UK markets open in 1 hour 38 minutes
  • NIKKEI 225

    28,283.92
    -467.70 (-1.63%)
     
  • HANG SENG

    23,832.04
    -248.48 (-1.03%)
     
  • CRUDE OIL

    71.06
    +2.91 (+4.27%)
     
  • GOLD FUTURES

    1,796.70
    +8.60 (+0.48%)
     
  • DOW

    34,899.34
    -905.06 (-2.53%)
     
  • BTC-GBP

    43,050.59
    +2,098.27 (+5.12%)
     
  • CMC Crypto 200

    1,433.08
    -22.33 (-1.53%)
     
  • ^IXIC

    15,491.66
    -353.54 (-2.23%)
     
  • ^FTAS

    4,020.38
    -146.90 (-3.53%)
     

Renewi plc: Half-year report

·28-min read

Renewi plc (RWI)
09-Nov-2021 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.

9 November 2021

 

 

STRONG FIRST HALF PERFORMANCE, WITH FURTHER INCREASE IN MANAGEMENT'S EXPECTATIONS FOR YEAR ENDING 31 MARCH 2022

 

Renewi plc (LSE: RWI), the leading international waste-to-product business, announces its results for the six months ended 30 September 2021.

 

Financial Highlights

 

Market and Strategic Highlights

 

Sustainability

 

1The definition and rationale for the use of non-IFRS measures are included in note 17.

* Core net debt used for banking leverage calculations excludes the impact of IFRS 16 lease liabilities and UK PPP net debt.

 

Otto de Bont, Chief Executive Officer, said:

 

"Renewi delivered a strong performance in the first half of FY22, with underlying EBIT 125% above prior year and 69% above the pre-Covid first half of FY20.  We have successfully retained some of the structural cost savings made in response to the Covid-19 pandemic and these, combined with volume recovery and ongoing strong recyclate prices, have contributed to the significant increase in margins and profits.  Following this strong first half, the Board is further increasing its full year expectations, which assume a moderation of recyclate prices in the second half as well as a reduced throughput at ATM.

 

"Our business model is essential to enable advanced circular economies to achieve their carbon reduction targets.  By recycling more we reduce incineration and assist our customers in reducing their carbon footprint as they replace virgin materials with our high-quality secondary materials.  We therefore expect to see long-term accretive growth opportunities across our markets as we add more value to the waste we collect and process."

 

 

Results

 

 

Sep 21

Sep 20

% change

Sep 192

UNDERLYING NON-STATUTORY

 

 

 

 

Revenue

 €915.6m

 €821.4m

  +11%

€850.7m

Underlying EBITDA1

 €126.6m

   €88.5m

  +43%

  €91.2m

Underlying EBIT1

   €63.8m

   €28.3m

 +125%

  €37.8m

Underlying profit before tax1

   €50.4m

   €15.3m

 +229%

  €20.2m

Underlying EPS1 (cents per share)

        47c

         15c

 +213%

 

Adjusted free cash flow1

   €25.9m

   €33.7m

 

 

Free cash flow1

   €14.2m

   €77.9m

 

 

Core net debt*

    €336m

    €381m

 

 

 

 

 

 

 

STATUTORY

 

 

 

 

Revenue

 €915.6m

 €821.4m

 

 

Operating profit

   €58.2m

   €17.0m

 

 

Profit before tax

   €44.7m

     €4.4m

 

 

Profit for the period

€37.1m

     €3.5m

 

 

Basic EPS (cents per share)

        46c

          5c

 

 

Cash flow from operating activities

  €75.5m

 €133.9m

 

 

Total net debt*

   €648m

    €684m

 

 

 

1 The definition and rationale for the use of non-IFRS measures are included in note 17.

2 September 2019 values are for ongoing businesses only and exclude the results for the Canada and Reym activities which were sold during FY20.

* Core net debt used for banking leverage calculations excludes the impact of IFRS 16 lease liabilities and UK PPP net debt.

 

The results for both this year and the prior years are reported applying IFRS 16.  Where appropriate, we also disclose certain metrics on an IAS 17 basis as this is of particular relevance for the calculation of leverage for the Group's banking covenants.

