Half-year Report

Biffa plc 

HALF YEAR RESULTS FOR THE 26 WEEKS ENDED 28 SEPTEMBER 2018

21 November 2018Biffa plc ('Biffa', 'the Group' or 'the Company'), a leading UK integrated waste management company, announces its results for the 26 weeks ended 28 September 2018 and confirms that the Board's expectations for the full year remain unchanged. 

Financial highlights:

Strategic highlights:

Michael Topham, Chief Executive of Biffa, said:

"Biffa has delivered a solid first half set of results, despite a number of expected external headwinds and our expectations for the full year remain unchanged.

The delivery of our strategic objective of building the leading UK I&C waste management platform continues, with another very strong period of organic and acquisition growth and expanding margins in this key division for Biffa. We have an established track record of delivery and are confident that we can continue to execute this proven strategy in the coming years.

The scale of our collection operations, and the control of materials that comes from this, offers us an attractive and advantaged position from which to invest in recycling and energy from waste opportunities.

Our intended investment in proven energy from waste technology alongside our partner Covanta is making good progress, with the strategic and financial investment case having strengthened since we first announced our plans in this space.

In recycling, we are today delighted to announce a major commitment to plastics recycling in the UK, with a c£15m investment in a PET plastic bottle recycling plant. We are proven players in this space and are excited about further growing our operations in this critical area of our industry.

The key themes in the UK waste management industry remain collection market consolidation and development of infrastructure in recycling and energy from waste. Biffa remains well placed to capitalise on these and we look forward with confidence."

PRESENTATION OF RESULTS

There will be a presentation of the results to analysts and investors at 9:30am today (21 November 2018) at Numis Securities, The London Stock Exchange Building, 10 Paternoster Square, London, EC4M 7LT. To register your attendance please contact [email protected]. 

A live audio webcast and conference call of the presentation will be available on Biffa's website - www.biffa.co.uk. The presentation slides will be added to Biffa's website prior to the analyst meeting.

ENQUIRIES:

Investors & Analysts

Michael Topham, Chief Executive Officer

Richard Pike, Chief Financial Officer

[email protected]

Media

Instinctif Partners

+44 (0) 20 7457 2020

[email protected]

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

Notes:

'Underlying activities' and a number of other terms and performance measures used in this document are not defined within accounting standards and may be applied differently by other organisations. See notes to the consolidated financial statements for basis of preparation and definitions of all non-statutory measures:

1 Revenue excluding Landfill Tax

2 Profit before depreciation and amortisation, exceptional items, impact of real discount rate changes to landfill provisions, finance costs and taxation

3 Profit before exceptional items, amortisation of acquisition intangibles, impact of real discount rate changes to landfill provisions, finance costs and taxation

4 Calculated as a percentage of statutory revenue

5 Profit for the period as adjusted for non-underlying operating items (exceptional items, amortisation of acquisition intangibles and impact of real discount rate change to landfill provisions), non-underlying net interest items and non-underlying taxation

6 Net increase/(decrease) in cash and cash equivalents excluding dividends, restructuring and exceptional items, acquisitions, movement in financial assets and movements in borrowings or share capital (but including finance lease principal payments)

7 Excludes contingent balances in respect of EVP instrument

8 Represents 2.0 x last twelve months' Underlying EBITDA

9 Total Underlying Operating Profit includes central costs of £7.6m (H1 2018: £9.3m)

CHIEF EXECUTIVE'S REVIEW

Operating Performance

Performance in the first half has been in line with our expectations, and our full year expectations remain unchanged. For the half year Revenue has increased by 2.7% to £549.2m and Net Revenue has increased by 4.2% to £501.8m. Underlying Operating Profit margin in the period is 7.4% compared to 8.1% last year, largely due to the previously reported short term impact of the recent movement in commodity prices.

Industrial & Commercial

I&C Net Revenue increased 7.9% to £302.9m, through a combination of organic and acquisitive growth. Organic revenue increased 3.1% with acquisitions contributing a further 4.8% to overall revenue growth. We continue to focus on improving our market leading service proposition which is reflected in our SME customer churn rate running at below 10% during the first half. New contract wins also remain strong, with major wins during the period including Metropolitan Police, DFS and Busy Bees with renewals of Thames Water, Tarmac and Village Hotels contracts. 

