Biffa Plc - Biffa plc Preliminary Results FY2019

RESULTS FOR THE 52 WEEKS ENDED 29 MARCH 2019

 

Leading in UK Sustainable Waste Management

 

 

Michael Topham, Chief Executive of Biffa, said:

 

''I am pleased to report another year of strong performance by Biffa. We have delivered a good set of financial results for the year while making further strides in the delivery of our strategy.

 

Our I&C Division performed particularly well.  We've had another very strong year of organic and acquisition growth coupled with a further reduction in customer churn. When we combine this with our unrelenting focus on driving operational performance improvement, this feeds through to improved underlying I&C margins.

 

I&C completed seven acquisitions spread across a wide area of the country, demonstrating the strength of our platform into which we can consolidate acquisitions. We have now completed 17 acquisitions since our IPO in October 2016. The pipeline of potential targets remains strong, and we expect to make further acquisitions in the coming year.

 

We've also successfully weathered the headwinds associated with the Chinese import restrictions on commodities and the recent market impacts in our Municipal division. Both of these areas, which have put downward pressure on our financial performance, have now stabilised.

 

We are proud of our leading plastics recycling capabilities and are excited at the role we are playing in this area. Biffa Polymers has delivered another strong year of progress and through our industry leading HDPE food grade production plant, 85% of milk bottles in the UK now contain Biffa recycled material.  We're progressing with the PET plastic bottle recycling facility investment in Seaham, County Durham, and we can also announce today that we have committed to expand the capacity and scope of the project, increasing the total investment to £27.5m. This will take our combined plastics processing capacity to c.120,000 tonnes p.a.

 

Good progress has been made in evaluating the investment opportunities we have in energy from waste, alongside our partners Covanta, and we expect to be able to announce financial completion on both projects in the near term. The UK has a significant shortage of energy from waste treatment capacity and we are well placed to facilitate and invest in these much-needed facilities.

 

We support the ambition contained in the Government's recently announced strategy for our industry. The strategy is both supportive of our current business positioning and the direction of travel in which we are taking the company. We will continue to work closely with policy makers and are ready to help deliver the vision we all share.

 

Our strategic priorities are clear - growing our I&C collections business and investing in recycling and energy from waste assets - and in view of this I have decided to reorganise the Group into two divisions - Collections and Resources & Energy. This will provide a more efficient, focused structure and position us for growth in the areas where we have advantaged positions.

 

We are making significant progress in positioning the business for future success in an era where how we manage our waste has never been more important and I would like to thank the entire Biffa team for their continued hard work and dedication. We have made a solid start to the financial year and look forward with confidence.''

 

 

 

FINANCIAL HIGHLIGHTS

 

 

 

Group Results

 

52 weeks 2019

£m

53 weeks 2018

£m

Change

£m

Change

%

Statutory Revenue11

1,091.2

1,076.7

14.5

3.3*

Net Revenue1, 11

1,030.8

1,006.1

24.7

4.4*

Underlying EBITDA2

   150.7

  150.0

 0.7

0.5

Underlying EBITDA Margin3

  13.8%

   13.9%

 

 

Underlying Operating Profit4

     81.7

    81.2

 0.5

0.6

Underlying Operating Profit Margin3

       7.5%

      7.5%

 

 

Underlying Profit before Tax5

     64.0

    59.6

 4.4

7.4

Other items before tax

     (42.5)

  (21.3)

 

 

Statutory Profit before Tax

           21.5

   38.3

 

 

Tax

           (3.5)

    (7.2)

 

 

Statutory Profit / (Loss) after Tax

          18.0

   31.1

 

 

 

                                                                                                                       

Underlying EPS6

       20.6

19.2

 

7.3

Statutory EPS

       7.2

      12.4

 

 

Total dividend per share

          7.20p

     6.70p

 

7.5

Underlying Free Cash7 Flow

       47.8

44.4

3.4

7.7

Reported Net Debt8

     310.7

279.0

31.7

 

Reported Net Debt: EBITDA9

       2.1x

       1.9x

 

 

 

*Note: on a comparable 52 week period: 52 week period 

 Underlying performance measures are not defined within accounting standards and maybe applied differently by other organisations.

 

Performance Highlights:

 

-  Underlying growth in Net Revenue of 4.4% to £1,030.8m (2018: £1,006.1m). 1.5% organic* and 2.9%* acquired. Underlying growth in Statutory Revenue of 3.3%* to £1,091.2m (2018: £1,076.7m)

 

-  Growth in Underlying EBITDA of 0.5% to £150.7m, and Underlying Operating Profit of 0.6% to £81.7m; having successfully absorbed the impact of the China import restrictions on commodity prices and pressures in the Municipal division.

 

-  Underlying PAT up 7.5% leading to Underlying EPS of 20.6p (statutory EPS of 7.2p) and an increased final dividend of 4.9 pence per share. Reduction in statutory PAT and EPS primarily due to one off exceptional items in relation to onerous contracts, legacy loan amortisation and GMP provisions. 