 

 

For further information:

 

Paternoster Communications

+44 20 3012 0241

Tom Buchanan

Renewi plc

+44 7976 321 540

Adam Richford, Head of Investor Relations

+44 20 3012 0241

Ben Honan

+44 7773 813 180

Michelle James, Communications

 

 

 

 

 

Notes:

 

Forward-looking statements

Certain statements in this announcement constitute "forward-looking statements".  Forward-looking statements may sometimes, but not always, be identified by words such as "will", "may", "should", "continue", "believes", "expects", "intends" or similar expressions.  These forward-looking statements are subject to risks, uncertainties and other factors which, as a result, could cause Renewi plc's actual future financial condition, performance and results to differ materially from the plans, goals and expectations set out in the forward-looking statements.  Such statements are made only as at the date of this announcement and, except to the extent legally required, Renewi plc undertakes no obligation to revise or update such forward-looking statements.

 

Chief Executive Officer's Statement

 

Overview

 

Renewi delivered a strong performance in the first half of FY22, with underlying EBIT 125% above prior year and 69% above the pre-Covid first half of FY20.  We have successfully retained some of the structural cost savings made in response to the Covid-19 pandemic and these, combined with volume recovery and ongoing strong recyclate prices, have contributed to the significant increase in margins and profits.  We are also particularly pleased to have achieved our target of reducing leverage below 2x while at the same time increasing our investment in growth projects.

 

We remain confident our three strategic value drivers - our innovation pipeline, recovery of earnings at ATM, and the Renewi 2.0 programme - will deliver significant additional earnings over the next years as well as the longer term.  Our business model is essential to enable advanced circular economies to achieve their circularity and consequent carbon reduction targets.  We continue to see positive structural growth drivers as the Dutch and Belgian regional governments progressively tax carbon emitters, incentivise recycling over incineration, and promote the use of secondary materials.  We therefore expect to see long-term accretive growth opportunities across our markets as we continue to assist our customers to recycle more and to use our high-quality secondary materials.

 

Group financial performance

 

 

 

 

 

 

 

 

 

 

 

Group Summary

 

Revenue

 

Underlying EBIT

 

 

 

Sep 21

Sep 20

Variance

 

Sep 21

Sep 20

Variance

 

 

 

€m

€m

%

 

€m

€m

%

 

 

 

 

 

 

 

 

 

 

 

Commercial Waste

 

670.6

595.0

13%

 

64.7

29.4

120%

 

Mineralz & Water

 

93.6

90.4

4%

 

4.0

2.3

74%

 

Specialities

 

168.0

149.4

12%

 

1.7

-

N/A

 

Group central services

 

        - 

        - 

 

 

(6.6)

(3.4)

-94%

 

Inter-segment revenue

 

(16.6)

(13.4)

 

 

-

-

 

 

Total

 

915.6

821.4

11%

 

63.8

28.3

125%

 

 

 

 

 

 

 

 

 

 

 

The underlying figures above are reconciled to statutory measures in note 3 in the consolidated financial statements.

 

Group revenue was up by 11% to €916m and underlying EBIT increased by 125% to €63.8m.  Underlying profit before tax increased by 229% to €50.4m.  Underlying earnings per share increased by 213% to 47 cents (2020: 15 cents).

 

The business delivered a positive adjusted free cash-flow of €25.9m (2020: €33.7m).  There was a net cash outflow of €1.9m (2020: inflow of €67.7m, which included the €55m benefit of deferred payroll and other taxes in the Netherlands).  Core net debt/EBITDA reduced to 1.82x at 30 September 2021, achieving the Board's target of leverage below 2x two years ahead of expectations.

 

The Board is keeping the dividend under review, taking into account the Group's ongoing investments in growth projects, current trading and longer-term outlook.

 

 

 

 

 

 

 

 

 

 

 

Commercial Waste

Revenue

 

Underlying EBITDA

 

Underlying EBIT

 

 

Sep 21

Sep 20

 

Sep 21

Sep 20

 

Sep 21

Sep 20

 

 

 

 

 

 

 

 

 

 

 

Netherlands Commercial

442.3

396.8

 

71.1

50.3

 

43.2

21.1

 

Belgium Commercial

228.9

198.5

 

38.1

22.6

 

21.5

8.3

 

Intra-segment revenue

(0.6)

(0.3)

 

-

-

 

-

-

 

Total (€m)

670.6

595.0

 

109.2

72.9

 

64.7

29.4

 

 

 

 

 

 

 

 

 

 

 

Period on period variance %

 

 

 

 

 

 

 

 

 

