Investor Day To be Europes leading provider of sustainable waste - - PowerPoint PPT Presentation

Investor Day

Tom Drury Group Chief Executive

To be Europe’s leading provider of sustainable waste management solutions 5th October 2010

2

group roup plc.

Objectives of the day

1. Explaining our business today 2. Bringing our strategy to life 3. Giving confidence in delivery 4. Demonstrating our growth potential 5. Meeting our Executive Team

Clear Strategy, effective execution, future benefit

3

group roup plc.

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 11:20 Orgaworld Presentation Henk Kaskens 11:45 Belgium Presentation Philippe Marcuz 12:10 Financial update Chris Surch 12:30 Q&A ALL 12:45 Close & Lunch

4

group roup plc.

Shanks’ Executive Team

Tom Drury Group CEO Philippe Marcuz Belgium MD Chris Surch Group FD Michael van Hulst Netherlands MD Ian Goodfellow UK MD

5

group roup plc.

Clear Strategy Effective execution Future benefits

“Clear strategy, effective execution, future benefits”

Clear Strategy

6

group roup plc.

Strategic framework Europe’s leading provider of sustainable waste management solutions

Organic growth strategy from recycling, organics and PFI

KPI’s and KRI’s Critical success factors Strategic objectives Vision

7

group roup plc.

Organic growth strategy from recycling, organics and PFI

Strategic framework Europe’s leading provider of sustainable waste management solutions

KPI’s and KRI’s Critical success factors Strategic objectives Vision

Strategic objectives

1. INVEST to drive organic growth where returns are greatest 2. DEVELOP our infrastructure further to support sustainable waste management and conversion of waste to renewable energy 3. SHARE our core capabilities and technologies within the Group 4. MAXIMISE asset utilisation and minimise unit costs 5. CONTINUE to use acquisitions to improve asset utilisation and re-orient the portfolio to high growth markets

8

group roup plc.

Organic growth strategy from recycling, organics and PFI

Strategic framework Europe’s leading provider of sustainable waste management solutions

KPI’s and KRI’s Strategic objectives Critical success factors Vision

Critical success factors

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 3. WELL INFORMED, engaged and motivated employees who have a safe and healthy workplace 4. SYSTEMS & PEOPLE in place to maximise the development and exchange of technology, processes, knowledge & skills for the benefit of the whole Group 5. A CULTURE of executing well to maximise growth, margin & cash 6. A GOOD CORPORATE CITIZEN including a commitment to high environmental standards and being green

9

group roup plc.

Strong drivers for strategy

Landfill tax Landfill tax Landfill tax Low Carbon Economy Low Carbon Economy Renewable Energy

Waste Framework Directive

Landfill Directive Landfill Directive Recycling Municipal waste contracts Organics

Legislative and regulatory drivers… …define our three growth areas.

10

group roup plc.

Shanks portfolio evolution

2000

2005

2010

• f Belgian

• f Dutch

• f Orgaworld

11

group roup plc.

Shanks distinct position in industry structure

Collect

• Separate

collections

• Co-mingled

collections

Sort / Reuse

• MRF
• Bulk transfer

Reprocess

• Monostreams:
• Food waste
• Wood
• Plastics
• Fuel Prep
• etc

Dispose

• Landfill
• Incineration

Focus on alternatives to traditional disposal – waste derived fuel preparation for power plants, cement industry, high energy industrial users Collect (or long term sub contract) sufficient waste to provide base load Exploit high volume, automated sorting lines with entrepreneurial

• utlet management

Develop certain monostreams with strong regulatory drivers – food, wood Avoid highly capital intensive, high fixed cost disposal assets (unless lifetime guarantee e.g. PFI) Low Capital requirement Medium Capital requirement Medium Capital requirement

High Capital requirement

High Capital requirement

12

group roup plc.

Overall portfolio delivers good organic growth and improved ROIC

NL BE UK

What will deliver from the portfolio

• Recover the 2% operating margin lost in the recession
• Organic Growth >GDP
• Generate strong free cashflow
• Harvest the returns from investments already made
• Replace the profits lost from the landfill and grow >GDP

thereafter

• Grow margin to at least 7-8%
• Double-digit organic revenue growth
• Step change growth from PFI with minimal capital

CAN

• Deliver strong ROIC on up to four organics plants

13

group roup plc.