 

-  Underlying Free Cash Flow up 7.7%. Following 7 acquisitions in the year, year-end Reported Net Debt up to £310.7m and leverage of 2.1x. Previously guided leverage range at 2.0-2.5x (on a pre-IFRS16 basis) Reported Net Debt : EBITDA remains unchanged.

 

The Board's expectations for the year ahead remain unchanged.

 

 

 

OPERATING PERFORMANCE

 

 

Industrial & Commercial

 

 

FY19

FY18

Change %

Revenue

608.3

574.0

8.0*

Underlying EBITDA

87.4

77.2

13.2

Underlying Operating Profit

55.6

48.1

15.6

Underlying Operating Profit Margin

9.1%

8.4%

 

  *Note: on a comparable 52 week period: 52 week period

 

·     

Another year of exceptional performance

·     

Underlying organic revenue growth of 3.2%* is ahead of both H1 run rate and last year, with new customer wins including Busy Bees, National Trust and Kingspan Group

·     

Key contract renewals include John Lewis Partnership, Stagecoach and Dairy Crest

·     

Further reduction in customer churn

·     

Underlying Acquisition revenue growth of 4.8% driven by 7 acquisitions in the year including Weir Waste Services Limited (c£16m annualised) and Specialist Waste Recycling Limited (c£40m annualised)

·     

Underlying Profit up 15.6% to £55.6m, driven by ongoing excellence in customer service and retention, delivery of acquisition synergies and optimisation of costs

·     

FY20 outlook of continued organic and acquisition revenue growth, ongoing focus on incremental margin improvement and a solid acquisition pipeline

 

 

Municipal

 

 

FY19

Restated

FY181

Change %

Revenue

164.6

174.8

(4.0)*

Underlying EBITDA

16.6

24.5

(32.2)

Underlying Operating Profit

4.7

11.2

(58.0)

Underlying Operating Profit Margin

2.9%

6.4%

 

  *Note: on a comparable 52 week period: 52 week period

1 FY18 has been restated to exclude the Leicester City Council contract which has been transferred to the Energy division with effect from the start of FY19

 

·     

Challenging year, but performance has stabilised

·     

Revenue and margin declined, principally as a result of contract attrition

·     

Underlying EBITDA and Operating Profit also impacted by contract attrition, as well as fuel and wage cost pressures and underperforming contracts

·     

Ongoing loss-making contracts require onerous contract provision per IAS 37

·     

FY20 outlook of market conditions stabilising at lower profitability levels, with underlying business performance expected to be broadly flat year on year. We are taking an extremely disciplined approach to new bids and we have recently seen Councils agreeing to fund capex in various bids

 

 

Resource Recovery & Treatment

 

 

FY19

FY18

Restated**

Change %

Revenue

215.4

220.3

(0.3)*

Net Revenue

154.9

149.7

5.5*

Underlying EBITDA

28.7

32.1

(10.5)

Underlying Operating Profit

11.1

13.7

(18.9)

Underlying Operating Profit Margin

5.2%

6.2%

 

   * Note: on a comparable 52 week period: 52 week period

**2018 net revenue has been restated to adjust for misstated internal Landfill Tax revenues which had led to net Revenue being understated

 

·     

Solid performance given external headwinds

·     

Underlying Net revenue growth of 5.5% was achieved primarily as a result of growth in the Polymers business

·     

Underlying profit margin decreased from 6.2 % to 5.2%, due to the China import restriction impact on commodity prices and expected landfill volume declines (partly site closures and partly normalised trend) being offset in part by a further year of progression in Polymers

·     

PET plant progressing well, and commissioning expected in Spring 2020 and we have committed to expand capacity and scope for a combined investment of £27.5m

·     

FY20 outlook of landfill remaining solid, underpinned by higher rail volumes, further run rate improvement towards positive EBITDA in the MRF's, strong progression in Polymers performance but with commodity prices remaining at lower than historic norms

 

 

Energy

 

 

FY19

Restated

FY181

Change %

Revenue

102.9

107.6

(2.5)*

Underlying EBITDA

32.9

32.3

1.9

Underlying Operating Profit

27.2

25.6

6.3

Underlying Operating Profit Margin

26.4%

23.8%

 

  *Note: on a comparable 52 week period: 52 week period

1 FY18 has been restated to include the Leicester City Council contract which has been transferred to the Energy division with effect from the start of FY19

 

·     

Solid performance boosted by ROC income

·     

The underlying reduction in Net revenue of 2.5%* was due to improved pricing and ROC income offset by expected reductions in both LFG volumes and WSCC disposal (pass-through) revenues

·     

Modest Underlying Profit improvement (rather than normal downward trend) due to ROC income levels

·     

Significant focus on EfW during the period and we expect to reach financial completion on both projects in the near term

·     

Ongoing loss making contract requires onerous contract provision per IAS 37

·     

FY20 outlook of continuing step down in LFG volumes in line with expectations being partially offset again by improved (hedged) pricing levels (92% sold @ £49.44/MWh)