TIDMBIFF
RNS Number : 3168E
Biffa plc
05 November 2020
Biffa plc
FY21 HALF YEAR RESULTS
Resilient performance during challenging period
5 November 2020
Biffa plc ('Biffa', 'the Group' or 'the Company') (LSE: BIFF),
the UK's leading sustainable waste management company, announces
its half year results for the 26 weeks ended 25 September 2020.
Michael Topham, Chief Executive of Biffa, said:
"I am very pleased with the performance of the business and the
progress we have made in delivering our strategic objectives in the
first half of the year, in extremely challenging circumstances. We
responded swiftly to the first wave of the pandemic and have
emerged strongly in recent months with Group Net Revenue in
September recovering to 93% of prior year levels. This is ahead of
our base case expectations and demonstrates the resilience of our
model.
"Our GBP100m equity raise in June enabled us to continue to
invest in growing the business, in line with our strategy. Since
June we have committed c. GBP40m in value-enhancing acquisitions in
our I&C business and are at an advanced stage of committing in
excess of a further GBP40m into green economy infrastructure
development. These investments will help to build a stronger, more
sustainable business for when we emerge from the pandemic.
"Whilst we are pleased with the recent momentum in our trading
performance and the progress in delivering our strategic investment
programme, we remain cautious in our outlook for the second half of
the financial year, particularly in light of the further lockdown
measures announced by the UK Government for England. Nevertheless,
having successfully navigated the first lockdown, and due to the
underlying strength of the Group's performance over recent months,
at this stage, our expectations for the full year remain
unchanged.
"My thanks go out to all of Biffa's stakeholders, and in
particular our team, for their hard work and ongoing commitment in
delivering Biffa's essential service throughout this testing
time."
Highlights :
-- Strong recovery in second quarter: Net revenues grew from GBP202.5m
in Q1 to GBP256.3m in Q2 and EBITDA recovered from GBP19.3m
to GBP39.0m. I&C revenues recovered to 94% of prior year levels
in September and landfill revenues recovered to 86% of prior
year levels in September. However, statutory revenue decreased
by 18.1% from GBP588.9m in H1 FY20 to GBP482.5m in H1 FY21.
-- Recommencement of investment programme: following the GBP100m
equity raise (GBP97.7m after costs) in June, c. GBP40m of investment
has been committed to acquisitions (including the recently announced
acquisition of Simply Waste) and over GBP40m is being committed
to plastic recycling development (Washington and Aldridge) and
the Protos Energy from Waste ("EfW") development.
-- Ongoing strong cash flow management: despite underlying EBITDA
falling by GBP28.5m to GBP58.3m, the Group was broadly cash
flow neutral when adjusting for HMRC payment deferrals and financing
activities.
-- Strengthened balance sheet: cash balances were boosted by a
further GBP97.7m as a result of the equity raise in June. Reported
net debt decreased by 31.0% to GBP310.3m from GBP449.8m at the
FY20 year end. This reduced the Group's reported debt leverage
multiple to 2.1x from 2.4x at FY20 year end. The Group's covenanted
leverage dropped from to 1.3x from 1.8x at the FY20 year end.
-- Various asset impairments and contract provisions are being
reported: reflecting changes in accounting assumptions and various
related business decisions resulting primarily from the impacts
of COVID-19 ("CV-19"). This has resulted in a Statutory loss
after tax for the period of GBP43.2m (H1 FY20 Profit after Tax
GBP20.6m).
-- Full year expectations unchanged: the UK Government's recent
announcement of a new lockdown period for England introduces
further uncertainty to the Group's short-term outlook. However,
having successfully navigated the first lockdown and having
benefitted from stronger than initially expected trading since
the easing of those restrictions, the Board's expectations for
the full year remain unchanged.
H1 H1
Underlying Results (unaudited) FY21 FY 20 Change Change
GBPm GBPm GBPm %
----------------------------------
Statutory Revenue(1) 482.5 588.9 (106.4) (18.1)
----- ------ ---------- ----------
Net Revenue(1) 458.8 555.1 (96.3) (17.3)
----- ------ ---------- ----------
Underlying EBITDA(2) 58.3 86.8 (28.5) (32.8)
----- ------ ---------- ----------
Underlying Operating Profit(3) 9.7 45.7 (36.0) (78.8)
----- ------ ---------- ----------
Underlying Operating Profit
Margin(4) 2.0% 7.7% N/A (74.0)
----- ------ ---------- ----------
Underlying Profit after
Tax(5) 1.2 29.7 (28.5) (96.0)
----- ------ ---------- ----------
Underlying Free Cash Flow(6) 27.6 3.9 23.7 607.7
----- ------ ---------- ----------
Reported Net Debt(6) 310.3 449.8 (139.5) (31.0)
----- ------ ---------- ----------
H1 H1
Statutory Results (unaudited) FY21 FY20 Change Change
GBPm GBPm GBPm %
---------------------------------
Statutory Operating Profit (45.0) 33.9 (78.9) (232.7)
------ ------ -------- --------
Statutory Operating Profit
Margin (9.3%) 5.7% N/A (263.2)
------ ------ -------- --------
Statutory Profit after
Tax (43.2) 20.6 (63.8) (309.7)
------ ------ -------- --------
Net Cash Flow 13.4 (14.0) 27.4 (195.7)
------ ------ -------- --------
Net Debt 351.6 491.1 (139.5) (28.4)
------ ------ -------- --------
PRESENTATION OF RESULTS
There will be a presentation of the results to investors,
analysts and banks at 9:30am today. The webcast and associated
materials will be available on Biffa's website - www.biffa.co.uk
/investors .
ENQUIRIES:
Investors & Analysts
Michael Topham, Chief Executive Officer or Richard Pike, Chief
Financial Officer
ir@biffa.co.uk
Media
Houston
0204 529 0549
biffa@houstonpr.co.uk
FORWARD-LOOKING STATEMENTS
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 The statutory revenue, net revenue and cost of sales for the
26 weeks ended 27 September 2019 have been decreased by GBP5.7m to
reflect an error made in consolidating the Recycling sub-division
revenue. There is no overall impact on the gross profit for the
period. For the full year FY20, the Group reported the correct
balances and no restatement is required.
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. Total Underlying Operating
Profit includes central costs of GBP5.9m (H1 2020: GBP8.3m)
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)
CHIEF EXECUTIVE'S REVIEW
Operating Performance
Trading for the first half recovered well, despite the
challenging economic environment, and was ahead of the Group's
CV-19 base case scenario. Group Net Revenues in September recovered
to 93% of FY20 levels. Underlying profit contribution improved
steadily month on month and the Group ceased the furloughing of
employees at the end of September.
In the period, the Group also received GBP10.8m in furlough
payments from HMRC as part of the Coronavirus Job Retention scheme.
These payments have been netted off against respective salary and
wage costs.
Collections
The Collections division comprises the I&C, Municipal and
Specialist Services businesses. It provides sustainable waste
collections, recycling and related services to industrial,
commercial, public sector and local authority customers.
H1 H1
FY21 FY20 Change
GBPm GBPm %
I&C 222.5 307.6 (27.7)
----- ----- --------
Municipal 91.6 86.8 5.5
----- ----- --------
Specialist services 40.7 43.6 (6.7)
----- ----- --------
Revenue 354.8 438.0 (19.0)
----- ----- --------
Underlying EBITDA 42.8 61.1 (30.0)
----- ----- --------
Underlying Operating Profit 11.1 34.7 (68.0)
----- ----- --------
Underlying Operating Profit
Margin 3.1% 7.9% (60.8)
----- ----- --------
As previously announced, the Group took swift action to mitigate
the impact of CV-19. Against the challenging economic backdrop,
Revenue in the Collections division decreased by 19.0% in H1 to
GBP354.8m.
Underlying Operating Profit margin was 3.1% in H1, reducing from
7.9% in the prior year. This is primarily due to the reduction in
I&C volumes during lockdown, which recovered steadily during
the period.
I&C
-- The I&C business saw a strong recovery in revenues from
50% of prior year levels in April, to 94% of prior year levels in
September.
-- Strong levels of new business despite the lockdown, including
new corporate clients SSE, Parkdean Resorts and Wincanton
Logistics.
-- Key customer renewals in the period included BP Retail, Severn Trent and Wolseley.
-- Successful targeting of SME volume through the Group's
Telesales service, which has been enhanced by further investment in
Biffa's digital offer.
-- Customer retention levels remain strong with low levels of churn (<5% annualised).
-- Lower ongoing unit operating costs achieved as a result of a
number of enduring efficiency measures initiated during
lockdown.
-- Two acquisitions completed in the year to date: in September,
Ward Recycling for GBP2.1m and a deferred consideration of up to
GBP2.0m; and in October, Simply Waste Solutions for GBP35.0m, with
a potential deferred consideration of up to GBP5.0m.
Municipal
-- As expected, there continues to be a high level of demand for household waste collections.
-- Service levels have been successfully maintained despite the
demands associated with increased volumes.
-- The Anglesey contract win during the period adds to
Tandridge, Winchester and Cornwall, which will mobilise in the
coming months. The Group has also negotiated profitable extensions
on the Crawley, Thurrock, East Lothian and Portsmouth
contracts.
-- Nonetheless, the increased contribution from new contract
wins during the period has been more than offset by increased costs
resulting from CV-19 related staff-absenteeism.
-- As previously stated, the Group has also negotiated the exit
from the loss-making contract in North Somerset (NSO), which will
come into effect towards the end of FY21.
Specialist Services
-- Specialist Services performed very strongly over the period,
with underlying profits up on the prior period. The resilient
nature of the customer base, who are predominantly in food
manufacturing and retail distribution services, has helped
Specialist Services to maintain this solid performance.
-- Whilst revenues decreased in the period, this was primarily
as a result of lower 'pass through' plastic PRN prices.
-- Key customer wins during the period included Avara Foods and Britvic.
Resources & Energy
The Resources & Energy division comprises the Recycling,
Organics, Inerts and Landfill Gas businesses. The division focuses
on the sustainable treatment, recycling, energy recovery and
ultimate disposal of waste.
H1 H1
FY21 FY20 Change
GBPm GBPm %
Recycling(1) 36.8 40.2 (8.4)
----- ----- --------
Organics 27.3 29.8 (8.4)
----- ----- --------
Inerts 45.0 60.4 (25.5)
----- ----- --------
Landfill Gas 18.6 20.5 (9.2)
----- ----- --------
Revenue 127.7 150.9 (15.4)
----- ----- --------
Recycling(1) 36.8 40.2 (8.5)
----- ----- --------
Organics 27.3 29.8 (8.4)
----- ----- --------
Inerts 21.3 26.6 (19.9)
----- ----- --------
Landfill Gas 18.6 20.5 (9.3)
----- ----- --------
Net Revenue 104.0 117.1 (11.2)
----- ----- --------
Underlying EBITDA 19.3 32.1 (39.9)
----- ----- --------
Underlying Operating Profit 4.4 19.3 (77.2)
----- ----- --------
Underlying Operating Profit
Margin 3.5% 12.8% (71.5)
----- ----- --------
1 The statutory revenue, net revenue and cost of sales for the
26 weeks ended 27 September 2019 have been decreased by GBP5.7m to
reflect an error made in consolidating the Recycling sub-division
revenue. There is no overall impact on the gross profit for the
period. For the full year FY20, the Group reported the correct
balances and no restatement is required.