Effective execution Clear strategy Future benefits

“Clear strategy, effective execution, future benefits”

Effective execution

14

group roup plc.

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% Realise £60m from disposals. Disposal of Avondale and PFI equity completed. Invest in focused growth strategy. £100m invested 2007-2010

15

group roup plc.

Developing our culture

Group develops strategy, manages risk, monitors performance and holds countries to account

A culture of entrepreneurialism within a clear central direction & framework

A decentralised structure with Group as a hands off financial investor

16

group roup plc.

Risk Management

New Group Risk Management role. Mandatory risk registers for all investments. Embedding into operating units.

Project Management

Strategic Investment Programme created. Hiring of experienced Project Managers. Programme Offices created in each country.

Performance Management

New MIS and KPI Project. Full Potential planning. Focus on utilisation, unit costs, mass balance.

Collaboration

Developing central coordination in the Benelux. Technology Exchange – organics, recycling, wood, SRF. Knowledge Management forums.

Financial Discipline

Focus on ROIC. Forward looking.

Communication

Greater transparency.

Talent Development

HR Directors, performance management, succession planning

Effective execution – Fit for the Future

Delivered through effective leadership and teamwork

17

group roup plc.

Future benefits Clear strategy Effective execution

“Clear strategy, effective execution, future benefits”

Future benefits

18

group roup plc.

Drivers of value

Two fundamental growth drivers:

Economic recovery Strategic investments

• £60m invested to

date, £30m-£40m planned for 2010/11

• Target Return on

Investment 15%

• Average 2 to 3 years

to reach target return

• 8-9% margin from

new PFI projects

• £20m-£25m impact
• f recession
• A good proportion

should return

• Average Solid Waste

variable margin c.35%

• Majority of £10m cost

programme should be maintained

19

group roup plc.

Future shape of Shanks

2010 2015

Canada UK Belgium Netherlands

20

group roup plc.

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

management and entrepreneurial waste expertise

• Strong cash flow and balance sheet and focus on

improving ROIC

In a strong position for growth

1

Maximum

value

Zero

waste policy

A zero waste policy means a larger market

• pportunity for recycling and processing

United Kingdom

2

United Kingdom

UK overview

Business based on strong regional positions in collection, recycling, processing and fuels production Rest

• f

Group 79% Rest

• f

Group 96% UK 21% UK 4% Revenue Trading profit

3

United Kingdom

Service offering

Recycling

Waste collections Solid Recovered Fuel

MBT treatment Anaerobic Digestion Soil treatment

4

United Kingdom

Sector Market size (ktpa) Shanks’ Position

C&I 5,137 #3 C&D 14,796 >#5 Sector Market size Shanks’ Position Household PFI £966m* #3 Organics 5,621 ktpa #4

Market overview

Regional Markets National Markets

*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

• pportunities

5

United Kingdom

Customers and revenue

PFI (47%)

• 95% = 4 contracts with LA’s, each with an average 20 years

remaining

• 5% = third party inputs

I&C (41%)

• Wide base of c12,000 customers
• 693,000 tonnes processed, of which 32% was diverted from

landfill Other (12%)

• 3%: Contaminated land remediation
• 4%: JV landfill
• 5%: Third-party food waste inputs

6

United Kingdom

Market driven by legislation

1994 EU Landfill Directive 1997 Introduction of Landfill Tax at £7/tonne 1998 PFI Introduced 2002 LATS introduced 2003 Packaging Directive - currently under review 2007 Defra £2bn of PFI credits approved - PFI Pipeline 2008 Landfill tax confirmed to rise by £8/tonne to £80 by 2014

2010 Estimated 24 million tonnes to be diverted by 2020

European and Domestic Regulation are the key drivers of value generation

7

United Kingdom

Market developments

Opportunities

• Revision of the definition of Municipal waste.
• Government support for Anaerobic Digestion
• Landfill tax rises continue up to £80 p/t by 2014
• Acquisition opportunities in waste processing

Volume and opportunity to add value in the near and medium term

8

United Kingdom

Country strategy

Recycling “Growth in margin to high single digit and additional processing capacity of 400ktpa via development of existing sites, target 85% utilisation of the capacity and increase landfill diversion/recycling to above 50% of inputs.” Organics “Become market leader through using Orgaworld technology by developing 350ktpa of capacity in strategically targeted markets over the next five years.” PFI contracts & contracts Bidding: “Improve profit margin of ELWA operating contract to high single digit and deliver Cumbria infrastructure on time and on budget.” Contracts: “Win profitable new contracts to bring total waste of 1.5mtpa under Shanks Management by 2014.” Funding investment “Sell non-core assets and PFI SPV’s to raise £60m to fully fund investment in growth in solid waste and organics.”

