Belgium and the Netherlands and is a leading player in each of these markets. The Group provides an extensive range of waste and resource management solutions and handles a wide variety of wastes, including domestic refuse, commercial waste, contaminated spoils and hazardous waste. Services offered include collections, domestic and commercial waste recycling, resource recovery, composting, mechanical biological treatment, anaerobic digestion, thermal treatment, industrial cleaning, special waste treatment and modern landfill disposal. Further information about the Group and its activities is available on our website. Shanks Group plc Registered in Scotland No Astor House, Station Road, Bourne End, Buckinghamshire, SL8 5YP contents 21 Financial Highlights 22 Chief Executive s Statement 24 Consolidated Income Statement 24 Consolidated Statement of Recognised Income and Expense 25 Consolidated Balance Sheet 26 Consolidated Cash Flow Statement 27 Notes to the Condensed Consolidated Interim Financial Statements 14 Statement of Directors Responsibilities 15 Independent Review Report to Shanks Group plc 16 Shareholder Information and Principal Offices

3 financial highlights 2007/8 2006/7 First Half First Half Revenue 271m 247m Headline profit m 19.7m Exceptional items: change in fair value of interest rate swaps 2 1.2m 2.3m profit on disposal of property 2 1.1m 0m Profit before tax from continuing operations 23.1m 22.0m Adjusted basic earnings per share 3 6.0p 5.6p Basic earnings per share 6.8p 6.3p Dividend per share 2.0p 1.9p EBITDA m 38.3m At 30 September At 31 March Core Business net debt 152m 134m PFI Companies net debt 5 132m 123m Total Group net debt before fair value adjustment 5 284m 257m Fair value of PFI interest rate swaps (1)m 0m Total Group net debt 283m 257m 1 Before exceptional items and tax 2 The Group considers these items as exceptional for the purposes of determining headline profit 3 Before exceptional items, net of associated tax 4 Earnings before interest, tax, depreciation and amortisation (EBITDA) 5 Excluding fair value of interest rate swaps 1