Against the challenging economic backdrop, overall Net Revenue
for the division decreased by 11.2% in H1 to GBP104.0m. This had a
significant impact on profitability with Underlying Operating
Profit reducing by 77.2% to GBP4.4m, and Underlying Operating
Profit Margin reducing from 12.8% to 3.5%.
Recycling
-- The Group's rHDPE operations at Redcar continued to perform
strongly during H1, reflecting its resilient nature and de-risked
contracting model.
-- As previously announced, short-term challenges with virgin
plastic and PRN prices have resulted in weaker results from the
Seaham rPET plant.
-- However, strong demand is already being experienced for food
grade pelleted material, with the new partnership announced with
Nestlé Waters UK being the first of several contracts that will be
put in place over the coming months. As a result, we are confident
that performance will rebound strongly in FY22.
-- Other new contract wins include KP Films and a contract
extension with Nampak Plastics Europe.
-- The Materials Recycling Facilities (MRFs) delivered
year-on-year progress despite commodity weakness. The MRFs segment
is now generating positive Underlying EBITDA and remains on track
to deliver positive Underlying EBIT once all legacy contracts roll
off over the next few years.
-- During the period, the appeal against the Environment Agency
("EA") conviction regarding the export of waste paper to China was
not upheld. The further case regarding export of waste paper to
India and Indonesia during FY19 is due to be heard in H1 FY22. The
Group strongly contests the prosecution and maintains that its
paper was of good quality, entirely suitable for reprocessing by EA
accredited paper mills.
Organics
-- The Group has seen significant volume reduction in food waste
due to the CV-19 pandemic and its impact on the leisure and
hospitality sectors. This has resulted in both volume and price
erosion at the Poplars anaerobic digestion ("AD") plant.
-- Composting volumes have remained resilient.
-- Operations in the West Sussex and Leicester contracts performed steadily during the period.
Inerts
-- The Landfill business also saw a steady recovery in Net
Revenues to 86% of prior year levels in September.
-- In line with the Group's Sustainability Strategy, over 6,600
tonnes of CO(2) was saved in the period from January 2019 to March
2020 by transporting inert waste by rail rather than road, with
around 850kt of annualised volume now being transported by
rail.
Landfill Gas
-- A resilient part of the Biffa portfolio during the current
year, which has been relatively unaffected by CV-19 due to
electricity price hedging in place.
-- 4.5% year on year volume decline is in line with expectations.
-- In addition, the Renewables Obligations Certificates (ROC)
recycling benefit is lower than the prior year due to lower demand
for the ROCs.
-- Export power prices are 99.4% hedged through FY21 @ GBP51.77 per MwH.
Operational KPIs
As previously reported, lockdown measures severely impacted
volumes during H1 in the I&C and landfill businesses in
particular, however as the business has recovered, the gap has
reduced to around 10% in tonnes collected and around 23% in tonnes
processed from pre- CV-19 levels. The tonnes processed decreased by
more than the tonnes collected as lower I&C volumes are having
a disproportionate impact on transfer volumes year on year. This,
together with lower organic waste volumes, accounts for the lower
processed volumes.
H1 H1 Change
FY21 FY20 %
Tonnes Collected (mt) 1.8 2.0 (10.0)
----- ----- ------
Tonnes Processed (mt) 1.6 2.1 (23.8)
----- ----- ------
Tonnes Landfilled (mt) 1.2 1.5 (20.0)
----- ----- ------
Energy generation (GWh) 196.6 210.7 (6.7)
----- ----- ------
Energy price (GBP/MWh) 48.3 44.6 8.3
----- ----- ------
Strategy Update
Biffa has a clear strategy for growth which is focused on three
specific opportunities: growing our leading I&C Collections
platform both organically and inorganically; investing to grow our
Biffa Polymers plastics recycling business; and partnering with
others to develop the UK's Energy from Waste ("EfW")
infrastructure.
At the Group's Capital Markets Day in September 2019, the
Company set out its 3-4 year investment target of GBP250m.The Group
now has firm plans in place to commit over 60% of that target with
c. GBP40m already invested in acquisitions, over GBP40m committed
to plastics recycling (Seaham, Washington and Aldridge) and GBP75m
still expected to be fully committed in the near term to EfW
(GBP40m Newhurst and GBP35m Protos). These investment plans are
consistent with, and fundamental to the Group's Sustainability
Strategy 'Resourceful, Responsible'.
The strategy supports Biffa's purpose 'to change the way people
think about waste' and its vision to 'lead the way in UK
sustainable waste management'.
Collections Growth
-- The I&C Collections business operates in a fragmented
market where scale delivers significant benefits. The Group is
focused on growing organically and through synergistic
acquisitions.
-- In September, the Group acquired the trade and assets of Ward
Recycling, an East Midlands based waste management company, for a
consideration of GBP2.1m. A contingent payment of up to GBP2.0m may
be payable depending on performance of the business. Ward Recycling
had run rate revenues pre CV-19 of GBP4m and is complementary to
the Group's East Midlands operations.
-- In October, the Group acquired Simply Waste Solutions, a
leading I&C waste collection business in the South of England,
for a consideration of GBP35m. A potential further consideration of
up to GBP5m may become payable, depending on the performance of the
business through to 31 March 2021. For the year ending 31 March
2020, Simply Waste reported revenues of GBP32m, EBITDA of GBP5.2m,
operating profit of GBP3.1m and had gross assets of GBP16.4m.
-- The acquisition pipeline remains strong.
Leading in UK Plastics Recycling
-- Biffa Polymers operates in an exciting sector, with
burgeoning demand for the closed-loop, food-grade recycled plastic
that the Group manufactures.
-- The Group continues to make good progress with the second
phase of its GBP27.5m investment in the Seaham rPET plastics
recycling facility, which is set to become operational towards the
start of FY22, subject to the second lockdown not affecting
timings. The Group is beginning to enter into offtake commitments
with a similar de-risked model to the existing rHDPE model. The
recently announced partnership with Nestlé Waters UK was the first
of these commitments, with anticipation that several more contracts
will be signed over the coming months. As a result, the Group
remains confident of the long term prospects of this
investment.
-- The construction of the GBP7m Washington plastics recycling
facility, which was announced in January but paused during the
early stages of the pandemic, has recommenced and is due to become
operational towards the end of Q1 FY22, again subject to the second
lockdown not affecting this timetable.
-- A new GBP7m investment in the Aldridge plastics sorting
facility is now being progressed which will support the increased
feedstock needs of the Polymers business. This facility was
committed to following the equity raise and is also due to become
operational in early FY22. As with Seaham phase two and Washington,
this timeline may be impacted by the second lockdown.
-- The Group also recently announced its involvement in the
Poseidon project, a cross-industry initiative aiming to create a
process to chemically recycle harder grades of PET material. The
Seaham facility will play a critical role in providing the
feedstock for this project.
-- The Group joined the OPRL (On-Pack Recycling Label) scheme to
promote clearer labelling for recycling and to help increase the
UK's recycling rates.
Developing Energy from Waste (EfW) Infrastructure
-- The UK continues to have under-capacity to treat
non-recyclable waste for energy recovery. Biffa, as one of the UK's
largest controllers of waste feedstock through its Collections
business, is well placed to unlock the development of this much
needed infrastructure.
-- The Group successfully broke ground at the Newhurst EfW
facility in June 2020. Construction is underway and the
state-of-the-art facility is expected to be completed during 2023
with no anticipated impact on timeline as a result of the second
lockdown.
-- The Protos EfW project, in which Biffa has a 25% equity
stake, is approaching financial close. Biffa is investing GBP35m
over a three year period into the project, and will supply 60% of
the feedstock, further underpinning offtake for its I&C
business. The 400k tpa plant will generate 49MW of energy.
Second Lockdown
The UK Government's recent announcement of a new lockdown period
in England introduces further uncertainty to the Group's short-term
outlook.
In the Collections division, I&C volumes were better than
expected in October, at 96% of prior year levels. During October,
volumes in the 'Tier 3' lockdown category were 3% down versus the
period three weeks prior, and volumes in Wales during the first
week of a two week lockdown were at 80% of prior year levels. Both
of these scenarios provide a helpful reference point for the
upcoming lockdown period. Based on the Group's understanding of the
new lockdown rules, we expect volumes to drop to c.70-75% of prior
year levels during lockdown. In the Municipal business, CV-related
staff absenteeism is expected to rise, but the Group will look to
redeploy staff from its I&C business to backfill where
required.
In the Resources & Energy (R&E) division, landfill
volumes are unlikely to drop significantly as the construction
sector is expected to remain open. In the Organics business, food
waste volumes will likely be impacted due to the temporary closure
of the leisure and hospitality sectors.
Timetables for the Seaham phase two, Washington and Aldridge
projects may be at risk due to the second lockdown, however the
Newhurst and Protos Energy from Waste projects should remain
unaffected.
The Group will pursue certain cost-control measures such as the
re-routing of vehicles, however this is expected to be on a much
smaller scale than the previous lockdown period in H1. The Group
has no current intention to re-implement the furloughing of
staff.
Summary and Outlook
The Board is very pleased with the performance of the business
and the progress made in delivering our strategic objectives in the
first half of the year, in extremely challenging circumstances. The
Group responded swiftly to the first wave of the pandemic and has
emerged strongly in recent months with Group Net Revenue in
September recovering to 93% of prior year levels. This is ahead of
our base case expectations and demonstrates the resilience of our
model.
The GBP100m equity raise in June enabled the Group to continue
to invest in growing the business, in line with its strategy. Since
June, the Group has committed c.GBP40m in value-enhancing
acquisitions in its I&C business and is at an advanced stage of
committing a further GBP40m into green economy infrastructure
development. These investments will help to build a stronger, more
sustainable business for when we emerge from the pandemic.
With plans to deliver the investment targeted in our strategic
roadmap now well-advanced, the Group is beginning to consider new
opportunities which are aligned to its core capabilities and
consistent with its vision to lead in sustainable waste
management.
Whilst we are pleased with the recent momentum in our trading
performance and the progress in delivering our strategic investment
programme, we remain cautious in our outlook for the second half of
the financial year, particularly in light of the further lockdown
measures announced by the UK Government for England. Nevertheless,
having successfully navigated the first lockdown, and due to the
underlying strength of performance over recent months, at this
stage, our expectations for the full year remain unchanged.
The Board's thanks go out to all of Biffa's stakeholders, and in
particular the Biffa team, for their hard work and ongoing
commitment in delivering Biffa's essential service throughout this
testing time.
BOARD OF DIRECTORS' STATEMENT
FINANCIAL REVIEW
Despite the above CV-19 impacted results, the growth drivers for
the Group remain attractive and are underpinned by supportive
Government legislation. Biffa is well positioned in its markets and
has a strong portfolio of businesses, services and capabilities
which are recovering well from the CV-19 pandemic. Whilst the Group
is pleased with the recent momentum in its trading performance and
the progress in delivering its strategic investment programme, it
remains cautious about the second half, particularly in light of
the further lockdown measures announced by the UK Government for
England.