9

United Kingdom

PFI Core Offering

Experienced operators / right technology choices available

Mechanical Biological Treatment (MBT) Anaerobic Digestion (AD) Energy from Waste (EfW)

10

United Kingdom

MSW Pipeline

*Invitation to submit refined solution

ISDS

• Invitation to Submit

Detailed Solution

CFT

• Call for Final Tenders

Glasgow City Council Bradford & Calderdale Milton Keynes & Northamptonshire* Barnsley, Doncaster, Rotherham Scottish Borders Council Lincolnshire County Council Edinburgh County Council

ISOS

• Invitation to Submit

Outline Solution West Lothian Council North London Waste Authority

10 ISOS volume 1,090 ktpa ISDS volume 805 ktpa CFT volume 558 ktpa Current volume 800 ktpa

11

United Kingdom

Cost savings programme

Cost savings Target PFI Contracts £1,000,000 Solid Waste £900,000 Haz Waste £140,000 Overheads £200,000

Operational efficiency equals increased value in the future

12

United Kingdom

–Cumbernauld AD facility –Bicester AD facility –East London residual AD facility –Blochairn MRF –Cumbria MBT x 2 –Kettering

Investment programme

13

United Kingdom

• Exceeded contractual target
• Successful contract variation
• Increased 3rd party income
• Increased SRF use
• Improved recyclate quality

Case study

Increased ELWA value Valuable lessons learnt for the future

14

United Kingdom

Strategy progression Appointment of new:

– Finance Director – Capital Projects Director

Double-digit growth in I&C business PFI margins have increased Development of processing capacity

15

Maximum

value

Zero

waste policy

A zero waste policy means a larger market

• pportunity for recycling and processing

United Kingdom

for the future.

SAVINGS, SYNERGIES & OPTIMISATION

Netherlands

NETHERLANDS 2

Michael van Hulst MD Wim Besselink Finance Director Jonny Kappen Hazardous Waste Henk Kaskens Organic Waste Marc van Buijtene Solid Waste Richard Bekker National Accounts Jan Thewissen EH&S Freek Groenestein Legal Council

The Dutch Management team

>150 years of experience

NETHERLANDS 3

Rest of Group 48% Rest of Group 33% Netherlands 52% Netherlands 67% Revenue Trading profit

Local business, international reputation

3

Unique culture, unique opportunities Synergies, savings and optimization

NETHERLANDS

Fit for the future

4

• Synergies
• Savings
• Optimization

A serious set of objectives, more importantly a project that inspired a corporate strategy (quality, quantity and direction of our goals) Project: what originally started as cost cutting program has developed as a moving forward program. Realised savings 2009/10 Eur 7.5 million

NETHERLANDS

Fit for the future

5

To achieve greater synergies special project teams involving local management are formed with clear responsibilities and timelines:

• Recycling in front; greater focus on recycling as a mutual goal,
• ptimizing ‘central’ installations (Icopower, woodplant, sieve,

sand, stone crusher etc)

• Sorting lines; optimise productivity and efficiency, looking for a

better optimum

• Quantity follows quality (sales); improved sales by exploiting

knowledge and expertise

• From data to information; improve available information,

development of KPI dashboard

• Purchasing; reducing costs by centralising buying power, where

appropriate

• HRM; more structured management development

Project teams

Ongoing achievement

NETHERLANDS

Activities

6

Strong market position

Solid waste Hazardous Organics Shanks ranks Shanks ranks Shanks ranks

#1 (C&D); #3 (C&I) # 1

# 3

NETHERLANDS

Market overview

7

Shanks’ annual volume

Strong base with 50,000 customers

Organic treatment 270 ktpa Solid waste C&I 493 ktpa Hazardous waste 1,640 ktpa Solid waste C&D 3,635 ktpa Sector Market size Shanks Share Market #1 (ktpa) (ktpa) Solid Waste C&I 6,550 493 7.5% (#3) VGG Solid Waste C&D 46,900 3,635 7.8% (#1) Shanks Organic Treatment 3,500 270 7.7% (#3) Essent Hazardous waste 5,580 1,640 29% (#1) Shanks Total 62,530 6,038 9.66%

