TIDMBIFF
RNS Number : 1651X
Biffa plc
22 November 2017
Biffa plc
22 November 2017
HALF YEAR RESULTS FOR THE 26 WEEKSED 22 SEPTEMBER 2017
Strategy Continues to Deliver
Biffa plc ('Biffa', 'the Group' or 'the Company'), a leading UK
integrated waste management company, announces its results for the
26 weeks ended 22 September 2017.
OVERVIEW
-- Strong first half performance as expected; full
year expectations unchanged
-- Net Revenue(1) up 7.8% to GBP481.6m (H1 17:
GBP446.7m)
-- Underlying EBITDA(2) up 7.3% to GBP76.3m (H1
17: GBP71.1m)
-- Underlying Operating Profit(3) up 9.3% to GBP43.4m
(H1 17: GBP39.7m); Underlying Operating Profit
margin(4) increasing to 8.1% from 8.0%
-- Underlying Profit after Tax(5) up 56.1% to GBP26.7m
(H1 17: GBP17.1m); statutory Profit after Tax
GBP23.7m (H1 17: statutory loss after tax GBP5.0m)
-- Underlying EPS 10.7p (H1 17: 171p); statutory
EPS 9.5p (H1 17: statutory loss per share 50.0p)
-- Two acquisitions completed during the period,
including O'Brien WRS with combined targeted
annual revenue of c. GBP35m; three acquisitions
completed post period end with targeted annual
revenue of c.GBP8m
-- Energy from Waste (EfW) project feasibility
assessments progressing as planned
-- Continued strong cash generation with Underlying
Free Cash Flow(6) of GBP13.3m (H1 17: GBP2.2m)
-- Period end Reported Net Debt(7) of GBP272.2m
or 1.9x Underlying EBITDA(8)
-- Further financial flexibility secured with an
increase in facilities of GBP80m
-- Interim dividend of 2.17p per share declared
H1 H1 Change Change
Underlying Results 18 17 GBPm %
(unaudited) GBPm GBPm
------------------------- ------- ------- ------- -------
Revenue 534.6 497.5 37.1 7.5
------------------------- ------- ------- ------- -------
Net Revenue(1) 481.6 446.7 34.9 7.8
------------------------- ------- ------- ------- -------
Underlying EBITDA(2) 76.3 71.1 5.2 7.3
------------------------- ------- ------- ------- -------
Underlying Operating
Profit(3) 43.4 39.7 3.7 9.3
------------------------- ------- ------- ------- -------
Underlying Operating
Profit Margin(4) 8.1% 8.0%
------------------------- ------- ------- ------- -------
Underlying Profit
after Tax(5) 26.7 17.1 9.6 56.1
------------------------- ------- ------- ------- -------
Underlying Free
Cash Flow(6) 13.3 2.2
------------------------- ------- ------- ------- -------
Reported Net Debt(7) 272.2 270.2*
------------------------- ------- ------- ------- -------
Statutory Results
(unaudited)
-------------------------
Statutory Operating
Profit 40.5 12.2 28.3
------------------------- ------- ------- ------- -------
Statutory Operating
Profit Margin 7.6% 2.4%
------------------------- ------- ------- ------- -------
Statutory Profit/(loss)
after Tax 23.7 (5.0) 28.7
------------------------- ------- ------- ------- -------
Net Cash Flow (33.1) (10.8)
------------------------- ------- ------- ------- -------
Net Debt 317.2 533.8
------------------------- ------- ------- ------- -------
*Pro forma - adjusted for IPO related cash flows
Ian Wakelin, Chief Executive of Biffa, said:
"We are pleased to have achieved a strong performance in the
first half of this year, during which we have continued to deliver
on our acquisitive and organic growth strategy.
"Biffa maintains its market leading position as a fully
integrated waste management specialist, and is well placed to
leverage its scale and presence both to consolidate a fragmented
market place and to further drive shareholder value by continuing
to optimise and grow our existing operations.
"Looking ahead, we see attractive growth opportunities,
including a healthy pipeline of acquisitions, of a range of sizes.
We also have scope to continue to develop our infrastructure and
services, taking advantage of the significant amount of waste we
control. We look forward to reporting on the progress made in our
EfW feasibility assessments when we announce our full year
results.
"Our full year expectations remain unchanged and we look to the
future with confidence."
DIVISIONAL PERFORMANCE
Net Revenue Underlying Operating
GBPm Profit
GBPm
----------- ----------------------- -------------------------
H1 18 H1 17 Change H1 18 H1 17 Change
% %
----------- ------ ------ ------- ------- ------- -------
I&C 280.7 261.3 7.4 24.7 21.3 16.0
----------- ------ ------ ------- ------- ------- -------
Municipal 97.8 89.7 9.0 4.4 5.2 (15.4)
----------- ------ ------ ------- ------- ------- -------
RR&T 60.8 53.7 13.2 10.6 7.3 45.2
----------- ------ ------ ------- ------- ------- -------
Energy 42.3 42.0 0.7 13.0 14.8 (12.2)
----------- ------ ------ ------- ------- ------- -------
TOTAL(9) 481.6 446.7 7.8 43.4 39.7 9.3
----------- ------ ------ ------- ------- ------- -------
Industrial & Commercial
-- Revenue growth of 7.4% to GBP280.7m. Customer
wins, continued pricing discipline and reduced
customer churn delivered organic revenue growth
of 3.5%, while acquisitions added 3.9% to revenues
for the half
-- Corporate customer wins include Arcadia and
Kerry Foods
-- Acquisition of O'Brien WRS completed in July
2017
-- Underlying Operating Profit margin up to 8.8%
from 8.2% due to revenue growth, cost control
and delivery of synergies from prior year acquisitions
Municipal
-- Satisfactory performance in a competitive market
-- Revenue growth of 9.0% to GBP97.8m; of which
organic growth was 2.9% and 6.1% relates to
the acquisition of Cory in the prior year
-- Underlying Operating Profit decreased by 15.4%
to GBP4.4m with Underlying Operating Profit
margin declining from 5.8% to 4.5%
-- Performance and outlook moderated by continuing
competitive market conditions, resulting in
lower margins on new contracts
Resource Recovery & Treatment
-- Net Revenue increase of 13.2%. Organic Net Revenue
growth of 9.4%
-- Underlying Operating Profit margin expansion
from 7.0% to 9.3%
-- Growth driven by strong landfill volumes and
prices, new operations (including Biffa Polymers
HDPE line) and acquisitions
-- Strong landfill volumes and pricing expected
to largely mitigate cost and price headwinds
from recent changes in Chinese regulations for
import of recycled commodities
Energy
-- Net Revenue stable at GBP42.3m with increased
energy prices offsetting the expected declines
in landfill gas generation
-- Underlying Operating Profit margin decreased
to 30.7% (35.2% for H1 FY17) predominantly due
to prior year non-repeating items in the West
Sussex contract
-- 99% of energy output for FY18 has been forward
sold at GBP41.66/Mwh. Landfill gas volumes declining
at c.7.5% pa
PRESENTATION OF RESULTS
There will be a presentation of the results to analysts and
investors at 9:30am today (22 November 2017) at Instinctif
Partners, 65 Gresham Street, EC2V 7NQ. To register your attendance
please contact biffa@instinctif.com
A live audio webcast and conference call of the presentation
will be available on Biffa's website - www.biffa.co.uk. The
presentation slides will be added to Biffa's website prior to the
analyst meeting.
ENQUIRIES:
Investors & Analysts
Ian Wakelin, Chief Executive Officer
Michael Topham, Chief Financial Officer
ir@biffa.co.uk
Media
Instinctif Partners
+44 (0) 20 7457 2020
biffa@instinctif.com
This announcement contains certain forward-looking statements
that are subject to the usual risk factors and uncertainties
associated with Biffa's business. Whilst Biffa believes the
expectations reflected herein to be reasonable in light of the
information available to them at this time, the actual outcome may
be materially different owing to factors beyond Biffa's control or
within Biffa's control where, for example, Biffa decides on a
change of plan or strategy. Accordingly, no reliance may be placed
on the figures contained in such forward-looking statements.
Notes:
'Underlying activities' and a number of other terms and
performance measures used in this document are not defined within
accounting standards and may be applied differently by other
organisations. See notes to the consolidated financial statements
for basis of preparation and definitions of all non-statutory
measures
1 Revenue excluding Landfill Tax
2 Profit before depreciation and amortisation, exceptional
items, impact of real discount rate changes to landfill provisions,
finance costs and taxation
3 Profit before exceptional items, amortisation of acquisition
intangibles, impact of real discount rate changes to landfill
provisions, finance costs and taxation
4 Calculated as a percentage of statutory revenue
5 Profit for the period as adjusted for non-underlying operating
items (exceptional items, amortisation of acquisition intangibles
and impact of real discount rate change to landfill provisions),
non-underlying net interest items and non-underlying taxation
6 Net increase/(decrease) in cash and cash equivalents excluding
dividends, restructuring and exceptional items, acquisitions,
movement in financial assets and movements in borrowings or share
capital (but including finance lease principal payments)
7 Excludes balances in respect of EVP instrument
8 Represents 1.9 x last twelve months' Underlying EBITDA
9 Total Underlying Operating Profit includes central costs of
GBP9.3m (H1 2017: GBP8.9m)
BOARD OF DIRECTORS' STATEMENT
Biffa continues to perform well across the Group and is set to
deliver another year of good growth and strong financial
performance.