Biffa continued to provide an essential service whilst facing
volume disruption in H1. The Group's performance is detailed
below:
Group GBPm (unless stated) H1 H1 Change Change
FY21 FY20 GBPm (%)
Revenue(1) 482.5 588.9 (106.4) (18.1)
------- ------- -------- --------
Net Revenue(1) 458.8 555.1 (96.3) (17.3)
------- ------- -------- --------
Underlying EBITDA 58.3 86.8 (28.5) (32.8)
------- ------- -------- --------
Depreciation and amortisation (48.6) (41.1) (7.5) 18.2
------- ------- -------- --------
Underlying Operating Profit 9.7 45.7 (36.0) (78.8)
------- ------- -------- --------
Finance income 2.0 1.3 0.7 53.8
------- ------- -------- --------
Finance charges (9.1) (10.7) 1.6 (15.0)
------- ------- -------- --------
Share of joint venture (0.4) - (0.4) N/A
------- ------- -------- --------
Underlying Profit before
Tax 2.2 36.3 (34.1) (93.9)
------- ------- -------- --------
Other items:
------- ------- -------- --------
Onerous contracts (12.3) 2.0 (14.3) (715.0)
------- ------- -------- --------
Strategy related costs (6.7) (2.5) (4.2) (168.0)
------- ------- -------- --------
Acquisition related costs (0.2) (0.4) 0.2 (50.0)
------- ------- -------- --------
Asset Impairment (8.2) - (8.2) N/A
------- ------- -------- --------
Amortisation of acquisition
intangibles (13.9) (8.5) (5.4) (63.5)
------- ------- -------- --------
Impact of changes in real
discount rate on landfill
provisions (13.4) (2.4) (11.0) (458.3)
------- ------- -------- --------
Interest (net) - 1.1 (1.1) (100.0)
------- ------- -------- --------
Tax charge/(credit) 9.3 (5.0) 14.3 (286.0)
------- ------- -------- --------
Profit after Tax (43.2) 20.6 (63.8) (309.7)
------- ------- -------- --------
1 The statutory revenue, net revenue and cost of sales for the
26 weeks ended 27 September 2019 have been decreased by GBP5.7m to
reflect an error made in consolidating the Recycling sub-division
revenue. There is no overall impact on the gross profit for the
period. For the full year FY20, the Group reported the correct
balances and no restatement is required.
Results
-- Trading for the first half performance has recovered well,
despite the challenging economic environment and has remained ahead
of the Group's base case scenario.
-- Revenue decreased by 18.1% to GBP482.5m and Net Revenue decreased by 17.3% to GBP458.8m.
-- Underlying EBITDA decreased by 32.8% to GBP58.3m.
-- Underlying Operating Profit at GBP9.7m compared with GBP45.7m
last year and the Underlying Operating Profit margin has decreased
to 2.0% from 7.7% last year for the first half period.
-- Profit after tax fell by GBP63.8m from GBP20.6m in H1 FY20 to
a loss before tax of GBP43.2m; GBP42.9m of this decrease was due to
an increase in non-underlying costs.
Finance Income
-- Finance income decreased from GBP2.0m to GBP1.3m primarily
driven by returns on pension assets.
Finance Charges
-- Underlying Finance includes interest charges on the Group's
borrowings, bond premiums and discount unwind on landfill
provisions.
-- Finance charges decreased from GBP10.7m to GBP9.1m due to
lower gearing as a result of the equity raise.
Non Underlying Items
To enable additional clarity of business performance, certain
items are excluded when calculating the Group's Underlying measures
of performance. See section entitled 'Basis of Preparation" within
the notes to the financial statements.
Other items are fully explained in Note 4 to the condensed
consolidated financial statements and include exceptional items,
amortisation of acquisition intangibles and material impacts from
changes in real discount rates on landfill provisions. After tax,
these charges totalled GBP44.4m in the period (H1 FY20: GBP9.1m).
The main items contributing to this total were asset impairment
charges relating to the Poplars AD plant (GBP8.2m) and the IT
replacement project (GBP5.8m); an uplift of the onerous contract
provisions of GBP12.3m; the decrease in the real discount rate on
landfill provisions of (GBP13.4m); and an increase in the charge
for amortisation of intangible assets of GBP5.4m.
Taxation
The effective tax rate on underlying profits was 47% (H1 2020:
18.2%), due to the impact of usual non deductible tax items when
compared to lower underlying profits. The effective tax rate on
statutory losses was 18% (H1 FY20: 19.5%).
Dividend
As previously reported, there was no final dividend declared for
FY20. The Group is also not declaring an interim dividend for FY21,
but understands the importance of dividends to shareholders and
will seek to reintroduce the dividend as soon as it is prudent to
do so.
Earnings per Share
During the year, the group issued 50 million shares as part of
an equity raise and a further 4.5 million shares were issued to the
Employee Benefit Trust for future share option exercises. As a
result, earnings have been spread over an adjusted closing share
capital balance of 286.2m shares. Total statutory earnings per
share decreased from 8.2 pence per share (pps) to a loss of
15.1pps.
Underlying earnings per share decreased from 11.9 pps to 0.4
pps.
Capital Allocation
A core part of the Group's strategy is to selectively invest in
businesses and infrastructure where it has a structural advantage
and can generate attractive returns. The Board is encouraged by the
level of growth achieved from acquisitions in the prior years.
During the first half of the year, Biffa has acquired one I&C
business in September for a consideration of GBP2.1m, and a larger
acquisition in October for GBP35m. The acquisition pipeline remains
strong.
The Group is also allocating capital to EfW and PET plastic
bottle recycling that will support long-term sustainable
growth.
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 25 September 2020, the net retirement benefit surplus was
GBP85.6m compared to a surplus of GBP124.7m at 27 March 2020.
The aggregate surplus has decreased since the FY20 year-end. The
main reasons for this deterioration is the fall in corporate bond
yields over the period which leads to a lower discount rate and so
a higher value placed on the liabilities, as well as a rise in
implied inflation over the period which further increases the value
of liabilities. This negative impact was partially offset by
positive returns on the Schemes' assets and the deficit
contribution of circa GBP4.2m paid into the Biffa Defined Benefit
Pension Scheme during the period.
Return on Capital
The Group operates a disciplined approach to capital
investment.
Group Return on Capital Employed (see Basis of Preparation and
Definitions) decreased from 8.9% to 4.0%. This decrease is driven
by the reduction in operating profit.
Group Return on Operating Assets (see Basis of Preparation and
Definitions) decreased from 19.4% to 11.9%. This has been impacted
by the decrease in underlying operating profit and an increase in
operating assets following investments in the plastics processing
plants, M&A activity and replacement capex.
Cash Flow
A summary of the Group's cash flow is shown below:
H1 H1
FY21 FY20
(GBPm) (GBPm)
Underlying EBITDA 58.3 86.8
--------------- ---------------
Working capital 17.6 (14.9)
--------------- ---------------
Net capital expenditure (20.7) (26.1)
--------------- ---------------
Net interest paid (7.2) (8.3)
--------------- ---------------
Finance lease principal payments (16.6) (23.5)
--------------- ---------------
Pension deficit payments (4.2) (4.1)
--------------- ---------------
Purchase of own shares 0.4 (6.0)
--------------- ---------------
Underlying free cash flow 27.6 3.9
--------------- ---------------
Restructuring and exceptional items (1.6) (3.2)
--------------- ---------------
Acquisitions (2.1) (2.5)
--------------- ---------------
Investment in associates (2.1) -
--------------- ---------------
Dividends paid - (12.2)
--------------- ---------------
Changes in net borrowings (102.4) (3.0)
--------------- ---------------
Equity Raise 97.7 -
--------------- ---------------
Movement in financial assets (3.7) 3.0
--------------- ---------------
Net cash flow 13.4 (14.0)
--------------- ---------------
Underlying free cash flow of GBP27.6m compares to GBP3.9m last
year, despite the fall in underlying profitability. This is due to
strong management of working capital, a GBP25.8m HMRC VAT deferral
(due March 2021), and the deferral of finance lease principal
payments of GBP8.3m. Net cashflow was broadly cash flow neutral
when adjusting for HMRC payment deferrals and financing
activities.
Capital expenditure (comprising purchases of property, plant and
equipment and purchases of intangibles) is down on last year at
GBP20.7m from GBP26.1m due to pausing non-essential capital
expenditure prior to the equity raise.
As previously reported, no final dividend was declared for
FY20.
Interest payments are down GBP1.1m from GBP8.3m in the prior
period to GBP7.2m, as a result of lower borrowings following the
equity raise.
As a consequence, net cash flow before funding activities
improved from an outflow of GBP11.0m in the first half of last year
to an inflow of GBP18.1m for the first half of this year.
A statutory group cash flow summary is set out below:
H1 H1
FY21 FY20
(GBPm) (GBPm)
Net cash from operating activities 66.7 67.0
------- --------
Net cash used in investing activities (25.0) (27.9)
------- --------
Net cash flow used in financing activities (28.3) (53.1)
------- --------
Net increase/(decrease) in cash and
cash equivalents 13.4 (14.0)
------- --------
Reported Net Debt and Borrowings
Group Reported Net Debt is GBP310.3m (H1 FY20: GBP449.8.m),
representing 2.1x Underlying EBITDA (H1 FY20: 2.9x). When looked at
on a pre-IFRS16 basis for bank covenant testing, net debt : EBITDA
at the half year was 1.3x (H1 FY20:1.9x).
The funds from the equity raise in June were used to reduce the
Revolving Credit Facility (RCF) borrowings in the short tem whilst
investment opportunities materialised.
H1 H1
FY21 FY20
(GBPm) (GBPm)
Cash 101.2 52.2
------- ---------
Loans (147.1) (245.2)
------- ---------
Finance leases (258.1) (250.5)
------- ---------
EVP preference liability (6.3) (6.3)
------- ---------
Reported Net Debt (310.3) (449.8)
------- ---------
Of the EVP preference liability, GBP6.3m has been included
within Reported Net Debt as it will be payable to EVP Preference
Shareholders irrespective of the outcome of the EVP dispute. The
remainder (GBP41.3m) has been excluded on the basis that it will
only become payable subject to the outcome of the EVP dispute and
will be funded by recovery of funds from HMRC.
Landfill Tax Matters
Biffa won the Upper Tax Tribunal for the EVP case. However, HMRC
have been granted leave to appeal to the Court of Appeal which will
be heard in March 2021.
In regards to the Group's landfill tax dispute on hazardous
soils, an assessment of GBP8.5m was paid to HMRC in December 2019.
The Group has appealed against the assessment to the First Tier Tax
Tribunal and will vigorously defend its position as it is confident
that its position is consistent with the law and the intent of the
legislation. The Company is currently waiting for a court date,
which is anticipated for 2021. HMRC also issued an interest
assessment in September 2020 of GBP0.6m, which was paid. The
original assessment and interest being disputed has been disclosed
as a contingent liability in note 15 to the accounts.
Reporting Periods
The Group will report full year results for the 52 weeks to 26
March 2021. The prior year comparisons are in relation to the 52
weeks ended 27 March 2020.
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
-- Biffa faces risks arising from the CV-19 pandemic
-- 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
-- Competition in the waste management industry could reduce Biffa's revenues and net income
-- 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 cyber security 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
-- 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 the availability of labour
Potential Impact of Brexit
The Board have re-reviewed the potential impact of Brexit, given
the imminence of the separation date. The impact on the Group is
still expected to be relatively limited given that it operates
primarily within the UK. Principal risks include the impact of
foreign exchange movements, particularly in relation to RDF
exports, possible imposition of tariffs on capital goods and a
potential constraint of labour supplies, all of which have
mitigating actions.