4 chief executive s statement Our hazardous waste divisions in total also delivered a better result than in the prior year. Whilst underlying trading was better, some of the improvement was due to the timing of the maintenance shutdown at our one million tonne per annum integrated hazardous waste treatment facility, ATM, which fell in the first half in 2006/7. The shutdown will occur in the second half in the current year. Financial Performance I am pleased to report a good performance in the first half of the 2007/8 year in line with our expectations. Headline Profit (profit before exceptional items and tax) rose 6% to 20.8m (2006/7: 19.7m) driven by the continuing strong performance in The Netherlands assisted by the Smink acquisition in June Adjusted basic earnings per share improved 7% to 6.0p from last year s 5.6p helped by a 2% reduction in the effective Headline tax rate to 32% (2006/7: 34%). As a result your Board is increasing the interim dividend 5% to 2.0p per share (2006/7: 1.9p per share). Revenue increased 10% to 271m (2006/7: 247m) and profit before tax was 23.1m (2006/7: 22.0m) after a 1.1m exceptional profit on the disposal of surplus property and a 1.2m non-cash gain (2006/7: 2.3m gain) on the change in the fair value of interest rate swaps. During the period borrowings relating to the core business increased by 18m to 152m (31 March 2007: 134m) after acquisition expenditure of 22m (including debt acquired). Private Finance Initiative (PFI) company debt also increased by 9m to 132m (31 March 2007: 123m) following continued planned capital investment in the East London Waste Authority (ELWA) project. Divisional Review The Netherlands The Netherlands activities delivered a strong performance with operating profits increasing 23% to 17.1m (2006/7: 13.9m). The largest contribution to this improvement was the full six month contribution from the Smink business acquired at the end of June Performance of this business continues to be in line with our acquisition plans. In April 2007 the Group completed two further acquisitions. The first was Kluivers, a tuck-in solid waste business in the Randstad area, for a consideration of 3m. More importantly, the company Orgaworld was purchased for 21m (including debt acquired), 3m of which is deferred, with the potential for further payments up to 14m (non discounted) dependent on future profits growth. This company is involved in the composting and anaerobic digestion of biodegradable waste and brings a new technology and expertise which can be exploited across the Group over time. Both businesses are performing in line with their acquisition plans. Belgium Operating profit reduced 5% to 8.9m (2006/7: 9.4m). As expected the contribution from our landfill reduced compared to a strong performance in the prior year, when it benefited from household waste diverted from public sector incinerators during non-routine shut downs. Contributions from industrial and commercial (I&C) Solid Waste activities in all geographic regions were considerably higher than last year reflecting the general buoyant economic conditions and aided by a significant industrial disposal contract. The hazardous waste market was down on last year, but is showing signs of stabilising. United Kingdom Trading profit (operating profit before exceptional items) increased by 25% to 2.5m (2006/7: 2.0m) as increased contributions from PFI contracts and logistics and recycling were offset by reduced Contaminated Land Services profits. The prior year also benefited 0.3m from property disposal profits. Phase II of the ELWA project is now operating at capacity. In addition a scheduled price increase came into effect in July 2007 confirming the contract s profitability. Both our ELWA and Dumfries and Galloway (D&G) contracts use the innovative Mechanical Biological Treatment (MBT) technology developed with our Italian partner Ecodeco. There continues to be significant interest from the cement and other energy intensive industries in the Solid Recovered Fuel (SRF) produced by the MBT process. Deliveries of SRF are increasing despite a temporary interruption of inputs to a cement kiln in North Wales following a problem at the plant unrelated to the processing of SRF. This has resulted in an increase in disposal costs for our D&G contract, but it is expected that the kiln will be functioning again by the start of our next financial year. The low activity levels experienced by Contaminated Land Services in the latter part of last year have persisted into the current year however there has been a marked improvement in the final couple of months of the period. This is due in part to the contribution from our recently opened soil hospital facility outside Edinburgh. As yet no decontamination work has come through from the clean up of the sites for the 2012 London Olympics although we remain well positioned to secure some of this work. The logistics and recycling business has continued to show substantial increases in trading profit particularly in the Central 2

