Biffa : FY21 Results

Biffa plc

RESULTS FOR THE 52 WEEKS ENDED 26 MARCH 2021

RESILIENT PERFORMANCE, RESOURCEFUL FUTURE

1 June 2021

Biffa plc ('Biffa', 'the Group' or 'the Company') (LSE: BIFF), the UK's leading sustainable waste management company, announces its results for the 52 weeks ended 26 March 2021.

Michael Topham, Chief Executive of Biffa, said:

"I'm extremely proud of the way the entire team responded in what has been a defining year for Biffa. We were able to protect our people and continue to provide the essential services on which society depends, while taking decisive action to strengthen the finances of the Group and continue to invest for the future. It has been a year none of us want to repeat but certainly one which showed us at our best.

We are pleased to have been able to end the financial year with results ahead of our expectations. We are strongly positioned for the post-pandemic recovery with leadership positions in our core markets, a well-developed investment programme and exciting growth opportunities ahead, leveraging the Group's unique position at the heart of the circular economy.

Adding to the progress we made in the year, the recent announcement of our agreement to acquire Viridor's collections business and certain recycling assets is another significant step for Biffa, further accelerating the delivery of our growth strategy."

Business Highlights

• Swift and decisive action taken from the outset of the pandemic focusing on protecting the health, safety, and wellbeing of our people, ensuring minimal disruption for customers and protecting the Group's financial strength
• Continued strategic delivery, supported by equity raise in June 2020, with just over £350m since committed and £425m committed since the September 2019 Capital Markets Day across our core investment areas:
  o Reduce: The Company Shop Group ('CSG') acquisition expanded our offering into commercial surplus redistribution and improves our capability to support customers' waste reduction and recycling targets
  o Recycle: Progress in consolidating Biffa's leading position in plastics recycling with additional investments in Seaham, Washington, and Aldridge
  o Recover: Newhurst and Protos energy from waste ('EfW') construction projects commenced and are on track
  o Collect: Simply Waste and Ward Industrial and Collections (I&C) acquisitions strengthened Biffa's leadership position in the I&C market
• Strategic delivery further accelerated by recent announcement of the agreement to acquire the Collections business and certain Recycling assets from Viridor for a cash consideration of c. £126m, plus c. £17m of IFRS 16 leases assumed. This expands Biffa's I&C collections business and recycling capabilities, broadening our customer base, and solidifying our leading position in UK sustainable waste management
• Further delivery of our sustainability strategy including the launch of the UK's largest fleet of electric refuse vehicles in Manchester and a reduction of greenhouse gas emissions by 17% over the last year and 40% over the last five years
• Strongly positioned for post-pandemic recovery with leadership positions in core markets and a well- developed investment programme, underpinned by an encouraging recent trading performance; full year expectations (excluding impact of Viridor transaction) unchanged

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Financial Highlights

• A resilient financial performance achieved in the year despite the impact of pandemic lockdowns
• The Collections division was significantly impacted in H1 due to temporary closures of many I&C customers with Q1 volumes dropping to c. 50% of the prior year, followed by a solid recovery across the balance of year, with full year volumes at 82% of the prior year
• The Resources & Energy ('R&E') division was particularly impacted in its Inerts business which also saw volumes drop to c. 50% of prior year levels in Q1. Volumes subsequently recovered to c. 80% of prior year. Other short-term pandemic related impacts included reduced commercial food waste volumes and depressed plastic prices
• Due to proactive measures implemented by the Group, Group EBITDA margin excluding adjusting items held up well at 13.3% (FY20 15.0%) despite the markedly lower revenues and volumes
• Group EBIT excluding adjusting items at £44.2m (FY20 £90.5m) was marginally ahead of the guided range of profit messaged in the 3 March 2021 Trading Update
• Statutory loss before tax of £52.8m (FY20: profit £56.4m). The main items contributing to this total were asset impairment charges relating to the Poplars AD plant (£8.2m) and the IT replacement project (£13.7m); an uplift of the onerous contract provisions of £10.3m; the decrease in the real discount rate on provisions of (£20.6m); and an increased level of amortisation of acquisition intangible assets (£27.4m); these are not included in the business performance excluding adjusted items metrics
• Statutory leverage (3.3x) and bank leverage ratio (2.2x) reflect another period of strong cash management. This leaves the balance sheet well positioned ahead of the Viridor acquisition, with bank leverage expected to return to c. 2.0x within 12-18 months of completion of the acquisition
• Financial performance underpinned by significant support and sacrifice from key stakeholders including dividend and bonus suspension, pay reductions for leadership, pay freezes and furlough support of £12.0m for up to 1,800 employees furloughed for various periods in the year. Due to the impacts of Covid-19 on the business, the Board is not recommending a final dividend for the FY21 year

Financial Summary
Business Results excluding
FY21	FY20	Change	Change
adjusting items
	£m	£m	£m	%
Statutory Revenue	1,042.0	1,163.1	(121.1)	(10.4)
Net Revenue1	988.1	1,102.8	(114.7)	(10.4)
EBITDA excluding adjusting	138.2	174.0	(35.8)	(20.6)
items2
EBITDA excluding adjusting	13.3%	15.0%	n/a11	n/a11
items margin
Operating Profit/(Loss)	44.2	90.5	(46.3)	(51.2)
excluding adjusting items3
Operating Profit/(Loss)
excluding adjusting items	4.2%	7.8%	n/a11	n/a11
margin4
Profit/(Loss) before Tax	29.0	71.7	(42.7)	(59.6)
excluding adjusting items5
Free Cash Flow excluding	33.2	53.6	(20.4)	(38.1)
adjusting items 6
Reported Net Debt 7	(456.8)	(425.5)	(31.3)	(7.4)
Reported Net Debt: EBITDA 8	3.3x	2.4x	n/a11	n/a11
EPS excluding adjusting items	7.7p	23.1p	(15.4p)	(66.8)

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Statutory Results	FY21	FY20	Change	Change
	£m	£m	£m	%
Statutory Revenue	1,042.0	1,163.1	(121.1)	(10.4)
Statutory Operating	(37.6)	74.1	(111.7)	(150.7)
Profit/(Loss)
Statutory Operating	(3.6%)	6.4%	n/a11	n/a11
Profit/(Loss) Margin
Statutory Profit/(Loss) before	(52.8)	56.4	(109.2)	(193.6)
Tax
Statutory Profit/(Loss) after Tax	(40.5)	45.6	(86.1)	(188.8)
Net Cash Flow	(57.0)	21.6	n/a11	n/a11
Statutory EPS	(13.7p)	18.3p	(32.0)	(174.9)
Total dividend per share	-	2.47pps	(2.47pps)	n/a11

The key for the tables can be found on page 23

Cautionary statement regarding forward-looking statements

This announcement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the Company's business. Whilst the Company believes the expectations reflected herein to be reasonable considering the information available to them at this time, the actual outcome may be materially different owing to factors beyond the Company's control or within the Company's control where, for example, the Company decides on a change of plan or strategy. Accordingly, no reliance may be placed on the figures contained in such forward-looking statements.

The forward-looking statements contained in this document speak only as of the date of this announcement, and Biffa does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Use of Alternative Performance Measures

Throughout the release we use a number of alternative (or non IFRS) performance measures to provide users with a clearer picture of the performance of the business. This is in line with how management monitor and manage the business day to day. Further definitions and details are provided in note 3: Adjusting items.

Presentation of Results

A live webcast of the results presentation will be available at 09.30 hrs today (1 June 2021) at www.biffa.co.uk/investors. An on- demand version of the webcast, as well as the RNS and presentation documents will also be available at www.biffa.co.uk/investors.

Publication of Annual Report

The Company will publish its Annual Report and Accounts 2021 on 21 June 2021. This document will be available to view on the Company's website at www.biffa.co.uk/investorsand is also being submitted to the National Storage Mechanism for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

AGM

Following the Group's announcement on 25 May 2021 of a revised date for the publication of its final results for the full year ended 26 March 2021, the Company will be moving its Annual General Meeting accordingly to 19 July 2021, a short delay to the

previously planned date of 7 July 2021.

Enquiries:

Michael Topham, Chief Executive Officer Richard Pike, Chief Financial Officer [e-mail]

Houston

Kate Hoare and Anushka Mathew [e-mail]

[phone]

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Structure of this document

1. Chief Executive Officer's Review
2. Operating performance

1. Collections

1. 1. Resources & Energy
2. Chief Financial Officer's Review
3. Financial statements

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1. Chief Executive Officer's Review A defining year

I'm extremely proud of the way the entire team responded to the coronavirus pandemic in what has been a defining year for Biffa. We were able to protect our people and continue to provide the essential services on which society depends, while taking decisive action to strengthen the finances of the Group and continue to invest for the future. It has been a year none of us wants to repeat but certainly one which showed us at our best.

Having responded swiftly to the first wave of the pandemic, we secured the support of shareholders to raise £100m of new equity to enable us to swiftly recommence our strategic investment programme. Since then, we have delivered on that investment programme at pace, making a number of acquisitions and committing capital into vital UK green economy infrastructure development, notably including the recent announcement of our agreement to acquire Viridor's Collections business and certain Recycling assets. These investments will ensure we are well placed as the post-pandemic recovery takes hold.

The second wave of the pandemic and the subsequent lockdowns over the winter inevitably presented further challenges for the business, although their impact on our trading performance was less pronounced than the first. As a result, we were able to end the financial year with trading results ahead of the Group's Covid-19 base case expectations which we communicated at the start of the pandemic. It is however important to recognise the collective sacrifice that was made through the year and support that has been received to get us to the position we are now in. Measures included dividend suspension, staff furlough, pay reductions and cancellation of all pay increases and bonuses. We reinvested some of the savings we made into enhanced sickness benefits for staff and in funding an all-employee share award of £300 as a token of our appreciation for their commitment and sacrifice.

Despite the obvious distractions that the pandemic has brought, I am particularly pleased with the first year of delivery of our sustainability strategy, 'Resourceful, Responsible', which we launched a year ago. Its delivery and Biffa's future success are inextricably linked.

This was a year in which strong relationships with all stakeholders were fundamental to ensuring business resiliency. My thanks go to all of our stakeholders, especially our employees for their commitment and support over the course of the year.

Financial Performance

Our financial performance was materially impacted by the Covid-19 pandemic, with the business experiencing a revenue reduction of £121.1m. Despite this, EBITDA excluding adjusting items margins held up well across FY21 at 13.3% (FY20: 15.0%). The measures contributing to this performance included taking c. 39% of the I&C frontline fleet off the road; furloughing up to 1,800 staff for various periods of the year for which we received £12.0m of government support; temporary pay cuts taken by the Board and senior leaders, pay freezes and the cancellation of all bonuses. These measures gave the Group the ability to better shoulder the downturn and progress its strategic priorities over FY21.

In addition, the Group booked a number of adjusting items in the year. These charges totalled £81.8m before tax in the year (FY20: £16.4m) and the main contributing items related to asset impairment charges, an uplift of the onerous contract provisions, impacts of the decrease in the real discount rate on provisions; and an increase in the charge for amortisation of intangible assets. The overall consequence of all of these items was a loss before tax for the year of £52.8m (FY20 PBT £56.4m).

An evolving sector with attractive growth opportunities

The UK waste sector is entering an exciting period of change, which brings enormous opportunities for Biffa. In some ways it could be said that the UK waste sector is entering its 'third age'.

The 'first age', in simple terms, was the period during the second half of the 20th century, when waste management became a regulated, organised industry, but which was essentially organised around collections and landfill. Waste companies oversaw the safe collection and disposal of waste from households and businesses. For most people this was a very convenient, cost-effective, 'out of sight, out of mind' model. Biffa's business was originally built during this period. Whilst ultimately rightly confined to the history books, it was an essential step on our journey to where we find ourselves today.

The 'second age' began roughly around the turn of the century with the realisation of the potential for environmental harm of the existing system - and the opportunity that existed if we took a different approach. The concept of the 'waste hierarchy' was incorporated into Government policy and recycling and energy recovery were prioritised ahead

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