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 review 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
Richard Pike
Chief Financial Officer
5 November 2020
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 25 September 2020 which comprises the Condensed
Consolidated Interim Income, Condensed Consolidated Interim
Statement of Financial Position, Condensed Consolidated Statement
of Changes in Equity, Condensed Consolidated Statement of Cash
Flows and related notes 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 Financial
Reporting Council. 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 Guidance 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 Financial Reporting Council 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 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 six months ended 25
September 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
5 November 2020
HALF YEAR RESULTS FOR THE 26 WEEKSED 25 SEPTEMBER 2020
Condensed Consolidated Interim Income Statement
For the half year ended 25 September 2020
26 weeks to 26 weeks to 52 weeks to
25 September 2020 27 September 2019 (unaudited) 27 March 2020 (audited)
(unaudited)
-------------------------------------- ----------------------------------------
Notes Underlying Other Items Underlying Other Underlying Other
Activities(1) GBPm Total Activities(1) Items Total Activities(1) Items Total
GBPm (note 4) GBPm GBPm GBPm GBPm GBPm GBPm GBPm
(note 4) (note 4)
----------------- ------------ ---------------- ------------- -------------- ------- ------------- -------------- ---------
Continuing
operations:
Revenue(2) 3 482.5 - 482.5 588.9 - 588.9 1,163.1 - 1,163.1
Cost of sales(2) (446.6) (39.6) (486.2) (513.4) (9.3) (522.7) (1,012.7) (11.6) (1,024.3)
----------------- ------------ ---------------- ------------- -------------- ------- ------------- -------------- ---------
Gross
profit/(loss) 35.9 (39.6) (3.7) 75.5 (9.3) 66.2 150.4 (11.6) 138.8
Operating costs (24.4) (15.1) (39.5) (28.5) (2.5) (31.0) (57.7) (4.8) (62.5)
Expected credit
loss recognised (1.8) - (1.8) (1.3) - (1.3) (2.2) - (2.2)
----------------- ------------ ---------------- ------------- -------------- ------- ------------- -------------- ---------
Operating
profit/(loss) 3 9.7 (54.7) (45.0) 45.7 (11.8) 33.9 90.5 (16.4) 74.1
Finance income 2.0 - 2.0 1.3 1.1 2.4 2.3 1.1 3.4
Finance charges (9.1) - (9.1) (10.7) - (10.7) (21.0) - (21.0)
Share of results
in joint venture (0.4) - (0.4) - - - (0.1) - (0.1)
----------------- ------------ ---------------- ------------- -------------- ------- ------------- -------------- ---------
Profit/(loss)
before
taxation 2.2 (54.7) (52.5) 36.3 (10.7) 25.6 71.7 (15.3) 56.4
Taxation 5 (1.0) 10.3 9.3 (6.6) 1.6 (5.0) (14.3) 3.5 (10.8)
----------------- ------------ ---------------- ------------- -------------- ------- ------------- -------------- ---------
Profit/(loss) for
the period 1.2 (44.4) (43.2) 29.7 (9.1) 20.6 57.4 (11.8) 45.6
================= ============ ================ ============= ============== ======= ============= ============== =========
Basic earnings/(loss)
per share in pence 60.4 (15.5) (15.1) 11.9 (3.7) 8.2 23.1 (4.8) 18.3
Diluted earnings/(loss)
per share in pence 60.4 (15.1) (14.7) 11.9 (3.7) 8.2 22.4 (4.6) 17.8
(1) Underlying Activities excludes other items which are
outlined in Note 4.
(2) The statutory revenue, net revenue and cost of sales for the
26 weeks ended 27 September 2019 have been decreased by GBP5.7m to
reflect an error made in consolidating the Recycling sub-division
revenue. There is no overall impact on the gross profit for the
period. For the full year FY20, the Group reported the correct
balances and no restatement is required.
Condensed Consolidated Interim Statement of Comprehensive
Income
For the half year ended 25 September 2020
26 weeks 26 weeks 52 weeks
ended ended Ended
25 27 27
September September March
2020 2019 2020
Notes GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Profit/(loss) for the period (43.2) 20.6 45.6
------------ ------------ --------------
Other comprehensive (expense)/income
Items that will not be reclassified
subsequently to income:
Actuarial gain on defined benefit
pension scheme (44.5) 10.9 40.9
Tax relating to items that will
not be reclassified subsequently 8.6 (1.9) (8.3)
------------ ------------ --------------
(35.9) 9.0 32.6
Items that may be reclassified
subsequently to income:
Net gain/(loss) on cash flow
hedge (5.6) 0.5 (0.6)
Net loss of cash flow hedge in
joint venture - - (1.8)
------------ ------------ --------------
(5.6) 0.5 (2.4)
------------ ------------ --------------
Other comprehensive (expense)/gain
for the period, net of income
tax (41.5) 9.5 30.2
------------ ------------ --------------
Total comprehensive (expense)/income
for the period (84.7) 30.1 75.8
============ ============ ==============
Condensed Consolidated Interim Statement of Financial
Position
As at 25 September 2020
As at As at As at
25 27 27
September September March
2020 2019 2020
Notes GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Assets
Non-current assets
Goodwill 7 134.2 131.3 132.2
Other intangible assets 179.2 206.9 197.0
Property, plant and equipment 9 504.3 503.1 527.7
Investment in joint venture 4.7 - 3.0
Long term receivables 68.9 66.1 68.2
Deferred tax assets 0.4 - -
Retirement benefit surplus 13 85.6 94.4 124.7
------------ ------------ ----------
977.3 1,001.8 1,052.8
------------ ------------ ----------
Current assets
Inventories 18.6 15.6 16.2
Trade and other receivables 170.0 170.8 165.3
Contract assets 46.0 63.6 56.2
Derivatives 0.3 - 0.4
Financial assets 10.7 12.9 6.7
Cash and cash equivalents 101.2 52.2 87.8
346.8 315.1 332.6
------------ ------------ ----------
Current liabilities
Borrowings (53.4) (43.2) (43.6)
Derivatives 10 (0.1) (0.1) -
Trade and other payables (281.8) (259.5) (274.2)
Contract liabilities (18.9) (18.0) (17.8)
Current tax liabilities (0.1) (0.2) -
Provisions 11 (27.2) (10.5) (10.2)
------------ ------------ ----------
Total current liabilities (381.5) (331.5) (345.8)
------------ ------------ ----------
Net current liabilities (34.7) (16.4) (13.2)
------------ ------------ ----------
Non-current liabilities
Borrowings (399.4) (500.1) (511.0)
Derivatives (6.7) - (1.6)
Trade and other payables (13.0) (13.0) (13.0)
Contract liabilities (0.6) (0.7) (0.6)
Provisions 11 (91.9) (95.8) (85.1)
Deferred tax liabilities - (5.3) (17.3)
------------ ------------ ----------
Total non-current liabilities (511.6) (614.9) (628.6)
------------ ------------ ----------
Net assets 431.0 370.5 411.0
============ ============ ==========
Equity
Called up share capital 3.0 2.5 2.5
Share premium 245.9 235.3 235.3
Treasury reserve* (3.2) (4.7) (4.7)
Hedging reserve (8.4) 0.1 (2.8)
Merger reserve 170.3 74.4 74.4
Retained earnings 23.4 62.9 106.3
------------ ------------ ----------
Total equity surplus attributable
to shareholders 431.0 370.5 411.0
============ ============ ==========
*To comply with guidance per IAS 32, Biffa Plc changed the
presentation of shares held in the Employee Benefit Trust (EBT) by
adding a separate line item within equity on the Balance Sheet.
"Treasury Shares" are held at cost and reflects the total number of
shares held by the EBT at their initial purchase price. Previously,
these shares were reported within Retained Earnings.
Condensed consolidated Statement of Changes in Equity
For the half year ended 25 September 2020
Called Share premium Treasury Merger Hedging Retained Total
up share reserve* reserve and other earnings equity
capital reserves
GBPm
GBPm GBPm GBPm GBPm GBPm GBPm
--------- ------------- --------- -------- ---------- --------- -------
As at 27 March 2020 2.5 235.3 (4.7) 74.4 (2.8) 106.3 411.0
--------- ------------- --------- -------- ---------- --------- -------
Profit for the period - - - - - (43.2) (43.2)
Loss of cash flow hedges - - - - (5.6) (5.6)
Other comprehensive
income
for the period - - - - - (35.9) (35.9)
Total comprehensive
loss for the period - - - - (5.6) (79.1) (84.7)
Transactions with owners:
Equity raise** 0.5 1.3 - 95.9 - - 97.7
Issue of share capital 0.0 9.3 - - - - 9.3
Repurchase of own shares - - (9.0) - - - (9.0)
Exercise of share options - - 10.5 - - (10.5) -
Share allotment for
employee share option
schemes*** - - - - - 5.6 5.6
Value of employee service
in respect of share
option schemes - - - - - 1.1 1.1
As at 25 September 2020 3.0 245.9 (3.2) 170.3 (8.4) 23.4 431.0
(unaudited)
========= ============= ========= ======== ========== ========= =======
*To comply with guidance per IAS 32, Biffa Plc changed the
presentation of shares held in the Employee Benefit Trust (EBT) by
adding a separate line item within equity on the Balance Sheet.
"Treasury Shares" are held at cost and reflects the total number of
shares held by the EBT at their initial purchase price. Previously,
these shares were reported within Retained Earnings.
**During the period, Biffa plc secured 100% of the shares of
Project Mozzarella (Jersey) Ltd. The transactions satisfied all
required conditions under section 612 of the UK Company Act 2006 to
obtain merger relief and therefore allowed for the premium on the
allotment of equity shares in Biffa Plc to be recorded in the
merger reserve rather than share premium.
***During the period, the Group settled its FY20 bonus payments
using share options. A share allotment of 3m shares was issued to
partially cover this payment.
