Straight back in the black following shake-up

The Leeds-based group, the UK’s leading supplier of recycling containers, said the results have given it a solid start to the second half.

Pre-tax profits rose to £340,000 in the six months to June 30 from a loss of £240,000 the previous year.

Group sales in the first half of 2013 were £13.90m, down from £16.7m the previous year when revenues were buoyed by the drought in the early spring and subsequent over-stocking by customers. This had an impact on demand in 2013.

The group said it had launched a number of innovative new products and had won several major contract and tender wins.

Chairman James Newman said that with finance in place for three years, a significantly reduced manufacturing cost base and a number of new products coming to market, the group is in a good place to build on its achievements.

Chief executive Jonathan Straight said that now that the vertical integration and reorganisation of the group is complete, the group will be able to focus on growing revenues across the business.

The firm said that the reorganisation has produced “considerable” cost savings and greatly improved margins.

Straight said it has a number of cash commitments to fulfil in the second half of 2013, including the launch of two major new products.

This means it will hold fire on paying a dividend although the group said it remains committed to re-instating the payment of dividends as soon as possible as performance improves.

Mr Straight said that the group began 2013 by building a strong order book, following the well reported delays in municipal markets towards the end of last year. These sales, combined with a much reduced cost base, allowed the group to generate much better margins.

“The introduction of the long-awaited continental shift working pattern led to a significant improvement in productivity transforming an operating loss of £250,000 in the first half of 2012 to an operating profit this year of £560,000,” he said.

The group said that sales were hit by customers over-stocking water butts in 2012 following the very dry spring. These went unsold during the very wet summer of 2012, which meant that orders were down in the first half of 2013.

Water butts deliver a high gross margin and this, along with municipal delays, led to a reduction in margins in the Trade Commercial account to 11.6 per cent.

This was partly mitigated by a 19.5 per cent reduction in overheads.

As a result the underlying operating profit fell from £1.02m to £430,000.

Municipal sales grew by 2.2 per cent to £9.4m and Straight said it achieved “considerable success” with business that was put out to tender.

New contracts included Hartlepool Borough Council for wheeled bins with home delivery services, Thanet District Council and East Ayrshire Council for kerbside boxes and food waste containers and the Mid Kent Waste Partnership (Ashford, Maidstone and Swale) for food waste containers with compostable liners.

In addition to these tendered contracts, Straight also won a significant contract with Serco, the international service company, to provide containers and other products for its Canterbury City Council contract.

Sales in non-municipal markets fell from £5.14m to £2.86m because of lower water butt sales and the disposal of the DIY business.

Mr Straight said that the DIY business unit had contributed little to profit.

The group is committed to growing sales in all of its corporate markets including export, third party retailers and the waste management industry.

In the retail business the underlying profits were flat at £220,000.

Gross margins increased to 30 per cent as a result of higher sales of high margin, water saving products such as Tapmagic.

£550,00 deal for Food waste

Straight has won a £550,000 contract with Bournemouth Borough Council to supply a new caddy for food waste recycling.

The container is designed to sit inside the top of a 140-litre wheeled bin creating two separate streams for collection and recycling within the one container.

The contract includes the supply of the straight kitchen caddy for indoor use, a number of the 23-litre kerbside caddies for larger households as well as a supply of Compost-a-Bag compostable liners.

With a 12-litre capacity, the new food waste inner caddy will hold up to 9kg of food waste. Bournemouth expects to receive 1.25kg of food waste per person per week.