Biffa year-end results reveal "continued strong momentum", says group

Written by: Editorial staff | Published:

Integrated waste management specialist, Biffa has unveiled its year-end results for the 52 weeks ended 24 March 2017 with "strong growth in net revenue and underlying operating profit margin".

According to the Group, it has been a "pleasing year of organic and acquisitive growth; all four divisions performed in line with expectations". Net Revenue is reported to be up 8.3% to £898.8m (2016: £830.3m) (3.3% organic and 5.0% acquired) with an underlying EBITDA up 12.6% to £137.7m (2016: £122.3m). The company is also said to enjoy strong cash flow and capital structure with an underlying free cash Flow of £28.8m (2016: £35.9m) and a year-end reported net debt of £246.1m (1.8x Underlying EBITDA).

Biffa reported continued momentum in delivering strategy with five acquisitions completed (total £25.7m investment) with strong pipeline of opportunities along with further infrastructure investments made. An agreement has been signed with energy from waste (EfW) developer and operator Covanta to jointly explore two potential EfW projects on an exclusive basis

The board said its expectations for the year ahead are unchanged.

Underlying Group results

2017

£m

2016

£m

Change

£m

Change

%

Revenue

990.4

927.5

62.9

6.8

Net revenue

898.8

830.3

68.5

8.3

EBITDA

137.7

122.3

15.4

12.6

EBITDA Margin

13.9%

13.2%

Operating Profit

73.8

62.5

11.3

18.1

Operating Profit Margin

7.5%

6.7%

Profit before Tax

45.1

21.2

23.9

112.7

Profit after Tax

35.8

10.2

25.6

251.0

Other items net of tax

(46.7)

(15.3)

(31.4)

Statutory Profit / (Loss) after Tax

(10.9)

(5.1)

(5.8)


Ian Wakelin, chief executive of Biffa, said: "Biffa delivered a strong performance in the year that also saw our successful listing on the main market of the London Stock Exchange. In the year we completed five acquisitions and have a strong pipeline of acquisition opportunities. At the same time, we have continued to take actions to improve the efficiency of our operations, get closer to our customers and leverage new opportunities for investment.

"We are also pleased to have signed an exclusive partnership with Covanta, a developer and operator of energy recovery facilities (ERFs) to explore the potential development of two large-scale ERFs in Leicestershire and Cheshire. The UK has a significant shortage of energy from waste treatment capacity and we look forward to exploring this opportunity further. Our expectations for the year ahead remain unchanged."

DIVISIONAL PERFORMANCE

Net Revenue

£m

Underlying Operating Profit

£m

2017

2016

Change %

2017

2016

Change %

I&C

522.1

479.2

9.0

38.5

27.3

41.0

Municipal

182.2

157.7

15.6

11.0

9.0

22.2

RR&T

107.2

104.7

2.4

11.6

5.4

114.8

Energy

87.2

88.8

(1.8)

29.9

34.5

(13.3)

TOTAL

898.8

830.3

8.3

73.8

62.5

18.1

Industrial & commercial

In its industrial & commercial divisions, Biffa reported strong organic revenue growth of 5.9% driven by new customer wins including Gala Bingo, Coca Cola Enterprises and Engie.

Acquisition revenue growth of 3.1% is said to have been driven by five acquisitions during the year including Cory (c.£8m annualised) and Blakeley’s (c.£8m annualised).

A "significant margin enhancement" to 7.4% from 5.7% is claimed to have been driven by the delivery of acquisition synergies, optimisation of disposal costs and enhanced customer pricing sophistication and discipline.

The Group said the outlook is positive due to continued revenue and margin growth along with a strong acquisition pipeline.

Municipal

Biffa also reported a "solid performance in a competitive market" in its municipal division with a net revenue growth of £24.5m or 15.6% to £182.2m, driven predominantly by the acquired Cory contracts (2.0% organic and 13.6% acquired).

Underlying operating profit is reported to have been increased by 22.2% to £11m with margin improvement from 5.6% to 6.0%.

The Manchester City contract is said to be "performing well" while the North Somerset contract started in March 2017 (c.£7m revenue pa). According to Biffa, the outlook is "stable".

Resource recovery & treatment

With regard to resource recovery & treatment, the Group reported a net revenue increase of 2.4% to £107.2m and an underlying operating profit margin expansion to 5.8% from 2.7% driven by improved operational performance in materials recycling facilities (MRFs) and recovery of commodity prices. Landfill volumes are said to be "stable with prices firmed".

New projects in soil treatment and aggregates recycling are reported to have contributed to the results while the expansion of the HDPE polymer plant in Redcar began commissioning on schedule toward year-end.

Once again Biffa said the outlook is positive due to the contribution of new facilities more than offsetting a modest landfill decline.

Energy

A fly in the ointment is a decline in the energy's division net revenue which is reported to have decreased "in line with expectations" by 1.8% to £87.2m due to a reduction in landfill gas yields of 7.3% and wholesale energy prices. The underlying operating profit margin is said to have decreased from 38.9% to 34.3% due to expected reduced landfill gas electricity volumes and pricing.

According to the Group, the first full year of full operations at West Sussex: EPC and client contract issues have been resolved "satisfactorily", while the agreement signed with Covanta is expected to explore the possible development of two energy recovery facilities.

With regards to the outlook for the energy division, LFG volumes are said to be reducing "as expected" (c.7% - 7.5% pa) with wholesale electricity prices (£18.5m revenue in FY17) c.95% hedged at £41.93/MWH.


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