5 Belt of Scotland where the integration of the two acquisitions, completed during the first half of last year, is delivering significant improvements. Shanks is now the largest waste management operator in the central belt of Scotland and we are able to realise the benefits arising from these economies of scale. Overall our landfill joint ventures have continued to trade well. Central Services Central Services costs were stable at 2.6m (2006/7: 2.6m). Developments The Netherlands The current buoyant market conditions, particularly in the construction sector which is a major client industry for our solid waste activities, are expected to persist. As mentioned above, the purchase of Orgaworld in April 2007 has brought expertise and experience in the composting and anaerobic digestion of biodegradable waste into the Group. This offering has opened up interesting opportunities not only in The Netherlands but also in Belgium and the United Kingdom. Belgium Landfill volumes are expected to continue to decline as the Walloon Region introduces new restrictions on landfilling of municipal waste from At the same time Landfill Tax will be extended to cover municipal as well as industrial and commercial waste. To offset this decline the Group are investing in a number of new organic growth projects, including refuse derived fuel (RDF) production and anaerobic digestion capabilities mentioned above. We also continue looking for acquisition opportunities, particularly in recycling and reprocessing industries. United Kingdom In November 2006 the Group was appointed as preferred bidder for the 25-year contract to manage the waste of Cumbria County Council. Negotiations continue and it is expected that the contract will commence in mid Tenders are also being made for similar local authority contracts as the Group seeks to capitalise on progress already made with its licensed MBT technology in this market. The UK Government estimates that at least 11 billion must be spent on new infrastructure to process municipal waste if the requirements of the European Union Landfill Directive are to be met. In February 2007, DEFRA implemented a streamlined process for the granting of PFI credits to local authorities whereby credits are granted in biannual award rounds. This should ensure a more certain flow rate of contracts coming out to tender in the future. The March 2007 Budget announced an increase in the Landfill Tax escalator; from April 2008 it will increase from 3 per tonne per annum to 8 per tonne per annum. Landfill Tax, currently 24 per tonne, will therefore rise to 32 per tonne in 2008 and continue with a 8 per tonne annual increase until a rate of 48 per tonne is reached in This change should accelerate the development and demand for alternative technologies and waste treatment within the local authority market. Landfill Tax will also provide a substantial disincentive for the landfilling of I&C waste. This change, together with the regulatory requirement to pre-treat all waste prior to landfill which came into effect in October 2007, will provide further stimulus to the Group s emerging I&C recycling activities. We have launched a number of products to support our customers with new compliance obligations and are pleased with the initial response. Principal Risks and Uncertainties The Group has set out the principal risks which could impact the performance of the Group in its Annual Report and Accounts 2007 (available on our website at There has been no material change in these risks. The Group operates a formal framework for the identification and evaluation of key risks applicable to each area of the business. These along with any mitigation actions are monitored on a continuing basis at both operating and Group Board level. Looking forward over the remainder of the year, the main areas of uncertainty are the impact of January 2008 legislative changes on landfilling in the Walloon Region of Belgium, and the magnitude and timing of contaminated soil disposal work related to the clean up of the sites for the 2012 London Olympics. Directorate On 1 October 2007 I took over from Michael Averill as Group Chief Executive. Michael will continue to act in an advisory capacity until May At the AGM in July 2007 both Philippe Delaunois and Barry Pointon retired from the Group Board, and the Board thanks them for their commitment and personal contributions. Philippe Delaunois will continue to advise our Belgium business on a consultancy basis. Outlook The Group is well positioned within attractive growth markets. It has a well regarded brand, proven technological offerings in MBT, anaerobic digestion and composting, a solid balance sheet and the resources and skills are in place to capitalise on increasing market opportunities. The Board is therefore confident of achieving our expectations for the current year and making further progress for the future. Tom Drury Group Chief Executive 3

6 consolidated income statement first half ended 30 September /8 2006/7 2006/7 First Half First Half Full Year Note Continuing operations Revenue Cost of sales (220.0) (200.4) (412.9) Gross profit Administrative expenses before exceptional items (25.2) (23.7) (49.4) Exceptional profit on disposal of property 1.1 Total administrative expenses (24.1) (23.7) (49.4) Operating profit Finance charges: Interest payable (11.4) (8.1) (18.2) Interest receivable Change in fair value of interest rate swaps Total finance charges 2 (3.9) (0.7) (0.1) Profit before tax Tax 3 (7.1) (7.3) (14.8) Profit after tax for the period Dividend per share 4 2.0p 1.9p 5.9p Earnings per share basic 5 6.8p 6.3p 13.3p diluted 5 6.8p 6.2p 13.3p The interim financial information and related comparative information is unaudited. The notes on pages 7 to 13 form an integral part of this condensed consolidated half yearly financial information. consolidated statement of recognised income and expense first half ended 30 September /8 2006/7 2006/7 First Half First Half Full Year Exchange gain (loss) on translation of foreign operations 4.4 (4.2) (3.9) Actuarial gain (loss) on defined benefit pension schemes 4.5 (1.0) (5.2) (3.4) Deferred tax in respect of defined benefit pension schemes (1.3) 0.3 (0.1) Net income (expense) recognised directly in equity 7.6 (4.9) (3.5) Profit for the period Total recognised income and expense for the period The interim financial information and related comparative information is unaudited. The notes on pages 7 to 13 form an integral part of this condensed consolidated half yearly financial information. 4

