12th Jun 2007 07:02
Biffa Plc12 June 2007 12 June 2007 Biffa Plc Preliminary results for the 52 weeks ended 30 March 2007 WELL PLACED IN A DEVELOPING MARKET Financial Highlights - Revenues at £742.7 million (2005/06: £712.3 million*), 6.3% ** organic growth - Operating profit at £90.7 million (2005/06: £86.3 million*), 7.0 % ** organic growth - Free cash flow *** up by 17% to £40.0 million - Proforma adjusted EPS **** of 14.1p (Basic EPS **** of 1.6p) - Final dividend of 4.2 pence. Total dividend for year of 6.3 pence Operational Highlights - Successful demerger from Severn Trent and now a well established FTSE 250 company - Strong profit growth achieved from Landfill through optimising balance between capacity and demand, with good performances from Special Waste and Power Generation - Excellent growth maintained in our national account business - New strategy adopted to improve local customer retention levels in our Collection business - Business well positioned for the changing structure of the waste market Martin Bettington, Chief Executive Officer of Biffa Plc commented: "Following strong growth last year, we expect growth at more modest levels fromour Resource Recovery and Landfill division in the current year. We envisagefurther growth in our national account Collection business and an improvedperformance from our integrated municipal contract with Leicester City Council.The local account sector of the Collection market is likely to remain highlycompetitive. We have implemented a revised pricing strategy and customer serviceinitiatives in order to strengthen our position in this sector. The benefit ofthese actions will take time to come through and as a result we anticipate thatfull year performance in the Collection division will be in line with the prioryear. For the Group as a whole, we expect steady progress in the current year. Our markets are entering a period of considerable change. We look forward tothis and are confident that our robust business model gives us an excellentplatform to capitalise on the opportunities that this change will create and todeliver continued growth into the medium term." For further information contact: Biffa Plc Tulchan Communications Martin Bettington, Chief Executive Officer David Trenchard Tim Lowth, Finance Director Stephen Malthouse Telephone 0207 353 4200 (all day) David Allchurch Telephone 0207 353 4200 * Comparative values for 2005/06 have been stated at reported values. ** The 2005/06 financial year comprised 53 weeks. Growth comparisons between2006/07 and 2005/06 revenue and operating profit have been made on a 52 weeksbasis to ensure comparability *** Free cash flow is defined as the net cash generated from operatingactivities plus the proceeds from the sale of property, plant and equipment,less any capital expenditure and excluding any special pension fundingcontributions. **** Proforma adjusted earnings per share are calculated by dividing adjustedearnings attributable to ordinary shareholders by the weighted average number ofordinary shares in issue since demerger to 30 March 2007. Adjusted earnings havebeen presented to eliminate the effects of prior year tax credits. Basic EPS iscalculated by dividing earnings attributable to ordinary shareholders by theweighted average number of ordinary shares in issue during the year. A presentation for analysts will be held at 9.30am today at JP Morgan Cazenove,20 Moorgate, London EC2R 6DA. The presentation will also be available atwww.biffa.co.uk. ================================================================================ Biffa Plc Preliminary final statement For the 52 weeks ended 30 March 2007 CHAIRMAN'S REVIEW A year of new beginnings and growth In a year when environmental issues, including the importance of recycling andthe management of waste, have been increasingly in the news, I am pleased toreport that Biffa has made excellent progress. The demerger from Severn Trent Plc was successfully completed on schedule andthe company is now a well established member of the FTSE 250. Furthermore wecontinue to position the business to capitalise on the changing structure of thewaste management market and the impact of new legislation. Our financial results for the 52 weeks ended 30 March 2007 reflect our continuedprogress. Revenue increased by 4.3% to £742.7 million, (2005/06: £712.3 million)and operating profit increased by 5.1% to £90.7 million, (2005/06: £86.3million). However, these comparisons are distorted because 2005/06 was a 53 weekperiod while 2006/07 was a normal 52 week period. After adjusting the 2005/06results to a comparable 52 week period, as set out in note 12 on page 18,revenue increased by 6.3% and operating profit increased by 7.0%. We generated free cash flow* of £40.0 million compared with £34.1 million lastyear, achieved largely through improved working capital management and tightercontrol over capital expenditure. Our basic earnings per share were 1.6 penceequivalent to last year. Our proforma adjusted earnings per share** of 14.1pence are 9.3% higher (2005/06: 12.9 pence). The Board is recommending a final dividend of 4.2 pence taking the totaldividend for the year to 6.3 pence to be paid on 31 July 2007 to shareholders onthe register on 29 June 2007. Delivery of our strategy Trends that have been evident in continental Europe for some years, with theemphasis on recycling and reducing the volume of waste going to landfill, arenow becoming a reality in this country. The management of waste in the UK is nowchanging rapidly primarily as a result of legislation giving effect to newgovernment targets. This has been further reinforced by the recent publicationof the 'Waste Strategy' white paper. We welcome this paper, and