We were greatly saddened by the news of the death of our
Chairman, Steve Marshall, in September. Steve had been our Chairman
since June 2013 and played a major role in guiding the Group
through its successes, including its IPO last year. He will be very
much missed.
David Martin, Senior Independent Director, has assumed the role
of Chairman on an interim basis. The search for a new Chairman is
underway, and the Company will keep shareholders updated.
Results
The Group delivered a positive set of results for the first half
of the year, achieved through a combination of organic and
acquisitive growth. The I&C and RR&T divisions made a
strong contribution to the performance, and while the Group
continues to see positive indicators overall, the trading
environment remains especially competitive in the Municipal
division. The Board is pleased with the progress made in expanding
our services and driving additional value from existing operations
across the whole business.
In the first half of the year, Revenues increased by 7.5% to
GBP534.6m and Net Revenues rose 7.8% to GBP481.6m, driven by growth
in our I&C, Municipal and RR&T divisions. Underlying EBITDA
rose 7.3% to GBP76.3m. Underlying Operating Profit rose 9.3% to
GBP43.4m with the Underlying Operating Profit margin increasing to
8.1% from 8.0%. Statutory Operating Profit increased to GBP40.5m
due to a reduction in other items from GBP27.5m to GBP2.9m
principally due to the impact of the increase in the real discount
rate on landfill provisions. Underlying Profit after Tax for the
period was GBP26.7m (Statutory Profit after Tax GBP23.7m) and
Underlying Earnings Per Share 10.7p (Statutory Earnings Per Share:
9.5p).
Capital Allocation
A core part of our strategy is to invest selectively in
businesses and infrastructure where we are advantaged and generate
attractive returns. The Board is encouraged by the momentum of
targeted acquisitive growth sustained in the year to date, which
includes most notably the acquisition of O'Brien WRS in July. We
will continue to pursue value-adding acquisitions and allocate
capital to incremental projects that will enhance capacity or
performance at existing sites, while remaining alert to
opportunities, such as in Energy from Waste, that will support
long-term sustainable growth.
Dividend
Reflecting the Board's continuing confidence in the prospects
for the Group, we are pleased to announce an interim dividend of
2.17p per share, which will be paid on 5 January 2018 to
shareholders on the register on 8 December 2017.
Summary
The growth drivers for the Group remain attractive. Biffa is
well positioned in its markets and has a strong portfolio of
businesses, services and capabilities. We are well placed to
deliver a strong second half performance and meet our objectives
for the full year.
CHIEF EXECUTIVE'S REVIEW
Operating Performance
Performance in the first half is in line with expectations, and
our full year expectations remain unchanged. For the half year
Revenue has increased by 7.5% and similarly Net Revenue has
increased by 7.8% to GBP481.6m, driven by growth in our I&C,
Municipal and RR&T divisions. Underlying Operating Profit
margin has increased from 8.0% to 8.1%.
Industrial & Commercial
H1 18 H1 17 Change
GBPm GBPm %
---------------------- ------ ------ -------
Revenue 280.7 261.3 7.4
---------------------- ------ ------ -------
Underlying EBITDA 38.4 33.6 14.3
---------------------- ------ ------ -------
Underlying Operating
Profit 24.7 21.3 16.0
---------------------- ------ ------ -------
Underlying Operating
Profit Margin 8.8% 8.2%
---------------------- ------ ------ -------
I&C Net Revenue increased 7.4% to GBP280.7m, through a
combination of organic and acquisitive growth. Organic revenue
increased 3.5% with acquisitions contributing a further 3.9% to
overall revenue growth. Corporate account contract wins during the
period included Arcadia and Kerry Foods. We also continue to focus
on improving our service to our important SME customer base and
have seen customer churn reduce again in the first six months.
Underlying Operating Profit margin was 8.8% for the half year,
having improved from 8.2% in the prior half year. Pricing
discipline has been maintained which, together with the achievement
of acquisition synergies and organic growth, are expected to
continue to deliver revenue and year-on-year margin growth in this
division.
Municipal
H1 18 H1 17 Change
GBPm GBPm %
---------------------- ------ ------ -------
Revenue 97.8 89.7 9.0
---------------------- ------ ------ -------
Underlying EBITDA 11.5 11.6 (0.9)
---------------------- ------ ------ -------
Underlying Operating
Profit 4.4 5.2 (15.4)
---------------------- ------ ------ -------
Underlying Operating
Profit Margin 4.5% 5.8%
---------------------- ------ ------ -------
The division delivered a satisfactory performance in a
competitive market. Revenue increased by 9.0% to GBP97.8m, of which
organic growth was 2.9% and 6.1% related to the acquisition of Cory
in the prior year. The performance and outlook of the division have
been moderated by continuing competitive market conditions,
resulting in lower margins on new contracts.
Resource Recovery & Treatment
H1 18 H1 17 Change
GBPm GBPm %
---------------------- ------ --------- ---------
Revenue 113.8 104.5 8.9
---------------------- ------ --------- ---------
Net Revenue 60.8 53.7 13.2
---------------------- ------ --------- ---------
Underlying EBITDA 19.4 16.3 19.0
---------------------- ------ --------- ---------
Underlying Operating
Profit 10.6 7.3 45.2
---------------------- ------ --------- ---------
Underlying Operating
Profit Margin 9.3% 7.0%
---------------------- ------ --------- ---------
The division delivered a strong performance. Net Revenue
increased 13.2% to GBP60.8m and Underlying Operating Profit
improved GBP3.3m to GBP10.6m driven by landfill volumes and prices,
the impact of new operations and acquisitions. Organic Net Revenue
grew 9.4% whilst acquisitions contributed 3.8% to Net Revenue
growth.
Recently there have been changes to regulations in China
relating to the import of recycled commodities. We have taken steps
to ensure that we are compliant with these new requirements. These
changes are causing some cost and price headwinds, however we
anticipate that these will be largely mitigated by stronger than
previously expected landfill volumes and pricing over the remainder
of the year.
Energy
H1 18 H1 17 Change
GBPm GBPm %
---------------------- ------ ------ -------
Revenue 42.3 42.0 0.7
---------------------- ------ ------ -------
Underlying EBITDA 15.7 17.9 (12.3)
---------------------- ------ ------ -------
Underlying Operating
Profit 13.0 14.8 (12.2)
---------------------- ------ ------ -------
Underlying Operating
Profit Margin 30.7% 35.2%
---------------------- ------ ------ -------
Stronger wholesale energy prices more than offset the
anticipated reductions in landfill gas volumes such that Revenue
grew marginally by 0.7%. Underlying Operating Profit margins
decreased predominantly due to non-repeating items relating to the
West Sussex contract in the prior year.
99% of expected energy output for FY18 has been forward sold at
GBP41.66/Mwh.
Our discussions with Covanta concerning the potential
development of two Energy Recovery facilities in Cheshire and
Leicestershire have progressed as planned and we look forward to
providing a further update when we announce our full year results.
In addition, we continue to explore other smaller opportunities in
the EfW market leveraging our expertise, existing energy
infrastructure and control of waste supply.
Acquisition Strategy
A key part of our strategy is to supplement organic growth by
making synergistic in-fill acquisitions, especially in our I&C
division. We have a proven track record of identifying and
integrating value-enhancing acquisitions from within our highly
fragmented marketplace.
In July 2017 we purchased O'Brien Waste Recycling Solutions
Holdings Limited, which brought in GBP34m of annualised revenues.
One other small acquisition was also completed during the period
and since the period end, a further three acquisitions have
completed with targeted annual revenue of c.GBP8m.
We continue to see a strong pipeline of acquisition
opportunities.
Acquisition Date Annualised Value*
Acquired Revenue GBPm
GBPm
-------------------------- ----------- ----------- -------
Trade and assets
of G&S Waste Management Mar 2017 0.3 0.2
-------------------------- ----------- ----------- -------
O'Brien WRS Jul 2017 34.4 38.2
-------------------------- ----------- ----------- -------
Amber Engineering Oct 2017 6.6 4.9
-------------------------- ----------- ----------- -------
Trade and assets
of HWS Waste Nov 2017 0.5 0.2
-------------------------- ----------- ----------- -------
Trade and assets
of Eco Food Recycling Nov 2017 0.7 0.7
-------------------------- ----------- ----------- -------
Total 42.5 44.2
--------------------------------------- ----------- -------
*Value comprises consideration plus net debt acquired
Operational KPIs
The strong performance in the period is further evidenced by our
operational KPIs, with growth in tonnages collected, processed and
landfilled, and a reduction in energy generation as landfill gas
yields decline gradually over time. Energy prices increased from
the prior year:
H1 18 H1 17 Change
%
------------------------ ------ ------ -------
Tonnes Collected
(mt) 2.08 1.94 7.2
------------------------ ------ ------ -------
Tonnes Processed
(mt) 1.74 1.65 5.5
------------------------ ------ ------ -------
Tonnes Landfilled
(mt) 1.61 1.49 8.1
------------------------ ------ ------ -------
Energy generation
(GWh) 236.8 251.5 (5.8)
------------------------ ------ ------ -------
Energy price (GBP/MWh) 40.0 36.1 10.8
------------------------ ------ ------ -------
Summary and Outlook
We are pleased to have achieved a strong performance in the
first half of this year, during which we have continued to deliver
on our acquisitive and organic growth strategy.
Biffa maintains its market leading position as a fully
integrated waste management specialist, and is well placed to
leverage its scale and presence both to consolidate a fragmented
market place and to further drive shareholder value by continuing
to optimise and grow our existing operations.