Netherlands Commercial

11%

 

 

41%

 

 

105%

 

 

Belgium Commercial

15%

 

 

69%

 

 

159%

 

 

Total

13%

 

 

50%

 

 

120%

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on

 

Underlying

 

Underlying

 

 

operating assets

 

EBITDA margin

 

EBIT margin

 

 

Sep 21

Sep 20

 

Sep 21

Sep 20

 

Sep 21

Sep 20

 

 

 

 

 

 

 

 

 

 

 

Netherlands Commercial

22.6%

12.0%

 

16.1%

12.7%

 

9.8%

5.3%

 

Belgium Commercial

38.5%

21.3%

 

16.6%

11.4%

 

9.4%

4.2%

 

Total

26.0%

14.1%

 

16.3%

12.3%

 

9.6%

4.9%

 

 

 

 

 

 

 

 

 

 

 

The return on operating assets for Belgium excludes all landfill related provisions.  The underlying figures above are reconciled to statutory measures in notes 3 and 17 in the consolidated financial statements.

 

The Commercial Division increased revenues by 13% to €671m and underlying EBIT by 120% to €64.7m, representing an EBIT margin of 9.6%.  Return on operating assets increased to a strongly accretive 26%.

 

In the Netherlands, revenue increased by 11% to €442.3m and underlying EBIT increased by 105% to €43.2m.  Volumes were broadly flat on the prior year and were around 3% below pre-Covid levels.  Compared to prior year, there was a small recovery in commercial volumes offset by the expected contraction in construction and bulky waste.  Inbound revenues increased by 3% and outbound revenues by 78%, reflecting the strength of recyclate prices and a corresponding reduction in inbound revenue from our customers with whom we have dynamically priced contracts.  As reported at our last results, paper/cardboard and ferrous metal prices have been particularly strong; the outlook for recyclates is discussed later in this review.  Around two thirds of the uplift in earnings was attributable to extra margin on recyclates, supported by continuing tight control of costs.

 

In Belgium, revenue increased by 15% to €228.9m and underlying EBIT by 159% to €21.5m.  Core volumes increased by 13% compared to the prior year and recyclates by 8%, although these volumes also remain around 7% below pre-Covid levels.  This strong volume recovery reflected the very challenging first quarter drop in the prior year.  Volume recovery contributed the majority of the increase in underlying EBIT, supported also by the strong recyclate prices and ongoing operational cost savings.

 

 

 

 

 

 

Mineralz & Water

Sep 21

Sep 20

Variance

 

 

€m

€m

%

 

 

 

 

 

 

Revenue

93.6

90.4

4%

 

Underlying EBITDA

11.0

10.0

10%

 

Underlying EBITDA margin

11.8%

11.1%

 

 

Underlying EBIT

4.0

2.3

74%

 

Underlying EBIT margin

4.3%

2.5%

 

 

Return on operating assets

4.6%

11.7%

 

 

 

 

 

 

 

The return on operating assets excludes all landfill related provisions.  Earnings recovery at ATM was more than offset by the integration of a former joint venture which increased assets and included significant one-off charges in the second half last year which read through into the return on operating asset calculation.  The underlying figures above are reconciled to statutory measures in notes 3 and 17 in the consolidated financial statements.

 

The Mineralz & Water Division made underlying progress and saw revenues increase by 4% to €93.6m and underlying EBIT increase by 74% to €4.0m.  The contaminated soil processing line successfully increased throughput to 55% of capacity with no impact on product quality of the filler, sand and gravel.  Over 0.4m tonnes out of 1.3m tonnes of clean thermally treated soil ("TGG") stocks have now been shipped, clearing space on the site and reducing external storage costs.  We anticipate shipping a further 250k tonnes in the second half.  Other activities in the Division remained in line with expectations.    

 

 

 

 

 

 

Specialities

Sep 21

Sep 20

Variance

 

 

€m

€m

%

 

 

 

 

 

 

Revenue

168.0

149.4

12%

 

Underlying EBITDA

7.9

4.5

76%

 

Underlying EBITDA margin

4.7%

3.0%

 

 

Underlying EBIT

1.7

-

N/A

 

Underlying EBIT margin

1.0%

0.0%

 

 

Return on operating assets

17.9%

1.8%

 

 

 

 

 

 

 

Underlying EBIT includes utilisation of €0.5m (2020: €6.1m) from onerous contract provisions.  The return on operating assets excludes the UK Municipal business.  The underlying figures above are reconciled to statutory measures in notes 3 and 17 in the consolidated financial statements.