are confident that we are well positioned to benefitfrom the opportunities resulting from the wide-ranging changes that it proposes.They play to our strengths because we operate across the whole of the valuechain: collecting waste from domestic, industrial and commercial customers andoperating a range of recycling and treatment facilities supported by anextensive network of well-located landfill facilities. In addition we have adivision with expertise in handling special waste and have interests in 109 MWof installed electricity generation capacity. As a result, we have theflexibility, resources and experience to capitalise on the changing structure ofthe market and maximise the opportunities brought by changing legislation. New regulations requiring all waste to be treated prior to final disposal willcome into effect in October this year. In anticipation of this change, we havecontinued to expand our recycling collection services and we expect that byOctober we will be offering this service to all our industrial and commercialcustomers across the UK. For those customers who choose not to pre-sort theirwaste, we will be able to provide a treatment service. The strength of our Collection business is central to our response to this newlegislation as we seek to continue to expand this part of the business. Over thepast few years, our ability to provide a consistent and reliable service acrossthe country has enabled us to build a leading position in the national accountsector of the market. We have now adopted a strategy to improve customerretention levels in the sector of the market represented by local accounts.Among other initiatives to achieve this, we have implemented selective priceincreases instead of imposing a standard increase across all accounts. Althoughthis impacted profits during the second half of the year, we believe that itwill improve customer retention and provide the foundations for future growth. We anticipate that landfill will continue to play an important role in thedisposal of waste in the UK over the medium term. The annual volume of wastegoing to landfill in the UK is anticipated to decline over the next few years.However, we expect to continue to benefit from the limited availability of sitesand the tightening of regulation around them. In addition, the recent budgetannouncement from the Chancellor confirming that landfill tax will increase fromits current £24 per tonne by £8 per tonne per annum from April 2008, reaching£48 per tonne in 2010 further supports the government's waste strategy forlandfill diversion, which underpins our integrated waste management businessmodel. In November 2006, we opened a new site at Cottonmount in Northern Irelandwhich added 5 million cubic metres of void to our operational portfolio. Ourstrategy is to continue to optimise the balance between capacity and demand aswe have done successfully this year, where the significant increase in gate feesmore than compensated for the lower volumes of waste going to landfill. Our employees The professionalism and dedication shown by our employees during the year hasbeen a major contribution to the successful execution of our demerger fromSevern Trent Plc, the effective implementation of our operational strategy andthe continued delivery of our sales and profit growth. On behalf of the Boardand our shareholders, I would like to take this opportunity to thank them fortheir hard work and commitment during this year. Outlook Following strong growth last year, we expect growth at more modest levels fromour Resource Recovery and Landfill division in the current year. We envisagefurther growth in our national account Collection business and an improvedperformance from our integrated municipal contract with Leicester City Council.The local account sector of the Collection market is likely to remain highlycompetitive. We have implemented a revised pricing strategy and customer serviceinitiatives in order to strengthen our position in this sector. The benefit ofthese actions will take time to come through and as a result we anticipate thatfull year performance in the Collection division will be line with the prioryear. For the Group as a whole, we expect steady progress in the current year. Our markets are entering a period of considerable change. We look forward tothis and are confident that our robust business model gives us an excellentplatform to capitalise on the opportunities that this change will create and todeliver continued growth into the medium term. * Free cash flow is defined as the net cash generated from operating activitiesplus the proceeds from the sale of property, plant and equipment, less anycapital expenditure and excluding any special pension funding contributions. ** Proforma earnings per share are calculated by dividing earnings attributableto ordinary shareholders by the weighted average number of ordinary shares inissue since demerger to 30 March 2007. Adjusted earnings per share have beenpresented to eliminate the effects of prior year tax credits. Bob Davies, Chairman 11 June 2007 BUSINESS REVIEW Collection division Gross revenues (including inter- and intra-segmental revenue) increased to£444.2 million from £429.0 million. The division contributed £56.1 million tothe Group's operating profits, compared with £60.1 million last year. On a 52week adjusted basis for 2005/06, as set out in note 12 on page 18, theCollection division revenues increased by 5.5% and operating profit declined by4.9%. In the largest segment of this business, the industrial and commercialsub-division, revenues grew by 3.3% from £318.5 million to £329.1 million. On a52 week adjusted basis for 2005/06, revenues increased by 5.3%. We have achievedstrong growth