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Biffa plc - Publication of Annual Report and Accounts 2020

RNS Number : 1606Q
Biffa plc
17 June 2020

Biffa plc

(the 'Company')



Publication of Annual Report and Accounts 2020 and

Notice of Annual General Meeting



The Company's Annual Report and Accounts for the year ended 27 March 20201 (the 'Annual Report') and Notice of Annual General Meeting 2020 (the 'Notice of Meeting') have been published on the Company's website and are available to view at www.biffa.co.uk/investors, a hard copy version of the Annual Report and Notice of Meeting will be sent to those shareholders who have elected to receive paper communications.


In compliance with Listing Rule 9.6.1, the Annual Report, Notice of Meeting and Proxy Form for the 2020 Annual General Meeting, to be held on Thursday 16 July 2020, will be available for inspection at the National Storage Mechanism at data.fca.org.uk.


The final results for the year ended 27 March 2020, released by the Company on 5 June 2020 include the information required pursuant to Rule 6.3.5 of the UK Disclosure Guidance and Transparency Rules, excepting publication of the responsibility statement of the Directors in respect of the Annual Report, a description of the principal risks and uncertainties facing the Company, and the related party transactions carried out by the Company and its subsidiaries during the year, which are detailed below. Page and note references in the text below refer to page numbers in the Annual Report and notes to the financial statements.


Sarah Parsons

Company Secretary


17 June 2020






Michael Topham, Chief Executive Officer

Richard Pike, Chief Financial Officer

[email protected]



Media & Analysts

Houston PR

[email protected]


Registered in England and Wales:



Registered office at:

Coronation Road,


High Wycombe,


HP12 3TZ




1 With respect to the table on page 86 of the Annual Report regarding Substantial Shareholdings, in addition to the 8.58% held directly by Avenue Europe International Management LP, Avenue also held 7.33% indirectly as at 4 June 2020, as disclosed in RNS number 8016O.







Statement of Directors' Responsibility under the Disclosure and Transparency Rules


Pursuant to Rule 4.1.12 of the Disclosure and Transparency Rules (DTRs) each of the Directors, the names and functions of whom are set out on pages 42-43 of the Annual Report, confirm that to the best of their knowledge:


■          the Financial Statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group and the Company;

■          the Strategic Report and the Directors' Report include a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties that they face; and

■          the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy.



Related Party Transactions

There have been no material related party transactions in the 52 weeks ended 27 March 2020 (2019: nil) except for key management compensation as set out in the Directors' Remuneration Report.

Details of the Directors' remuneration are set out in the Directors' Remuneration Report on pages 62-83. There have been no related party transactions with any directors in the year or in the subsequent period.

During the year to 27 March 2020, the Group invested £5m in Newhurst ERF Limited a joint venture that the Group holds 50% share in through Newhurst ERF Holding Limited. This is therefore a related party of Biffa Plc. On financial close the Group received from the joint venture reimbursement for development costs incurred. There was one other related party transaction in the year. The Group issued loan notes of £2.2m to Newhurst ERF Holding Limited, the parent company of Newhurst ERF Limited. Both parties can redeem the notes at any time. Annual rate of interest on the notes is eight per cent. This whole balance remained outstanding at year end. None of the amount is deemed to be uncollectable and no expenses have been recognised during the period in respect of bad or doubtful debts in this regard.

No Directors held any material interest in any contract with the Company or the Group in the year or subsequent period to 27 March 2020.

The Group has made £10.2m (2019: £9.2m) contributions to the pension schemes.


Principal Risks and Uncertainties         Key: No change: -     Reduced: â     Increased: á     New: «

Risk title/description

Risk movement
and Impact

Mitigating actions

Changes in year

Strategic objective

Changes in Government policy and legal and regulatory compliance

The Group operates in a highly regulated industry and any changes to Government policy, standards or regulatory compliance requirements could have an adverse impact on the Group's operations and results.


·  Operational

·  Financial

·  Reputational

·  Regulatory

Experienced and qualified environmental support experts working across all operating divisions.

Representation on the Environmental Services Association and other external bodies; liaison with policy makers and Regulators at national and local levels; responses to Government/regulatory consultations and sustainability reporting.

Environmental compliance strategy in place including annually reviewed targets and actions at local, divisional and Group levels.

Established compliance processes in place to manage other regulatory compliance risks, such as anti-bribery and corruption, GDPR, modern slavery, competition and vehicle operating licences.

Founding member of the Slave Free Alliance and has implemented several initiatives, including a manager's guide to modern slavery, to raise awareness across the business.

Training for senior leaders on modern slavery, anti-bribery and corruption, GDPR and competition.

Published reports (Reality Check series) on Recycling Collections Guide and on Managing Waste Plastics.

10-year Sustainability Strategy "Resourceful, Responsible" developed and launched in March 2O2O, which helps link the commercial strategy with sustainability/ESG strategy and targets. These are in line with UK Government environmental policy and objectives, as well as the United Nations Sustainable Development Goals.


Health & Safety (H&S)

Biffa's operations present inherent H&S risks to our employees, our customers and the wider public.

Violations of H&S laws/ regulations could have a material adverse effect on Biffa's business and reputation.


·  Reputational

·  Regulatory

·  Financial

Group H&S function reports to the CEO.

Active and regular engagement by senior management including weekly reporting
and calls with the Group Executive Team.

Inclusion of H&S targets and objectives within Group Balanced Business Plans (BBP) with one of the five pillars being 'Safe and Sustainable'.

Embedded policies, standards and procedures in place across Biffa for the systematic control of significant H&S risks.

Primary Authority relationship with Hampshire Fire and Rescue Service enables access to advice and counsel on fire risk issues.

Management system transitioned to ISO 14001 and ISO 9001:2015.

New H&S Programme - Safer Together launched.

Existing H&S standards updated and incorporated into a new Group Integrated Management System.

New driver training programme - Streetwise developed which focuses on defensive driving behaviours.

Wellbeing programme delivered supporting key topics such as mental health.


Mergers & Acquisitions (M&A) strategy and delivery

Biffa faces risks arising from its acquisition strategy, such as increased competition for acquisition targets or a lack of suitable targets. Additionally, acquisition integration risks and issues could arise, impacting the delivery of expected benefits, either within expected timeframes or to the extent anticipated.


·  Financial

Group delegated authorities for the review/approval of all transactions by senior management, Investment Committee and the Board.

Dedicated corporate finance expertise in place together with experienced Biffa subject matter experts as senior stakeholders for the acquisition process.

Board and executive level review and update included in monthly Board report summarising pipeline of identified potential targets.

Due diligence undertaken for all M&A transactions, including use of external advisers depending on target value and complexity. A standardised approach using an established valuation model is in place with all transactions reviewed/approved by the Investment Committee and (where appropriate) the Board.

Project team kept in place until integration phase completed. Post-acquisition reviews to track benefit delivery with financial benefits embedded within financial planning processes (e.g. forecasts and budgets).

During the year we have continued our M&A strategy to support growth and completed five small acquisitions.

We have also worked to integrate the previous year's acquisitions including the internalisation of SWR customer collections previously outsourced. This activity will complete next year.

Post COVID-19 we anticipate returning to a strong pipeline of opportunities.




Long-term contracts
and tendering

The Group is exposed to risks inherent in long-term fixed-price contracts, in particular in its Municipal division and related operations. Risks include inaccurate long-term cost estimates due to changes in the external operating environment and market dynamics that lead to material deviations from initial underlying assumptions.


·  Financial

·  Reputational

Group delegated authorities for the review/approval of bids by senior management, the Investment Committee and the Board (depending on bid size).

Material bids are compiled by dedicated development teams with significant expertise and experience. They are supported by subject matter experts as appropriate.

Protection from change of law or force majeure for unforeseen circumstances is designed into contracts.

A contract risk framework is in place to identify key commercial/legal risks and confirm through the governance process that these have been considered and mitigated.

Continued focus on the sales governance process including:

·  The development of the contract risk framework to formalise the governance approach to key commercial/legal risks, which has been approved by the Board.

·  Improved capacity and capability across our project management and mobilisation team facilitating a culture of continuous improvement.

·  Restructure of the commercial/ sales function, integrating leadership under the new Municipal Commercial Director, but also adding additional support in both the commercial and business development teams.



A signification reduction in demand for I&C Collection services, as many customers are forced to cease or drastically reduce trading, may have an adverse impact on Biffa's operating performance, revenues and results of operations.

In addition, the Group expects reductions in volumes into some processing facilities in the R&E division and impacts to all business operations from workforce illness or enforced absence.


·  Financial

·  Operational

·  Reputational

The Group has introduced measures to reduce costs, including furloughing over 1,500 employees; pay reductions being taking by the Board, the Group Leadership Team and the broader leadership group; and suspension of bonuses and pay increases.

All M&A has been suspended and non-essential capital expenditure that has not already been committed for FY21 has been put on hold. In addition, payment deferrals have been negotiated where appropriate and meaningful in areas such as indirect taxes, pensions, lease liabilities and material supplies.

Covenant amendments and additional liquidity headroom have been agreed with the Group's banks.

An internal response team has been set up to ensure we support the health and wellbeing of our colleagues, manage business continuity, provide clear and timely communications and minimise service disruption.

All staff who are able to have been advised to work from home and social distancing applied across our workplaces.

Internal communications and engagement have been key with CEO vlogs, internal appreciation campaigns and our employee App, Biffa Beat all contributing.


See pages 6 to 7 of the Annual Report and Accounts for more information.




Business continuity, cyber security and IT resilience

A significant disruption to Biffa's infrastructure, including IT systems, could potentially have an impact on the activity of the Group's customers, such as increased billing times, interruptions to collection operations and processing logistics, and additional costs.

Additionally, the theft, loss, destruction, misappropriation or release of sensitive and/or confidential information could result in business disruption, negative publicity or brand damage.


·  Financial

·  Reputational

·  Operational

Crisis management and emergency response plans in place for key sites and operations.

Server infrastructure supporting key IT services hosted in Microsoft Azure Cloud providing resilience, failover and backup services.

ISO 27001 certification (Information Security) in place.

Externally hosted business continuity recovery sites in place for key administrative and support functions with a tri-annual testing programme in place.

Intrusion detection in place and a cloud-based 'always on' security service provided by Microsoft protecting against key cyber threats.

Cyber security education initiatives taken place.

Continued testing and improvement of Biffa Business Continuity arrangements throughout the year.

Business continuity capability demonstrated during COVID-19 crisis whereby the majority of contact centre and head office functions enabled to work from.



Economic environment/Brexit

Economic conditions in the UK may have an adverse impact on Biffa's operating performance, revenues and results of operations. The Group is exposed to political, social and macroeconomic risks relating to the UK's exit from the EU.

Any economic weakness that leads to reduced volumes of waste and recyclate will adversely impact the Group's business. Furthermore, a deterioration in macroeconomic conditions may also result in increased competitive pricing pressure and increased customer turnover.


·  Financial

Biffa has revenues and costs that are either directly or indirectly impacted by the value of Sterling relative to key currencies such as the US Dollar or the Euro. This provides some degree of offset and natural hedge.

We enter into forward contracts for the sale of electricity and to mitigate short-term currency exposures, improving earnings visibility in the short term.

Biffa provides services across the breadth of the UK economy and to customers in the public and private sectors. The breadth of customers offers a degree of protection against economic pressures that may affect specific areas of the economy.

The Group has assessed the potential impact of certain Brexit scenarios on its activities and the Board is satisfied that there is unlikely to be a net material impact on the Group.

Whilst we continue to monitor this risk, we are confident that our existing mitigations will enable the Group to minimise the impact of any weakening in economic conditions.




People - attraction, succession, retention

The loss of the services of a number of Executive Directors, senior management or key employees, or if the Group encountered labour shortages or was unable to attract people for core business roles, could have a material adverse effect on Biffa's business results, operations, financial condition and prospects.


·  Operational

·  Financial

Reward framework for employees and managers competitively aligned to the market, including Performance Share Plan for senior personnel and Sharesave scheme available to all employees.

Talent and management development programmes deployed at senior levels and progressively to other levels going forward.

Ongoing review of the recruitment and retention of drivers.

Established apprenticeship programme.

COVID-19 response team set up to ensure we support the health and wellbeing of our colleagues, manage business continuity, provide clear and timely communications and minimise service disruption.

Introduced an Advanced Leadership Programme.