Looking ahead, we see attractive growth opportunities, including
a healthy pipeline of acquisitions, of a range of sizes. We also
have scope to continue to develop our infrastructure and services,
taking advantage of the significant amount of waste we control. We
look forward to reporting on the progress made in our EfW
feasibility assessments when we announce our full year results.
Our full year expectations remain unchanged and we look to the
future with confidence.
FINANCIAL REVIEW
Group Performance
Revenues increased by 7.5% from GBP497.5m to GBP534.6m, with Net
Revenues increasing by 7.8% from GBP446.7m to GBP481.6m.
Underlying EBITDA increased by 7.3% to GBP76.3m with Underlying
Operating Profit increasing by 9.3% to GBP43.4m. The principal
drivers of the growth in both Underlying EBITDA and Underlying
Operating Profit were the I&C and RR&T divisions. Statutory
Operating Profit increased 232% to GBP40.5m. Underlying Profit
before tax increased 39% to GBP33.3m. Statutory Profit before Tax
increased by GBP32.8m to GBP29.2m.
Finance Income
Finance income reduced from GBP2.9m to GBP0.3m reflecting lower
surplus cash balances under the Group's post-IPO capital
structure.
Underlying Finance Charges
Underlying Finance charges exclude the fair value discount
unwind on the EVP preference share liability. They include interest
charges on the Group's borrowings, bond premiums and discount
unwind on landfill provisions.
Underlying Finance charges reduced by GBP8.3m in the period. The
decrease reflects the Group's reduced borrowings resulting from the
Group's post-IPO capital structure.
Underlying Taxation
The effective tax rate on underlying profits was 20% (H1 2017:
28%), consistent with the prevailing rate of Corporation Tax.
Other Items
To enable additional clarity of business performance, certain
items are excluded when calculating the Group's Underlying measures
of performance. See below 'Basis of Preparation and
Definitions'.
The items are more fully explained in Note 4 to the condensed
consolidated financial statements and include exceptional items,
amortisation of acquisition intangibles, material impacts from
changes in real discount rates on landfill provisions, and the fair
value discount unwind on the EVP preference shares. After tax,
these items totalled GBP(3.0)m in the period (H1 2017: GBP(22.1)m).
The principal reason for the significant decrease in the current
half year is the impact of the increase in the real discount rate
on landfill provisions, which resulted in a credit of GBP4.7m in
the period, compared to a charge of GBP20.3m in the prior
period.
A reconciliation from Underlying Profit after Tax to Statutory
Profit after Tax is set out below.
H1 18 H1 17
(GBPm) (GBPm)
------------------------------------ -------- --------
Underlying Profit after Tax 26.7 17.1
------------------------------------ -------- --------
Exceptional items (1.4) 0.2
------------------------------------ -------- --------
Amortisation of acquisition
intangibles (6.2) (7.4)
------------------------------------ -------- --------
Impact of changes in real discount
rate on landfill provisions 4.7 (20.3)
------------------------------------ -------- --------
Interest (net) (1.2) -
------------------------------------ -------- --------
Tax 1.1 5.4
------------------------------------ -------- --------
Statutory Profit after Tax 23.7 (5.0)
------------------------------------ -------- --------
Earnings per Share
Total statutory earnings/(loss) per share increased from (50.0)
pence per share to 9.5 pence per share.
Underlying earnings per share decreased from 171 pence per share
to 10.7 pence per share, due to the new share capital issued at the
Group's IPO more than offsetting the improvement in profit after
tax.
Dividend
An interim dividend of 2.17p per share has been declared and
will paid on 5 January 2018 to shareholders on the register on 8
December 2017. The ex-dividend date is 7 December 2017.
Details of the progressive dividend policy adopted by the board
are set out in the Board of Directors' Statement.
Retirement Benefits
The Group operates a defined benefit pension scheme for certain
employees which is closed to new entrants and which closed to
future accrual for the majority of its members as at 1 November
2013. At 22 September 2017, the net retirement benefit surplus was
GBP20.3m compared to a surplus of GBP15.4m at 24 March 2017. The
change in the financial position of the scheme reflects the
performance of the Scheme's assets plus the receipt of the deficit
contribution by the Group.
The scheme had an actuarial deficit of GBP66.7m as at the time
of the last valuation in March 2015, and an inflation-linked
contribution of GBP3.85m from March 2017 has been agreed with the
trustee of the scheme.
Return on Capital
The Group operates a disciplined approach to capital
investment.
Group Return on Capital Employed (see Basis of Preparation and
Definitions) increased from 9.7% to 10.1%. This measure is
materially affected by intangible assets held on the balance sheet
which were initially recognised in 2008 upon the LBO of the Group
including Landfill Gas Rights and Brand.
Group Return on Operating Assets (see Basis of Preparation and
Definitions) increased from 26.2% to 26.7%
Cash Flow
A summary of the Group's cash flows is shown below:
H1 H1
FY18 FY17
(GBPm) (GBPm)
Underlying EBITDA 76.3 71.0
------------------------------- -------- --------
Working capital (12.4) (16.0)
------------------------------- -------- --------
Capital expenditure (19.4) (19.6)
------------------------------- -------- --------
Property sales 2.0 0.4
------------------------------- -------- --------
Net interest paid (10.5) (14.9)
------------------------------- -------- --------
Finance lease principal
payments (17.4) (14.9)
------------------------------- -------- --------
Pension deficit payments (3.9) (3.0)
------------------------------- -------- --------
Other (1.4) (0.8)
------------------------------- -------- --------
Underlying free cash flow 13.3 2.2
------------------------------- -------- --------
Restructuring and exceptional
items (3.1) (2.9)
------------------------------- -------- --------
Acquisitions, including
net debt repaid (36.6) (11.9)
------------------------------- -------- --------
Dividends paid (6.0) -
------------------------------- -------- --------
Movement in financial assets (0.7) 1.8
------------------------------- -------- --------
Net cash flow (33.1) (10.8)
------------------------------- -------- --------
Underlying free cash flow improved from GBP2.2m to GBP13.3m due
to improvements in underlying profitability, working capital and
reduced interest payments.
The net working capital outflow in the period is expected to
substantially reverse in the second half.
Capital expenditure (comprising purchases of property, plant and
equipment and purchases of intangibles) remained broadly unchanged
at GBP19.4m.
Net interest paid decreased due to the reduced borrowings put in
place at the time of the Group's IPO.
Finance lease principal payments increased as expected due to
phasing of the Group's ongoing vehicle replacement programme.
A statutory group cash flow summary is set out below:
H1 H1
FY18 FY17
(GBPm) (GBPm)
--------------------------------- -------- --------
Net cash from operating
activities 54.9 50.1
--------------------------------- -------- --------
Net cash used in investing
activities (51.5) (31.0)
--------------------------------- -------- --------
Net cash flow used in financing
activities (36.5) (29.9)
--------------------------------- -------- --------
Net decrease in cash and
cash equivalents (33.1) (10.8)
--------------------------------- -------- --------
Reported Net Debt and Borrowings
The Group's Reported Net Debt increased from GBP246.1m to
GBP272.2m in the period, representing 1.9x last twelve months'
Underlying EBITDA (H1 17: pro forma 2.1x).
An increase in facilities with existing lenders was completed in
October 2017. This includes an option to increase the Group's term
loan by GBP53.3m to GBP253.3m, and an increase of GBP26.7m on the
existing GBP100m revolving credit facility.
The GBP26.1m increase in Reported Net Debt was principally due
to the acquisition of O'Brien Waste Recycling Solutions Holdings
Limited, which had an aggregate impact on net debts in the order of
GBP38m, partially offset by strong underlying free cash flow
performance.
Reported Net Debt (GBPm) H1 18 H1 17
--------------------------- ------- ------------------
Actual Pro forma
--------------------------- ------- ------- ---------
Cash 23.3 95.2 29.6
--------------------------- ------- ------- ---------
Loans (194.3) (409.2) (200.0)
--------------------------- ------- ------- ---------
Finance leases (101.2) (99.8) (99.8)
--------------------------- ------- ------- ---------
Junior shareholder loan - (120.0) -
--------------------------- ------- ------- ---------
Total (272.2) (533.8) (270.2)
--------------------------- ------- ------- ---------
Reported Net Debt excludes the Group's EVP preference share
liability of GBP45.0m (prior year: nil) as explained in note 16.
The H1 2017 pro forma Net Debt reflects the impact of the Group's
IPO in October 2016, which resulted in a reduction in the Group's
loans and cash balances.
Landfill Tax Matters
We await judgment from the tax tribunal in the EVP case. We have
received notification from HMRC that interest on the EVP liability
(totalling GBP8.7m, for which funds were allocated at IPO but which
remains unpaid) is not due and will not be requested. This has a
near term cash benefit to the Group but 90% of this unpaid amount
will ultimately be repayable to pre-IPO shareholders when the case
is finally determined under the terms of the instruments put in
place at IPO.
In a separate matter, we have recently been notified by HMRC
that they disagree with our Landfill tax treatment in relation to
naturally occurring soils that contain very low levels of asbestos.
Biffa - along with other industry operators - has always understood
this material to be subject to lower rate tax and has very strong
legal advice to support its position. This concerns material
landfilled between 2012 and 2015 only and the tax at stake,
including interest, amounts to circa GBP9.2m (GBP7.7m post
corporation tax). Since 2015, following direction from HMRC, this
material has been taxed at standard rate Landfill tax.
