TIDMRWI
RNS Number : 7056G
Renewi PLC
08 November 2018
This announcement contains inside information
8 November 2018
Renewi plc
Renewi plc (LSE: RWI), a leading international waste-to-product
business, announces its interim results for the six months ended 30
September 2018.
Results
-- First half trading performance broadly in line with
management expectations against a strong result in the prior
period
-- Good progress with major integration programmes and synergy delivery on track
-- Cash performance and net debt better than management's expectations
-- Interim dividend maintained at 0.95 pence per share
Strategy
-- Accelerating execution of existing Renewi strategy through "Focus and Grow" approach
-- Focus phase concentrates the business on Benelux recycling and includes:
o identifying and quantifying further synergies above EUR40m
beyond 2019/20
o planned disposal of non-core assets: Canadian business and
Reym industrial cleaning business
-- Grow phase will capture the benefits from strong structural
growth drivers in Benelux recycling
-- As previously announced, Otto de Bont, currently Managing
Director of the Renewi Netherlands Commercial Division, will be
appointed CEO in April 2019
Outlook
-- Resumption of full soil production at ATM not expected this
financial year resulting in reduced management expectations of up
to EUR3m operating profit per month
-- Increased synergies and higher pricing expected to positively impact second half
-- Demand for recycling services growing structurally through
long term targets and imminent increases in Dutch incineration
taxes
Commenting on the results, Peter Dilnot, Chief Executive
Officer, said:
"The half year results were broadly in line with our
expectations. Merger integration continued as planned, with
successful key migrations to new Renewi platforms and processes.
The Group's cash performance was ahead of our expectations and
leverage remains well controlled.
"We have been working closely with regulators in order to resume
full production at ATM and the supply of our cleaned soil into the
market. However, yesterday, we received notification from the
regulators requesting further analysis of our treated soil ahead of
future shipments. As a result, we will limit production until the
situation is resolved and this will reduce expected profit for the
current financial year.
"More broadly, Renewi's growth is underpinned by increasing
demand for recycling services. Our end markets are being stimulated
by a clear environmental need, increasing regulation and customer
pull.
"We are accelerating the execution of our strategy through a new
"Focus and Grow" approach. The Focus phase will include delivering
the committed EUR40m synergies and further benefits thereafter. We
are also focusing our portfolio on Benelux recycling with the
planned disposal of our Canadian business and our Reym industrial
cleaning business. The Grow phase will deliver shareholder value by
capturing the significant opportunities emerging in the circular
economy."
As previously announced, Renewi
is now reporting its financial
results in Euros reflecting
the Group's principal trading Change
currency 2018 2017 % Total
Revenue EUR900m EUR890m 1%
----------- ------------ ---------
EBITDA(+) EUR92.6m EUR99.0m -6%
----------- ------------ ---------
Underlying EBIT(+) EUR44.8m EUR49.5m -9%
----------- ------------ ---------
Underlying profit before tax(+) EUR33.9m EUR38.7m -12%
----------- ------------ ---------
Underlying EPS(+) (cents per
share) 3.1c 3.7c -16%
----------- ------------ ---------
Underlying free cash flow(+) EUR28.2m EUR57.9m
----------- ------------ ---------
Exceptional and non-trading
items EUR(10.4)m EUR(13.4)m
----------- ------------ ---------
Core net debt EUR496m EUR495m
----------- ------------ ---------
Core net debt to EBITDA 2.99x 2.78x
----------- ------------ ---------
STATUTORY
----------- ------------ ---------
Profit before tax for the
period EUR23.5m EUR25.3m
----------- ------------ ---------
Basic earnings per share (cents) 2.5c 2.2c
----------- ------------ ---------
Cash flow from operating activities EUR68.0m EUR75.1m
----------- ------------ ---------
Interim Dividend (pence per
share) 0.95p 0.95p
----------- ------------ ---------
(+) The definition and rationale for the use of non-IFRS
measures are included before the Consolidated Income Statement.
Notes:
1. The interim dividend of 0.95 pence per share will be paid on
4 January 2019 to shareholders on the register at close of business
on 30 November 2018.
2. Management will be holding an analyst presentation at 9:30
a.m. today, 8 November in the Entrust Room on the fifth floor at
etc Venues, Bishopsgate Court, 4-12 Norton Folgate, London E1
6DQ.
3. Webcast details for the presentation at 9.30 a.m.
- Webcast: www.renewiplc.com
- Telephone conference:
United Kingdom 020 3936 2999
Belgium 078 48 16 83
Netherlands 085 888 7233
All other locations +44 20 3936 2999
- Participant Access Code: 215081
4. A copy of this announcement is available on the Company's
website, (www.renewiplc.com). A copy of the presentation being made
today to financial institutions will also be available.
For further information contact:
Renewi plc
Peter Dilnot - Chief Executive Officer
Toby Woolrych - Chief Financial Officer +44 (0)1908 650580
FTI Consulting
Richard Mountain/ Susanne Yule/ Nick
Hasell +44 (0)20 3727 1340
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'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 undertakes no obligation to revise or
update such forward-looking statements.
INTRODUCTION
Renewi has had a successful first eighteen months since the
transformational merger of Shanks with Van Gansewinkel Groep (VGG)
in February 2017, making good progress with business integration
and delivering a positive underlying performance. The results for
the period were broadly in line with our expectations and the
challenges experienced during the first half are being actively
addressed. These actions, together with synergies and improved
pricing, will read through in the second half, offset by further
reductions in output at ATM.
Our vision is to be the leading waste-to-product company. Our
strategy for growth remains clear - we are focused on delivering
the committed merger benefits; achieving margin expansion through
self-help initiatives; expanding into strategic growth areas
through innovation and investment; and actively managing our
business portfolio. We are today announcing an accelerated
execution of our strategy through a new "Focus and Grow"
approach.