7 consolidated balance sheet at 30 September 2007 At At At 30 September 30 September 31 March Note Non-current assets Intangible assets Property, plant and equipment Other investments and loans to joint ventures Trade and other receivables Deferred tax assets Current assets Inventories Trade and other receivables Current tax receivable Cash and cash equivalents Total assets Current liabilities Borrowings 10 (33.7) (6.0) (28.9) Trade and other payables (131.3) (118.9) (127.3) Current tax payable (16.4) (13.3) (13.4) Provisions 7 (5.6) (7.7) (6.3) (187.0) (145.9) (175.9) Non-current liabilities Borrowings 10 (284.5) (304.3) (271.2) Other non-current liabilities (14.2) (0.1) (2.3) Deferred tax liabilities (31.7) (30.6) (27.4) Provisions 7 (23.9) (21.5) (22.5) Retirement benefit obligations (3.4) (10.8) (8.4) (357.7) (367.3) (331.8) Total liabilities (544.7) (513.2) (507.7) Net assets Equity Share capital Share premium Exchange reserve Retained earnings Minority interest 0.1 Total equity The interim financial information and related comparative information is unaudited. The notes on pages 7 to 13 form an integral part of this condensed consolidated half yearly financial information. 5

8 consolidated cash flow statement first half ended 30 September /8 2006/7 2006/7 First Half First Half Full Year Note Net cash from operating activities Investing activities Purchases of intangible assets (0.1) (0.5) (1.1) Purchases of property, plant and equipment (18.2) (14.0) (39.3) Disposals of property, plant and equipment Financial asset capital advances (9.6) (13.2) (30.9) Financial asset capital repayments Acquisition of subsidiary and other businesses (21.6) (54.7) (65.3) Income received from other investments Net cash used in investing activities (44.5) (79.7) (131.4) Financing activities Interest paid (10.5) (7.6) (17.1) Interest received Proceeds from issue of shares Dividends paid (9.5) (8.9) (13.4) Increase in borrowings Increase in obligations under finance leases Repayments of obligations under finance leases (1.4) (1.5) (3.0) Net cash flow from financing activities Net (decrease) increase in cash and cash equivalents (7.4) 3.7 (16.6) Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period The interim financial information and related comparative information is unaudited. The notes on pages 7 to 13 form an integral part of this condensed consolidated half yearly financial information. 6

9 notes to the condensed consolidated interim financial statements 1 Basis of preparation and status of financial information This condensed consolidated half-yearly financial information for the half year ended 30 September 2007 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, Interim Financial Reporting as adopted by the European Union. The half-yearly condensed consolidated financial report should be read in conjunction with the Annual Report and Accounts 2007, which have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union. The condensed half-yearly financial information is unaudited and was approved by the Board of Directors on 6 November These interim financial results do not comprise statutory accounts within the meaning of Section 240 of the Companies Act Statutory accounts for the year ended 31 March 2007 were approved by the Board of directors on 30 May 2007 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 237 of the Companies Act The accounting policies adopted are consistent with those of the annual financial statements for the year ended 31 March 2007, as described in those annual financial statements, with the exception of exceptional items. Items are classified as exceptional and disclosed separately due to their size or incidence to enable a better understanding of performance and this policy has been adopted during the six month period. The Group s financial statements for the year ended 31 March 2008 will be impacted by IFRS 7 Financial Instruments: Disclosures which will increase the amount of disclosure in the full financial statements. The accounting, income and net assets will remain unchanged. No other new mandatory accounting standards, amendments to standards or interpretations are expected to materially impact the 31 March 2008 financial statements. 2 Segmental analysis Waste management business shown by management responsibility and geographical area: 2007/8 2006/7 2006/7 First Half First Half Full Year (a) Profit for the period Revenue Netherlands Belgium United Kingdom Total revenue Group Share of joint ventures Total revenue Trading profit* Netherlands Belgium United Kingdom Central Services (2.6) (2.6) (5.3) Total trading profit* Group Share of joint ventures Total trading profit* Exceptional profit On disposal of property (United Kingdom) 1.1 Total operating profit Finance charges Interest payable (11.4) (8.1) (18.2) Interest receivable Change in fair value of interest rate swaps Total finance charges (3.9) (0.7) (0.1) Profit before tax Tax (7.1) (7.3) (14.8) Profit after tax for the period Intersegment sales are not significant. *Trading profit excludes profits on disposal of property which have been classified as exceptional due to their size and incidence. Their exclusion allows for better comparability between the years presented. 7