in our national account business. However, the benefit of this wasoffset by the impact of changes to our selective pricing strategy for ourlocally managed accounts which adversely affected trading performance in thesecond half of the year. This investment is aimed at improving retention levelsin our locally managed accounts and, allied with our enhanced focus on customerservice, to strengthen our customer base. This in turn creates the opportunityto improve productivity and reverse the decline in locally managed volumes. Our municipal collection sub-division continued to perform well, deliveringrevenues of £80.8 million, 10.7% ahead of last year's levels. On a 52 weekadjusted basis for 2005/06, revenues increased by 12.9%. Revenue growth wasboosted by the expansion of services to include the collection of recyclablesfrom households as well as ordinary waste, and the recent contract award inAugust 2006 of our largest collection-only municipal contract for theMetropolitan Borough of Wirral, expected to generate annual revenues of £10million over a fourteen year period. Our integrated municipal contracts generated revenues of £24.4 million, 4.1%ahead of last year's levels. On a 52 week adjusted basis for 2005/06, revenuesincreased by 6.0%. In our Interim Statement in December 2006, we stated that wehad been experiencing operational difficulties with the treatment and recyclingelement of our integrated municipal contract with Leicester City Council. Thecollection service element of the contract has performed very well throughoutthe year. The modification works to the mechanical-biological-treatment (MBT)facility have made good progress, and we expect that by mid 2007 the contractshould return to profitability. Our PFI contract on the Isle of Wight continuedto perform well with growth in both revenue and operating profit levels. Overall, margins in the Collection division declined from 14.0% to 12.6%, drivenpartly by the change in our pricing strategy within our locally managedindustrial and commercial sector and partly due to the operating difficulties atour integrated municipal contract with Leicester City Council. Excluding theLeicester contract, the operating margin for the Collection division was 13.4%compared to 14.4% in the prior year. Looking forward, we envisage further growth in our national account Collectionbusiness and an improved performance from our integrated municipal contract withLeicester City Council. The local account sector of the Collection market islikely to remain highly competitive. We have implemented a revised pricingstrategy and customer service initiatives in order to strengthen our position inthis sector. The benefit of these actions will take time to come through and asa result we anticipate that full year performance in the Collection divisionwill be in line with the prior year. Special Waste Gross revenues for this division were £49.4 million (14.2% was inter- andintra-segmental revenue), 0.4% up on last year's levels. On a 52 week adjustedbasis for 2005/06, revenues increased by 2.3%. Operating profit was £2.5 millioncompared with £1.9 million last year. The largest segment of this division, recovery and treatment, performed well,generating revenues of £20.9 million in the year, broadly in line with lastyear. The industrial and environmental sub-division, the second largest revenuecontributor within this division, also performed well with revenues of £11.3million, an increase of £1.4 million compared with last year as it benefitedfrom a number of one-off contracts in the first half. Overall we delivered animprovement in margins from 3.9% in 2005/06 to 5.1%, as the division continuedto benefit from the impact of hazardous waste regulations. Resource Recovery & Landfill This division showed a strong trading performance over the year. Gross revenuesincreased by 5.6% to £319.8 million compared with last year's levels (2005/06:£302.8 million), of which 24.6% was inter- or intra-segmental revenue (2005/06:24.5%). Operating profits were £47.9 million compared with £40.8 million in theprevious year, a 17.4% increase. On a 52 week adjusted basis for 2005/06,revenues increased by 7.6% and operating profits by 19.8%. The largest segment of this division's revenue is represented by rechargedlandfill tax, which amounted to £132.3 million in the year, an 11.3% increase onlast year's levels, compared with a 13.4% increase on 52 week adjusted basis for2005/06. This represents the passing on to our customers of a fiscal tax charge,which has a neutral impact on Group profits. Landfill gate fees are our largestprofit contributor to this division, generating revenues of £111.2 million, withan 11.1% increase on a 52 week adjusted basis compared with 2005/06. As the landfill market experiences a reduction in the proportion of waste sentto landfill, landfill volumes across all sites were 1% down to 7.3 milliontonnes. This reflected the closure of a number of filled sites, whilst volumeswere up 3% for sites that were open throughout 2006/07 and 2005/06. However thecontinuing increases in average unit revenue prices more than offset the overalldecline in volume. For all sites, average unit revenues (excluding landfill tax)were 12% up year on year at £15.30 per tonne. At the end of the year, ourconsented and operational void bank totalled 74 million cubic meters, of which11 million cubic metres is leased to another landfill operator. Additionally, wehad 6 million cubic metres of consented but not operational void, whilst alsocontinuing to control 22 million cubic metres of potential void. The recycling and treatment activities within this division continued to makegood progress, with recycling volumes increasing 7% against last year's