NETHERLANDS

Market developments

Solid waste

• Following a decline in waste volumes, markets

have stabilised

• Strong price competition in all markets, esp.

C&D

• Incineration overcapacity
• Recyclate prices now recovered

Hazardous waste

• Soil situation (ATM) remains challenging

8

NETHERLANDS 9

Opportunities

• Continued rationalisation of cost base
• Lowest unit cost base
• Maximise asset utilisation
• Lower incineration fees
• Revenue potential in bulky waste and

biomass

• Strong water processing potential

Savings, Synergies & Optimisation

Positive for the future.

NETHERLANDS

Summary

• Decentralised with a strong, culturally-
• rientated regional service (but

centralising where appropriate)

• Actively seeking to extract greater

synergies across businesses (Fit for the Future projects) to build stronger margins

• Growth through investment

programme and other market

• pportunities

for the future.

SAVINGS, SYNERGIES & OPTIMISATION

Netherlands

1

ORGAWORLD

Orgaworld

#1

Towards

In organic waste

2

ORGAWORLD

Innovative products, remarkable results

compost green energy from biogas biofertilisers biostimulators

3

ORGAWORLD

Revenue development

Steady incline to success A doubling of revenue every four years

4

ORGAWORLD

• Composting: creating innovative

products from organic waste

• Anaerobic digestion both wet and

dry: creating green electricity from

• rganic waste
• Waste water treatment: creating

green electricity and clean water from organic waste

Technology: from concept to practice

5

ORGAWORLD

Comprehensive coverage

Netherlands

No 1: 645.000 tonnes/y

6

ORGAWORLD

Canada

• Virgin market filled with challenging opportunities:
• 150.000 t/y composting plant London (15 years contract)
• 100.000 t/y composting plant Ottawa (20 years contract)
• Prequalified for mixed waste AD facility for the City of

Toronto

• Tendered for Dundalk facility
• New opportunities Quebec, BC

A land of unlimited opportunities

7

ORGAWORLD

Cumbernauld wet anaerobic digester: under construction, 60.000 t/y

Shanks Orgaworld

• Impressive first reference project in the

UK

• Huge potential market; few competitors
• Combination of proven dutch technology

with a well respected, UK established company

Perfect partners for growth in the UK

8

ORGAWORLD

Financials

£0m £5m £10m £15m £20m £25m £30m Orgaworld Netherlands Orgaworld Canada Total Trading Profit Revenue

9

ORGAWORLD

• Triple A location: port of Amsterdam
• Feedstock

– Long standing partnerships with companies like McCain, Friesland Foods, Cargill, Albert Heijn – Enables us to intensify and expand relationships with companies like KLM, Heinz, Schiphol Airport

• Partners & subsidiaries provide

Possibilities to benefit from mutual ecological cascade

Case Study

Orgaworld’s 8th facility is Europe's largest AD facility

10

ORGAWORLD

• Electricity:

– The CHP-units (Combined Heat Power) combust the methane gasses from the AD facility. Enough electricity is produced to cover Greenmills’ internal electricity requirements – Surplus electricity is supplied to the grid

• Heat:

– First quality heat is used for sludge drying and bio-ethanol distillation – Second quality heat is used for heating purposes tank storage, melting oils & fat

• Waste & waste water:

– fractions from one process input for other Greenmills’ processes.