We expect that HMRC will demand payment of this tax, upon which
we will appeal against the assessment and vigorously defend our
position. We are confident that our position is consistent with the
law and the intent of the legislation.
The tax at stake has been disclosed as a contingent liability in
note 15 to the accounts.
REPORTING PERIODS
The Group will report results for the 53 weeks to 30 March 2018.
Whilst this means the results will include an additional week of
trading, it also means that the 53 weeks will incorporate two more
public holidays than the 52 weeks to 24 March 2017. The Directors
consider these two offsetting factors to result in a negligible net
impact on overall results.
RISKS & UNCERTAINTIES
The principal risks and uncertainties affecting the business
activities of Biffa and the industry in which it operates remain
those detailed in the Annual Report and Accounts and which are
summarised as follows:
-- Biffa operates in a highly regulated industry,
and changing regulatory requirements and
standards could have an adverse impact on
the Group's operations and results
-- Economic conditions in the United Kingdom
may have an adverse impact on Biffa's operating
performance, revenues and results of operations
-- Biffa is exposed to risks inherent in long-term
fixed-price contracts, in particular in
its Municipal and related operations
-- Fluctuations in electricity, fuel and other
commodity prices could affect Biffa's operating
results
-- Biffa faces risks arising from its hedging
activities
-- Biffa is subject to the risk of increased
customer churn
-- Competition in the waste management industry
could reduce Biffa's revenues and net income
-- Biffa's business depends on its reputation
and the value of its brand
-- Biffa is exposed to risks and liabilities
that may not be adequately covered by insurance
and increases in insurance costs could reduce
the Company's profitability and cashflow
-- Biffa faces risks arising from its acquisition
strategy
-- A significant disruption to Biffa's information
technology system, or delay during its migration
to new systems, could adversely affect the
Company's performance
-- A cybersecurity incident could negatively
impact Biffa's business and its relationships
with customers
-- Biffa may fail to identify strategic developments
and may be unsuccessful in developing new
technologies, or its current technological
capabilities may become obsolete
-- Biffa's operations expose it to the risk
of material health and safety liabilities
-- Provisions for landfill site closure costs
may be inadequate
-- Biffa faces risks related to its landfill
gas operations
-- Biffa operations are dependent upon it having
necessary permits under the applicable regulatory
regime, including planning permits and permissions
for the development of new sites or facilities,
as well as waste management and operator's
licences
-- Biffa is subject to risks arising from its
bonding and other financial security arrangements
-- Biffa may be subject to litigation, disputes
or other legal proceedings
-- Biffa is dependent on its senior personnel
-- Biffa may be affected by work stoppages
-- Risks related to Biffa's borrowings
-- Biffa is exposed to a number of political,
social and macroeconomic risks relating
to the United Kingdom's potential exit from
the European Union (EU)
BASIS OF PREPARATION AND DEFINITIONS
The reported financial information has been prepared on the
basis of Note 1 of the interim financial statements. The financial
information has been prepared on the basis of results for the 26
weeks ended 22 September 2017.
In considering the financial performance of our principal
segments, we analyse them on the basis of their underlying
performance. This is the principal measure used by management to
assess the business performance of the Company's underlying
activities. Underlying activities exclude exceptional and other
items. Note 4 explains in detail items which are excluded from our
underlying profit measures.
The Board believes that by presenting our financial performance
using underlying performance it is easier to read and interpret
financial performance between periods, as underlying profit
measures are more comparable having removed the distorting effect
of the excluded items. Those items are more clearly understood if
separately identified and analysed.
Accounting
Basis * Prepared in accordance with IFRS
* H118 represents the 26 weeks ended 22 September 2017;
H117 represents the 26 weeks ended 23 September 2016;
FY17 represents the 52 weeks ended 24 March 2017
------------------ -------------------------------------------------------------
Net Revenue
* Statutory revenue excluding landfill tax, unless
stated otherwise, 'revenue' refers to statutory
revenue. Landfill tax is excluded as the rate is
outside the Group's control
------------------ -------------------------------------------------------------
Organic Net
Revenue Growth * The increase/(decrease) in net revenue in the period
excluding net revenue from acquisitions completed in
the period and net revenue from acquisitions
completed in the prior period up to the anniversary
of the relevant acquisition date, to the extent such
net revenue falls in the current period
* Organic net revenue growth can be expressed both as
an absolute financial value and as a percentage of
prior period revenue
------------------ -------------------------------------------------------------
Acquisition
Net Revenue * Acquisition Net Revenue Growth in any period
Growth represents the Net Revenue Growth in the relevant
period from (i) acquisitions completed in the
relevant period and (ii) acquisitions completed in
the twelve months ended to the start of the relevant
period up to the twelve-month anniversary of the
relevant acquisition date (to the extent such Net
Revenue falls in the current period). Acquisition
Revenue Growth is calculated on the same basis, using
revenue in place of Net Revenue.
------------------ -------------------------------------------------------------
Acquisition
Net Revenue * Acquisition Net Revenue Growth Rate in any period
Growth Rate represents the Acquisition Net Revenue Growth for the
period expressed as a percentage of the prior
period's Net Revenue. Acquisition Revenue Growth Rate
is calculated on the same basis, using revenue in
place of Net Revenue
------------------ -------------------------------------------------------------
Underlying
EBITDA * Profit before depreciation and amortisation,
exceptional items, impact of real discount rate
changes to landfill provisions, finance costs and
taxation
* Divisional underlying EBITDA is stated after
allocation of shared services costs
------------------ -------------------------------------------------------------
Underlying
Operating * Profit before exceptional items, amortisation of
Profit acquisition intangibles, impact of real discount rate
changes to landfill provisions, finance costs and
taxation
* Divisional underlying operating profit is stated
after allocation of shared service costs
------------------ -------------------------------------------------------------
Reported Net
Debt * Net debt excluding balances relating to EVP
preference shares
------------------ -------------------------------------------------------------
Return on
Capital Employed * Operating Profit excluding exceptional items and
(ROCE) impact of real discount rate changes to landfill
provisions divided by average of opening and closing
shareholder's equity plus net debt (including finance
leases), pensions and environmental provisions
------------------ -------------------------------------------------------------
Return on
Operating * Underlying Operating Profit divided by average of
Assets (ROOA) opening and closing Property, Plant & Equipment, plus
net working capital
------------------ -------------------------------------------------------------
Underlying
Free Cash * Net increase/(decrease) in cash and cash equivalents
Flow excluding dividends, restructuring and exceptional
items, acquisitions, movement in financial assets and
movements in borrowings or share capital (but
including finance lease principal payments)
------------------ -------------------------------------------------------------
Statement of Directors' Responsibilities
The half year financial information is the responsibility of,
and has been approved by the Directors. The Directors are
responsible for preparing the half year report in accordance with
the Disclosure and Transparency Rules (DTR) of the United Kingdom's
Financial Conduct Authority
We confirm that to the best of our knowledge:
a) The condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting' as issued
by the International Accounting Standards Board and adopted by the
European Union ;
b) The interim management report includes a fair view of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
c) The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By Order of the Board
Ian Wakelin
Chief Executive Officer
22 November 2017
INDEPENT REVIEW REPORT TO BIFFA PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
26 weeks ended 22 September 2017 which comprises the condensed
consolidated interim income statement, condensed consolidated
interim statement of comprehensive income, condensed consolidated
statement of changes in equity, condensed consolidated statement of
financial position, the condensed consolidated statement of cash
flows and related notes to the condensed interim financial
information 1 to 17. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 26 weeks ended 22
September 2017 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
22 November 2017
Biffa plc
22 November 2017
HALF YEAR RESULTS FOR THE 26 WEEKSED 22 September 2017
Condensed Consolidated Interim Income Statement
For the half year ended 22 September 2017
26 weeks to
26 weeks to 23 September 2016 52 weeks to
22 September 2017 (unaudited) (unaudited) 24 March 2017 (audited)
------------------------------ ------------------------------ -------------------------------
Other Other Other
Items Items Items
Underlying GBPm Underlying GBPm Underlying GBPm
Activities(1) (note Total Activities(1) (note Total Activities(1) (note Total
Notes GBPm 4) GBPm GBPm 4) GBPm GBPm 4) GBPm
------------- ------ ------- ------------- ------ ------- ------------- ------- -------
Continuing
operations:
Revenue 3 534.6 - 534.6 497.5 - 497.5 990.4 - 990.4
Cost of sales (460.4) (1.0) (461.4) (433.0) (26.6) (459.6) (866.0) (31.5) (897.5)
------------- ------ ------- ------------- ------ ------- ------------- ------- -------
Gross profit 74.2 (1.0) 73.2 64.5 (26.6) 37.9 124.4 (31.5) 92.9
Operating
costs 4 (30.8) (1.9) (32.7) (24.8) (0.9) (25.7) (50.6) (30.2) (80.8)
Operating
profit 3 43.4 (2.9) 40.5 39.7 (27.5) 12.2 73.8 (61.7) 12.1
Finance income 0.3 - 0.3 2.9 - 2.9 4.9 0.6 5.5
Finance
charges (10.4) (1.2) (11.6) (18.7) - (18.7) (33.6) (2.7) (36.3)
Profit/(loss)
before
taxation 5 33.3 (4.1) 29.2 23.9 (27.5) (3.6) 45.1 (63.8) (18.7)
Taxation (6.6) 1.1 (5.5) (6.8) 5.4 (1.4) (9.3) 17.1 7.8
------------- ------ ------- ------------- ------ ------- ------------- ------- -------
Profit/(loss)
for the
period 26.7 (3.0) 23.7 17.1 (22.1) (5.0) 35.8 (46.7) (10.9)
============= ====== ======= ============= ====== ======= ============= ======= =======
Earnings/(loss)
per share
(pence) 610.7 (1.2) 9.5 171.0 (221.0) (50.0) 29.3 (38.3) (9.0)
(1) Underlying Activities excludes other items which are
outlined in Note 4.