levelson a like-for-like basis. Construction for our second in-vessel compostingfacility at Etwall in Derbyshire has now been completed, and from April 2007 wewill commence the recycling of green and food waste for three local authoritieswith whom we have secured contracts guaranteeing waste inputs for 10 years, withan expected value of £8.4 million. Looking forward, we seek to maximise growth through continued void optimisationwhile at the same time developing our facilities to respond to customers' needfor waste diversion. This investment is driven principally by the increasingtrend of waste diversion from landfill but, importantly, it also supports ourcollection activities, where a treatment service will be provided to thosecustomers who choose not to pre-sort their waste. Power Generation This has been a successful year for the division, reporting gross revenues of£21.6 million compared with £18.9 million last year. Operating profits were £9.2million compared with £7.5 million last year. On a 52 week adjusted basis for2005/06, revenues increased by 16.8% and operating profits by 24.3%. Operatingmargins increased from 40.0% in the previous year to 42.6% this year, as aresult of securing fixed prices for non-NFFO output at the beginning of theyear. The division wholly owns 67.6 MW of installed capacity, of which 46% qualifiesfor ROC's (2005/06: 33%); following our successful conversion of the lessprofitable NFFO priced contracts into ROC priced supplements. During the year weadded a further 4 MW to existing wholly-owned capacity. The Group also hasinterests in a further 41.1 MW, held through joint venture and royaltyarrangements. The decline in the price we have been receiving for electricity sales sinceMarch 2007 is expected to hold back growth in the year ahead. However, theoverall package of revenue for ROC qualifying output remains substantiallyhigher than the revenue earned under NFFO contracts. We therefore envisage thatwe will maintain the profits of this business by terminating less profitableNFFO contracts and qualifying the capacity thus released for ROC's. FINANCIAL REVIEW Trading results Revenues increased by 4.3% to £742.7 million, (2005/06: £712.3 million) andoperating profit increased by 5.1% to £90.7 million, (2005/06: £86.3 million).Profit before tax was up 11.1% to £72.8 million (2005/06: £65.5 million) afternet finance charges of £18.6 million (2005/06: £21.8 million) and share ofresults of joint ventures of £0.7 million (2005/6: £1.0 million). However, thesecomparisons are distorted as 2005/06 was a 53 week period while 2006/07 was anormal 52 week period. In order to facilitate proper comparison, 52 weekadjusted data for 2005/06 has been provided, as set out in note 12 on page 18.On this 52 week adjusted basis, revenues increased by 6.3%, operating profitincreased by 7.0% and profit before tax increased by 11.1%. Finance charges and income Finance charges were £22.9 million during the year, a reduction of £0.9 millioncompared with last year's levels of £23.8 million primarily due to therestructuring of the Company's capital structure undertaken in the run-up to theGroup's demerger from Severn Trent Plc. Finance income earned on the group's cash balances was £2.6 million, comparedwith £2.0 million from the previous year reflecting the higher average cashbalances during the year. Net finance income from pensions was £1.7 million, (2005/06: Nil) due to theexpected returns on the increased level of assets in the scheme exceeding theinterest cost for the scheme liabilities. Taxation The tax charge for the year was £9.5 million (2005/06: Tax credit of £4.1million), reflecting an actual effective tax rate of 13.0% (2005/06: -6.3%). The2006/07 tax charge was influenced by the resolution of prior year tax queries,amounting to £14.1 million (2005/06: £24.5 million), adjusting for these items,the current year effective tax rate was 32.4% (2005/06: 31.2%). Earnings per share Basic earnings per share for this year were 1.6 pence (2005/06: 1.6 pence).Proforma basic earnings per share** fell by 9.9% to 18.1 pence (2005/06: 19.9pence), influenced primarily by the inclusion of significant tax credits in 2005/06. Excluding the impact of these prior year tax credits, proforma adjusted earningsper share ** for the current year increased from 12.9 pence to 14.1 pence, anincrease of 9.3%, reflecting the growth in operating profit and the reduction innet finance charges. Comparable financial results Comparisons between the results for 2006/07 and 2005/06 are distorted by thefact that the former period covered 52 weeks and the latter 53 weeks. In orderto facilitate a meaningful comparison, note 12 on page 18 sets out the reportedresults for both periods, with 2005/06 results also adjusted to a 52 weeksequivalent. Martin Bettington, Chief Executive Officer 11 June 2007 CONSOLIDATED INCOME STATEMENT For the 52 weeks ended 30 March 2007 Notes 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ----------- ------------ Revenue 1 742.7 712.3Cost of sales (624.8) (600.9) ----------- ------------ Gross profit 117.9 111.4 Distribution costs (9.1) (9.2)Administrative expenses (18.8) (16.5)Other operating income 0.7 0.6 ----------- ------------ Operating profit 1 90.7 86.3 Share of posttax results of joint ventures 0.7 1.0Finance income 2 4.3 2.0Finance charges 2 (22.9) (23.8) ----------- ------------ Profit before taxation 72.8 65.5Taxation 3 (9.5) 4.1 ----------- ------------ Profit for the year 63.3 69.6 =========== ============ Earnings per share expressed in pence per share - Basic 5 1.6p 1.6p - Diluted 5 1.6p 1.6p All the amounts above relate to continuing operations and are attributable toequity holders of Biffa Plc. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE For the 52 weeks ended 30 March 2007 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ------------ ------------ Profit for the year attributableto equity holders of Biffa Plc 63.3 69.6 Actuarial gains / (losses) ondefined benefit pension scheme 11.1 (4.5) Deferred tax (charge) / creditarising from actuarialgains or losses (3.3) 1.3 ------------- ------------ Total recognised incomefor the year 71.1 66.4 ============= ============ CONSOLIDATED BALANCE SHEET As at 30 March 2007 Notes As at As at 30 March 31 March 2007 2006 £m £m ------------ ------------ Assets Non-current assets Goodwill 732.7 732.7Other intangible assets 1.3 1.3Property, plant and equipment 343.4 335.5Interest in joint ventures 0.7 0.6Other receivables and investments 0.1 0.2 ------------ ------------ 1,078.2 1,070.3 ------------ ------------ Current assets Inventories 2.5 3.2Trade and other receivables 142.5 149.0Cash and cash equivalents 26.9 23.2 ------------ ------------ 171.9 175.4 ------------ ------------ Current liabilities Trade and other payables (114.3) (119.9)Current tax liabilities (15.1) (9.1)Financial liabilities - borrowings (0.8) (205.8)Provisions 6 (16.7) (16.7) ------------ ------------ (146.9) (351.5) ------------ ------------ Net current assets / (liabilities) 25.0 (176.1) ------------ ------------ Non-current liabilitiesFinancial liabilities - borrowings (384.9) (148.0)Deferred tax liabilities (3.4) (0.4)Retirement benefit obligations 7 (6.2) (33.7)Non-current provisions 6 (52.3) (55.0) ------------ ------------ (446.8) (237.1) ------------ ------------ Net assets 656.4 657.1 =========== ============ EquityCalled up share capital 11 35.0 711.3Capital redemption reserve 11 676.4 -Retained deficit 11 (55.0) (54.2) ----------- ------------ Total shareholders' equity 656.4 657.1 =========== ============ Net debt 10 358.8 314.7Gearing (note i) 35% 32% (i) Gearing has been calculated on the basis of Debt / (Debt + Equity). CONSOLIDATED CASH FLOW STATEMENT For the 52 weeks ended 30 March 2007 Notes 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ----------- ------------ Cash flows from operating activities Cash generated from operations 8 125.7 121.7Interest received 3.0 1.9Interest paid (15.5) (23.1)Tax paid (14.3) (1.4) ----------- ------------Net cash from operating activities 98.9 99.1 ----------- ------------ Cash flows from investing activities Acquisition of subsidiaries (net of cash acquired) - (0.2)Purchases of property, plant and equipment (73.4) (75.5)Proceeds from the sale of property, plant and equipment 2.5 1.5Dividend received 0.7 1.3 ----------- -----------Net cash used in investing activities (70.2) (72.9) ----------- ----------- Cash flows from financing activities Dividends paid (72.9) (13.0)Finance lease principal payments (28.9) (8.5)Drawdown of borrowings 368.6 -Repayment of borrowings (307.7) (264.4)Settlement of interest free loan 15.9 -Issue of shares - 267.5 ----------- -----------Net cash flow from financing activities (25.0) (18.4) ----------- ----------- Net increase in cash and cash equivalents 3.7 7.8 Cash and cash equivalents atbeginning of year 23.2 15.4 ---------- -----------Cash and cash equivalents at end of year 26.9 23.2 ========== =========== --------------------------------------------------------------------------------Free cash flowNet cash generated from operating activities 98.9 99.1Proceeds from the sale of property, plant and equipment 2.5 1.5Purchase of property, plant and equipment (73.4) (75.5)Special pension contribution payments 12.0 9.0 ---------- ----------- 40.0 34.1 ========== =========== -------------------------------------------------------------------------------- 1 SEGMENTAL INFORMATION The Group is managed by type of business and as such is organised into fouroperating divisions. These divisions represent the business segments in whichthe Group reports its primary segment information. Since all trading activityand operations are in the United Kingdom, there is no secondary reporting formatby geographical segment. The segment results for the 52 weeks ending 30 March 2007 are as follows: 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ---------- ---------- RevenueCollection 444.2 429.0Special Waste 49.4 49.2Resource Recovery and Landfill 319.8 302.8Power Generation 21.6 18.9Eliminations (note i) (92.3) (87.6) ---------- ---------- Total 742.7 712.3 ========== ========== Operating profitCollection 56.1 60.1Special Waste 2.5 1.9Resource Recovery and Landfill 47.9 40.8Power Generation 9.2 7.5Shared services and corporate costs (note ii) (25.0) (24.0) ---------- ---------- Operating profit 90.7 86.3Share of post tax results of joint ventures (note iii) 0.7 1.0Finance income 4.3 2.0Finance charges (22.9) (23.8) ----------- ---------- Profit before tax 72.8 65.5 =========== ========== The Group's analysis of revenue by category is analysed as follows: 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ------------ ------------ Provision of services 742.7 712.3Finance income 4.3 2.0Share of post tax results of joint ventures 0.7 1.0 ------------ ------------ 747.7 715.3 ============ ============ (i)Inter and intra-segment transactions between and within divisions are enteredinto under the normal commercial terms and conditions that would also beavailable to unrelated third parties. (ii)Shared services and corporate costs include a management charge payable toSevern Trent Plc amounting to £0.8 million for services received prior to thedemerger, with corporate costs arising from the corporate governance and otherrequirements of becoming a listed company totalling £1.7 million during theyear. In the previous year, shared services and corporate costs included amanagement