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Waste Recycling's accounting change produces £4.9m loss

Waste Recycling Group, Britain's largest processor of waste, saw its shares slump 18 per cent yesterday after it announced it had adopted a more cautious accounting policy which created £4.9m of losses in the six months to 30 June.

The company said £3.5m of the write-off was due to ongoing delays in rolling out its compost business, which separates organic waste from domestic rubbish and sells it on to corporate customers.

Hugh Etheridge, the finance director of WRG, said the delay made it "prudent" to write off costs against developing the business. Its shares closed down 60.5p to 272.5p.

Mr Etheridge said: "In this era of much more conservative accounting and more rigorous tests about what assets are on the balance sheet, we thought it was more prudent to make a provision against this now."

The company said the delays were mainly due to government concerns about recycling animal products after the foot-and-mouth epidemic last year. Mr Etheridge predicted the company would not be able to scale up its compost business for two years, but added that developing a compost business continued to be a core part of Waste Recycling's strategy.

WRG, which operates more than 100 sites including 62 landfills, wrote off a further £1.4m of costs relating to planning and developing landfill sites because increased Government regulation has extended the amount of time it takes to receive planning permission to as much as five years.

The total exceptional costs of £4.9m dragged profits down by 51 per cent to £4.9m in the first half. Stripping out tax, goodwill and exceptionals, WRG saw underlying profit rise 7 per cent to £21.7m.

Nigel Sandy, the chief executive, said the group experienced a "distinct slowing" in June, which he attributed in part to the World Cup. He added business had picked up in July, leading to a position of "cautious optimism" about the prospects for the economy in the next few months.

The company, whose last chairman, Pat Barrett, left after only three months in the job, announced it has appointed James Newman, a non-executive director, to the position of non-executive chairman.

Despite problems caused by regulatory delays, WRG is set to benefit from the tightening up in rules governing the disposal of rubbish such as used fridges. Waste Recycling said it expected to dispose of 170,000 fridges this year because it has the right technology to comply with new European laws by removing potentially dangerous gases before burying the fridges in landfill sites.