10 notes to the condensed consolidated interim financial statements continued 2 Segmental analysis continued At At At 30 September 30 September 31 March (b) Analysis of net assets Netherlands Gross assets Gross liabilities (83.4) (59.4) (67.3) Net operating assets Belgium Gross assets Gross liabilities (49.3) (43.8) (47.6) Net operating assets United Kingdom Gross assets Gross liabilities (34.4) (46.8) (34.5) Net operating assets Central Services Gross assets Gross liabilities (11.3) (9.0) (17.3) Net operating liabilities (10.3) (7.4) (16.4) Total Gross assets Gross liabilities (178.4) (159.0) (166.7) Net operating assets Current tax (14.3) (11.9) (11.3) Deferred tax (23.9) (16.9) (16.6) Net debt (282.8) (247.2) (257.4) Net assets Tax 2007/8 2006/7 2006/7 First Half First Half Full Year Current tax UK corporation tax at 30% (2006/7: 30%) Current year Prior year (0.4) Double tax relief (1.9) (1.4) (2.0) Overseas tax Current year Prior year (0.1) 1.0 Total current tax charge Deferred tax Current year (1.1) Prior year 0.7 (0.1) 0.9 Total deferred tax (credit) charge (0.4) Tax charge for the period The tax rate for the first half of the current year is based on the estimated charge for the full year. As a result of changes announced in the 2007 Budget UK corporation tax will reduce from 30% to 28% effective from 6 April 2008 and the deferred tax impact of this has been included above. There will also be a phased withdrawal of industrial buildings allowances over a period of 4 years and a reduction in general pool writing down allowances from 25% to 20% which will be enacted in the Finance Act It is estimated that this will result in a 10 million exceptional tax charge in the year ending 31 March This principally relates to the non discounted value of tax relief that would have been available on the PFI infrastructure towards the end of the 25 year PFI contracts. 8

11 4 Dividends 2007/8 2006/7 2006/7 First Half First Half Full Year Amounts recognised as distributions to equity holders in the period: Interim dividends 4.5 Final dividends Total dividends An interim dividend of 2.0p per share (2006/7: 1.9p per share) was approved by the Board on 6 November 2007 and will be paid on 9 January 2008 to shareholders on the register at close of business on 14 December The final dividend for 2006/7 of 4.0p per share (2005/6: 3.8p per share) was approved by the shareholders at the Annual General Meeting on 26 July 2007 and was paid on 3 August Earnings per share 2007/8 2006/7 2006/7 First Half First Half Full Year Number of shares Weighted average number of ordinary shares for basic earnings per share 235.8m 234.7m 234.8m Effect of share options in issue 0.7m 0.6m 0.8m Weighted average number of ordinary shares for diluted earnings per share 236.5m 235.3m 235.6m Calculation of basic and adjusted basic earnings per share Earnings for basic earnings per share being profit for the period ( m) Change in fair value of interest rate swaps (net of tax) ( m) (0.9) (1.6) (4.8) Other exceptional items ( m) (1.1) Earnings for adjusted basic earnings per share ( m) Basic earnings per share (pence) 6.8p 6.3p 13.3p Adjusted basic earnings per share (pence) (see note below) 6.0p 5.6p 11.3p Calculation of diluted earnings per share Earnings for basic earnings per share being profit for the period ( m) Effect of dilutive potential ordinary shares ( m) Earnings for diluted earnings per share ( m) Diluted earnings per share (pence) 6.8p 6.2p 13.3p The Directors believe that adjusting earnings per share for the effect of exceptional items enables comparison with historical data calculated on the same basis. Exceptional items are those that need to be disclosed separately on the face of the income statement because of their size or incidence. Changes in the fair values of interest rate swaps that the Group is required to enter into in relation to its PFI arrangements are excluded as they do not reflect commercial reality. 9