charge payable to Severn Trent Plc amounting to £3.1 million. (iii)The share of post tax results of joint ventures relates entirely to thePower Generation division. Other segment items are: 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ----------- -----------Capital expenditure Collection 36.0 50.1Special Waste 0.6 1.0Resource Recovery and Landfill 31.9 19.7Power Generation 4.1 3.3Shared services and corporate 1.0 2.0 ----------- ----------- 73.6 76.1 =========== =========== Depreciation and amortisationCollection 35.7 32.5Special Waste 1.6 1.8Resource Recovery and Landfill 20.2 20.4Power Generation 2.8 2.5Shared services and corporate 1.4 1.3 ----------- ----------- 61.7 58.5 =========== =========== There were no significant other non-cash expenses. Capital expenditure comprises additions to property, plant and equipment andintangible assets, including additions resulting from acquisitions arisingthrough business combinations. Segment Assets As at As at 30 March 31 March 2007 2006 £m £m ------------ ---------- Goodwill Collection 492.2 492.2Special Waste 34.9 34.9Resource Recovery and Landfill 180.2 180.2Power Generation 25.4 25.4 ------------ ----------- 732.7 732.7 ------------ ----------- Operating AssetsCollection 253.6 273.4Special Waste 18.5 19.7Resource Recovery and Landfill 180.5 152.0Power Generation 25.0 23.2Shared services and corporate 39.8 44.7 ------------ ----------- 517.4 513.0 ============ =========== TotalCollection 745.8 765.6Special Waste 53.4 54.6Resource Recovery and Landfill 360.7 332.2Power Generation 50.4 48.6Shared services and corporate 39.8 44.7 ----------- ----------- 1,250.1 1,245.7 =========== =========== Segment assets consist primarily of goodwill and operating assets such asintangible assets, property, plant and equipment, inventories and receivables.Shared service and corporate assets include deferred taxation, cash and loans tothe former parent company. Segment Liabilities As at As at 31 March 31 March 2007 2006 £m £m ----------- ---------- Collection 42.4 45.7Special Waste 8.3 6.2Resource Recovery and Landfill 96.7 90.0Power Generation 3.8 3.1Shared services and corporate 442.5 443.6 ----------- ---------- Group total liabilities 593.7 588.6 =========== ========== Segment liabilities comprise operating liabilities. Shared service and corporateliabilities, inter alia, include retirement obligations, leasing obligations,corporate borrowing and taxation. 2 FINANCE INCOME AND CHARGES 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ------------- -----------Finance charges:Interest on bank overdrafts and loans (10.0) -Loan issue costs (note i) (0.2) -Interest on obligations under finance leases (note ii) (3.1) (3.2)Interest payable to former parent (note iii) (7.2) (18.3)Interest on discounted provisions (2.4) (2.3) ------------ -----------Finance charges (22.9) (23.8)Finance income (note iv) 4.3 2.0 ------------ ----------- Net finance charges (18.6) (21.8) ============ =========== (i)Loan issue costs of £1.6 million arising on the new credit facility have beencapitalised and will be amortised over the term of the loan (five years). (ii)On 16 March 2007, the finance lease agreement with Societe Generale LondonBranch was settled and replaced with borrowings drawn down from the dual tranchefacility held with Barclays Capital. (iii)Loans due to the former parent company, Severn Trent Plc, were settled on 9October 2006 with borrowings drawn down from the dual tranche facility held withBarclays Capital. (iv)Finance income includes £1.7 million (2005/06: £nil), comprising expectedreturn on assets of £10.9 million (2005/06: £8.5 million) less interest costaccrued on pension liabilities of £9.2 million (2005/06: £8.5 million). 3 TAXATION The income tax charge comprises as follows: 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ------------- ------------Current tax:Corporation tax at 30% Current year 18.1 - Prior year (4.6) (2.9)Severn Trent Group relief at 30% Current year - 13.5 Prior year (4.2) (21.8) ------------ ------------Total current tax 9.3 (11.2) Deferred tax: Current year 5.5 6.9 Prior year (5.3) 0.2 ------------ ------------Total deferred 0.2 7.1 ------------ ------------ Total tax charge / (credit) 9.5 (4.1) ============ ============ Corporation tax is calculated at 30% (2005/06: 30%) of the estimated assessableprofit of the year. The charge for the year can be reconciled to the profit perthe income statement as follows: 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ------------ -----------Profit on ordinary activities before tax 72.8 65.5 ------------ ----------- Profit on ordinary activities multiplied by the standard rate of corporation tax in UK of 30% (2005/06: 30%) 21.8 19.6 Effects of: Expenses not deductible for tax purposes 1.8 0.8Adjustment to tax charge in respect of prior periods (14.1) (24.5) ------------ ----------- Total tax charge / (credit) 9.5 (4.1) ============ =========== The prior period tax credit in 2006/07 of £14.1 million includes amounts arisingas a result of the resolution of HM Revenue and Customs enquiries relating totax computations prior to 2005/06. Tax credited directly to equity In addition to the amount charged to the income statement, the following amountsof tax have been credited directly to equity: 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ------------ ------------Deferred tax Tax credit on employee share option plans (0.5) - ------------ ------------ (0.5) - ============ ============ 4 DIVIDENDS 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ------------ ------------Equity - ordinaryInterim paid: 2.1p (2005/06 : 1.46p) per £1 share 7.4 6.5Second interim paid: Nil (2005/06 : 1.46p) per £1 share - 6.5Dividend paid to former parent company 65.5 - ------------- ------------ 72.9 13.0 ============= ============ On 22 September 2006, Biffa Plc paid Severn Trent Plc a pre-demerger dividend of£65.3 million; this has subsequently been adjusted to £65.5 million. In addition, the directors recommended a final dividend in respect of thefinancial year ending 30 March 2007 of 4.2 pence per ordinary share to be paidon 31 July 2007 to shareholders who are on the register at 29 June 2007. Thefinal proposed dividend to ordinary shareholders will absorb an estimated £14.7million of shareholders funds and will have no income tax consequences for theGroup. These financial statements do not reflect this dividend payable. 