Condensed Consolidated Interim Statement of Comprehensive
Income
For the half year ended 22 September 2017
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
Profit/(loss) for the
period 23.7 (5.0) (10.9)
------------- ------------- ----------
Other comprehensive
(loss)/income
Items that will not
be reclassified subsequently
to income:
Actuarial gain/(loss)
on defined benefit pension
scheme 13 1.3 (50.5) (17.6)
Deferred tax relating
to items that will not
be reclassified subsequently 5 (0.2) 8.8 3.4
1.1 (41.7) (14.2)
Other comprehensive
income
items that may be reclassified
subsequently to income:
Net gains on cash flow
hedge 0.3 - 0.3
Other comprehensive
loss for the period,
net of income tax 1.4 (41.7) (13.9)
Total comprehensive
income/(loss) for the
period 25.1 (46.7) (24.8)
============= ============= ==========
Condensed Consolidated Interim Statement of Financial
Position
As at 22 September 2017
As at As at As at
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
Assets
Non-current assets
Goodwill 7 98.2 69.6 70.4
Other intangible assets 218.5 223.2 219.9
Property, plant and equipment 9 327.4 313.6 327.8
Long term receivables 75.7 9.8 75.6
Deferred tax assets 22.4 24.7 28.5
Retirement benefit surplus 13 20.3 - 15.4
762.5 640.9 737.6
------------- ------------- ----------
Current assets
Inventories 11.9 9.2 9.1
Trade and other receivables 199.2 200.8 177.7
Property plant and equipment
held for sale 0.6 - -
Financial assets 11.3 15.7 10.7
Derivative financial
assets 10 0.6 - 0.3
Current tax asset 0.2 - -
Cash and cash equivalents 23.3 95.2 56.4
247.1 320.9 254.2
------------- ------------- ----------
Current liabilities
Borrowings (29.4) (27.5) (30.8)
Derivative financial
liabilities 10 - (1.3) -
Trade and other payables (239.0) (242.4) (230.8)
Current tax liabilities - (0.9) (0.9)
Provisions 11 (10.8) (13.2) (10.3)
Total current liabilities (279.2) (285.3) (272.8)
------------- ------------- ----------
Net current (liabilities)/assets (32.1) 35.6 (18.6)
------------- ------------- ----------
Non-current liabilities
Borrowings (311.1) (601.5) (315.5)
Trade and other payables (13.0) (0.1) (13.1)
Non-current provisions 11 (94.5) (100.3) (98.8)
Retirement benefit obligations 13 - (17.9) -
------------- ------------- ----------
Total non-current liabilities (418.6) (719.8) (427.4)
------------- ------------- ----------
Net assets/(liabilities) 311.8 (43.3) 291.6
============= ============= ==========
Equity
Called up share capital 2.5 - 2.5
Share premium 235.5 - 235.5
Hedging reserves 0.6 - 0.3
Merger reserve 74.4 - 74.4
Retained deficit (1.2) (43.3) (21.1)
Total equity surplus/(deficit)
attributable to shareholders 311.8 (43.3) 291.6
============= ============= ==========
Condensed consolidated Statement of Changes in Equity
For the half year ended 22 September 2017
Called up share Share premium Merger reserve Hedging and Retained Total equity
capital other reserves deficit
GBPm
GBPm GBPm GBPm
GBPm GBPm
---------------
As at 24 March
2017 2.5 235.5 74.4 0.3 (21.1) 291.6
--------------- ------------- -------------- --------------- --------------- ------------
Profit for the
period - - - - 23.7 23.7
Other
comprehensive
income for the
period - - - 0.3 1.1 1.4
Value of
employee
service in
respect of
share option
schemes - - - - 1.1 1.1
Total
comprehensive
income for the
period - - - 0.3 25.9 26.2
Transactions
with owners:
Dividends paid - - - - (6.0) (6.0)
--------------- ------------- -------------- --------------- --------------- ------------
As at 22
September 2017
(unaudited) 2.5 235.5 74.4 0.6 (1.2) 311.8
=============== ============= ============== =============== =============== ============
Called up share Share premium Merger reserve Hedging and Retained Total equity
capital other reserves earnings/
GBPm (deficit)
GBPm GBPm GBPm
GBPm GBPm
--------------- ------------- -------------- ---------------
As at 25 March
2016 - - - - 3.4 3.4
--------------- ------------- -------------- --------------- --------------- ------------
Profit for the
period - - - - (5.0) (5.0)
Other
comprehensive
income for the
period - - - - (41.7) (41.7)
--------------- ------------- -------------- --------------- --------------- ------------
Total
comprehensive
income for the
period - - - - (46.7) (46.7)
--------------- ------------- -------------- --------------- --------------- ------------
As at 23
September 2016
(unaudited) - - - - (43.3) (43.3)
=============== ============= ============== =============== =============== ============
Called up share Share premium Merger reserve Hedging and Retained Total equity
capital other reserves earnings/
GBPm (deficit)
GBPm GBPm GBPm GBPm
GBPm
---------------
As at 25 March
2016 - - - - 3.4 3.4
--------------- ------------- -------------- ---------------- ---------------- ------------
Loss for the
period - - - - (10.9) (10.9)
Issue of share
capital 2.5 261.0 - - - 263.5
Share issue costs - (25.5) - - - (25.5)
Cash flow hedges - - - 0.3 - 0.3
Value of employee
service in
respect of share
option schemes - - - - 0.6 0.6
Recognition of
merger reserve - - 74.4 - - 74.4
Other
comprehensive
income for the
period - - - - (14.2) (14.2)
--------------- ------------- -------------- ---------------- ---------------- ------------
Total
comprehensive
income for the
period 2.5 235.5 74.4 0.3 (24.5) 288.2
--------------- ------------- -------------- ---------------- ---------------- ------------
As at 24 March
2017 (audited) 2.5 235.5 74.4 0.3 (21.1) 291.6
=============== ============= ============== ================ ================ ============
Condensed Consolidated Statement of Cash Flows
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
Cash flows from operating
activities
Cash generated from
operations 12 59.3 52.8 73.3
Restructuring and
exceptional costs 4 (3.1) (2.9) (34.9)
Taxation (paid)/received (1.3) 0.2 -
Net cash from operating
activities 54.9 50.1 38.4
------------- ------------- ----------
Cash flows from investing
activities
Purchases of property,
plant and equipment (16.3) (16.9) (39.4)
Purchases of intangible
assets (3.1) (2.7) (6.8)
Acquisitions (net
of cash) (34.1) (11.9) (14.8)
Proceeds from the
sale of property,
plant and equipment 2.0 0.4 2.4
Interest received - 0.1 0.3
Net cash used in investing
activities (51.5) (31.0) (58.3)
------------- ------------- ----------
Cash flows from financing
activities
Interest paid (10.5) (15.0) (28.8)
Repayment of borrowings (100.5) - (420.5)
Finance lease principal
payments (17.4) (14.9) (28.9)
Drawdown of new borrowings 98.0 - 245.0
Proceeds from issue
of share capital - - 212.6
Cost of issue of share
capital - - (5.4)
Deposits made in respect
of long term bonds (0.1) - (3.7)
Dividends paid (6.0) - -
Net cash flow used
in financing activities (36.5) (29.9) (29.7)
------------- ------------- ----------
Net decrease in cash
and cash equivalents (33.1) (10.8) (49.6)
------------- ------------- ----------
Cash and cash equivalents
at the beginning of
the period 56.4 106.0 106.0
------------- ------------- ----------
Cash and cash equivalents
at the end of the
period 23.3 95.2 56.4
============= ============= ==========
Notes to the Condensed Interim Financial Information
1. Basis of preparation
This condensed consolidated interim financial information for 26
weeks ended 22 September 2017 has been prepared in accordance with
the Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34. "Interim Financial Reporting" as adopted
by the European Union. The condensed consolidated interim financial
information should be read in conjunction with the annual report
dated 13 June 2017 which is available on the Company website, and
has been prepared in accordance with the IFRSs as adopted by the
European Union.
The condensed consolidated interim financial information does
not comprise statutory accounts within the meaning of Section 434
of the Companies Act 2006. Statutory financial statements for the
52 weeks ended 24 March 2017 were approved by the Board of
Directors on 13 June 2017 and delivered to the Registrar of
Companies. The independent auditor's report on those accounts was
unqualified, did not contain an emphasis of matter paragraph and
did not contain a statement under Section 498(2) or (3) of the
Companies Act 2006.
This condensed consolidated interim financial information has
been reviewed, not audited. The condensed group financial
statements have been prepared on the basis of the accounting
policies set out in the statutory financial statements.
1.1 Going concern basis
The Group remains in a net current liability position and meets
its day to day working capital requirements through its available
bank facilities. The Group's forecasts and projections, taking
account of reasonably possible changes in trading performance, show
that the Group should be able to operate within the level of its
current facilities. As a consequence, and having reassessed the
principal risks, the Directors consider it appropriate to adopt the
going concern basis of accounting in preparing the interim
financial information.