Called Share premium Treasury Merger Hedging Retained Total
up share reserve reserve and other earnings equity
capital GBPm reserves
GBPm GBPm GBPm
GBPm GBPm GBPm
--------- ------------- -------- -------- ---------- --------- -------
As at 30 March 2019 2.5 235.3 (4.7) 74.4 (0.4) 53.1 360.2
--------- ------------- -------- -------- ---------- --------- -------
Profit for the period - - - - - 20.6 20.6
Cashflow hedges - - - - 0.5 - 0.5
Other comprehensive
income
for the period - - - - - 9.0 9.0
Total comprehensive
income for the period - - - - 0.5 29.6 30.1
Transactions with owners:
Value of employee service
in
respect of share option
schemes - - - - - (7.6) (7.6)
Dividends paid - - - - - (12.2) (12.2)
--------- ------------- -------- -------- ---------- --------- -------
As at 27 September 2019 2.5 235.3 (4.7) 74.4 0.1 62.9 370.5
(unaudited)
========= ============= ======== ======== ========== ========= =======
Called Share premium Treasury Merger Hedging Retained Total
up share reserve reserve and other (deficit)/ equity
capital GBPm reserves earnings
GBPm GBPm
GBPm GBPm GBPm GBPm
------------- -------- -------- ---------- ----------- -------
As at 30 March 2019 2.5 235.3 (4.7) 74.4 (0.4) 53.1 360.2
(audited)
--------- ------------- -------- -------- ---------- ----------- -------
Profit for the period - - - - - 45.6 45.6
Other comprehensive
(loss)/income - - - - (2.4) 32.6 30.2
--------- ------------- -------- -------- ---------- ----------- -------
Total comprehensive
(loss)/income
for the period - - - - (2.4) 78.2 75.8
Value of employee service
in
respect of share option
schemes - - - - - (6.7) (6.7)
Dividends paid - - - - - (18.3) (18.3)
--------- ------------- -------- -------- ---------- ----------- -------
As at 27 March 2020 2.5 235.3 (4.7) 74.4 (2.8) 106.3 411.0
(audited)
========= ============= ======== ======== ========== =========== =======
Condensed Consolidated Statement of Cash Flows
26 weeks 26 weeks 52 weeks
ended ended ended
25 27 27
September September March
2020 2019 2020
GBPm GBPm GBPm (audited)
Notes (unaudited) (unaudited)
Cash flows from
operating activities
Cash generated from
operations 12 68.3 69.4 193.8
Restructuring and
exceptional
costs (1.6) (3.2) (14.0)
Net cash from
operating activities 66.7 66.2 179.8
Taxation
received/(paid) - 0.8 (0.2)
------------------------ ------------------------- ------------------------
Net cash inflow from
operating
activities 66.7 67.0 179.6
------------------------ ------------------------- ------------------------
Cash flows from
investing activities
Purchases of property,
plant
and equipment (19.3) (24.7) (56.8)
Purchases of
intangible assets (1.9) (1.8) (3.8)
Compensation - - 4.4
Purchase of business,
net of
cash acquired (2.1) (2.5) (5.1)
Investment in joint
ventures (2.1) - (5.0)
Proceeds from the sale
of property,
plant and equipment 0.3 1.0 1.6
Loan to joint ventures - - (2.4)
Interest received 0.1 0.1 0.3
------------------------ ------------------------- ------------------------
Net cash used in
investing
activities (25.0) (27.9) (66.8)
------------------------ ------------------------- ------------------------
Cash flows from
financing activities
Interest paid (7.4) (8.4) (17.2)
Equity Raise 97.7 - -
Repayment of
borrowings (102.4) (90.0) -
Finance lease
principal payments* (16.6) (23.5) (50.2)
Drawdown of new
borrowings - 87.0 1.0
Fees payable on 1 year
extension
of RCF - - (0.5)
Dividends paid - (12.2) (18.3)
Employee share scheme
purchase 0.4 (6.0) (6.0)
------------------------ ------------------------- ------------------------
Net cash flow used in
financing
activities (28.3) (53.1) (91.2)
------------------------ ------------------------- ------------------------
Net
increase/(decrease)
in
cash and cash
equivalents 13.4 (14.0) 21.6
------------------------ ------------------------- ------------------------
Cash and cash
equivalents at
the beginning of the
period 87.8 66.2 66.2
------------------------ ------------------------- ------------------------
Cash and cash
equivalents at
the end of the period 101.2 52.2 87.8
======================== ========================= ========================
*Finance lease payments are significantly lower than prior
period due to Biffa negotiating payment rent deferrals totalling
GBP8.3m with several landlords.
Notes to the Condensed Interim Financial Information
1. Basis of Preparation
This condensed consolidated interim financial information for 26
weeks ended 25 September 2020 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 9 June 2020 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 27 March 2020 were approved by the Board of
Directors on 9 June 2020 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.
The Group's income statement and segmental analysis separately
identify financial results before exceptional and other items. The
Directors believe that the presentation of the results in this way
is relevant to an understanding of the Group's financial
performance. Presenting financial results before exceptional and
other items is consistent with the way that the financial
performance is measured by management and reported to the Board and
aids the comparability of reported results from year to year in
this context.
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.
The Group's income statement and segmental analysis separately
identify financial results before exceptional and other items. The
Directors believe that the presentation of the results in this way
is relevant to an understanding of the Group's financial
performance. Presenting financial results before exceptional and
other items is consistent with the way that the financial
performance is measured by management and reported to the Board and
aids the comparability of reported results from year to year in
this context. The Group's income statement and segmental analysis
separately identify a number of Alternative Performance Measures
(APMs) in addition to those reported under IFRS. The Directors
believe that the presentation of the results in this way, which is
not meant to be a substitute for or superior to IFRS measures, is
relevant to an understanding of the Group's underlying trends,
financial performance and position. These APMs are also used to
enhance the comparability of information between reporting periods
and the Group's divisions, by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid the user
in understanding the underlying performance. Our APMs and KPIs are
aligned to our strategy and together form the basis of the
performance measures for remuneration. Consequently, APMs are
consistent with how the business performance is planned and
reported internally to the Board and Operating Committees to aid
their decision making. Additionally, some of these measures are
used for the purpose of setting remuneration targets.
Accounting
Basis * Prepared in accordance with IFRS
* H1 FY21 represents the 26 weeks ended 25 September
2020; H1 FY20 represents the 26 weeks ended 27
September 2019; FY20 represents the 52 weeks ended 27
March 2020
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 contingent 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)
--------------------------------------------------------------
1.1 Going Concern Basis
Since reporting of the Group's full year results for year ending
27 March 2020, CV-19 continues to have a significant impact on the
Group's financial and operational performance. However, gradual
improvements have been seen across all divisions in the business
with overall Group revenue returning to 93% of prior year
performance. The Group's latest financial performance forecast for
the next 12 months is in line with management expectations and
sales volumes are expected to be maintained for the rest of 2021
financial year. Current forecasts also expects that the Group will
return to near prior year levels at the end of FY22.
The Group meets its daily working capital requirements through
its bank facilities. Forecast and projections for the Group, taking
into account reasonable fluctuations in trading performance, show
that the Group are expected to operate within the current levels of
the facility. The Group has significant financial resources
including unutilised bank facilities of GBP200.0m and cash and cash
equivalents of GBP101.2m as at 25 September 2020. One of the
Group's response to the CV-19 impact was to agree revised covenants
with the banking syndicate for the main loan facility which
increased the leverage covenant from 3.5x to 5.5x for H1 and 4.6x
for H2. The eventual outturn at the HY was 1.3x. The reassuring
headroom on the debt leverage was driven by an equity raise which
took place in June 2020; GBP97.7m was successfully raised from the
issue of 50 million shares. These funds together with the Group's
long-term customer contract portfolio, flexible cost based coupled
with geographically diverse operating footprint means the Group is
well placed to manage the direct business impacts and the current
global economic uncertainty arising from the CV-19 pandemic.
Management has also performed a sensitivity analysis which
supports this view by modelling a reasonable worst-case scenario.
The worst-case scenario assumes that the Group will focus on
continuing existing operations and no acquisitions takes place or
any further investment on plastics projects. The Group's
profitability, liquidity and financial headroom have all been
assessed an incorporated within this scenario analysis.
Based on the results of this analysis and after careful
consideration of the uncertainty and dynamic nature of CV-19, the
Directors confirm that they have reasonable expectation that the
Group will be able to continue to withstand the impacts of CV-19.
The Directors have concluded the Group has made satisfactory
arrangements to address its financing and business risks. And have
reasonable expectations that the Group will have adequate resources
to continue in operation for at least twelve months from the
signing date of these consolidated interim financial statements.
They therefore consider it appropriate to adopt the going concern
basis of accounting in preparing these financial statements.
Second Lockdown
The UK Government's recent announcement of a new lockdown period
in England introduces further uncertainty to the Group's short-term
outlook.
In the Collections division, I&C volumes are expected to
drop to c.70-75% of prior year levels during lockdown. In the
Municipal business, CV-related staff absenteeism is expected to
rise, but the Group will look to redeploy staff from its I&C
business to backfill where required. In the Resources & Energy
(R&E) division, landfill volumes are unlikely to drop
significantly as the construction sector is expected to remain
open. In the Organics business, food waste volumes will likely be
impacted due to the temporary closure of the leisure and
hospitality sectors.
Timetables for the Seaham phase two, Washington and Aldridge
projects may be at risk due to the second lockdown, however the
Newhurst and Protos Energy from Waste projects should remain
unaffected.
The Group will pursue certain cost-control measures such as the
re-routing of vehicles, however this is expected to be on a much
smaller scale than the previous lockdown period in H1. The Group
has no current intention to re-implement the furloughing of
staff.
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 for the
year ending 27 March 2020.
The significant financial judgements considered in relation to
the Half Year Report and Accounts are detailed below:
Environmental and The group operates a number of landfill sites
aftercare commitments in the UK. A significant cost of owning and operating
a landfill site in the UK arises after the land
filling operation ceases due to the constructive
and legal obligation to restore sites and then
to care for them until it can be demonstrated
that they present no ongoing risk to the environment.
A provision is made for the costs associated
with restoring and maintaining its landfill sites
and controlling leachate and methane emissions
from the sites. A number of estimate uncertainties
affect the calculation, including the impact
of regulation, accuracy of site surveys, transportation
costs and changes in the real discount rate.
The provisions incorporate our best estimates
of the financial effects of these uncertainties,
but future changes in any of these estimates
could materially impact the calculation of the
provision.
The associated outflows are estimated to arise
over a period of up to 60 years depending on
the date of each site closure. In determining
the provision, the estimates for future expenditure
required to settle the obligation are inflated
using longer term inflation rates, and discounted
using the nominal discount rate. The rates utilised
reflect the period of the obligation on a site
by site basis which varies between 10 and 60
years.
As a result of CV-19, interest rates dropped
to 0.1% on 19 March 2020 and as a result future
discount rates have fallen significantly; particularly
for shorter years. At FY20 year end the 5 year
discount rate was 2.1% and the 60 year discount
rate was 2.3%. Since then, discount rates have
dropped to 0.6% and 1.5% respectively. This has
had a material impact on the landfill aftercare
provisions.
Retirement Benefit The group operates several defined benefit pension
Accounting schemes which are accounted for under IAS 19
("Employment Benefits"). Pension accounting is
a specialist area requiring the exercise of significant
management judgement and the use of technical
expertise to determine the surplus or deficit
of the scheme in accordance with generally accepted
actuarial practices. The assumptions used in
valuing the defined benefit pension liabilities
including the discount rate, yield curves, mortality
assumption, inflation level, pension increase
and measures of longevity are complex and changes
to the assumptions can have a material impact
on the value of pension liabilities.
Management has assessed the completeness of accounting
considerations across the group and determined
that the primary risks that arose from the CV-19
pandemic related to the valuation of unquoted
pension assets. The pandemic has resulted in
the valuation of certain property assets being
subject to increased uncertainty. In addition,
the valuation of certain alternative investments
including those held in private equity portfolios
are subject to an unusually high level of uncertainty
due to the most recent valuations on them being
performed prior to the significant economic impacts
of the CV-19 pandemic.
In prior years, pre-CV-19, the fund valuations
dated December, January and February were deemed
appropriate as there was very little fluctuations
between year end and half-year reporting. However,
since CV-19 fund valuations have changed significantly
across all industries, and it is now appropriate
to value the funds at the reporting dates.
Fund valuations were performed for 27 March 2020
year end and also performed for 25 September
2020 interim reporting to mitigate risk of fluctuations
in valuations.
