City snapshot: UK to introduce deposit return scheme

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Environment secretary Michael Gove has said a deposit return scheme (DRS) will be introduced in the UK in a bid to stop plastic pollution “wreaking havoc” with the environment.

In a move which follows in the footsteps of the Scottish government, Defra announced it would push ahead with DRS even though it has yet to complete an official consultation on the controversial scheme.

Industry sources and environmental groups welcomed the announcement from the government that it would work with devolved governments to bring in a joined up DRS system across the UK.

However, today’s surprise timing was criticised as evidence of the government’s chaotic handling of the plastic crisis, as it is the latest in a string of different announcements in the past few months.

One senior industry boss described the government’s communication of its strategy as an “omnishambles” and said it had had shown a “total lack of joined up thinking”, whilst ministers were accused of seemingly trying to outdo each other to be seen as “saviours of the environment”, in the face of concerted media and environmentalist pressure.

Earlier this month Chancellor Philip Hammond announced a call for evidence on plans to reduce plastic waste, including the possibility of a new tax on single-use plastic products and packaging.

And in January PM Theresa May announced a 25 year plan to tackle plastic which held back on committing to DRS because the government said ministers were still consulting in the idea.

But Today Gove announced some form of DRS scheme would be brought in to “increase recycling rates and slash the amount of waste polluting our land and seas”.

“We can be in no doubt that plastic is wreaking havoc on our marine environment – killing dolphins, choking turtles and degrading our most precious habitats, “ said Gove. “It is absolutely vital we act now to tackle this threat and curb the millions of plastic bottles a day that go unrecycled.

“We have already banned harmful microbeads and cut plastic bag use, and now we want to take action on plastic bottles to help clean up our oceans.”

The announcement said the government would introduce a scheme in England for single use drinks containers, including plastic, glass and metal.

It said the consultation would look at the details of how such a scheme would work, alongside other measures to increase recycling rates.

“We hope to talk to the devolved administrations about the scope for working together on this important issue,” said Gove, which sources said was a welcome move amid fears of cross border chaos if Scotland pushed ahead with DRS in isolation.

Similar schemes already operate in countries such as Denmark, Sweden and Germany whereby consumers pay an up-front deposit when they buy a drink, ranging from 8p in Sweden to 22p in Germany, redeemed on return of the empty drink container.

The proposals are likely to involve a network of reverse vending machines, where consumers insert plastic or glass bottles or cans into a machine which returns their deposit

Businesses will then responsible for making sure they are effectively recycled – a move which it said led to a 97% recycling rate in Germany.

However, Defra said it had not ruled out a possible variant of DRS which would include cash rewards for returning drinks containers without an upfront deposit, something which some manufacturers have said would be less punitive to consumers.

Defra said the consultation will take into account views from producers, suppliers and consumers to ensure that any system introduced works across the country.

It said it would only take forward options from the consultation “which demonstrate that they offer clear benefits and are resistant to fraud, and costs on businesses, consumers and the taxpayer are proportionate.”

One leading supplier said: “The government’s handling of this has become quite frankly an omnishambles. There has been a total lack of joined up thinking and a terrible lack of communication with the industry about what it actually wants to achieve.

“Whilst the direction of travel had been clear for some time and we have been expecting DRS to arrive, the fact that this has come out today in yet another announcement from the government is yet more evidence that ministers are not working effectively together and with industry but rather trying to score political points and almost competing against each other.

“One good thing is that the announcement seems to suggest that the government realises that it would be ridiculous to have one system north of the border and another south of the border. But everyone is shaking their head about the way it’s been handled.”

One leading environmental charity boss agreed that the government’s handling of the DRS issues had been “confusing and shambolic.”

“There have been so many conflicting announcements. The government really does seem to be in a muddle.

“We are pleased that the government is now listening about concerns over plastic, after turning a deaf ear to it for years but now we have this whole blizzard of different announcements, there is a real danger that it is going to end up in chaos.

“We need to have a joined up policy which tackles the key issues and is also fair to manufactures and retailers.”

Last week The Grocer revealed leading food and drink companies, including Coca- Cola and Tesco, were working together to come up with schemes to revamp failing local authority recycling systems and tackle the issue of on the go waste.

Wrap is also due to announce industry commitment to reduce plastic consumption next month with the launch of its UK Plastics Pact.

