Biffa to reorganise into two divisions; annual profits drop

Waste management company Biffa posted a drop in full-year profit on Wednesday, dented by onerous contracts and debt payments, as it said it will reorganise the group into two divisions.

In the year to 29 March, statutory pre-tax profit fell to £21.5m from £38.3m in 2018. However, underlying pre-tax profit rose 7.4% to £64m on revenue of £1.09bn, up 3.3% on the previous year.

In the industrial and commercial segment, revenue rose 8% to £608.3m, while underlying operating profit was 15.6% higher at £55.6m. Underlying organic revenue growth of 3.2% was ahead of both the first half run rate and last year, with new customer wins including Busy Bees, National Trust and Kingspan Group. Biffa also secured key contract renewals, including John Lewis Partnership, Stagecoach and Dairy Crest.

In the municipal business, revenue slipped 4% to £164.6m and underlying operating profit slumped 58% to £4.7m in what the company said was a "challenging" year, mostly due to contract attrition.

Chief executive Michael Topham said: "We have delivered a good set of financial results for the year while making further strides in the delivery of our strategy."

Topham said the company had "successfully weathered" the headwinds associated with the Chinese import restrictions on commodities and the recent market impacts in its municipal division.

"Both of these areas, which have put downward pressure on our financial performance, have now stabilised," he said.

"Our strategic priorities are clear - growing our industrial & commercial collections business and investing in recycling and energy from waste assets," Topham added.

As a result, he has decided to reorganise the group into two divisions: collections and resources & energy. Topham said this will provide a more efficient, focused structure and position the company for growth in the areas where it has advantaged positions.

Numis said the results are "solid", with pre-tax profit of £64m ahead of its estimate of £59.6m.

"We continue to believe that the group's strategy leaves it well placed to create long-term value in an attractive market," the broker said, as it reiterated its 'buy' recommendation and 305p price target.

At 1125 BST, the shares were up 0.7% at 229.50p.