We have been particularly pleased by the growth in our Integrated Resource Management offer, which provides bespoke embedded solutions to customers with complex waste management needs.

Underlying Operating Profit margin was 9.1% for the half year, having improved from 8.8% in the prior half year. Pricing discipline has been maintained which, together with the achievement of acquisition synergies and organic growth, are expected to continue to deliver revenue and year-on-year margin growth in this division.

Municipal *

*H1 18 has been restated to exclude the Leicester City Council contract which has been transferred to the Energy division with effect from H1 19 - see Note 3 to the financial statements

The division's trading performance has been impacted by a number of factors in a competitive market. 

Revenue of £83.4m (FY18: £87.4m) reflects the expiry of the Stafford and Surrey Heath contracts in the prior period.

Underlying EBITDA and Operating profit were both impacted by the combination of contract attrition, unrecovered fuel and labour cost inflation and the performance of certain recently acquired contracts.

Whilst we expect the market conditions to persist, we do believe that they have now stabilised. We have undertaken a thorough review of the business, refined both our operating structure and bid criteria and we believe that our underlying performance has now stabilised. In this regard, we were pleased to have recently been awarded the Waverley BC contract.

Resource Recovery & Treatment

The division delivered a strong performance, given the China backdrop. Net Revenue increased 7.6% to £65.4m, albeit that Underlying EBITDA and Underlying Operating Profit were both impacted by the year on year commodity price movement.

As previously reported, we responded rapidly to this issue, refining the product quality criteria as well as broadening our other domestic and export markets. Furthermore, the pricing environment has recently improved and we expect this to be maintained going forward.

Energy*

*H1 18 has been restated to include the Leicester City Council contract which has been transferred from the Municipal division with effect from H1 19 - see Note 3 to the financial statements

Revenue of £50.1m compares with £52.7m last year due to stronger wholesale energy and renewable subsidy prices which have partially offset the anticipated reductions in landfill gas generation.

Underlying Operating Profit margins improved as a result of the higher prices.

We expected a full year effective electricity price of £45.9/MWh (H1 18: £41.9/MWh).

Operational KPIs

The solid performance in the period is further evidenced by our operational KPIs, with tonnages collected remaining constant despite some contract attrition in the Municipal division. The increase in processed tonnages has been driven by infrastructure investments and acquisitions, with landfill volumes showing decline in line with our medium term trend expectations. The reduction in energy generation reflects the gradual decline in landfill gas yields over time. Energy prices increased from the prior year:

Strategy Update

The Group has an established strategy to Grow market presence - both organically and by acquisition; to Develop services and infrastructure by leveraging its control of waste streams; and to Optimise systems and processes, driving value from its existing operations. We continue to make good progress in the delivery of this strategy.

We have a proven track record of identifying and integrating value-enhancing acquisitions from within the highly fragmented I&C marketplace.

In August 2018 we purchased Weir Waste Services Limited, which brought in £17.3m of annualised revenues. Three other small acquisitions were also completed during the period and since the period end, one small acquisition has been completed with targeted annual revenue of  c£2m.

We continue to see a strong pipeline of acquisition opportunities.

*Value comprises consideration plus net debt acquired

Our discussions with Covanta concerning the potential development of two Energy Recovery facilities in Cheshire and Leicestershire continue to make good progress. We have made significant progress around both the financing structure and the commercial and operational contracts that will underpin these projects and we are progressing the revised permits that are needed to operate both sites at the planned capacities.

In addition, we continue to progress the smaller scale Swansea EfW opportunity.

We are advancing a new PET plastic bottle recycling investment, which we expect to cost around £15m and which will take around 18 months to build and commission. We are considering potential joint venture parties to collaborate on the project if this is mutually beneficial.

Summary and Outlook

Biffa has delivered a solid first half set of results, despite a number of expected external headwinds and our expectations for the full year remain unchanged.

The delivery of our strategic objective of building the leading UK I&C waste management platform continues, with another very strong period of organic and acquisition growth and expanding margins in this key division for Biffa. We have an established track record of delivery and are confident that we can continue to execute this proven strategy in the coming years.