12 notes to the condensed consolidated interim financial statements continued 6 Business combinations (a) On 13 April 2007 the Group acquired 70% of the share capital of Orgaworld B.V. in the Netherlands, for an initial consideration of 7.4m and will acquire the remaining 30% over the next five years. Orgaworld is involved in the composting and anaerobic digestion of biodegradable waste. The goodwill recognised is attributable to Orgaworld s strong market position and technological know-how. From acquisition to 30 September 2007, Orgaworld has contributed 3.9m to revenue and 0.3m to profit after tax. The aggregate book value of the assets and liabilities acquired and the provisional fair value to the Group, pending completion of the evaluation of the business, were as follows: Book Fair value Provisional value adjustment fair value Intangible assets Property, plant and equipment Trade receivables Current tax receivable Cash Trade payables (1.9) (1.9) Other payables (1.3) (1.3) Borrowings (11.3) (11.3) Deferred tax liabilities (0.9) (2.0) (2.9) Provisions (0.1) (0.1) Minority interest (0.1) (0.1) Provisional goodwill Satisfied by: Cash consideration 7.1 Deferred consideration (including 10.6m which is conditional) 12.4 Costs incurred 0.3 Total consideration 19.8 (b) On 5 April 2007 the Group acquired 100% of the share capital of Kluivers Totaal Recycling en Vernietiging B.V., a company specialising in the collecting and recycling of wastepaper in the Netherlands, for a total consideration of 3.3m. The goodwill recognised is attributable to Kluivers profitability and the synergies expected to arise post acquisition. From acquisition to 30 September 2007, Kluivers has contributed 2.1m to revenue and 0.1m to profit after tax. The aggregate book value of the assets and liabilities acquired and the provisional fair value to the Group, pending completion of the evaluation of the business, were as follows: Book Fair value Provisional value adjustment value Intangible assets Property, plant and equipment Trade receivables Cash Trade payables (0.4) (0.4) Other current payables (0.5) 0.1 (0.4) Deferred tax liabilities (0.5) (0.5) Provisional goodwill Satisfied by: Cash consideration 2.7 Deferred consideration 0.6 Total consideration

13 6 Business combinations continued (c) If all the acquisitions had been completed on 1 April 2007 instead of the dates above, total Group revenue and Group profit for the period would not have been materially different on a pro-forma basis. (d) For acquisitions completed in the year to 31 March 2007 there have been no amendments to the provisional fair values. 7 Provisions Site restoration and aftercare Other Total At 31 March Provided cost of sales finance charges Acquired with acquisition of businesses Utilised (0.4) (0.4) (0.8) Exchange rate movements At 30 September Current Non-current At 30 September Current Non-current At 31 March Current Non-current At 30 September Reconciliation of changes in total equity 2007/8 2006/7 2006/7 First Half First Half Full Year Opening total equity as at 31 March Recognised income and expense for the period Dividends paid (see note 4) (9.5) (8.9) (13.4) Share-based payments Tax on share-based payments (0.1) (0.2) Minority interest arising on acquisitions in the period 0.1 Other reserves movement (1.1) Issue of share capital Closing total equity

14 notes to the condensed consolidated interim financial statements continued 9 Cash flows from operating activities 2007/8 2006/7 2006/7 First Half First Half Full Year Net cash from operating activities Operating profit Amortisation of intangible assets Depreciation of property, plant and equipment Charge for long term landfill provisions Gain on disposal of property, plant and equipment (1.5) (0.6) (1.0) Earnings before interest, tax, depreciation and amortisation (EBITDA) Net decrease in provisions (0.9) (2.7) (4.3) Share-based payments Operating cash flows before movement in working capital (Increase) decrease in inventories (0.5) Increase in receivables (4.3) (7.9) (7.3) (Increase) decrease in payables (0.1) (2.8) 8.9 Cash generated by operations Income taxes paid (2.6) (2.7) (9.9) Net cash from operating activities