 

The Specialities Division grew revenues by 12% to €168m and delivered an underlying EBIT of €1.7m.  Coolrec continued to perform strongly, benefiting from operational improvements and strong recyclate prices.  Maltha recovered well from a Covid impacted prior period.  UK Municipal saw the benefits of high recyclate prices offset by higher Council volumes, some of which are loss-making, and an accounting adjustment in one contract.

 

Markets and strategy

 

Continuing positive developments in our end markets

 

COP26 is challenging the world to take the necessary steps to avoid catastrophic increases in global temperatures by the end of the century.  Production of more secondary materials to reduce virgin material use and the associated carbon emissions is a requirement for success in meeting these goals.  Becoming more circular and cutting virgin materials use by 28% within nine years could lead to a reduction in global greenhouse gas emissions by 39% according to the Circularity Gap Report.

 

Recycling plays a key part in enabling a circular economy by converting waste back into secondary materials and is therefore set to be supported by fiscal and regulatory governmental policy.  Recycling, like most markets, needs balanced supply and demand. 

 

Supply is stimulated by banning or taxing landfill and incineration to create an environment in which sorting and processing to produce recyclates is economically competitive.  This is already in place in the Benelux and has been further strengthened in Flanders by the recent announcement to double the incineration tax to €25 per tonne.  Next generation stimulation of supply is fundamental to Vlarema 8 legislation in Flanders which comes into effect in January 2023.  Vlarema 8 effectively introduces the mandatory pre-sorting of waste to remove recyclates before residues are incinerated, and this legislation is the key driver of our decision to build three large state-of-the-art sorting lines in Flanders. 

 

Demand is stimulated by setting targets for minimum recycled content for government tenders, or indeed simply mandating certain levels of recycled content in all materials.  For example, the Netherlands has a longstanding policy commitment to be 50% circular by 2030, and Belgium has very similar circularity ambitions in both Flanders and Wallonia.  This is further backed by trends in consumer demand where a sustainable solution appeals to a growing segment of the customer universe.  These targets have led us to predict that recyclates will over time become scarce materials and that prices should consequently rise from the long-term lows that we saw in March 2020, and that these prices may ultimately decouple from trading at a discount to virgin materials.  The last twelve months have seen sustained increases in the selling prices for most key recyclates, including paper, metals and plastics.  In the shorter term, we forecast some moderation of pricing towards the long-term average levels, as temporary imbalances in supply and demand attributable to Covid are resolved. 

 

Looking forward, legislators are considering further action, including carbon taxes, minimum recycled content levels and producer responsibility for the management of closed loops.  All these measures will help to accelerate the transition to increased recycling rates and, critically, increased demand for secondary materials.  While progress is being made, we believe that it will have to accelerate significantly if governments wish to meet their own recycling and circularity targets. 

 

Our unchanged strategy for long-term profitable growth

 

Our purpose is to protect the world by giving new life to used materials, and our vision is to be the leading waste-to-product company in the world's most advanced circular economies.  This differentiates Renewi as a company that focuses on reuse: supplying high-quality secondary materials, which we believe is the best way to extract value from waste.  We are a key player in the rapidly emerging circular economy and a pioneer among companies that collect our society's waste to find new uses for it.

 

To expand our position as a secondary raw material producer, our strategy is based on three pillars:

 

Positive progress with our three value drivers

 

We have three key value drivers, each expected to be worth €20m EBIT in the coming years: our innovation pipeline, Renewi 2.0, and the return to full production at our ATM facility. 

 

Capital committed to underpin the €20m EBIT target from the innovation pipeline

 

Innovation is one of our core priorities and we are working on a growing number of initiatives to deliver the first two pillars of our growth strategy.  Given that a number of these initiatives relate to new products or technologies, we do not expect them all to proceed to commercialisation.  During the past six months we have made significant progress and we have now committed €110m in total to the programme to underpin our targeted EBIT increase, of which €25m has been spent.  Our programme was outlined in detail in our recent virtual Capital Markets Event, which can be seen on our website.  The most significant of the investments is the €60m project to build advanced sorting lines in Flanders to meet the needs of the Vlarema 8 legislation.  These sorting lines will provide up to 400kT of capacity, generating attractive returns due to increased pricing, reduced incineration costs and some extra recyclate income.  The Walloon government has indicated that it will likely implement similar legislation to come into effect in 2025 and we expect pre-sorting of residual waste will become more common across other advanced circular economies with time.  Our investments at ATM and at our organics facility in Amsterdam are largely complete and will commission by the end of FY22.  These Board approved investments each meet the required return on operating assets of 16%-20%.