Strategic project implementation

Failure to deliver strategic projects, such as Energy from Waste (EfW) and Project Fusion. EfW increases Biffa's residual waste treatment capabilities providing a secure and cost-effective disposal solution for the I&C business. Fusion is focused on our products and services, how they are sold and delivered, the technology used and the online services offered to customers. As with any such projects, there are risks that the project fails to deliver the anticipated improvements and/or benefits for the budgeted investment, adversely impacting reputation and operating results.


·  Operational

·  Financial

Board and Group Executive Team engagement and leadership.

Selected software is a proven 'off the shelf' product.

Independent programme assurance.

Change network in place to ensure line management ownership of Fusion.

Proven EfW technology, substantial UK and worldwide reference plants with > 30 operational in the UK treating in excess of 10m tonnes per annum.

EfW joint venture providing complementary skill sets and experience to minimise risk.

Limited recourse project structure.

Fusion transformation project has made sound progress throughout the year but has been slowed down during COVID-19 crisis. The project will resume following the resolution of the crisis.

Newhurst EfW has achieved financial close, securing a fixed programme and fixed price contract.





Finance availability/investment

If the Group were to fail to comply with any of the financial or non-financial covenants in its credit facilities (due, for example, to deterioration in financial performance), it could result in an event of default and the acceleration of the Group's obligations to repay those borrowings, increased borrowing costs or cancellation of certain credit facilities.


·  Financial

Significant and flexible bank funding facility with substantial headroom to enable the Group to progress strategic priorities and accommodate any downside performance risk.

£350m unsecured revolving credit facility, expiring in March 2025 but with an option to extend for a further year. As at the end of the year, £98m of the facility was undrawn.

In addition to the bank funding facility, the Group has over £150m of lease liabilities, with undrawn funding of over £70m at the end of the year.

Ongoing monitoring of financial and non-financial covenants with summary updates to the Board.

Covenant amendments and additional liquidity headroom have been agreed with the Group's banks in response to the COVID-19 crisis.






Commodities market
and pricing volatility

Biffa produces significant volumes of recycled commodities for re-sale. Commodities produced include various paper grades, card, plastics, and ferrous and non-ferrous metals.

In addition, Biffa generates power from renewable sources and changes to electricity export prices impact revenues and profits achieved.

Markets for these recyclate products have individual supply and demand dynamics impacting both price and availability of off-take.

Following China's decision to ban mixed paper imports in 2018, other Far East markets have tightened quality standards, and in some instances also banned imports. This has put further downward pressure on prices with an oversupply of material in the market and made it more challenging to place lower quality material.



·  Financial

·  Operational

Ongoing monitoring and improvements to product quality within recycling processes.

Off-taker strategy review to limit dependency, where able, on the Chinese market.

Commodity price risk sharing within long-term commercial contracts.

Working with key customers (e.g. Local Government) to agree gate fees to reflect any increased costs and also dual collection methods.

Power price hedging policy in place, which is regularly reviewed.

Route to market Power Purchase Agreement with top tier off-taker gives off-take certainty and credit worthiness.


Investment in sorting technology and process improvements to ensure we can continue to supply overseas markets. Supply agreements now in place with domestic processors to enable a proportion of the material to remain in the UK.

Biffa's investment in plastic recycling has significantly reduced reliance on exports, with the majority of recovered plastics being processed to end destination internally.

Continued focus on minimising exposure to recycle commodity price fluctuations by risk sharing with our local authority customers. In FY 2019/20, we mitigated 58% of commodity price risk through this approach.








Strategic/competitive threat to business model

Market disruption from
the application of new technology and the advent of new business models could change the waste supply chain and adversely impact Biffa's established operating asset base of a traditional collection network and processing facilities.


·  Financial

·  Operational

Internal business innovation group focuses on market developments and to act as an incubator for ideas and new business models.

Continual competitor analysis to consider threats and changes to the landscape.

Annual strategy review to ensure that Biffa business model remains current and competitive.

Customer surveys to ensure that the Biffa offer remains relevant and compelling.

Ongoing investment in and improvement of the customer experience through digitisation, improved processes and management information.

Several innovative concepts have been developed as potential projects and evaluated by the executive team.











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Quick facts: Biffa PLC

Price: 203.5

Market: LSE
Market Cap: £616.61 m

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