15 10 Net debt Consolidated movement in net debt 2007/8 2006/7 2006/7 First Half First Half Full Year Net (decrease) increase in cash and cash equivalents (7.4) 3.7 (16.6) Increase in borrowings and finance leases (12.9) (68.3) (62.5) Amortisation of loan fees (0.4) (0.2) (0.4) Exchange (loss) gain (5.9) Change in fair value of interest rate swaps Movement in net debt (25.4) (58.4) (68.6) Net debt at beginning of period (257.4) (188.8) (188.8) Net debt at end of period (282.8) (247.2) (257.4) Net debt represented by: At At At 30 September 30 September 31 March Cash and cash equivalents Current borrowings (33.7) (6.0) (28.9) Non-current borrowings (284.5) (304.3) (271.2) Total Group net debt (282.8) (247.2) (257.4) Consolidated analysis of net debt At At At 30 September 30 September 31 March Core Business net debt (151.8) (120.8) (134.0) Private Finance Initiative net debt (131.7) (121.3) (122.9) Total Group net debt before fair value of interest rate swaps (283.5) (242.1) (256.9) Fair value of Private Finance Initiative interest rate swaps 0.7 (5.1) (0.5) Total Group net debt (282.8) (247.2) (257.4) 11 Related party transactions There have been no additional significant or unusual related party transactions to those disclosed in the Group s Annual Report for 31 March

16 statement of directors responsibilities The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR and DTR The directors of Shanks Group plc are listed in the Shanks Group plc Annual Report and Accounts 2007, with the exception of the following changes in the period. Mr R B Pointon and Mr P Delaunois retired on 26 July 2007, Mr M Averill retired on 30 September 2007 and Mr T Drury was appointed on 1 October A list of current directors is maintained on the Shanks Group plc website: By order of the Board T W Drury Group Chief Executive F A N Welham Group Finance Director 14

17 independent review report to Shanks Group plc Introduction We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2007, which comprises the income statement, balance sheet, statement of recognised income and expense, cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. Directors responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom s Financial Services Authority. As disclosed in note 1, the annual financial statements of the group are prepared in accordance with the IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union. Our responsibility Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2007 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom s Financial Services Authority. PricewaterhouseCoopers LLP Chartered Accountants London 6 November

18 shareholder information Financial Calendar 14 December 2007 Record date for interim dividend 9 January 2008 Payment of interim dividend 31 March financial year ends June 2008 Announcement of 2008 results and recommended dividend July 2008 Annual General Meeting August 2008 Final dividend payable Share Dealing Service A low cost, execution-only, postal share-dealing service for the purchase and sale of Shanks Group plc shares is available from Pershing Securities Ltd. Commission is 1 per cent with a minimum charge of 15. The service is restricted to UK residents and transactions are limited to 15,000 (approximately 10,000). Pershing Securities Ltd is authorised and regulated by the Financial Services Authority and is a member of LIFFE and the London Stock Exchange. For details, please contact: Pershing Securities Ltd Broker Services Team The Royal Liver Building Pier Head Liverpool L3 1LL Tel: /7 Registrar and Transfer Office Any enquiries relating to shareholdings such as lost certificates, dividend payments or a change of address should be made to the Registrar and Transfer Office (see address below). Mandated dividends are paid by BACS (Bankers Automated Clearing System) which credits shareholders bank or building society accounts on the payment date. The appropriate tax voucher will be sent to the registered address. Further information on this facility can be obtained from the Registrar. principal offices Corporate Head Office Registered Office Registrars Shanks Group plc Shanks Group plc Computershare Investor Services PLC Astor House Shanks House PO Box 82 Station Road 211 Blochairn Road The Pavilions Bourne End Blochairn Bridgwater Road Buckinghamshire Glasgow Bristol SL8 5YP G21 2RL BS29 7NH Tel: (0) Registered in Scotland No Tel: Fax: (0) website: info@shanks.co.uk 16

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20 Shanks Group plc Interim Report and Accounts 2007/8