 

Project

Partner

Opportunity

Status

Advanced residual waste sorting Flanders

Stand-alone

€€€€€

Three lines approved, with the first to commission during 2022

ATM Gravel sand & filler

Stand-alone

€€€

Filler capacity installed and product certifications progressing well

Organics: bio-gas to bio-LNG

Shell & Nordsol

€€

Opened by King Willem-Alexander on October 14 2021 and now commissioning

Organics: expanded depackaging capacity

Stand-alone

Construction complete and will commission in 2021

Expansion plastic recycling

Stand-alone

€€

Ghent and Waalwijk investments complete.  Acht to commission in 2023

Mattress recycling

IKEA group

€€€

New facilities: fourth facility completed and fifth in planning.  Chemical recycling plant to be commissioned in early 2022

Feedstock for chemical recycling of plastics

Petro Chemical

€ - €€€

Discussions ongoing concerning feedstock specification and sourcing

Polyurethane recycling

Chemical recycler

€ - €€€

Technical feasibility studies underway

Wood flake for low-carbon steel

Arcelor-Mittal

€€ - €€€€

Commercial discussions ongoing

€ = c€2m of additional EBIT at full run rate

 

Renewi 2.0 programme

 

We are now eighteen months into our Renewi 2.0 programme: a three-year programme to make the company simpler, more customer-focused, more efficient and a better place to work.  This comprises multiple projects, orientated around two key themes: digitisation of the business and the simplification and harmonisation of processes.

 

As previously indicated, the programme is expected to deliver a minimum of €20m of annual cost benefits on a run-rate basis after completion of this three-year programme to 2023 for a total cash cost of €40m, which will be split into an exceptional cost of €33m and capital investment of €7m.  Our current run-rate of savings has increased to €4.0m.  We remain confident that we will achieve the targeted savings on schedule.

 

After the successful launch of the MyRenewi portal more than 140,000 customers have been invited to access the platform.  The current number of active customers is around 40,000 and adoption is increasing each month.  Around 2,700 orders and questions per week are being processed over the platform, which has driven phone call volumes down 5% year to date towards a target 20% reduction.

 

Our procure-to-pay process, PEAR, is now fully operational in Belgium and is being extended to the Netherlands. 

 

ATM profit recovery

 

ATM is our major site that cleans contaminated soil, water and chemical waste, providing a unique range of services in the Netherlands.  The market for the thermal treatment of contaminated soil and its reuse as TGG was disrupted from mid-2018 due to environmental concerns, reducing earnings by around €20m.  ATM's TGG was cleared by IL&T, the national regulator, for use in appropriate locations from late 2019. 

 

We continue to make good progress with our recovery plan.  Certification projects for our filler, sand and gravel are continuing at pace.  Inbound deliveries of contaminated soil have been lower than expected, as previously announced, due to short-term reductions in active projects in the market as well as delays in securing import permits from the authorities.  As a result, we have reduced our throughput back to 35% from 55% until we see an upturn in inbound volumes.  We remain confident in ongoing progress and in delivery of the €20m EBIT target albeit with an expected delay of up to two years.

 

Sustainability performance

 

In 2020 we launched Renewi's upgraded sustainability strategy and our new sustainable development objectives for the next three and five years.  Using the UN Sustainable Development Goals, we are focusing on three key themes: Enabling the circular economy; Reducing carbon emissions and waste; and Caring for people.  In keeping with our purpose, our business and sustainability strategies are inextricably linked and mutually supportive.  By delivering on one, we will help to deliver on the others.

 

During the last six months we have made good progress with our strategy, including the following highlights:

 

Outlook

 

Following the strong performance in the first half and previous increased guidance expectations, the Board is further increasing its FY22 expectations, which assume a moderation of recyclate prices in the second half as well as a reduced throughput at ATM.

 

We remain confident our three strategic growth initiatives - our innovation pipeline, recovery of earnings at ATM, and the Renewi 2.0 programme - will deliver significant additional earnings over the coming years as well as the longer term. 