2. Accounting policies
Except as described below, the accounting policies and key
assumptions and sources of estimation uncertainty applied are
consistent with those as described in the annual report.
Taxes on income in the interim periods are accrued using the
full year effective tax rate that would be applicable to expected
total annual profit or loss.
3. Segmental information
The Group is managed by type of business and is organised into
four operating divisions. These divisions represent the business
segments in which the Group reports its primary segment
information. All trading activity and operations are in the United
Kingdom and there is therefore no secondary reporting format by
geographical segment. Revenue within segments is eliminated on
consolidation. The Group's segmental results are as follows:
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Revenue
Industrial and Commercial 280.7 261.3 522.1
Municipal 97.8 89.7 182.2
Resource Recovery and
Treatment 113.8 104.5 198.9
Energy 42.3 42.0 87.2
534.6 497.5 990.4
============= ============= ==========
All revenue is with external third parties. There is no single
customer that accounts for more than 10% of Group revenue (26 weeks
to 23 September 2016: none, 52 weeks to 24 March 2017: none).
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Underlying EBITDA(1)
Industrial and Commercial 38.4 33.6 65.5
Municipal 11.5 11.6 23.8
Resource Recovery and
Treatment 19.4 16.3 29.5
Energy 15.7 17.9 35.5
Group costs (8.7) (8.3) (16.6)
------------- ------------- ----------
Underlying EBITDA(1) 76.3 71.1 137.7
Depreciation and amortisation (32.9) (31.4) (63.9)
------------- ------------- ----------
Underlying Operating Profit(2) 43.4 39.7 73.8
-------------------------------- ------------- ------------- ----------
Exceptional items (note
4) (1.4) 0.2 (29.2)
Impact of real discount
rate changes to landfill
provisions 4.7 (20.3) (17.9)
Amortisation of acquisition
intangibles (6.2) (7.4) (14.6)
-------------------------------- ------------- ------------- ----------
Operating Profit 40.5 12.2 12.1
Finance income 0.3 2.9 8.1
Finance charges (11.6) (18.7) (38.9)
------------- ------------- ----------
Profit/(loss) before taxation 29.2 (3.6) (18.7)
============= ============= ==========
(1)Underlying EBITDA represents earnings before interest,
taxation, depreciation, amortisation, exceptional items and the
impact of real discount rate changes to landfill provisions
(2)Presented before other items as disclosed in Note 4.
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Underlying operating profit
Industrial and Commercial 24.7 21.3 38.5
Municipal 4.4 5.2 11.0
Resource Recovery and
Treatment 10.6 7.3 11.6
Energy 13.0 14.8 29.9
Group costs (9.3) (8.9) (17.2)
------------- ------------- ----------
43.4 39.7 73.8
============= ============= ==========
Segment underlying EBITDA represents the underlying profit
earned by each segment without allocation of the share of
depreciation and amortisation, exceptional items, the impact of
real discount rate changes to landfill provisions, finance costs
and income tax expense. Underlying operating profit recognises the
impact of depreciation and amortisation excluding the amortisation
of acquisition intangibles. These measures are both reported to the
Board for the purpose of resource allocation and assessment of
segment performance.
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Tangible and other intangible
assets
Industrial and Commercial 150.1 142.8 151.0
Municipal 65.1 69.5 70.0
Resource Recovery and Treatment 97.2 81.5 89.1
Energy 186.3 197.8 192.4
Shared services and corporate 47.2 45.1 45.2
------------- ------------- ----------
545.9 536.7 547.7
============= ============= ==========
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Capital expenditure
Industrial and Commercial 16.7 26.8 49.3
Municipal 4.6 14.7 23.7
Resource Recovery and
Treatment 14.0 5.9 25.0
Energy 0.6 2.3 3.5
Shared services and corporate 3.0 7.7 8.2
------------- ------------- ----------
38.9 57.4 109.7
============= ============= ==========
Capital expenditure comprises additions to intangible assets and
property, plant and equipment.
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Depreciation and amortisation
Industrial and Commercial 13.7 12.3 27.0
Municipal 7.1 6.4 12.8
Resource Recovery and
Treatment 8.8 9.0 17.9
Energy 2.7 3.1 5.6
Shared services and corporate 0.6 0.6 0.6
------------- ------------- ----------
32.9 31.4 63.9
Amortisation of acquisition
intangibles 6.2 7.4 14.6
------------- ------------- ----------
Total 39.1 38.8 78.5
============= ============= ==========
Depreciation and amortisation relates to the write down of both
intangible and tangible fixed assets over their estimated useful
economic lives. Amortisation of acquisition intangibles is
disclosed separately in line with the segmental underlying
operating profit.
4. Other items
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Exceptional items:
Acquisition related costs 1.1 0.6 1.2
Corporate restructuring
costs 0.1 - 29.1
Onerous contracts (0.4) (1.1) (2.4)
Strategy related costs 0.6 0.3 1.3
------------- ------------- ----------
1.4 (0.2) 29.2
Impact of real discount
rate changes to landfill
provisions (4.7) 20.3 17.9
Amortisation of acquisition
intangibles 6.2 7.4 14.6
------------- ------------- ----------
2.9 27.5 61.7
============= ============= ==========
Included within finance
costs
Finance charges 1.2 - 2.6
Finance income - - (4.7)
Taxation impact of other
items 1.1 5.4 17.1
============= ============= ==========
Exceptional items are those that in the Directors' view are
required to be separately disclosed by virtue of their size or
incidence to enable a full understanding of the Group's
performance.
The Group's financial performance is analysed into two
components; underlying performance (which excludes other items),
and other items. Underlying performance is used by management to
monitor financial performance as it is considered it aids
comparability of the reported financial performance year to
year.
Management utilises an exceptional framework which has been
approved by the Board. This follows a three-step process which
considers the nature of the event, the financial materiality
involved and the particular facts and circumstances. Items of
income and expense that are considered by management for
designation as exceptional items include items such as corporate
restructuring costs, acquisition related costs, write downs or
impairments of non-current assets, movements on onerous contract
provisions and strategy related costs including the implementation
of Project Fusion.
Acquisition related costs
Acquisition related costs represents costs incurred with the
acquisition of businesses and are included in operating costs.
The GBP1.2 million of acquisition related expenditure in the 52
weeks ended 24 March 2017 relates to professional fees and other
costs which are directly attributable to acquisitions. This
includes GBP0.8 million in relation to the acquisition of 100% of
the issued share capital of Cory Environmental Municipal Services
Limited. The acquisition related costs in the 26 weeks to 22
September 2017 principally relate to the acquisition of 100% of the
issued share capital of O'Brien Waste Recycling Solutions Holdings
Limited.
Corporate restructuring costs
Corporate restructuring costs are principally costs directly
related to the Group's admission to the London Stock Exchange in
October 2016 and have been recognised in operating costs.
Onerous contracts
Onerous contract costs reflect all movement disclosed in cost of
sales on loss making contract provisions within the Municipal and
Resource Recovery and Treatment divisions.
Strategy related costs
Strategy related costs relate to any major business turnaround
and the Group's system replacement project, Project Fusion. The
costs for the 26 weeks ended 22 September 2017 relate mainly to
Project Fusion (GBP0.3 million in the 26 weeks ended 23 September
2016: GBP1.3 million in the 52 weeks ended 24 March 2017). All
strategy related costs are included in operating costs.
Amortisation of acquisition intangibles
Amortisation of acquisition intangibles represents the amount
amortised by the Group in each period in respect of intangibles
from prior acquisitions, which amounts are reported separately in
cost of sales from the Group's depreciation and amortisation
charges for each period presented.
Impact of real discount rate changes to landfill provisions
The impact of real discount rate changes to landfill provisions
reflects the impact on provisions which arises wholly due to the
change in discount rate on landfill provisions as this is not
reflective of operational performance.
The impact of real discount rate changes to landfill provisions
from 2.3% at 24 March 2017 to 2.4% at 22 September 2017 is included
in cost of sales.
Finance charges
Finance charges relate to the EVP debt instrument as disclosed
in note 16.
The tax impact of other items is calculated as 20% (20%: 2016)
of the expenses allowable in calculating the taxable profit.
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Segmental exceptional
items:
Industrial and Commercial 0.9 0.2 0.5
Municipal - (0.3) (0.8)
Resource Recovery and
Treatment (0.4) (0.5) (1.0)
Energy 0.1 (0.1) 0.1
Group costs 0.8 0.5 30.4
------------- ------------- ----------
1.4 (0.2) 29.2
============= ============= ==========
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Operating costs
Distribution costs 10.7 9.3 19.1
Administrative expenses 20.1 15.5 31.5
------------- ------------- ----------
30.8 24.8 50.6
============= ============= ==========
5. Income tax recognised in profit or loss
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Current tax:
In respect of the current
period 0.2 0.1 -
Adjustment in respect
of prior periods - (0.4) (0.5)
------------- ------------- ----------
0.2 (0.3) (0.5)
------------- ------------- ----------
Deferred tax:
Adjustment in respect
of the current period 5.9 (0.2) (11.0)
Adjustment in respect
of prior periods - 1.0 1.2
Adjustments attributable
to changes in tax rates
and laws (0.6) 0.9 2.5
------------- ------------- ----------
5.3 1.7 (7.3)
------------- ------------- ----------
Total tax charge 5.5 1.4 (7.8)
============= ============= ==========
Corporation tax is calculated at 19% (26 weeks to 23 September
2016: 20%,52 weeks to 24 March 2017: 20%) of the estimated
assessable profit/(loss) for the period. The charge for the period
can be reconciled to the profit/(loss) per the statement of profit
or loss as follows:
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Profit/(loss) on ordinary
activities before tax 29.2 (3.6) (18.7)
Profit/(loss) on ordinary
activities before tax
multiplied by the standard
rate of corporation tax
in the UK of 19% 5.5 (0.7) (3.7)
Expenses not deductible
for tax purposes 0.7 0.8 6.6
Non-taxable income (0.1) (0.2) (0.2)
Utilisation of unrecognised
tax losses - - (1.2)
Recognition of deferred
tax on previously unrecognised
losses - - (12.5)
Adjustment in respect
of prior periods - 0.6 0.7
Adjustments attributable
to changes in tax rates
and laws (0.6) 0.9 2.5
------------- ------------- ----------
Total taxation 5.5 1.4 (7.8)
============= ============= ==========
The income tax expense is based on an effective annual tax rate
estimated individually for each tax jurisdiction in which the Group
operates and applied to the pre-tax profit, excluding exceptional
items, of the relevant entity. The effective tax rate on underlying
profit before tax is 20% (23 September 2016: 28%).
