Shanks debt write-off shocks City: Uncertainty over environmental laws clouds outlook 'although the house is now clean'

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The Independent Online
Shanks & McEwan, the troubled waste management group, shocked the City yesterday with further huge provisions against bad debts in its construction division.

The group, battered by a string of profit warnings over the past year, is writing off pounds 11m against contracts in its construction business after a pounds 17m provision last year.

The total exceptional charge in the 1993 accounts will be pounds 20m - the pounds 11m construction provision, a pounds 3.3m write-down of some group assets, a pounds 700,000 provision for legal costs and a previously announced pounds 5m restructuring charge.

The provisions will send the group spiralling to losses of pounds 6m before tax in 1993 after a profit before exceptionals of pounds 14m.

The latest round of bad news follows a review by Gordon Waddell, chairman, after Roger Hewitt, chief executive, was forced out in January.

Mr Waddell said: 'We've been through the house, we've looked under the bed, turned over all the furniture, and the house is now clean.'

The outlook was still clouded by environmental legislation worries although business had improved in the past quarter.

The Government has the power from May to ban the import of hazardous waste for treatment under European Union legislation. Such a move would badly damage Rechem, Shanks' waste incineration company, which plunged into losses in the third quarter of last year after technical problems at its plants.

Mr Waddell said the company had recovered well in the final quarter although the worry over legislation made it impossible to take a decision on the final dividend.

The City had feared the dividend would disappear, and Mr Waddell hinted yesterday that it was likely to be cut.

He said the operations had been restructured satisfactorily into three operating divisions, but that trading conditions were still extremely tough.

Mr Waddell, who became chairman a year ago, took over as acting chief executive after Mr Hewitt was forced out by the board following pressure from institutional shareholders.

Mr Hewitt had wanted to pursue a strategy of centralising control, but Mr Waddell said the business had been decentralised and the head office had been shut.

The group also announced that it was changing its auditors, Moores Rowland.

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