Case Study

Optimal synergy between the applied unit operations in Greenmills - waste and by-products from one unit

• peration input for another unit operation

11

ORGAWORLD

Case Study

12

ORGAWORLD

Other potential European markets

• Focus on countries with a population of
• ver 10m inhabitants
• Target countries must have programs &

legislation in place to support programs, including landfill tax, landfill bans and BMW-diversion initiatives

• The ‘local culture’ must allow for/ support

sustainable growth

• Preliminary targets include:
• EU: Italy, France, Spain, Poland

13

ORGAWORLD

• Excellent technologies producing

innovative products

• Well established international foothold

in the Netherlands, Canada and UK with expansion opportunities across the world

• Exclusive partnerships providing

exciting prospects for investment

• From brainchild to trailblazer to no. 1 in
• rganic waste

Orgaworld

Towards #1 in organic waste

14

ORGAWORLD

Orgaworld

#1

Towards

In organic waste

1

BELGIUM

Tomorrow,

.there’ll be

no. more. waste.

Belgium

2

BELGIUM BELGIUM

Organisational chart

Philippe Marcuz Managing Director Nathalie Brunelle GM Wallonia Sven Mollet GM Flanders Ans Verachtert GM Foronex Johan Strauven Finance Director Laurent Dauge R&D

Fit for the future.

3

BELGIUM BELGIUM

Overview

Rest of Group 74% Rest of Group 74% Belgium 26% Belgium 26% Revenue Trading profit

Revenue Profit

Wielsbeke Bree Manhay

National footprint

4

BELGIUM BELGIUM

Service offering

Foronex Wood Biomass Landfill Power SRF AD Hazardous Waste & Industrial Cleaning Soil Treatment CHP Collection

Strength in depth

5

BELGIUM BELGIUM

Estimated revenue and trading profit

Solid waste Hazardous waste Power Landfill Sand Quarry

Solid waste is our core business

3% 2% 6% 2% 19% 3% 20% 24% 52% 70%

2011E Profit 2011E Revenue

6

BELGIUM BELGIUM

Market summary

Differentiated offering based on recycling and energy recovery

38.0 mt 6.0 mt 1.9 mt C&I MSW Hazardous

Market volumes Key players

7 Company 2009 Belgian sales (€) Collection Incineration Landfill SRF Recycling Sita 400 Indaver 250 Shanks 200 AVR Van Ganswinkel 195 Veolia 100

7

BELGIUM BELGIUM

• Developing the solid waste

business

• Recycling
• High quality fuel products
• High quality products
• Green energy production
• Strategy spearheaded with new

talent

Overall Shanks strategy

Achieve greater synergy

8

BELGIUM BELGIUM

€4.1m cost savings programme

Ongoing benefits from cost savings

Business € Comments Foronex €1.4m Mainly sale of animal bedding business (£0.5m) and Transport division savings (£0.3m) Landfill €1.1m Cetem landfill restructuring following lower volumes as a result of changed legislation Hazardous €0.2m 2010-11 impact of prior year cleaning division restructuring plan at Bernissart (Hainaut) SW Ghent €0.6m Improved utilisation of SRF facility SW Brussels €0.5m Cost savings plan Brussels Central €0.1m Insurance cost savings programme Shanks Group Other €0.2m Other cost saving programmes in SW and HW Total €4.1m

9

BELGIUM BELGIUM

• New Ghent SRF line - €10m
• Anaerobic Digestion at Roeselare
• CHP wood pellet facility Valorbois
• Turbine landfill gas at Mont-Saint-Guibert
• Sorting centre at Mont-Saint-Guibert

Investment program

Strong underlying growth

10

BELGIUM BELGIUM

Our future

11

BELGIUM BELGIUM

• No.1 in Belgian / French wood waste processing market
• Strong network
• Initial problems in the business have led to lower profitability than

projected

• Company strategy has migrated from trader to biomass producer
• Opportunities to invest in cogeneration
• Valorbois operational (3MW / 45ktpa)
• Ghlin – Capex signed off for woodchip production
• Wielsbeke – Potential site for new plant
• Bree wood dust installation

– Throughput 120ktpa – E.on contract 100ktpa

• Exited animal bedding business

Case Study

Foronex

From a trader to a biomass producer

12

BELGIUM BELGIUM

• Greenwin Minerve Project

– Co-funded by the Belgian government – 5 universities participating – First goal “increase biogas production” – Second goal “landfill mining”

Future innovation

Innovation through R&D

13

BELGIUM BELGIUM

Summary

• Realise the benefits from

investment

• Transition from landfill to recycling &

recovery

• Grow the biomass business

14

BELGIUM

Tomorrow,

.there’ll be

no. more. waste.

