Renewi PLC (LSE:RWI) will pay to exit UK waste treatment with the business set to be sold to rival Biffa for a net cost to Renewi of £57 million.
On a cash basis, the total is even higher at £154 million including transaction and “capitalisation” costs.
Renewi’s chief executive, Otto de Bont, had no qualms about the cost of its exit, stating: "The sale of UK Municipal to Biffa is a transformational milestone which marks the beginning of a new chapter for Renewi.
“The exit of UK Municipal will immediately improve our cashflow and profit margins, and enable us to drive sustainable growth.”
Renewi added free cash flow would rise by €15-20 million per annum through the disposal while at least 50 basis points will be added to underlying profit margins.
The sale also significantly de-risks the group’s balance sheet, he said, as unpredictable UK Municipal liabilities and Onerous Contract Provisions (OCPs) will be replaced by conventional and competitively priced debt financing.
“We will now fully focus on growing in Europe’s most attractive and advanced recycling markets.”
Michael Topham, Biffa’s chief executive, added: “The addition of UK Municipal’s five contracts to our existing contracts in West Sussex, Leicester and Somerset further establishes our reputation as a trusted provider of complex, long-term waste treatment contracts to local governments.”
Renewi also released full-year results showing underlying profits fell 35% to €68 million with core net debt down slightly to €368 million.
Broker Liberum said the UK Municipal disposal was a good outcome but would push core net debt up to €517million.
Shares in Renewi rose 1% to 639p.
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