 

Our business model is essential to enable advanced circular economies to achieve their carbon reduction targets.  We continue to see positive structural growth drivers as the Dutch and Belgian regional governments progressively tax carbon emitters, incentivise recycling over incineration, and promote the use of secondary materials.  We therefore expect to see long-term accretive growth opportunities across our markets as we continue to assist our customers to recycle more and to use our high-quality secondary materials.


FINANCE REVIEW

 

 

 

 

 

 

Financial Performance

Sep 21

Sep 20

Variance

 

 

€m

€m

%

 

 

 

 

 

 

Revenue

915.6

821.4

11%

 

Underlying EBITDA

126.6

88.5

43%

 

Underlying EBIT

63.8

28.3

125%

 

Operating profit

58.2

17.0

242%

 

 

 

 

 

 

Underlying profit before tax

50.4

15.3

229%

 

Non-trading & exceptional items

(5.7)

(10.9)

 

 

Profit before tax

44.7

4.4

 

 

Total tax charge for the period

(7.6)

(0.9)

 

 

Profit for the period

37.1

3.5

 

 

 

 

 

 

 

The underlying figures above are reconciled to statutory measures in notes 3 and 17 in the consolidated financial statements.

 

Renewi delivered a strong performance in the first half of FY22, with revenues and underlying EBIT 11% and 125% above prior year.  We have retained some of the structural cost savings made in response to Covid and these, combined with ongoing strong recyclate prices, have contributed to a significant increase in margins and profits.  Underlying EBIT was €35.5m higher than prior year, of which €23.7m resulted from all-time high recyclate prices and €9.3m from volume and mix changes, with the balance coming from net price gains more than offsetting inflation, increased ATM throughput, costs savings and others.  Underlying EBITDA increased by 43% whereas underlying EBIT increased by 125% as the level of depreciation and amortisation remained fairly constant year on year.  The level of exceptional and non-trading items in the current year was again significantly reduced to €5.7m resulting in a statutory operating profit of €58.2m compared to €17.0m last year.  Interest charges and share of results from associates and joint ventures were comparable to last year which has resulted in an underlying profit before tax of €50.4m for this year compared to €15.3m in the prior year.

 

Non-trading and exceptional items excluded from pre-tax underlying profits

To enable a better understanding of underlying performance, certain items are excluded from underlying EBIT and underlying profit before tax due to their size, nature or incidence.  Total non-trading and exceptional items excluding tax were reduced by 48% to €5.7m (2020: €10.9m), of which €1.6m was non-cash.  Of the total charge, €4.0m relates to the Renewi 2.0 programme. 

 

Operating profit from continuing operations, after taking account of all non-trading and exceptional items, was €58.2m (2020: €17.0m).

 

Net finance costs

Net finance costs excluding exceptional items increased by €0.2m to €13.7m (2020: €13.5m), with savings on main facility interest due to lower borrowing levels net of increased costs for leases which reflect an increase in new leases entered into during the previous years.  Further details are provided in note 6 to the consolidated interim financial statements.

 

Taxation

Total taxation for the period was a charge of €7.6m (2020: €0.9m).  The effective tax rate on underlying profits at 25% is based on the estimate of the full year effective tax rate.  An exceptional tax credit of €5.0m includes €1.3m attributable to the non-trading and exceptional items of €5.7m and €3.7m as a result of tax rates changes in the UK which were substantively enacted during the first half.

 

The Group statutory profit after tax, including all non-trading and exceptional items, was €37.1m (2020: €3.5m).

 

Earnings per share (EPS)

Following the one for ten share consolidation, EPS comparatives have been restated to reflect the change in the number of shares.  Underlying EPS excluding non-trading and exceptional items was 47 cents per share, an increase of 32 cents.  Basic EPS was 46 cents per share compared to 5 cents per share in the prior year.

 

The Board has not declared an interim dividend.

 

CASH FLOW PERFORMANCE

 

The funds flow performance table is derived from the statutory cash flow statement and reconciliations are included in note 17 in the consolidated financial statements. 

 

The table shows the cash flows from an adjusted free cash flow to total cash flow.  The adjusted free cash flow measure was introduced last March and focuses on the cash generation excluding the impact of Covid-19 tax deferrals, settlement of ATM soil liabilities and spend relating to the UK PPP onerous contracts.  Adjusted free cash flow also includes lease repayments for IFRS 16 leases.  The prior period comparatives have been restated to reflect this new layout.