Belgium

1

group roup plc.

CHRIS SURCH

Group Finance Director

Realising our potential

2

group roup plc.

Agenda

Trading statement PFI Investment programme Trading statement

3

group roup plc.

Trading update

• Underlying market conditions remain weak
• Trading in line with expectations
• NL - Recyclates, cost savings and good HW
• ffset market conditions
• BE - Landfill impact. Other improvements
• ffset currency impact
• UK – Good growth. PFI margin improvement
• n track
• Canada - Ottawa now benefitting & mitigates

impact of London Ontario temporary closed down

Strong underlying growth in first half

4

group roup plc.

Refinancing

Long-term financing to match long-term growth After

Private placement - 6.95% Bank - 2 year

• 4.23%

Lease Private Placement Bank - 2 year

• 4.23%

Bond 5 year – 5.00% Lease

Before

4

5

group roup plc.

Strong cash performance

Rights issue and strong underlying cash flow have reduced debt to EBITDA

• Year to 31 March 2011 UCF% expected to be above 70%

1.0 1.5 2.0 2.5 £0m £15m £30m £45m £60m FY08 - 76% FY09 - 55 % FY10 - 107% Debt to EBITDA ratio Free cash flow Free cash flow Core net debt to EBITDA ratio

6

group roup plc.

• Sale of sub debt and majority of equity in

ELWA and D&G to John Laing for £25m in cash

• Proceeds in line with Directors’ Valuation
• Significant simplification of reported

results

• Agreement with John Laing to potentially

share equity and bid costs on future contracts

PFI Equity Sale

Significant strengthening of PFI

• one of the three strategic growth areas

7

group roup plc.

Agenda

Trading statement PFI Investments Investment programme Trading statement PFI

8

group roup plc.

PFI - Directors valuation

Cash from sale to John Laing £25m

NPV of financing and

• perating cash

flows. NPV of planned efficiency improvements

31 March 2010 Realised Future

New contracts £? Added value £15m Base £65m Added value £15m

Base £40m 8 Base £40m

Laing transaction underpins £65m+ Directors’ valuation; significant opportunities

9

group roup plc.

PFI margin improvement

• 2%

0% 2% 4% 6% 8% Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 PFI margin development

• Addition of new Cumbria contract
• Operating improvements at ELWA
• 3rd party waste at ELWA

Margin improvement on track

10

group roup plc.

Interest rate Swaps* Interest Expense* Interest Income* Trading Profit Revenue

Impact of PFI equity sale

Profit and Loss account Before After

Financials simplified post-Laing transaction

* Remaining balances small

11

group roup plc.

Potential PFI returns

Investments Investments Returns Returns

Past Future

Increased returns and lower investment

12

group roup plc.

Agenda

Trading statement PFI Investments

Investment programme Investment programme

PFI

13

group roup plc.

Medium-term growth

Two fundamental growth drivers:

Economic recovery Strategic investments

• £20m-£25m impact
• f recession
• A good proportion

should return

• Average Solid

Waste variable margin c.35%

• Majority of £10m

cost programme should be maintained

• £60m invested to

date, £30m-£40m planned for 2010/11

• Target Return on

Investment 15%

• Average 2 to 3

years to reach target return

• 8-9% margin from

new PFI projects

14

group roup plc.

Revenue Disposal costs

Vehicle, equipment & other costs

Direct labour & subcontractors Variable Margin Depreciation & Facility costs Admin Costs &

• ther fixed costs

Net Margin

Economic recovery potential

Good variable margin of c.35% leads to significant profit potential from economic recovery

15

group roup plc.

Cost savings

Cost savings programme Underlying Savings Disposal cost savings

2010 2011

Focus on retaining savings

16

group roup plc.

Investments

Distribution of £100m investment programme Target return 15%

Anaerobic Digestion

Other

• rganics

Recycling

Hazardous waste & biomass

Belgium

Investment distribution by country Belgium Canada Netherlands UK 27% 19% 31% 23%

17

group roup plc.

Potential

Potential PFI PFI improvements £100m investment programme Economic recovery Base

Strong underlying growth potential from economic recovery and strategic investments

17