----------------------------------------------------------------
Asset Impairment The group carries different classes of intangible
Review assets including, gas reserves, brand name and
customer contracts. Additionally, the group has
classes of tangible assets. The carrying value
of these is dependent on future cash flows and
if these cash flows do not meet the group's expectations
there is risk that the assets will be impaired.
The impairment reviews performed by the group
contain a number of significant estimates including
energy prices, gate fees, forecast tonnage prices,
gas yield projections, long-term growth and discount
rates. Management relies on a number of third
party experts to value a number of these key
estimates.
Changes in these assumptions can have a significant
impact on the headroom available in the impairment
calculations.
----------------------------------------------------------------
Onerous Contract Certain group's contracts are onerous and long-term
Provision in nature. These contracts can be complex and
contain key performance indicator clauses where
penalties may be incurred in the event of non-compliance.
The group is therefore required to make operational
and financial assumptions to estimate future
losses over periods that can extend beyond seven
years.
Variability of contract penalties, underlying
delivery costs, commodity prices applied and
customer claims or disputes can put additional
pressure on margins and on future contract profitability,
giving rise to onerous contract provisions.
The prediction of future events over extended
periods contains inherent risk and the outcome
of customer and subcontractor claims is uncertain
and involves a high degree of management estimation.
----------------------------------------------------------------
Provision for expected The expected credit losses are estimated based
credit loss on the Group's historical credit loss experience,
adjusted for factors that are specific to the
debtors, general economic conditions and an assessment
of both the current as well as the forecast future
conditions at the reporting date.
Due to CV-19, several factors have affected management's
use of the Group's historical credit loss experience
including:
* High court enforcement activity ceased up until the
end of June 2020.
* Field visits for debt collection process were not
permitted during lockdown.
* A "softer" approach to debt collection and more
lenient payment terms
* Government changes to insolvency proceedings
implemented preventing issuing of winding up
petitions
As a result management have deemed historical
performance during the CV-19 affected periods
unreliable as a basis for estimating the expected
credit loss and have used historical evidence
up to FY20.
----------------------------------------------------------------
Change in Accounting Estimate for Useful Economic Life of LFG
Division
The Landfill Gas business generates some of its income via the
production of Renewable Obligation Certificates (ROCs). These are
"green energy certificates" which are issued to operators of
accredited renewable generating stations for the eligible renewable
electricity that they generate. ROCs are then sold on to energy
providers for which the Group recognises revenue on sales. ROCs
income currently represents around 55% of the division's total
revenue.
The ROCs scheme lasts for 20 years and the majority of landfill
gas sites will see their ROCs scheme terminate in financial year
2027. At this point, the revenue and profit profile of the LFG
division will change significantly. Previously, the net book value
of LFG sites was amortised over the "end of generation forecast"
which represented the estimated life of the gas generation for the
site. Going forward, management have decided to change the
accounting estimate of the useful life of the ROCs assets and amend
the amortisation profile to better match the costs of the asset
against the principal periods from which the Group will receive
future economic benefits.
Corporation tax calculations
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.
At the date of authorisation of these Financial Statements, the
below Standards and amendments are effective for reporting periods
beginning after 1 January 2020, but have not impacted on the
Group's reporting.
- IFRS 7 Financial Instruments: Disclosures Amendments regarding
pre-replacement issues in the context of the IBOR reform
- IFRS 16 Leases: Amendment to provide lessees with an exemption
from assessing whether a CV-19-related rent concession is a lease
modification
- IAS 1 Presentation of Financial Statements: Amendments regarding the definition of material
- Amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8,
IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and
SIC-32 to update those pronouncements with regard to references to
and quotes from the framework or to indicate where they refer to a
different version of the Conceptual Framework
At the date of authorisation of these Financial Statements, the
below Standards are not yet effective and not deemed to have a
material impact on the Group's reporting:
- IFRS 17 Insurance Contracts
3. Segmental Information
The Group is managed by type of business and is organised into
two 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.
There has been no change to the segmental splits of the Group
during the year.
The Group's segmental results are as follows:
26 weeks 26 weeks 52 weeks
ended ended Ended
25 27 27
September September March
2020 2019 2020
GBPm (unaudited) GBPm (unaudited) GBPm (audited)
Revenue
Collections 354.8 438.0 870.8
Resources & Energy (1) 127.7 150.9 292.3
482.5 588.9 1,163.1
============================= ============================== =======================
1 The statutory revenue, net revenue and cost of sales for the
26 weeks ended 27 September 2019 have been decreased by GBP5.7m to
reflect an error made in consolidating the Recycling sub-division
revenue. There is no overall impact on the gross profit for the
period. For the full year FY20, the Group reported the correct
balances and no restatement is required.
26 weeks 26 weeks 52 weeks
ended ended Ended
25 27 27
September September March
2020 2019 2020
GBPm GBPm GBPm (audited)
(unaudited) (unaudited)
Revenue reconciliation (1)
Statutory Revenue 482.5 588.9 1,163.1
Landfill tax (23.7) (33.8) (60.3)
---------------------------- ---------------------------- -----------------------
Net revenue 458.8 555.1 1,102.8
============================ ============================ =======================
1 The statutory revenue, net revenue and cost of sales for the
26 weeks ended 27 September 2019 have been decreased by GBP5.7m to
reflect an error made in consolidating the Recycling sub-division
revenue. There is no overall impact on the gross profit for the
period. For the full year FY20, the Group reported the correct
balances and no restatement is required.
26 weeks 26 weeks 52 weeks
ended ended Ended
25 27 27
September September March
2020 2019 2020
GBPm GBPm GBPm (audited)
(unaudited) (unaudited)
Net revenue in prior
period (1) 560.8 515.7 1,030.8
Acquisition revenue growth 1.4 27.9 46.7
Organic revenue
(decline)/growth (103.4) 11.5 25.3
---------------------------- ---------------------------- -----------------------
Net revenue 458.8 555.1 1,102.8
============================ ============================ =======================
1 The statutory revenue, net revenue and cost of sales for the
26 weeks ended 27 September 2019 have been decreased by GBP5.7m to
reflect an error made in consolidating the Recycling sub-division
revenue. There is no overall impact on the gross profit for the
period. For the full year FY20, the Group reported the correct
balances and no restatement is required.
26 weeks 26 weeks 52 weeks
ended ended Ended
25 27 27
September September March
2020 2019 2020
GBPm (unaudited) GBPm (unaudited) GBPm (audited)
Collections revenue
I&C 222.5 307.6 603.7
Municipal 91.6 86.8 177.3
Specialist Services 40.7 43.6 89.8
354.8 438.0 870.8
============================== ============================== =======================
26 weeks 26 weeks 52 weeks
ended ended Ended
25 27 27
September September March
2020 2019 2020
GBPm GBPm GBPm (audited)
(unaudited) (unaudited)
Resources & Energy revenue
Recycling (1) 36.8 40.2 79.5
Organics 27.3 29.8 56.9
Inerts 45.0 60.4 112.6
Landfill Gas 18.6 20.5 43.3
127.7 150.9 292.3
============================ ============================ =======================
1 The statutory revenue, net revenue and cost of sales for the
26 weeks ended 27 September 2019 have been decreased by GBP5.7m to
reflect an error made in consolidating the Recycling sub-division
revenue. There is no overall impact on the gross profit for the
period. For the full year FY20, the Group reported the correct
balances and no restatement is required.
All revenue is with external third parties. There is no single
customer that accounts for more than 10% of Group revenue (26 weeks
to 27 September 2019: none, 52 weeks to 27 March 2020: none).
26 weeks 26 weeks 52 weeks
ended ended Ended
25 27 27
September September March
2020 2019 2020
GBPm (unaudited) GBPm (unaudited) GBPm
(audited)
Underlying EBITDA(1)
Collections (2) 42.8 61.1 126.4
Resources & Energy 19.3 32.1 63.4
Group costs (3.8) (6.4) (15.8)
----------------- ----------------- ----------
Underlying EBITDA (2) 58.3 86.8 174.0
Depreciation and amortisation (48.6) (41.1) (83.5)
----------------- ----------------- ----------
Underlying Operating Profit(2) 9.7 45.7 90.5
---------------------------------------- ----------------- ----------------- ----------
Exceptional items (note 4) (27.4) (0.9) (4.4)
Impact of real discount rate changes
to landfill provisions (13.4) (2.4) 4.9
Amortisation of acquisition intangibles (13.9) (8.5) (16.9)
---------------------------------------- ----------------- ----------------- ----------
Operating Profit (45.0) 33.9 74.1
Finance income 2.0 2.4 3.4
Finance charges (9.1) (10.7) (21.0)
Share of results in joint venture (0.4) - (0.1)
================= ================= ==========
(Loss)/Profit before taxation (52.5) 25.6 56.4
================= ================= ==========
(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
25 27 27
September September March
2020 2019 2020
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Underlying operating profit
Collections 11.1 34.7 72.2
Resources & Energy 4.4 19.3 37.7
Group costs (5.8) (8.3) (19.4)
----------- ----------- ---------
9.7 45.7 90.5
=========== =========== =========
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.
As at As at As at
25 27 27
September September March
2020 2019 2020
GBPm GBPm GBPm (audited)
(unaudited) (unaudited)
Tangible and other
intangible assets
Collections 305.9 316.9 325.6
Resources & Energy 294.5 294.7 309.6
Shared services and
corporate 83.1 98.5 89.5
---------------------------- ---------------------------- -----------------------
683.5 710.1 724.7
============================ ============================ =======================
26 weeks 26 weeks 52 weeks
ended ended Ended
25 27 27
September September March
2020 2019 2020
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Capital expenditure
Collections 12.6 28.1 65.4
Resources & Energy 7.2 18.1 48.1
Shared services and corporate 3.1 1.8 6.4
----------- ----------- ---------
22.9 48.0 119.9
=========== =========== =========
Capital expenditure comprises additions to intangible assets and
property, plant and equipment.
26 weeks 26 weeks 52 weeks
ended ended ended
25 27 27
September September March
2020 2019 2020
GBPm GBPm GBPm (audited)
(unaudited) (unaudited)
Depreciation and
amortisation
Collections 31.7 26.4 54.2
Resources & Energy 14.8 12.8 25.7
Shared services and
corporate 2.1 1.9 3.7
---------------------------- ---------------------------- -----------------------
48.6 41.1 83.6
Amortisation of
acquisition intangibles 13.9 8.5 16.9
---------------------------- ---------------------------- -----------------------
Total 62.6 49.6 100.5
============================ ============================ =======================
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
ended ended 52 weeks
25 27 ended 27
September September March
2020 2019 2020
GBPm GBPm GBPm (audited)
(unaudited) (unaudited)
Exceptional items:
Acquisition related costs 0.2 0.4 1.1
Onerous contracts 12.3 (2.0) (1.5)
Asset Impairment 14.0 - -
Strategy related costs 0.9 2.5 4.8
27.4 0.9 4.4
Impact of real discount
rate changes to
landfill
provisions 13.4 2.4 (4.9)
Amortisation of
acquisition intangibles 13.9 8.5 16.9
---------------------------- ---------------------------- ------------------------
54.7 11.8 16.4
============================ ============================ ========================
Included within finance
costs
Finance charges - (1.1) (1.1)
Taxation impact of other
items (10.3) (1.6) (3.5)
============================ ============================ ========================
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.
Corporate restructuring costs
Corporate restructuring costs mostly relate to professional
fees.
Onerous contracts
Onerous contract costs reflect all movements on onerous service
contract provisions. During the period the Group made additional
onerous contract provisions for 3 customer contracts:
North Somerset - GBP3.7m
The 7-year contract with North Somerset District Council has
been running at a loss since the contract began on 1 March 2017.
Previous expectations were that after the initial mobilisation and
transformation phases were completed in the first 24 months the
contract would generate a profit. This expectation has subsequently
been revised with the contract expected to remain in a loss-making
position throughout its term and as a consequence Biffa and North
Somerset District Council have agreed, in principle, to mutually
end the contract subject to legal agreement of exit terms.
Mid-Kent Swale - GBP4.0m
The contracts with the Mid-Kent Partnership (being Swale,
Maidstone & Ashford) have been running at a loss since we
delivery began in 2013 and are expected to do so for the remainder
of the term. Since reporting FY20 results, the financial
performance of the contract has degraded materially, due in the
main to the termination of a third party contract for fleet repairs
and maintenance, forcing the Group to internalise these costs. The
provision for mid-Kent has therefore been revised to include these
additional costs.
Leicester - GBP4.6m
The 25-year contract with Leicester City Council is expected to
be loss-making for the remainder of the contract term (May 2028).
Since March 2020 additional capital costs relating to repairs to
the site's infeed plates and digesters have been identified. These
have arisen due to unforeseen issues with the machinery in the
period and are considered necessary in order to fulfil our
obligations under the contract. These additional costs are
primarily related to both processing plants that we operate under
the contract.
Asset Impairment
There is an GBP8.2m one-off cost related to the impairment of
the Poplars Anaerobic Digestion plant. CV-19 had a significant
impact on the hospitality and accommodation sector as well as
driving a lower demand for oil globally. The lower activity levels,
fall in future energy price curve, coupled with a delay in the
Government's implementation of the Resource and Waste Management
strategy has changed management's assumptions on future gate fees,
haulage and productions levels. This has led to impairment of the
subdivision as future value in use is deemed significantly lower
than previously expected.
The Group's system replacement programme; Project Fusion was
also impaired during the period. Due to CV-19 the programme has
experienced delays in restarting works, and management have also
identified further requirements to upgrade the current systems. As
a result, certain costs will become obsolete or further work with
have to be undertaken and therefore GBP5.8m has been written off in
the period.
Strategy-related costs
Strategy-related costs arise from Group-wide initiatives to
reduce the ongoing cost base and improve efficiency in the
business. These costs are substantial in scope and impact, and do
not form part of recurring operational or management activities
that the Directors would consider part of our underlying
performance. Adjusting for these charges provides a measure of
operating profitability that is comparable over time.
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, the amounts for which are reported
separately from the Group's depreciation and amortisation
charges.
Impact of real discount rate changes to landfill provisions
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.
Finance charges
Finance charges in prior periods relate to the EVP debt
instrument as disclosed in note 16.
The tax impact of other items is calculated as 19% (19%: 2019)
of the expenses allowable in calculating the taxable profit.
26 weeks 26 weeks 52 weeks
ended ended ended 27
25 27 March
September September 2020
2020 2019 GBPm (audited)
GBPm GBPm
(unaudited) (unaudited)
Segmental exceptional
items:
Collections 7.7 (1.1) 0.7
Resources & Energy 12.8 (0.6) (1.5)
Group costs 6.9 2.6 5.2
---------------------------- ---------------------------- -----------------------
27.4 0.9 4.4
============================ ============================ =======================
Underlying operating costs have been split into distribution and
administration costs as detailed below:
26 weeks 26 weeks 52 weeks
ended ended ended 27
25 27 March
September September 2020
2020 2019 GBPm (audited)
GBPm (unaudited) GBPm (unaudited)
Operating costs
Distribution costs 10.1 9.9 20.1
Administrative expenses 14.3 18.6 37.6
----------------------------- ----------------------------- -----------------------
24.4 28.5 57.7
----------------------------- ----------------------------- -----------------------
Administration costs have decreased as a result of a reduction
in non essential costs and no provision for bonuses.
In addition to the Other items disclosed above, the Group uses
Return on Operating Assets and return on capital employed as
performance measures. These are aligned to the strategy and are
reported internally to the Board and Operating Committees to aid
their decision making. These are calculated as below:
26 weeks 26 weeks 52 weeks
ended ended ended 27
25 27 March
September September 2020
2020 2019 GBPm (audited)
GBPm GBPm
(unaudited) (unaudited)
Return on Operating Assets
Underlying Operating
Profit 54.5 86.6 90.5
Average of Property, Plant
and Equipment 503.7 428.7 514.0
Net working capital (44.2) (22.0) (46.7)
Total average of Property,
Plant and Equipment
plus net working capital 459.5 406.7 467.3
Return on Operating Assets 11.9% 21.3% 19.4%
============================ ============================ =======================
Return on Operating Assets is determined by adjusted operating
profit for the prior 12 months divided by the average of opening
and closing PP&E plus net working capital. Net working capital
is the average in the prior 12 months of the net of inventories,
trade and other receivables and trade and other payables.
26 weeks 26 weeks 52 weeks
ended ended ended 27
25 27 March
September September 2020
2020 2019 GBPm (audited)
GBPm GBPm
(unaudited) (unaudited)
Return on Capital Employed
Operating Profit (4.8) 44.5 74.1
Exceptional items 30.9 18.6 4.4
Impact of real discount
rate changes to
landfill provisions 6.1 6.7 (4.9)
---------------------------- ---------------------------- -----------------------
Adjusted Operating profit 32.2 69.8 73.6
Average of shareholders'
equity 400.0 358.0 385.6
Net debt 421.4 417.6 477.3
Retirement benefits (89.0) (76.1) (101.8)
Environmental provisions 68.7 69.5 62.0
---------------------------- ---------------------------- -----------------------
801.1 769.0 823.1
Return on Capital Employed 4.0% 9.1% 8.9%
============================ ============================ =======================
Return on capital employed is determined by adjusted operating
profit for the prior 12 months divided by the average of opening
and closing shareholders equity, plus the average of net debt,
pensions and environmental provisions.
5. Income Tax Recognised in Profit or Loss
26 weeks 26 weeks 52 weeks
ended ended ended
25 27 27
September September March
2020 2019 2020
GBPm GBPm (unaudited) GBPm
(unaudited) (audited)
Current tax:
In respect of the current period - - -
Adjustment in respect of prior periods - - 0.1
------------ ----------------- ----------
- - 0.1
------------ ----------------- ----------
Deferred tax:
Adjustment in respect of the current
period (9.3) 5.6 11.4
Adjustment in respect of prior periods - - (0.8)
Adjustments attributable to changes in
tax rates and laws - (0.6) 0.1
------------ ----------------- ----------
(9.3) 5.0 10.7
------------ ----------------- ----------
Total tax charge (9.3) 5.0 10.8
============ ================= ==========
Corporation tax is calculated at 19% (26 weeks to 27 September
2019: 19%, 52 weeks to 27 March 2020: 19%) 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
Comprehensive Income as follows:
26 weeks 26 weeks 52 weeks
ended ended Ended
25 27 27
September September March
2020 2019 2020
GBPm GBPm (unaudited) GBPm
(unaudited) (audited)
(Loss)/Profit on ordinary activities
before tax (52.5) 25.6 56.4
Profit on ordinary activities before
tax multiplied by the standard rate of
corporation tax in the UK of 19% (10.0) 4.9 10.7
Expenses not deductible for tax purposes 0.7 0.7 0.8
Non-taxable income - - (0.1)
Adjustments attributable to changes in
tax rates
and laws - (0.6) (0.6)
------------ ----------------- ----------
Total tax (credit)/charge (9.3) 5.0 10.8
============ ================= ==========
Budget 2020, substantively enacted on 17 March 2020, announced
that the main UK corporation tax rate applicable from 1 April 2020
now remains at 19%, rather than the previously enacted reduction to
17%. As deferred tax assets and liabilities are measured at the
rates expected to apply in the period of the reversal, deferred tax
balances have been calculated at 19%.
As the Group's presence is mainly in the UK we do not envisage a
significant impact on the Group following the decision of the UK
Government to invoke Article 50 to leave the EU.
The UK have introduced various stimulus/reliefs for businesses
to cope with the impact of CV 19 pandemic. We will monitor as the
details become available for any that may materially impact our
future tax charges.
6. Earnings per Share
From continuin g 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
25 27 27
September September March
2020 2019 2020
GBPm GBPm GBPm (audited)
(unaudited) (unaudited)
Earnings for the purposes of basic
earnings per share being net profit
attributable to owners (43.2) 20.6 57.4
Earnings for the purposes of diluted
earnings per share (43.2) 20.6 57.4
============ ============ ===============
Number of shares
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 286,242,902 250,000,000 248,642,098
============ ============ ===============
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 294,490,074 250,000,000 256,403,630
============ ============ ===============
Basic earnings per share (pence) (15.1) 8.2 18.3
============ ============ ===============
Diluted earnings per share (pence) (14.7) 8.2 17.8
============ ============ ===============
From continuing operations
26 weeks 26 weeks 52 weeks
Ended ended Ended
25 27 27
September September March
2020 2019 2020
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Net (loss)/profit attributable to equity
holders of the parent (43.2) 20.6 57.4
----------- ----------- ---------
(Loss)/Earnings from continuing operations
for the purpose of basic earnings per
share excluding discontinued operations (43.2) 20.6 57.4
----------- ----------- ---------
(Loss)/Earnings from continuing operations
for the purpose of diluted earnings
per share excluding discontinued operations (43.2) 20.6 57.4
=========== =========== =========
7. Goodwill
Total
GBPm
Goodwill
As at 27 March 2020 132.7
Additions (see below) 2.0
As at 25 September 2020 134.7
=====
Accumulated impairment:
As at 27 March 2020 (0.5)
Impairment Charge -
-----
As at 25 September 2020 (0.5)
=====
Net book amount:
-----
As at 25 September 2020 134.2
=====
As at 27 March 2020 132.7
=====
8. Acquisitions
On 1 September 2020, the Group acquired the trade and assets of
Donald Ward Limited which operated a national waste brokerage
service and runs a small number of collection vehicles in the
London area. The acquisition is in line with the Group's growth
strategy and complements the current operations of the Collections
division.
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 0.8
Customer lists 0.9
Creditors (0.5)
Deferred tax liability (0.2)
Total net assets 1.0
Goodwill 2.0
-----------
3.0
Satisfied by:
Cash 2.1
Contingent cash consideration* 0.9
-----------
Total consideration 3.0
Net cash outflow arising on acquisition:
Cash consideration 2.1
Less: cash and cash equivalent balances acquired -
-----------
2.1
===========
*Management expects that there will be a further contingent
consideration due in March 2021, based on income performance of the
acquired business. Although there is a maximum potential
consideration payment of GBP2.0m, management's current expectation
for the contingent consideration is GBP0.9m.
Acquisition-related costs were immaterial.
The preliminary goodwill of GBP2.0 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.
9. Property, Plant and Equipment
During the 26 weeks ended 25 September 2020, the Group acquired
property, plant and equipment including leased assets, but
excluding property, plant and equipment acquired through business
combinations, with a cost of GBP29.9 million (27 September 2019:
GBP44.7 million).
