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Biffa bounces as it steps up recycling plans

Published: 08:48 03 Mar 2021 GMT

Biffa PLC - Biffa says second-half trading tops expectations

Biffa PLC (LON:BIFF) said performance in the second half has continued to be ahead of expectations, while three new recycling plants are coming on stream soon, with the decision also taken to expand its plastic milk bottle recycling operations.

Full-year underlying earnings (EBIT) are forecast to be £42-44mln, which is above expectations. The metric wasn’t used in last year’s results but EBITDA came in at £174mln.

READ: Biffa buys surplus food redistributor Company Shop Group for £82.5mln

The waste management firm said the impact of the third lockdown on earnings has been less severe than originally anticipated.

Biffa said phase two of the Seaham plastics recycling plant and the previously announced projects at Washington and Aldridge are progressing to plan, with all three expected to come online in the early part of the new financial year.

Agreements for the sale of the output of the Seaham facility on de-risked commercial terms are in the final stages of negotiation with a select number of long-term strategic partners.

With the development projects at Seaham and Washington now nearing completion, the group has decided to further expand its capacity in post-consumer HDPE recycling, with an additional investment of £13mln to be made at its Washington facility.

This additional investment at Washington will increase the group's high-density polyethylene (HDPE) milk bottle recycling capacity by a further 50% to 39,000 tonnes of input per annum, equivalent to 1.6bn bottles a year.

It will also grow its Polymers' business to an annual capacity of 155,000 tonnes and revenue of around £85mln.

The output from this facility will be used in the manufacture of new HDPE milk bottles in the UK.

This will create 50 jobs in an area where Biffa has been a pioneer. Around 85% of milk bottles in the UK now contain Biffa material. 

Looking at the financials, group net revenues in the third quarter were back up to 97% of those achieved in the same period last year, while fourth-quarter revenues are estimated to be around 92% of last year’s levels.

Industrial & Commercial (I&C) volumes have stabilised at circa 80% of prior-year levels for the fourth quarter, higher than the predicted 70-75% range reported in January.

The firm said it materially reduced the need for provision for doubtful debts, resulting in a provision release in the final quarter. Net debt at year-end is expected to be £440-460mln from £426mln in March 2020.

Shares advanced over 7% to 275.5p on Wednesday morning.

Broker Peel Hunt was impressed by the “sense of positive forward momentum” developing for Biffa, but analysts said they have not changed their minds on the recent Company Shop acquisition, “which we see as imaginative and theoretically value creative but too business-to-consumer”.

 

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