 

 

 

 

 

Funds flow performance

Sep 21

Sep 20

 

 

€m

€m

 

 

 

 

 

EBITDA

126.6

88.5

 

Working capital movement

(36.0)

6.4

 

Movement in provisions and other

(0.2)

-

 

Net replacement capital expenditure

(29.7)

(23.7)

 

Repayment of obligations under lease liabilities

(21.9)

(19.9)

 

Interest, loan fees and tax

(12.9)

(17.6)

 

Adjusted free cash flow

25.9

33.7

 

Deferred Covid taxes

(0.4)

55.0

 

Offtake of ATM soil

(3.4)

(2.6)

 

UK Municipal contracts

(7.9)

(8.2)

 

Free cash flow

14.2

77.9

 

Growth capital expenditure

(7.5)

(3.3)

 

Renewi 2.0 and other exceptional spend

(6.0)

(5.6)

 

Other

(2.6)

(1.3)

 

Total cash flow

(1.9)

67.7

 

 

 

 

 

Free cash flow conversion

22%

275%

 

 

 

 

 

Free cash flow conversion is free cash flow as a percentage of underlying EBIT.  The non-IFRS measures above are reconciled to statutory measures in note 17 in the consolidated financial statements.

 

Adjusted free cash flow was lower at €25.9m despite the strong EBITDA improvement.  There was an outflow on working capital in the period primarily driven by temporary delays in billing during a process change and an underlying reduction in payables.  Core days sales outstanding (DSO) remain unimpacted by Covid-19. 

 

Replacement capital spend at €29.7m was slightly ahead of last year.  In addition, €16.6m of new leases have been entered into which are reported as right-of-use assets with a corresponding lease liability.  These leases include the continuation of the truck replacement programme, property lease renewals or extensions and other assets.  Growth capital spend included further spend on the €10m facility to process out-of-date food waste in Amsterdam.

 

Interest and tax payments were lower than the prior period due to phasing of annual tax settlements which have fallen into the second half this year along with lower interest payments given reduced bank borrowings.

 

Looking at the three components that are shown below adjusted free cash flow, there has been minimal repayment on Covid-19 tax deferrals.  The total tax deferrals were €60m at the end of March and the Dutch elements will be settled in 36 monthly instalments starting in October 2021.  Initial cash spend for placement of TGG soil stocks placed in the market in the first six months was €3.4m.  The balance of the liability of up to €20m is expected to be placed in the market over the next 24 months.  Cash outflow on UK PPP contracts was €7.9m.

 

Spending on Renewi 2.0 and other exceptional costs was similar to last year at €6.0m.  Other cash flows include the funding for the closed UK defined benefit scheme and the purchase of short-term investments in the insurance captive net of sundry dividend income from other investments.

 

Net cash generated from operating activities decreased from €129.4m in the prior period to €74.1m in the current year.  A reconciliation to the underlying cash flow performance as referred to above is included in note 17 in the consolidated interim financial statements.

 

We continue to pay significant attention to cash, taking into account the future investment needs of the business alongside the ongoing replacement capital and the medium term repayment of the Covid taxes.

 

INVESTMENT PROJECTS

 

Expenditure in FY22

The Group's long-term expectations for replacement capital expenditure remain around 80% of depreciation.  FY22 replacement capital spend is expected to be up to €80m which includes some catch-up from the prior two years and a second half investment in a replacement LUVO emissions cleaning unit at the ATM TRI plant.  In addition, up to €40m of IFRS 16 lease investments are expected for the full year, primarily in replacement trucks.

 

Growth capital expenditure will continue to increase as elements of the innovation pipeline comes into the construction phase.  Growth investments in FY22 are estimated at €23m which includes the first half expenditure on the out-of-date food waste facility in Amsterdam, with the second half influenced by the exact timing of expenditure on the advanced sorting investments in Belgium for Vlarema 8 and other initiatives.  The following table shows the investments and returns expected for the circular innovation projects shared at the recent Capital Markets Event.

 

 

 

 

 

 

 

 

 

 

 

FY21 &

 

 

 

 

 

 

 

Circular innovations

Prior

FY22

FY23

FY24

FY25

FY26

TOTAL

 

 ...

€m

€m

€m

€m

€m

€m

€m

 

 

 

 

 

 

 

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting