View from City Road: Smell lingers over Shanks' books

Gordon Waddell, the chairman of Shanks & McEwan, assured the City yesterday that after his review, 'the house is now clean', an apt metaphor for a waste management group.

The problem with Shanks is that it has spent the past couple of years in the effective waste management of shareholders' money. The company's finances are now almost as unpleasant as the waste it treats, following further large write-offs from a disastrous foray into the construction of roads, not to mention restructuring costs to reverse the policy of Roger Hewitt, the chief executive who left last June.

After the initial construction losses, Mr Hewitt said the business was to be more closely controlled from the centre. Mr Waddell was having none of that and, having sacked Mr Hewitt, has gone for decentralisation into autonomous operating divisions, cutting out head office costs.

Mr Waddell appears to have got a grip on the business, but even if the internal problems are fully sorted out, there are external problems on the horizon that make the group's future look uncertain.

If the Government exercises the powers available to it from May to ban the import of hazardous waste for treatment, Shanks' Rechem waste treatment business will be plunged into losses.

The group also has to grapple with a lawsuit from farmers over alleged damage to cattle from a Shanks incinerator in Scotland.

And it is unclear if the company has provided for all the bad debts from the construction debacle.

Shanks has a long way to go before it gives good reason for investors to treat its shares with anything other than the same circumspection with which it handles toxic waste it treats.