5 EARNINGS PER ORDINARY SHARE Basic earnings per ordinary share is calculated by dividing earningsattributable to ordinary shareholders by the weighted average number of ordinaryshares in issue during the year. Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares outstanding to assume conversion of all dilutivepotential ordinary shares. Adjusted earnings per ordinary share figure have beenpresented to eliminate the effects of prior year tax credits. 52 weeks to 53 weeks to 30 March 31 March 2007 2006 ------------ ------------Basic earnings per share denominator (millions) 3,852.7 4,445.6Diluted earnings per share denominator (millions) 3,854.4 4,445.6Basic earnings per share (pence) 1.6 1.6Diluted earnings per ordinary share (pence) 1.6 1.6Adjusted earnings per ordinary share (pence) 1.3 1.0 ------------ ----------- The reconciliation between basic and adjusted figures are as follows: 52 weeks to 53 weeks to 30 March 2007 31 March 2006 Earnings per share Earnings per share £m pence £m pence ------ ------ ------ ------ Earnings attributable to ordinary shareholders for basic 63.3 1.6 69.6 1.6 earnings per share calculationPrior year tax credits (14.1) (0.3) (24.5) (0.6) ------ ------ ------ ------ Adjusted earnings 49.2 1.3 45.1 1.0 ====== ====== ====== ====== Prior to demerger there was a reclassification of 6,736,698,761 Biffa ordinaryshares into deferred shares so that the number of Biffa ordinary shares in issuematched the number of Severn Trent ordinary shares in issue. The deferred shareshave been repurchased for 1 pence in aggregate and cancelled. As a consequenceof these changes to the capital structure the Directors consider the earningsper share data shown above to be of limited value. The following proforma supplementary information shows the earnings per sharefor each year based on the weighted average number of Biffa ordinary shares inissue since demerger to 30 March 2007 and the debt structures in place on thefirst day following demerger. 52 weeks to 53 weeks to 30 March 31 March 2007 2006 ------------ -----------Basic earnings per share denominator (millions) 349.7 349.5Diluted earnings per share denominator (millions) 351.5 349.5Proforma basic earnings per share (pence) 18.1 19.9Proforma diluted earnings per share (pence) 18.0 19.9Proforma adjusted earnings per ordinary share (pence) 14.1 12.9 =========== =========== The reconciliation between basic and adjusted figures are as follows: 52 weeks to 30 March 2007 53 weeks to 31 March 2006 Earnings per share Earnings per share £m Pence £m pence ------ ------ ------ ------Earnings attributable to ordinary shareholders 63.3 18.1 69.6 19.9 for basic earnings per share calculation Prior year tax credits (14.1) (4.0) (24.5) (7.0)credits ------ ------ ------ ------ Adjusted earnings 49.2 14.1 45.1 12.9 ====== ====== ====== ====== 6 PROVISIONS Land Onerous Integration Insurance Total reinstatement contracts provision and environmental £m £m £m £m £m ------------------------------------------------------------------At 25 March 2005 67.9 3.2 0.2 4.1 75.4Utilised (10.6) (1.6) (0.2) (2.8) (15.2)Charge to income 9.2 0.1 - 2.1 11.4Discount elimination 2.3 - - - 2.3Transfers from fixed assets / (2.2) - - - (2.2) other assets ------------------------------------------------------------------ At 31 March 2006 66.6 1.7 - 3.4 71.7Utilised (9.8) (1.0) - (2.6) (13.4)Charge to income 8.6 - - 2.4 11.0Discount elimination 2.4 - - - 2.4Transfers from fixed assets / (2.7) - - - (2.7) other assets ------------------------------------------------------------------- At 30 March 2007 65.1 0.7 - 3.2 69.0 =================================================================== Provisions have been analysed between current and non-current as follows: As at As at 30 March 31 March 2007 2006 £m £m ---------- -----------Current 16.7 16.7Non-current 52.3 55.0 ---------- ----------- 69.0 71.7 ========== =========== 7 POST RETIREMENT BENEFITS Formal actuarial valuations of the Group's defined benefit pension schemes,based on the projected unit method, are carried out triennially with periodactuarial reviews. The movement in the net pension deficit for the year are setout below: As at As at 30 March 31 March 2007 2006 £m £m ---------- -----------Opening net liability 33.7 43.4Current service cost 10.1 8.7Expected return on assets less interest cost (1.7) -Normal employer contributions (3.8) (13.9)Special employer contributions (Note i) (21.0) (9.0)Actuarial gains / (losses) (11.1) 4.5 ----------- -----------Closing net liability 6.2 33.7 =========== =========== (i) Special pension contributions comprise £16 million into the Severn Trent Pension Scheme and £5 million into the UK Waste Pension Scheme. Free cashflow is only adjusted by £12.0 million of these special payments, as normalpension contribution payments for 2006/07 totalling £9.0 million were prepaid inMarch 2006. 