The Finance Act 2016 paragraphs 4 and 5, which provides for
reductions in the main rate of corporation tax from 19% to 17%
effective from 1 April 2020, has been substantively enacted. As
deferred tax assets and liabilities are measured at the rates that
are expected to apply in the periods of the reversal, deferred tax
balances at the balance sheet date have been calculated at the rate
at which the relevant balance is expected to be recovered or
settled which is 17%.
6. Earnings per share
From continuing and discontinued operations
The calculation of the basic and diluted earnings per share is
based on the following data:
Earnings
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Earnings for the purposes
of basic earnings per share
being net profit attributable
to owners 23.7 (5.0) (10.9)
Earnings for the purposes
of diluted earnings per share 23.7 (5.0) (10.9)
============= ============= ===========
Number of shares
Weighted average number of
ordinary shares for the purposes
of basic earnings per share 250,000,000 10,000,000 121,889,489
Weighted average number of
ordinary shares for the purposes
of diluted earnings per share 250,000,000 10,000,000 121,889,489
============= ============= ===========
From continuing operations
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Net profit attributable to
equity holders of the parent 23.7 (5.0) (10.9)
------------- ------------- ----------
Earnings from continuing operations
for the purpose of basic earnings
per share excluding discontinued
operations 23.7 (5.0) (10.9)
Earnings from continuing operations
for the purpose of diluted
earnings per share excluding
discontinued operations 23.7 (5.0) (10.9)
============= ============= ==========
The earnings per share for the period ended 23 September 2016
has been determined on the basis of the pre-IPO capital structure
of Wasteholdco 1 Limited.
7. Goodwill
Total
GBPm
Goodwill
As at 24 March 2017 70.9
Additions (note 8) 27.8
-----
As at 22 September 2017 98.7
=====
Accumulated impairment:
As at 24 March 2017 (0.5)
Impairment Charge -
-----
As at 22 September 2017 (0.5)
=====
Net book amount:
-----
As at 22 September 2017 98.2
=====
As at 24 March 2017 70.4
=====
8. Acquisitions
On 5 July 2017, the Group acquired 100% of the issued share
capital of O'Brien Waste Recycling Solutions Holdings Limited.
O'Brien Waste Recycling Solutions Holdings Limited is a waste
management business servicing commercial and local authority
customers in the North East of England.
The preliminary amounts recognised in respect of the
identifiable assets acquired and liabilities assumed are as set out
in the table below.
Preliminary
total
GBPm
Property, plant and equipment 6.7
Intangible assets 2.5
Inventory 0.7
Debtors 6.6
Cash and cash equivalents 1.4
Deferred tax liability (0.6)
Creditors (4.7)
Borrowings (4.4)
Total net assets 8.2
Goodwill 27.0
Total consideration 35.2
Satisfied by:
Cash 35.2
Total consideration transferred 35.2
Net cash outflow arising on acquisition:
Cash consideration 35.2
Less: cash and cash equivalent balances
acquired (1.4)
33.8
The fair value of the debtors includes receivables due from
trade debtors with a fair value of GBP5.9 million and a gross
contractual value of GBP6.0 million. The best estimate at
acquisition date of the contractual cash flows not to be collected
is GBP0.1 million.
No contingent liabilities were identified at the acquisition
date.
Acquisition-related costs (included in administrative expenses)
amount to GBP0.2 million.
O'Brien Waste Recycling Solutions Holdings Limited contributed
GBP8.6 million revenue and GBP0.7 million to the Group's profit for
the period between the date of acquisition and the balance sheet
date.
If the acquisition of O'Brien Waste Recycling Solutions Holdings
Limited had been completed on the first day of the financial year,
group revenues for the period to 22 September 2017 would have
increased by GBP17.2 million and group profit would have increased
by GBP1.5 million.
The preliminary goodwill of GBP27.0 million arising from the
acquisition represents future opportunities in the UK integrated
waste management sector. None of the goodwill is expected to be
deductible for income tax purposes.
In addition the trade and assets of G&S Waste Limited were
acquired on 31 March 2017 for consideration of GBP0.2m, resulting
in goodwill of GBP0.2m. A further GBP0.1m of consideration was paid
in relation to the acquisition of Blakeley's Recycling Limited that
completed in November 2016.
9. Property, plant and equipment
During the 26 weeks ended 22 September 2017, the Group acquired
property, plant and equipment including leased assets, but
excluding property, plant and equipment acquired through business
combinations, with a cost of GBP26.6 million (23 September 2016:
GBP41.8 million).
Assets with a net book value of GBP1.2 million were disposed of
by the Group during the 26 weeks ended 22 September 2017 (23
September 2016: GBP1.6 million) resulting in a net profit on
disposal of GBP0.8 million (23 September 2016: GBPnil million).
The Group's capital commitments at 22 September 2017 were
GBP18.2 million (23 September 2016: GBP18.2 million).
10. Financial risk management and financial instruments
The Group's activities expose it to a variety of financial
risks: market risk (including capital risk management, cash flow
interest rate risk and price risk), credit risk and liquidity risk.
The Group's overall risk management programmes focus on the
unpredictability of financial markets and seek to minimise
potential adverse effects on the Group's financial performance.
The condensed interim financial statements do not include all
financial risk management information and disclosures set out in
the annual report and hence they should be read in conjunction with
the Group's annual report. There have been no changes in the risk
management policies since the year end.
Liquidity risk
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
-- Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
-- Level 2 - Inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from
prices)
-- Level 3 - Inputs for the asset or liability that are not based on observable market data
There have been no transfers between these categories in either
the current or preceding period.
The following table presents the Group's financial assets and
liabilities at fair value at 22 September 2017:
Level Level Level Total
1 2 3 GBPm
GBPm GBPm GBPm (unaudited)
(unaudited) (unaudited) (unaudited)
Assets
Derivatives - 0.6 - 0.6
------------ ------------ ------------ ------------
- 0.6 - 0.6
============ ============ ============ ============
The following table presents the Group's financial assets and
liabilities at fair value at 23 September 2016:
Level Level Level Total
1 2 3 GBPm
GBPm GBPm GBPm (unaudited)
(unaudited) (unaudited) (unaudited)
Liabilities
Derivatives - 1.3 - 1.3
------------ ------------ ------------ ------------
- 1.3 - 1.3
============ ============ ============ ============
The following table presents the Group's financial assets and
liabilities at fair value at 24 March 2017:
Level Level Level Total
1 2 3 GBPm
GBPm GBPm GBPm (audited)
(audited) (audited) (audited)
Assets
Derivatives - 0.3 - 0.3
---------- ---------- ---------- ----------
- 0.3 - 0.3
========== ========== ========== ==========
Fair value measurement
In accordance with IFRS 13, disclosure is required for financial
instruments that are measured in the Group balance sheet at fair
value. The fair value of trade and other receivables, cash and cash
equivalents, borrowings and trade and other payables approximates
to their carrying amounts.
Valuation techniques and assumptions applied in determining fair
values of each class of asset or liability are consistent with
those used as at 24 March 2017 and reflect the current economic
environment. The fair value measurements of the derivatives are
classified as Level 2 in the fair value hierarchy as defined by
IFRS 13.
11. Provisions
Landfill
restoration
& aftercare Insurance Other Total
GBPm GBPm GBPm GBPm
As at 24 March 2017 80.9 11.6 16.6 109.1
Utilised (3.2) 0.6 (1.0) (3.6)
Impact of change in real
discount rate charged
to profit and loss account (4.7) - - (4.7)
Charged/(credited) to
profit and loss account 2.6 0.2 0.3 3.1
Unwinding of discount 1.2 - - 1.2
Transfers from fixed/other
assets 0.2 - - 0.2
------------ --------- ------ -----
As at 22 September 2017 77.0 12.4 15.9 105.3
============ ========= ====== =====
Provisions have been analysed between current and non-current as
follows:
As at
22 September
2017
GBPm
(unaudited)
Current 10.8
Non-current 94.5
-------------
105.3
=============
Landfill restoration and aftercare
As part of its normal activities, the Group undertakes to
restore its landfill sites and to maintain the sites and control
leachate and methane emissions from the sites. Provision is made
for these anticipated costs.
Maintenance and leachate and methane control costs are incurred
as each site is filled and for a number of years post closure.