Assets with a net book value of GBP0.2 million were disposed of
by the Group during the 26 weeks ended 25 September 2020 (27
September 2019: GBP0.4 million) resulting in an immaterial net
profit (27 September 2019: GBP0.6 million).
The Group's capital commitments at 25 September 2020 were
GBP28.8 million (27 September 2019: GBP9.1 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 derivative financial
assets and liabilities at fair value at 25 September 2020:
Level 1 Level 2 Level 3 Total
GBPm GBPm (unaudited) GBPm (unaudited) GBPm (unaudited)
(unaudited)
Assets/Liabilities)
Derivatives (6.5) - - (6.5)
------------ ----------------- ----------------- -----------------------------
(6.5) - - (6.5)
============ ================= ================= =============================
The following table presents the Group's financial assets and
liabilities at fair value at 27 September 2019:
Level 1 Level 2 Level 3 Total
GBPm GBPm (unaudited) GBPm (unaudited) GBPm (unaudited)
(unaudited)
Assets/(Liabilities)
Derivatives (0.1) - - (0.1)
------------ ----------------- ----------------- -----------------------------
(0.1) - - (0.1)
============ ================= ================= =============================
The following table presents the Group's financial assets and
liabilities at fair value at 27 March 2020:
Level 1 Level 2 Level 3 Total
GBPm GBPm (unaudited) GBPm (unaudited) GBPm (unaudited)
(unaudited)
Assets/(Liabilities)
Derivatives (1.2) - - (1.2)
------------ ------------------ ----------------- -----------------------------
(1.2) - - (1.2)
============ ================== ================= =============================
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 27 March 2020 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 Onerous
& contract
aftercare Insurance Dilapid-ations provisions Total
GBPm GBPm GBPm GBPm GBPm
----------- -------------- ------------ -------
As at 27 March 2020 56.6 11.0 12.3 15.4 95.3
Utilised (3.7) (1.7) (0.5) - (5.9)
Impact of change in real
discount rate charged
to
profit and loss account 13.4 - - - 13.4
Charged to profit and
loss account 1.4 0.3 1.6 12.3 15.6
Unwinding of discount 0.7 - - - 0.7
Transfers from fixed/other
assets 0.1 0.7 (0.7) - 0.1
------------ ----------- -------------- ------------ -------
As at 25 September 2020 68.5 10.3 12.7 27.7 119.2
============ =========== ============== ============ =======
Provisions have been analysed between current and non-current as
follows:
As at
25 September
2020
GBPm (unaudited)
Current 27.2
Non-current 91.9
------------------------------
119.1
==============================
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. A number of estimate uncertainties
affect the calculation, including the impact of regulation,
accuracy of site surveys, transportation costs and changes in the
real discount rate. The provisions incorporate our best estimates
of the financial effects of these uncertainties, but future changes
in any of these estimates could materially impact the calculation
of the provision. Restoration costs are incurred as each site is
filled, and in the period immediately after its closure. The
provision incorporates the best estimate of the financial effect of
these uncertainties, but future changes in any of the assumptions
could materially impact the calculation of the provision.
Maintenance and leachate and methane control costs are incurred
as each site is filled and for a number of years post closure.
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.
Changes in the provision arising from revised estimates or
discount rates or changes in the expected timing of expenditures
that relate to property, plant and equipment are recorded as
adjustments to their carrying value and depreciated prospectively
over their remaining useful economic lives; otherwise such changes
are recognised within the income statement.
The associated outflows are estimated to arise over a period of
up to 60 years depending on the date of each site closure. In
determining the provision, the estimates for future expenditure
required to settle the obligation are inflated using longer term
inflation rates, and discounted using the nominal discount rate.
The rates utilised reflect the period of the obligation on a site
by site basis which varies between 10 and 60 years.
Long-term aftercare provisions included in landfill restoration
and aftercare provisions have been inflated and discounted using
the below nominal rates:
Inflation rate Discount rate
Period of obligation As at 25 As at 27 As at 25 As at 27
September March 2020 September March 2020
2020 2020
----------------- ------------------ ----------------- ------------------
5 years 2.4% 2.1% 0.6% 2.1%
----------------- ------------------ ----------------- ------------------
10 years 2.5% 2.3% 1.0% 2.1%
----------------- ------------------ ----------------- ------------------
20 years 2.5% 2.3% 1.5% 2.5%
----------------- ------------------ ----------------- ------------------
30 years 2.2% 2.0% 1.6% 2.4%
----------------- ------------------ ----------------- ------------------
60 years 1.9% 1.6% 1.5% 2.3%
----------------- ------------------ ----------------- ------------------
Insurance
The associated outflows are estimated to arise over a period of
up to five years from the Balance Sheet date.
Dilapidations and Onerous Contracts
Provision for dilapidations was GBP12.7 million (52 weeks ended
27 March 2020: GBP12.3 million, 26 weeks ended 27 September 2019:
GBP7.9 million) and GBP27.7 million (52 weeks ended 27 March 2020:
GBP15.4 million, 26 weeks ended 27 September 2019: GBP15.2 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. Within current provisions there is GBP8.1m relating to
the onerous contract on North Somerset which is expected to be
settled before the end of FY21.
12. Cash Flows from Operations
26 weeks 26 weeks 52 weeks
ended ended ended 27
25 27 March
September September 2020
2020 2019 GBPm (audited)
GBPm GBPm
(unaudited) (unaudited)
(Loss)/Profit for the
period (43.2) 20.6 45.6
Adjustments for:
Finance income (2.0) (2.4) (3.4)
Finance charges 9.1 10.7 21.0
Share in joint ventures 0.4 - 0.1
Taxation (9.3) 5.0 10.8
---------------------------- ---------------------------- -----------------------
Operating (loss)/profit (45.0) 33.9 74.1
Share based payments 1.1 - 3.0
Onerous contract
provisions 12.3 0.9 4.4
Impairment of assets 15.1 - -
Amortisation of
intangibles 18.9 9.2 17.9
Depreciation of property,
plant and equipment 43.6 40.4 82.6
Loss/(Profit) on disposal
of fixed assets 0.2 (0.6) (1.0)
Increase in inventories (2.5) (1.1) (1.7)
Decrease/(Increase) in
debtors 2.1 (38.9) (14.7)
Increase in creditors 16.2 22.0 32.3
(Increase)/Decrease in
financial asset (3.7) 3.0 9.2
Increase/(Decrease) in
provisions 10.0 0.6 (12.3)
---------------------------- ---------------------------- -----------------------
Total cash generated from
operations 68.3 69.4 193.8
============================ ============================ =======================
Reconciliation of net cash flow to movement in debt
26 weeks 26 weeks 52 weeks
ended Ended ended
25 27 27
September September March
2020 2019 2020
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Net (decrease)/increase in cash and cash
equivalents 13.4 (14.0) 21.6
Net decrease/(increase) in borrowings 101.8 (124.1) (135.4)
----------- ----------- ---------
Movement in net debt in the period 115.2 (138.1) (113.8)
Net debt at start of period (466.8) (353.0) (353.0)
----------- ----------- ---------
Net debt at end of period (351.6) (491.1) (468.8)
=========== =========== =========
Of the EVP preference liability, GBP6.3m has been included
within Reported Net Debt as it will be payable to EVP Preference
Shareholders irrespective of the outcome of the EVP dispute. The
remainder of GBP41.3m has been excluded on the basis that it will
only become payable subject to the outcome of the EVP dispute and
will be funded by recovery of funds from HMRC.
26 weeks 26 weeks 52 weeks
ended ended Ended
25 27 27
September September March
2020 2019 2020
GBPm (unaudited) GBPm (unaudited) GBPm (audited)
Cash and cash equivalents 101.2 52.2 87.8
Finance leases (258.1) (250.5) (258.0)
Bank loans (147.1) (245.2) (249.0)
EVP preference liability (6.3) (6.3) (6.3)
Reported net debt (310.3) (449.8) (425.5)
EVP preference liability (41.3) (41.3) (41.3)
Net debt (351.6) (491.1) (466.8)
13. Pension and Post Retirement Benefits
Defined benefit schemes
The amounts recognised in the balance sheet are determined as
follows:
As at As at
25 September 27 March
2020 2020
GBPm GBPm
(unaudited) (audited)
Present value of funded defined benefit obligation (578.5) (485.9)
Fair value of funded plan assets 645.8 599.3
Adjustment for the restriction in asset benefit (0.7) (1.7)
Adjustment in respect of GMPF Admission agreement 19.0 13.0
Net asset arising from defined benefit obligation 85.6 124.7
Reconciliation of opening and closing balances of the present
value of the defined benefit obligation
As at 25
September
2020
GBPm (unaudited)
Benefit obligation at beginning of period 485.9
Service cost 1.3
Interest cost 5.8
Contributions by plan participants 0.2
Net remeasurement gains - financial 97.2
Benefits paid (11.9)
Benefit obligation at end of period 578.5
Reconciliation of opening and closing balances of the fair value
of plan assets
As at 25
September
2020
GBPm (unaudited)
Fair value of plan assets at beginning of period 599.3
Interest income on scheme assets 7.3
Return on assets, excluding interest income 46.3
Contributions by employers 4.9
Contributions by plan participants 0.2
Benefits paid (11.9)
Scheme administrative cost (0.3)
Fair value of plan assets at end of period 645.8
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
27 March 2020 has not changed. Further, there have been no related
party transactions in the 26 weeks to 25 September 2020.
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 GBP85.8 million outstanding at
25 September 2020 (27 March 2020: GBP84.9 million, 27 September
2019: GBP85.3 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 GBP14.9 million (27 March 2020:
GBP19.8 million, 27 September 2019: GBP17.8 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, which is fully
explained in Note 16.
The Group is also engaged in a dispute with HMRC in relation to
the landfill tax treatment of sub-soils with low levels of
contamination from asbestos. At the date of signing of the accounts
the outcome is not certain, however the Group has received a
protective assessment of GBP8.5m, which has been paid and is
included in prepayments in the current year as the Group is
disputing this assessment.
16. EVP Related Items
The Group is engaged in a dispute with HMRC concerning
historical Landfill Tax.
HMRC claims that the Group is liable for GBP61.9 million 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 was heard by the First tier Tax Tribunal which found
in HMRC's favour. Biffa won the Upper Tax Tribunal for the EVP
case. However, HMRC have been grant leave to appeal to the Court of
Appeal which will be heard March 2021.
The Directors have taken independent advice and been granted
leave to appeal the decision.
The contested amount was paid to HMRC following the refinancing
of the Group upon its IPO in October 2016. In addition to the
payment of GBP61.9 million, the Group paid GBP1.7 million in
interest in the period ended 24 March 2017.
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 prepayment.
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 GBP47.6 million has been recognised in borrowings, an
accrual of GBP13 million has been recognised in non-current
liabilities. Of the liability of GBP47.6 million, GBP6.3 million
has been included within Reported Net Debt as it will be payable
irrespective of the outcome of the dispute.
The remaining balance of GBP41.3 million has been excluded from
Reported Net Debt.
17. Post Balance Sheet Events
On 9 October 2020, the Group acquired certain trade and assets
of Camo Ltd (trading as Simply Waste Solutions) for a total
consideration of GBP40.0m consisting of GBP35.0m upfront
consideration and GBP5.0m deferred consideration (dependant on
financial performance). The acquisition accounting remains under
review for the acquisition.
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