The scale of our collection operations, and the control of materials that comes from this, offers us an attractive and advantaged position from which to invest in recycling and energy from waste opportunities.

Our intended investment in proven energy from waste technology alongside our partner Covanta is making good progress, with the strategic and financial investment case having strengthened since we first announced our plans in this space.

In recycling, we are today delighted to announce a major commitment to plastics recycling in the UK, with a c£15m investment in a PET plastic bottle recycling plant. We are proven players in this space and are excited about further growing our operations in this critical area of our industry.

The key themes in the UK waste management industry remain collection market consolidation and development of infrastructure in recycling and energy from waste. Biffa remains well placed to capitalise on these and we look forward with confidence.

BOARD OF DIRECTORS' STATEMENT

Biffa is set to deliver another year of revenue growth and solid underlying financial performance.

Results

The Group delivered solid results for the first half of the year.

Revenues increased by 2.7% to £549.2m and Net Revenues rose 4.2% to £501.8m, driven in the main by growth in our I&C division.

Underlying EBITDA was relatively flat at £75.6m (H1 18: £76.3m).

Underlying Operating Profit at £40.8m compares with £43.4m last year and the Underlying Operating Profit margin has moved from 8.1% to 7.4%.

The first half, when compared to last year, was markedly impacted by the expected lower commodity prices. We anticipate that this impact will not persist to the same degree in the second half of the year.

Both corporate new business and acquisition pipelines remain healthy.

Capital Allocation

A core part of our strategy is to selectively invest in businesses and infrastructure where we have a structural advantage and can generate attractive returns. The Board is encouraged by the level of growth achieved from acquisitions in the year to date, which includes most notably the acquisition of Weir Waste Services Limited in August for £16.1m. We are continuing to pursue value-adding acquisitions and allocate capital to incremental projects that will enhance capacity or performance at existing and new sites, such as in Energy from Waste and PET plastic bottle recycling, that will support long-term sustainable growth.

Dividend

Reflecting the Board's continuing confidence in the prospects for the Group, we are pleased to announce an interim dividend of 2.3p per share, an increase of 6.0% from last year. This interim dividend will be paid on 4 January 2019 to shareholders on the register on 8 December 2018.

Summary

The growth drivers for the Group remain attractive. Biffa is well positioned in its markets and has a strong portfolio of businesses, services and capabilities. We are well placed to deliver a strong second half performance and meet our objectives for the full year.

FINANCIAL REVIEW

Group Performance

Revenues increased by 2.7% from £534.6m to £549.2m, with Net Revenues increasing by 4.2% from £481.6m to £501.8m.

Underlying EBITDA of £75.6m compares to £76.3m last year, with Underlying Operating Profit at £40.8m compared to £43.4m last year. The principal drivers of profit movement in the first half were commodity pricing in RR&T and the combination of contract attrition, fuel and labour inflation and certain new contract performance in the Municipal division.

Finance Income

Finance income increased from £0.3m to £0.8m primarily driven by returns on pension assets.

Underlying Finance Charges

Underlying Finance charges exclude the fair value discount unwind on the EVP preference share liability. They include interest charges on the Group's borrowings, bond premiums and discount unwind on landfill provisions.

Underlying Finance charges increased by 2.9% to £10.7m in the period. The increase reflects the Group's marginally increased borrowings resulting from the Group's investment in acquisitions and infrastructure.

Underlying Taxation

The effective tax rate on underlying profits was 19.4% (H1 2018: 19.8%), broadly consistent with the prevailing rate of Corporation Tax.

Other Items

To enable additional clarity of business performance, certain items are excluded when calculating the Group's Underlying measures of performance. See below 'Basis of Preparation and Definitions'.

The items are more fully explained in Note 4 to the condensed consolidated financial statements and include exceptional items, amortisation of acquisition intangibles, material impacts from changes in real discount rates on landfill provisions, and the fair value discount unwind on the EVP preference shares. After tax, these items totalled £(5.9)m in the period (H1 2018: £(3.0)m). The principal reason for the increase in the current half year is the impact of the increase in the real discount rate on landfill provisions, which resulted in a credit of £2.7m in the period, compared to £4.7m in the prior period and increased amortisation of acquired intangibles.

A reconciliation from Underlying Profit after Tax to Statutory Profit after Tax is set out below.

Earnings per Share

Total statutory earnings/(loss) per share reduced from 9.5 pence per share to 7.6 pence per share broadly reflecting the reduction in operating profit.

Underlying earnings per share was also reduced to 10.0 pence per share (H1 2018 10.7p).

Dividend

An interim dividend of 2.3p per share has been declared and will paid on 4 January 2019 to shareholders on the register on 8 December 2018.

Details of the progressive dividend policy adopted by the board are set out in the Board of Directors' Statement.

Retirement Benefits

The Group operates a defined benefit pension scheme for certain employees which is closed to new entrants and which closed to future accrual for the majority of its members as at 1 November 2013. At 28 September 2018, the net retirement benefit surplus was £57.8m compared to a surplus of £51.3m at 30 March 2018. The change in the financial position of the scheme reflects the performance of the Scheme's assets plus the receipt of the deficit contribution by the Group.

The scheme had an actuarial deficit of £66.7m as at the time of the last valuation in March 2015, and an inflation-linked contribution of £3.85m from March 2017 has been agreed with the trustee of the scheme. The Group is currently in discussions with the trustees with regard to the March 2018 triennial scheme valuation.

Return on Capital

The Group operates a disciplined approach to capital investment.

Group Return on Capital Employed (see Basis of Preparation and Definitions) decreased from 10.1% to 8.6%. This measure is materially affected by intangible assets held on the balance sheet which were initially recognised in 2008 upon the LBO of the Group including Landfill Gas Rights and Brand.

Group Return on Operating Assets (see Basis of Preparation and Definitions) also decreased from 26.7% to 24.7%

Cash Flow

A summary of the Group's cash flows is shown below:

Underlying free cash flow of £2.7m compares to £13.3m last year, principally due to movements in working capital.

The net working capital outflow in the period is expected to substantially reverse in the second half. Capital expenditure (comprising purchases of property, plant and equipment and purchases of intangibles) is up on last year at £22.3m from £19.4m.

Net interest paid decreased due to the timing of interest payments and rolled up interest around the FY17 and FY18 year ends.

A statutory group cash flow summary is set out below: 

Reported Net Debt and Borrowings

Group Reported Net Debt is £302.8m (FY18: £272.2m), representing 2.0x last twelve months' Underlying EBITDA (H1 18: 1.9x).

Underlying free cash flow was £2.7m in the period. As a result, the £30.6m increase in Reported Net Debt was principally due to the 4 business acquisitions and the dividend.

Of the EVP preference liability, £6.3m has been included within Reported Net Debt as it will be payable to EVP Preference Shareholders irrespective of the outcome of the EVP dispute. The remainder (£41.2m) has been excluded on the basis that it will only become payable subject to the outcome of the EVP dispute and will be funded by recovery of funds from HMRC.

Landfill Tax Matters

We have received notification that our EVP appeal will be heard in Summer 2019. As previously explained, the exposure in relation to this claim was pre-paid at the time of the IPO.

As regards our Landfill tax - Hazardous soils dispute, we continue to expect that HMRC will demand payment of this tax. We will appeal against any assessment and vigorously defend our position as we are confident that our position is consistent with the law and the intent of the legislation.

The tax at stake has been disclosed as a contingent liability in note 15 to the accounts.

Reporting Periods

The Group will report results for the 52 weeks to 29 March 2019. The prior year comparisons are in relation to the 53 weeks ended 30 March 2018. The Directors consider the slight differences in comparables to result in a negligible net impact on overall results.

Risks & Uncertainties

The principal risks and uncertainties affecting the business activities of Biffa and the industry in which it operates remain those detailed in the Annual Report and Accounts and which are summarised as follows:

Potential Impact of Brexit

The Board believes that the potential impact of Brexit on the Group will be relatively limited given that it operates primarily within the UK. Principal risks include foreign exchange movements, imposition of tariffs and potential constraint of labour supplies.

The Board will continue to closely monitor developments in the UK Government's Brexit plans and any potential impacts on the Group.

BASIS OF PREPARATION AND DEFINITIONS

The reported financial information has been prepared on the basis of Note 1 of the interim financial statements. The financial information has been prepared on the basis of results for the 26 weeks ended 28 September 2018.

In considering the financial performance of our principal segments, we analyse them on the basis of their underlying performance. This is the principal measure used by management to assess the business performance of the Company's underlying activities. Underlying activities exclude exceptional and other items. Note 4 explains in detail items which are excluded from our underlying profit measures.

The Board believes that by presenting our financial performance using underlying performance it is easier to read and interpret financial performance between periods, as underlying profit measures are more comparable having removed the distorting effect of the excluded items. Those items are more clearly understood if separately identified and analysed.

Statement of Directors' Responsibilities

The half year financial information is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing the half year report in accordance with the Disclosure and Transparency Rules (DTR) of the United Kingdom's Financial Conduct Authority

We confirm that to the best of our knowledge:

By Order of the Board

Michael Topham

Chief Executive Officer

21 November 2018

INDEPENDENT REVIEW REPORT TO BIFFA PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 28 September 2018 which comprises the Condensed Consolidated Interim Income, Condensed Consolidated Interim Statement of Financial Position, Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated Statement of Cash Flows and related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1 the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 28 September 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Statutory Auditor

London, United Kingdom

21 November 2018

Condensed Consolidated Interim Income Statement

For the half year ended 28 September 2018

¹ Underlying Activities excludes other items which are outlined in Note 4.

Condensed Consolidated Interim Statement of Comprehensive Income

For the half year ended 28 September 2018

Condensed Consolidated Interim Statement of Financial Position

As at 28 September 2018

Condensed consolidated Statement of Changes in Equity

For the half year ended 28 September 2018

Condensed Consolidated Statement of Cash Flows

Notes to the Condensed Interim Financial Information

1. Basis of Preparation

This condensed consolidated interim financial information for 26 weeks ended 28 September 2018 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 "Interim Financial Reporting" as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual report dated 13 June 2018 which is available on the Company website, and has been prepared in accordance with the IFRSs as adopted by the European Union.

The condensed consolidated interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory financial statements for the 53 weeks ended 30 March 2018 were approved by the Board of Directors on 13 June 2018 and delivered to the Registrar of Companies. The independent auditor's report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

This condensed consolidated interim financial information has been reviewed, not audited. The condensed group financial statements have been prepared on the basis of the accounting policies set out in the statutory financial statements.

1.1 Going concern basis

The Group remains in a net current liability position and meets its day to day working capital requirements through its available bank facilities. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. As a consequence, and having reassessed the principal risks, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.

2. Accounting policies

Except as described below, the accounting policies and key assumptions and sources of estimation uncertainty applied are consistent with those as described in the annual report.

Taxes on income in the interim periods are accrued using the full year effective tax rate that would be applicable to expected total annual profit or loss.

IFRS 9 - "Financial Instruments" has been adopted as at 31 March 2018, replacing the multiple classification and measurement models in IAS 39 "Financial instruments: Recognition and measurement".

IFRS 9 modifies the classification and measurement of certain classes of financial assets and liabilities and required the Group to reassess classification of financial assets from four to three primary categories (amortised cost, fair value through profit and loss, fair value through other comprehensive income), reflecting the business model in which assets are managed and their cash flow characteristics. Financial liabilities continue to be measured at either fair value through profit and loss or amortised cost.

Changes in accounting policies resulting from IFRS 9 have been applied as at 31 March 2018. The adoption of IFRS 9, based on financial instruments and hedging relationships as at the date of initial application of IFRS 9 and as at 28 September 2018, did not have a material impact on the Condensed Consolidated Interim Financial Statements. There is no adjustment to opening retained earnings arising from the adoption of IFRS 9 and the prior period has not been restated.

IFRS 15 - "Revenue from Contracts with Customers" has been adopted as at 31 March 2018 and outlines the principles an entity must apply to measure and recognise revenue and related cashflows.

The standard replaces IAS 18 'Revenue' and IAS 11 'Construction Contracts' and related interpretations. The Biffa Group has undertaken a comprehensive analysis of the new standard based on a review of the portfolios of contracts reflecting the different revenue streams across the four operating divisions.

Changes in accounting policies resulting from IFRS 15 have been applied as at 31 March 2018. The adoption of IFRS 15 has impacted the timing of revenue recognised for contract modifications within the Municipal Division. An adjustment of £(6.2)m has been made to opening retained earnings in the Consolidated Statement of Changes in Equity and the prior period has not been restated.

IFRS 16 - "Leases" is effective for periods beginning on or after 1 January 2019 and will therefore be applied to the Biffa Group Financial Statements for the 52 weeks ending 27 March 2020. The standard replaces IAS 17 - "Leases" and requires lessees to recognise assets and liabilities for all leases with the exception of short-term leases or where the underlying asset is of low value. The Biffa Group is assessing the impact of the new standard and as the impact will depend on the circumstances at the time of adoption it is not yet practicable to provide a reliable estimate of the impact on the Group's results. A further update will be included in the Financial Statements for the period ending 29 March 2019.

3. Segmental Information

The Group is managed by type of business and is organised into four operating divisions. These divisions represent the business segments in which the Group reports its primary segment information. All trading activity and operations are in the United Kingdom and there is therefore no secondary reporting format by geographical segment. Revenue within segments is eliminated on consolidation.

With effect from the start of the 26 weeks ended 28 September 2018 the Leicester contract has been moved to the Energy division to benefit from the operational and technical expertise of the division in Anaerobic Digestion. The prior period results have therefore been restated for comparison purposes.

The Group's segmental results are as follows:

1 The prior periods shown above reflect the transfer of the Leicester business from the Municipal division to the Energy division. The Municipal division results include a reduction in revenue of £10.4m in the 26 weeks ended 22 September 2017 and £19.9m reduction in the 53 weeks ended 30 March 2018 with corresponding increases in the Energy division for those periods

All revenue is with external third parties. There is no single customer that accounts for more than 10% of Group revenue (26 weeks to 22 September 2017: none, 53 weeks to 30 March 2018: none).

¹ Underlying EBITDA represents earnings before interest, taxation, depreciation, amortisation, exceptional items and the impact of real discount rate changes to landfill provisions

² Presented before other items as disclosed in Note 4.

3 The prior periods shown above reflect the transfer of the Leicester business from the Municipal division to the Energy division. The Municipal division results include a reduction in EBITDA of £0.2m in the 26 weeks ended 22 September 2017 and £1.1m increase in the 53 weeks ended 30 March 2018 with a corresponding increase and reduction in the Energy division for those periods

1 The prior periods shown above reflect the transfer of the Leicester business from the Municipal division to the Energy division. The Municipal division results include an increase in Underlying operating profit of £0.5m in the 26 weeks ended 22 September 2017 and £2.5m in the 53 weeks ended 30 March 2018 with corresponding reductions in the Energy division for those periods.

Segment underlying EBITDA represents the underlying profit earned by each segment without allocation of the share of depreciation and amortisation, exceptional items, the impact of real discount rate changes to landfill provisions, finance costs and income tax expense. Underlying operating profit recognises the impact of depreciation and amortisation excluding the amortisation of acquisition intangibles. These measures are both reported to the Board for the purpose of resource allocation and assessment of segment performance.

1 The prior periods shown above reflect the transfer of the Leicester business from the Municipal division to the Energy division. The Municipal division results include a reduction in tangible and other intangible assets of £5.9m as at 22 September 2017 and £5.6m as at 30 March 2018 with corresponding increases in the Energy division for those periods.

1 The prior periods shown above reflect the transfer of the Leicester business from the Municipal division to the Energy division. The Municipal division results include a reduction in capital expenditure of £0.4m in the 26 weeks ended 22 September 2017 and £1.4m in the 53 weeks ended 30 March 2018 with corresponding increases in the Energy division for those periods.

Capital expenditure comprises additions to intangible assets and property, plant and equipment.

1 The prior periods shown above reflect the transfer of the Leicester business from the Municipal division to the Energy division. The Municipal division results include a reduction in depreciation and amortisation of £0.7m in the 26 weeks ended 22 September 2017 and £1.4m in the 53 weeks ended 30 March 2018 with corresponding increases in the Energy division for those periods.

Depreciation and amortisation relates to the write down of both intangible and tangible fixed assets over their estimated useful economic lives. Amortisation of acquisition intangibles is disclosed separately in line with the segmental underlying operating profit.

4. Other Items

Exceptional items are those that in the Directors' view are required to be separately disclosed by virtue of their size or incidence to enable a full understanding of the Group's performance.

The Group's financial performance is analysed into two components; underlying performance (which excludes other items), and other items. Underlying performance is used by management to monitor financial performance as it is considered it aids comparability of the reported financial performance year to year.

Management utilises an exceptional framework which has been approved by the Board. This follows a three- step process which considers the nature of the event, the financial materiality involved and the particular facts and circumstances. Items of income and expense that are considered by management for designation as exceptional items include items such as corporate restructuring costs, acquisition related costs, write downs or impairments of non-current assets, movements on onerous contract provisions and strategy related costs including the implementation of Project Fusion.

Acquisition related costs

The £1.6m of acquisition related expenditure in the 53 weeks ended 30 March 2018 relates to professional fees and other costs which are directly attributable to acquisitions. This includes £0.9m in relation to the acquisition of 100% of the issued share capital of O'Brien Waste Recycling Solutions Holdings Limited, £0.2m in relation to the acquisition of 100% of the issued share capital of Amber Engineering Limited, and £0.2m in relation to the acquisition of the trade and assets of Blakeley's Recycling Limited in the prior year. The £1.3m of acquisition related costs in the 26 weeks to 28 September 2018 principally relate to the acquisition of 100% of the issued share capital of O'Brien Waste Recycling Solutions Holdings Limited and the acquisition of 100% of the issued share capital of Weir Waste Services Limited.

Corporate restructuring costs

Corporate restructuring costs are principally costs directly related to the Group's admission to the London Stock Exchange.

Onerous contracts

Onerous contract costs reflect all movement on onerous service contract provisions.

Strategy-related costs

Strategy-related costs primarily relate to the Group's system replacement programme Project Fusion.

Amortisation of acquisition intangibles

Amortisation of acquisition intangibles represents the amount amortised by the Group in each period in respect of intangibles from prior acquisitions, the amounts for which are reported separately from the Group's depreciation and amortisation charges.

Impact of real discount rate changes to landfill provisions

Impact of real discount rate changes to landfill provisions reflects the impact on provisions which arises wholly due to the change in discount rate on landfill provisions as this is not reflective of operational performance.

Finance charges

Finance charges relate to the EVP debt instrument as disclosed in note 16.

The tax impact of other items is calculated as 19% (20%: 2017) of the expenses allowable in calculating the taxable profit.

Underlying operating costs have been split into distribution and administration costs as detailed below:

5. Income Tax Recognised in Profit or Loss

Corporation tax is calculated at 19% (26 weeks to 22 September 2017: 19%, 53 weeks to 30 March 2018: 19%) of the estimated assessable profit/(loss) for the period. The charge for the period can be reconciled to the profit/(loss) per the Statement of Comprehensive Income as follows:

The Finance Act 2016, which provides for reductions in the main rate of Corporation Tax from 20% to 19% effective from 1 April 2017 and to 17% effective from 1 April 2020, was enacted on 15 September 2016. As deferred tax assets and liabilities are measured at the rates that are expected to apply in the periods of the reversal, deferred tax balances at the balance sheet date have been calculated at the rate at which the relevant balance is expected to be recovered or settled.

Whilst the UK remains part of the EU the evolution of the application of EU tax competition regulations continues to create uncertainty over tax legislations and at this stage it is not possible to quantify the impact on the financial Statements.

As the Group's presence is mainly in the UK we do not envisage a significant impact on the Group following the decision of the UK Government to invoke Article 50 to leave the EU.

6. Earnings per share

From continuing and discontinued operations

The calculation of the basic and diluted earnings per share is based on the following data:

Earnings

From continuing operations