Long-term aftercare provisions included in Landfill restoration and
aftercare provisions have been discounted at a rate of 2.4% (24
March 2017: 2.3%)
Aftercare costs are incurred as each site is filled and for a
number of years post closure. This period can vary significantly
from site to site, depending upon the types of waste landfilled and
the speed at which it decomposes, the way the site is engineered
and the regulatory requirements specific to the site. The
associated outflows are estimated to arise over a period of up to
60 years depending on the date of each site closure.
Insurance
The associated outflows are estimated to arise over a period of
up to five years from the balance sheet date.
Other
Other provisions include a provision for dilapidations for
GBP9.6 million (52 weeks ended 24 March 2017: GBP10.4 million, 26
weeks ended 23 September 2016: GBP10.6 million) and GBP2.2 million
(52 weeks ended 24 March 2017: GBP2.7 million, 26 weeks ended 23
September 2016: GBP4.0 million) relating to onerous contracts. The
associated outflows are estimated to arise over a period of up to
20 years from the balance sheet date.
12. Cash flows from operations
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Profit/(loss) for the period 23.7 (5.0) (10.9)
Adjustments for:
Finance income (0.3) (2.9) (5.5)
Finance charges 11.6 18.7 36.3
Taxation 5.5 1.4 (7.8)
------------- ------------- ----------
Operating profit 40.5 12.2 12.1
Exceptional items 1.4 (0.2) 29.2
Amortisation of intangibles 7.2 8.1 15.4
Depreciation of property,
plant and equipment 31.9 30.7 63.2
Profit on disposal of fixed
assets (0.8) - (0.9)
Increase in inventories (2.1) (0.8) (0.7)
Increase in debtors (15.4) (22.4) (62.1)
Increase in creditors 1.9 6.0 (1.5)
Decrease/(increase) in financial
asset (0.7) 1.8 6.9
Increase/(decrease) in provisions (4.6) 17.4 11.7
------------- ------------- ----------
Total cash generated from
operations 59.3 52.8 73.3
============= ============= ==========
Reconciliation of net cash flow to movement in debt
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Net decrease in cash and cash
equivalents (33.1) (10.8) (49.6)
Net decrease/(increase) in
borrowings 5.8 (17.1) 265.6
------------- ------------- ----------
Movement in net debt in the
period (27.3) (27.9) 216.0
Net debt at start of period (289.9) (505.9) (505.9)
------------- ------------- ----------
Net debt at end of period (317.2) (533.8) (289.9)
============= ============= ==========
Included within net debt is GBP45.0m of liability in relation to
the ongoing EVP case as detailed in note 16 (23 September 2016:
GBPnil, 24 March 2017: GBP43.8m)
26 weeks 26 weeks 52 weeks
ended ended ended
22 September 23 September 24 March
2017 2016 2017
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Cash and cash equivalents 23.3 95.2 56.4
Finance leases (101.2) (99.8) (108.9)
Bank loans (194.3) (529.2) (193.6)
------------- ------------- ----------
Reported net debt (272.2) (533.8) (246.1)
EVP liability (45.0) - (43.8)
------------- ------------- ----------
Net debt (317.2) (533.8) (289.9)
============= ============= ==========
13. Pension and post retirement benefits
Defined benefit schemes
The amounts recognised in the balance sheet are determined as
follows:
As at As at
22 September 24 March
2017 2017
GBPm GBPm
(unaudited) (audited)
Present value of funded defined benefit
obligation (486.2) (488.7)
Fair value of funded plan assets 506.5 504.1
Net asset arising from defined benefit
obligation 20.3 15.4
============= ==========
Reconciliation of opening and closing balances of the present
value of the defined benefit obligation
As at
22 September
2017
GBPm
(unaudited)
Benefit obligation at beginning
of period 488.7
Service cost 0.6
Interest cost 7.0
Contributions by plan participants 0.1
Benefits paid (10.2)
Benefit obligation at end
of period 486.2
=============
Reconciliation of opening and closing balances of the fair value
of plan assets
As at
22 September
2017
GBPm
(unaudited)
Fair value of plan assets
at beginning of period 504.1
Interest income on scheme
assets 7.2
Return on assets, excluding
interest income 1.3
Contributions by employers 4.3
Contributions by plan participants 0.1
Benefits paid (10.2)
Scheme administrative cost (0.3)
-------------
Fair value of plan assets
at end of period 506.5
=============
The movement in the pension balance in the 6 months ended 22
September 2017 largely reflects the deficit contribution paid by
the Scheme at the end of March 2017.The performance of the Scheme's
assets was also a contributing factor.
14. Related party transactions
The nature of related parties as disclosed in the consolidated
financial statements for the Group as at and for the 52 weeks ended
24 March 2017 has not changed. Further, there have been no related
party transactions in the 26 weeks to 22 September 2017.
15. Contingent liabilities
The Group must satisfy the financial security requirements of
environmental agencies in order to ensure that it is able to
discharge the obligations in the licences or permits that the Group
holds for its landfill sites. The Group satisfies these financial
security requirements by providing financial security bonds. The
amount of financial security which is required is determined in
conjunction with the regulatory agencies, as is the method by which
assurance is provided. The Group has existing bond arrangements in
England and Wales of approximately GBP81.6 million outstanding at
22 September 2017 (24 March 2017: GBP82.1 million, 23 September
2016: GBP81.9 million) in respect of the Group's permitted waste
activities where the Group has obligations under the Environment
Agency's "fit and proper person" test to make adequate financial
provision in order to undertake those activities. Additionally, the
Group has bonds to a value of GBP19.4 million (24 March 2017:
GBP18.6 million, 23 September 2016: GBP21.2 million) in connection
with security for performance of local authority contracts and the
shipment of waste under the trans-frontier shipment of waste
regulations. No liability is expected to arise in respect of these
bonds.
The Group is engaged in a dispute with HMRC in relation to the
landfill tax treatment of certain materials used in the engineering
of landfill sites from September 2009 to May 2012. The Group has an
assessment for Landfill tax of GBP62m plus interest. The Group has
recognised in long term debtors, the payment of the initial
assessment for landfill tax but is awaiting an assessment from HMRC
in relation to the expected interest which it expects to pay in the
coming year and which will be recognised in long term debtors.
As detailed above, HMRC have notified the Group that they
disagree with the Landfill tax treatment in relation to naturally
occurring soils that contain very low levels of asbestos. This
concerns material landfilled between 2012 and 2015 only and the tax
at stake, including interest, amounts to circa GBP9.2m (GBP7.7m
post corporation tax). Since 2015, following direction from HMRC,
this material has been taxed at standard rate Landfill tax.
It is expected that HMRC will demand payment of this tax, upon
which the Group will appeal against the assessment and vigorously
defend the position. Having taken appropriate advice, the Group is
confident that the position is consistent with the law and the
intent of the legislation, and therefore that no provision is
necessary.
16. EVP related items
The Group is engaged in a dispute with HMRC concerning historic
landfill tax.
HMRC claims that the Group is liable for GBP62m of Landfill tax
in respect of certain waste materials deposited in Biffa's landfill
sites from 2009 to 2012 ('EVP'). Biffa contests that the material
was used in the sites for an engineering purpose and is not
therefore subject to Landfill tax. Notwithstanding the Group's
opinion on the tax treatment of this material, since 2012 all
materials of this nature have been subjected to Landfill tax. The
matter has been heard by the First Tier Tax Tribunal and we are
awaiting judgement. Appeals to higher courts are expected following
this judgement.
The contested amount was originally unpaid under a hardship
agreement with HMRC but was paid to HMRC following the refinancing
of the Group upon its IPO in October 2016. In addition to the
payment of GBP62m, interest of GBP1.7m has been paid to date.
The Directors, having taken appropriate advice, do not believe
that a liability to tax exists, and accordingly have treated the
payment of the tax and associated interest as a long-term
receivable.
As part of the IPO of the Group, arrangements were put in place
to make certain payments to the shareholders and certain members of
employee incentive schemes of the Group immediately prior to its
listing, subject to and in respect of the outcome of the dispute. A
liability of GBP45.0m has been recognised in borrowings, (24 March
2017: GBP43.8m), an accrual of GBP13.0m has been recognised in
non-current liabilities, (24 March 2017: GBP13.0m), and a
non-underlying non-cash interest charge of GBP1.2m (24 March 2017:
GBP1.0m) has been recognised in finance charges in respect of these
obligations. The liability of GBP45.0m (24 March 2017: GBP43.8m) in
borrowings has been excluded from Reported Net Debt.
17. Post balance sheet events
On 27 October 2017, the Group acquired the entire share capital
of Amber Engineering Limited for consideration of GBP5m.
On 17 November 2017, the Group acquired the trade and assets of
Eco Food Recycling Limited for consideration of GBP0.7m.
On 1 November 2017, the Group acquired the trade and assets of
HWS Waste Limited for consideration of GBP0.2m.
The acquisition accounting remains under review for all of the
above acquisitions.
On 20 October 2017, an extension to the existing debt facility
was agreed as allowed under the existing debt facility
arrangements. This includes the availability of a further GBP26.7m
revolving credit facility and GBP53.3m term loan. The extension to
the term loan is available on the same terms as the original
facility and is available for the Group to drawdown until 31 March
2018. The extension to the original revolving credit facility is
available on the same terms as the original facility and is
available to the Group until one month before the final termination
date. Neither of the facilities have been utilised at the date of
signing.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FFLLLDFFLFBV
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