8 CASH FLOWS FROM OPERATING ACTIVITIES 52 weeks to 53 weeks to 30 March 31 March 2007 2006 £m £m ----------- -----------Profit for the year 63.3 69.6Adjustments for: Share of post tax results of joint ventures (0.7) (1.0)Finance income (4.3) (2.0)Finance charges 22.9 23.8Taxation 9.5 (4.1) ----------- -----------Operating profit 90.7 86.3Amortisation of intangibles 0.6 0.5Depreciation of property, plant and equipment 61.1 58.0Profit on disposal of property, plant and equipment (0.8) (0.5)Decrease/(increase) in inventories 0.7 (0.2)Increase in debtors (8.2) (9.6)Decrease in creditors (16.6) (9.6)Decrease in provisions (2.4) (3.7)Equity share based payments 0.6 0.5 ----------- ------------ Total cash flow from operating activities 125.7 121.7 =========== ============ 9 CONSOLIDATED MOVEMENT IN NET DEBT As at As at 30 March 31 March 2007 2006 £m £m ----------- ------------Net increase in cash and cash equivalents 3.7 7.8(Increase) / repayment of borrowings and finance leases (47.8) 272.9 ----------- ------------ Movement in net debt in the year (44.1) 280.7Net debt at beginning of year (314.7) (595.4) ----------- ------------ Net debt at end of year (358.8) (314.7) =========== ============ 10 ANALYSIS OF NET DEBT As at As at 30 March 31 March 2007 2006 £m £m ----------- -----------Cash and cash equivalents 26.9 23.2Loans due from former parent company - 15.9Finance leases (17.0) (46.1)Loans due to former parent company - (307.7)Bank loans (368.5) -Preference share debt (0.2) - ----------- ----------- (358.8) (314.7) =========== =========== 11 STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Share capital Capital Retained Total £m Redemption earnings £m reserve £m £m -------------------------------------------------------- At 26 March 2005 443.8 - (107.9) 335.9Profit for the financial year - - 69.6 69.6Actuarial loss arising on post employment obligations, including tax - - (3.2) (3.2)Dividends paid in the year - - (13.0) (13.0)Issue of ordinary shares 267.5 - - 267.5Value of employee services, net of deferred tax - - 0.3 0.3 --------------------------------------------------------- At 31 March 2006 711.3 - (54.2) 657.1Profit for the financial year - - 63.3 63.3Actuarial gain arising on post employment obligations, including tax - - 7.8 7.8Dividends paid in the year - - (72.9) (72.9)Cancellation of ordinary shares (676.4) 676.4 - -Value of employee services, net of deferred tax - - 1.1 1.1Shares held in trust 0.1 - (0.1) - ---------------------------------------------------------- At 30 March 2007 35.0 676.4 (55.0) 656.4 ========================================================== 12 COMPARABLE FINANCIAL RESULTS Comparisons between the results for 2006/07 and 2005/06 are distorted by thefact that the former period covered 52 weeks and the latter 53 weeks. In orderto facilitate a meaningful comparison the table below shows reported results forboth periods, with 2005/06 results also adjusted to a 52 weeks equivalent. Reported full Adjusted full Reported full year year year 52 weeks 52 weeks 53 weeks 2006/07 2005/06 2005/06 £m £m £m --------------- --------------- ---------------RevenueCollection 444.2 420.9 429.0Special Waste 49.4 48.3 49.2Resource Recovery and Landfill 319.8 297.1 302.8Power Generation 21.6 18.5 18.9Less inter and intra-segment revenue (92.3) (85.9) (87.6) --------------- --------------- ---------------Total 742.7 698.9 712.3 =============== =============== =============== Operating profitCollection 56.1 59.0 60.1Special Waste 2.5 1.9 1.9Resource Recovery and Landfill 47.9 40.0 40.8Power Generation 9.2 7.4 7.5Shared services and corporate costs (25.0) (23.5) (24.0) --------------- -------------- ---------------Total 90.7 84.8 86.3 ============== ============== =============== 13 BASIS OF PREPARATION OF FINANCIAL STATEMENTS AND STATUS OF FINANCIALINFORMATION The financial information set out above does not constitute the Group's statutory accounts for the 52 weeks ended 30 March 2007 or for the 53 weeks ended 31 March 2006 (as restated for IFRS) but are derived from those accounts. Statutory accounts for 2006 have been delivered to the Registrar of Companies and those for 2007 will be delivered following the Group's annual general meeting. The auditors have reported on these accounts; their reports were unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. All 2006 comparatives have been restated to comply with International FinancialReporting Standards (IFRSs) and a full reconciliation of the 2006 income statement and balance sheet can be found in the notes to the financial statements when published and at www.biffa.co.uk. While the financial information included in this preliminary announcement hasbeen computed in accordance IFRSs, this announcement does not in itself containsufficient information to comply with IFRSs. The Group expects to publish fullfinancial statements that comply with IFRSs in June 2007. 14 ANNUAL GENERAL MEETING The final dividend is subject to confirmation at the Annual General Meetingwhich will be held on Thursday, 26 July 2007 at Chartered Accountants Hall, OneMoorgate Place, London. Transfers to be taken into account for the proposedfinal dividend for ordinary shareholders should be lodged with the Company'sRegistrars, Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DAby 6.00pm on Friday 29 June 2007, being the Company's Record Date. The proposedfinal dividend for ordinary shareholders will be paid on Tuesday 31 July 2007. 15 WEBSITE POLICY The directors are responsible for the maintenance and integrity of the company'swebsite. Information published on the internet is accessible in many countrieswith different legal requirements. Legislation in the United Kingdom governingthe preparation and dissemination of financial statements may differ fromlegislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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