 

Morning update

Hilton Food Group (HFG) this morning reported full-year pre-tax profit up 3% from £33.2m to £34.2m after exceptionals – up 7.9% to £37.4m before exceptionals – on revenue up £10.1% to £1.36bn.

Exceptional items comprised acquisition costs of £2.8m for Seachill, a leading chilled UK based fish processor, along with associated intangibles amortisation of £400,000.

Strategic highlights included the £80.8m Seachill acquisition, which added fish as a new protein, funded through a £55.9m equity placement and new bank financing.

HFG also agreed with Countdown, New Zealand’s leading supermarket chain, to build and operate a new production facility from 2020 and it expanded in central Europe to produce freshfoods including sandwiches, pizza, ready meals and soups.

It agreed a joint venture with Foods Connected, a UK market intelligence data management system company focused on the fresh food supply chain.

Since the year end, it has agreed to restructure its Australian joint venture and take full operational control of its two existing plants from this July.

Growth in operating profit before exceptional items was up 11.6% (2.3% after exceptional items) and 7.0% on a constant currency basis

The company noted strong cash generation and an ungeared balance sheet despite the Seachill acquisition which was funded through an equity placing which raised over £55m and a new bank refinancing putting in place a syndicated facility.

It highlighted, too, progress with the construction of its Brisbane facility in Australia and its New Zealand facility plans which were at an advanced stage.

The group commented on what it said was a continuing climate of local, global and geopolitical uncertainties including the UK’s decision to leave the European Union.

Turning to Brexit, although the final terms were unknown, Hilton’s predominantly local sourcing and operating model left it well placed and it was confident that the Hilton business was resilient to weather these uncertainties.

Robert Watson, chief executive, said 2017 was a transformational year during which the business achieved significant strategic progress.

“We entered into a new protein through the acquisition of Seachill as well as agreement to build a new facility in New Zealand and fresh food expansion in Central Europe.

“Hilton made good progress with volume and profit growth demonstrating our geographical and operational progress. This momentum has continued into 2018 and we continue to explore further expansion opportunities.”

On the markets this morning, the FTSE 100 fell 0.6% in early trading to 6,961.1pts.

Early risers were few and far between in early trading, but included Associated British Foods (ABF), up 1.8% at 2,466p, Premier Foods (PFD), up 1.2% at 37.7p, and Unilever (ULVR) up 0.7% at 3,765p

Fallers included Just Eat (JE), off 1.6% at 693.2p, Stock Spirits Group (STCK), down 1.1% at 236p and Morrisons (MRW), off 0.5% at 204.7p. Tesco (TSCO) also slipped 0.5% at 204.5p. SSP Group (SSPG) fell 1.2% to 601p.

 

Yesterday in the City

The FTSE 100 closed up 1.6% at 6,999.9pts.

The Competition and Markets Authority cleared the anticipated acquisition by Sysco Corporation (NYSE: SYY), through Cucina Lux Investments, of Kent Frozen Foods. Sysco trades under brands including Brakes, Fresh Direct and M&J Seafood.

Real Good Food (RGD) temporarily resolved cashflow pressures after its three major shareholders stepped in to provide extra funding. Napier Brown Ingredients, Omnicane International Investors and funds managed by Downing provided up to £4m in the form of a draw-down loan note facility. The company said this would relief pressure on cash availability over the coming months while longer-term funding arrangements were put in place.

New York Stock Exchange-listed spice and flavours giant McCormick (NYSE: MKC) reported “a great start” to 2018 with net sales up 19.2% from $1.04bn (£739m) to $1.24bn. Adjusted net income climbed 38.8% from $96m to $133.2m in the three months to 28 February at the company, which also owns the Schwartz brand.

Market fallers included Marston’s (MARS), of 1.3% at 100.6p, Greencore, (GNC) down 2.3% at 127.9p, Devro, off 1% at 201.5p and Premier Foods (PFD) ended the day down 1.3% at 37.2p.

Market climbers included AG Barr (BAG), up 1.79% at 626p following the morning’s full-year results. Applegreen (APGN) closed up 1.2% t 510p, Britvic (BVIC), up 1.3% at 670p and Fevertree Drinks, up 1.4% at 2,809p. Sainsbury’s (SBRY) , following an investor presentation at its Redhill store, moved up 1.7%, McColl’s Retail Group, 4.6% at 230p and Majestic WINE (WINE), 3.6% at 389.5p.