Investment column: Shanks Group

PROCESSING WASTE is a largely recession-proof business, and Shanks Group, the rubbish business which also generates electricity by incinerating BSE-infected meat, has consistently rewarded shareholders.

Yesterday's interims were a mess of one-offs, but were further evidence that the shares' unbroken, if gradual, run should continue.

Shanks says conditions in the landfill market are as tough as ever. Disposal practices are changing because of stricter European regulations. This coincides with two of Shanks' major contracts being renewed on less favourable terms. Against this backdrop, Shanks' UK waste operations saw profits decline by just 3 per cent, to pounds 15m.

Meanwhile, the group's Belgian business benefitted from the dioxin-in- chickens scare. The local incinerator happened to be in disrepair, so Shanks took care of the poultry cull. Profits from the region rose 27 per cent to pounds 8m - an increase unlikely to be replicated in the second half barring another food scare.

The group has just secured a pounds 16m contract to continue the cattle cull. On the downside, Shanks' recycling arm continues to lose money because of falling paper and plastic prices. That should break even next year.

Analysts expect full-year pre-tax profits of pounds 37.5m and earnings of 11.7p per share. The shares continue to be buoyed by speculation that a European water company may be interested in acquiring a UK waste business.

The group's fundamental resilience suggests the shares, up 3.5p at 243p yesterday, have further to go.