In line with this approach and as a part of our active portfolio
management, we have today announced that we have decided to
initiate sale processes for the non-core Canadian business and Reym
industrial cleaning business which we expect to complete over the
next 12 months.
RESULTS
As announced in July 2018, we have changed our reporting
currency from Sterling to Euros from the start of this financial
year.
Continuing Operations Revenue Underlying EBIT
---------------------------------- ---------------------------------
Six months ended Six months ended
Sep 18 Sep 17 Variance Sep 18 Sep 17 Variance
EURm EURm % EURm EURm %
Commercial Waste 586.3 574.6 2% 40.5 41.1 -1%
Hazardous Waste 108.0 117.3 -8% 5.9 15.7 -62%
Monostreams 110.5 102.4 8% 8.8 10.8 -19%
Municipal 113.4 112.3 1% 4.3 (5.6) N/A
Group central
services - - (14.7) (12.5) -18%
Inter-segment
revenue (17.8) (16.2) - -
------------ --------- --------- ----------- --------- ---------
Total 900.4 890.4 1% 44.8 49.5 -9%
------------ --------- --------- ----------- --------- ---------
The figures above are reconciled to statutory measures in note 3
in the interim financial statements.
Group revenue in the first half increased 1% to EUR900m.
Underlying EBIT reduced 9% to EUR44.8m and underlying profit before
tax reduced 12% to EUR33.9m. Underlying EPS decreased 16% to 3.1
cents per share.
The Commercial Waste Division (65% of Group revenue) delivered a
broadly flat underlying EBIT of EUR40.5m, on revenues up 2%. The
prior period included an exceptional summer for construction
activity and higher paper and plastic recyclate prices. Underlying
inbound volumes were solid and pricing was positive. Recyclate
income was as expected, with margins reduced compared to the prior
year albeit protected by dynamic pricing. Cost inflation is
increasing in the market and we incurred more than EUR4m of
additional costs over the summer due to lack of capacity at
incinerators and other outlets. We are actively addressing this
issue and expect to pass on this impact through pricing to waste
producers.
The Hazardous Waste Division reported an 8% reduction in
revenues and a 62% reduction in underlying EBIT to EUR5.9m
reflecting the ongoing reduced production rates of thermal soil at
ATM compared with the prior period of full production. This is
further explained in the operating review below. Reym saw high
demand levels over the summer but continued to be impacted by
productivity challenges arising from ad hoc customer demand
schedules. The shortfall was offset by a strong performance from
the waterside at ATM.
While revenue increased by 8% in the Monostreams Division,
underlying EBIT decreased 19% to EUR8.8m. Orgaworld and Mineralz
performed well in the first half, however Coolrec was weak on the
back of lower cathode ray tube (CRT) volumes and declining metal
prices in the second quarter. The glass business also had a
disappointing first half with operational challenges at our van
Tuijl facility and ongoing weakness, as well as a number of small
fires, at Maltha's operation at Dintelmond in the Netherlands.
The Municipal Division grew revenues 1% and turned a prior
period loss of EUR5.6m into a profit of EUR4.3m. In the UK this
included the benefits of the sale of Westcott Park and some
operational projects, as well as Wakefield now being accounted for
as an onerous contract. The Canadian business saw a significant
improvement in performance, as expected, with stronger volumes,
improved operational performance and the successful full service
commencement of our Surrey bio-fuel facility.
Group central services costs increased 18% to EUR14.7m. This
included labour inflation, planned increases in investments in IT
and the loss of recharges following the transfer of the profitable
Dutch property portfolio into the Netherlands Commercial
Division.
Non-trading and exceptional items before tax were in line with
our expectations at EUR10.4m in the first half (2017: EUR13.4m),
EUR17m of which related to the merger, EUR1m for continuation of
additional logistics at ATM as a result of the soil market issues
and EUR3m for amortisation of acquired intangible assets, offset by
an EUR11m profit from portfolio management including the sale of
EBG. This resulted in a statutory profit before tax of EUR23.5m
(2017: EUR25.3m).
The Group delivered an underlying free cash inflow of EUR28.2m
(2017: EUR57.9m) in the first half with a good working capital
performance and well controlled capital expenditure. Replacement
capital spend was EUR44m which represented a ratio of 92% of the
depreciation charge which is higher than last year due to the start
of a number of larger capex projects and IT platform investment. In
addition, the first half benefited from disposal proceeds of EUR23m
(2017: EURnil).
Core net debt at 30 September was EUR496m. This was better than
our expectations, representing a net debt to EBITDA ratio of 2.99x,
comfortably within the Group's covenant level of 3.5x.
Reflecting the Board's continuing confidence in the growth
prospects for Renewi, we are declaring a maintained interim
dividend of 0.95p per share.
ATM update
As previously reported, our ATM soil treatment facility has been
operating at reduced output since August 2017. We have been working
closely with regulators in order to resume full production and the
supply of our cleaned soil into the market.
We have made progress with the national regulator (IL&T).
They had indicated that upgrades we have made voluntarily to the
production process mean that ATM soil meets their requirements
communicated in February and repeated in June and the current legal
product specifications as per the certification. We have also been
in discussions over the summer with local regulators who are
responsible for providing permits for specific use of cleaned soil
in their respective areas.
On 7 November 2018, the regulators collectively wrote to us,
requesting further analysis of our treated soil ahead of future
soil shipments. We will now initiate the additional requested
analysis and will continue our technical and legal dialogue with
the regulators. In the meantime, we will reduce production to c30%
of capacity until the situation is resolved and this will adversely
impact operating profit by up to EUR3m per month. We do not
currently expect to resume full production this financial year.
More broadly, there continues to be a strong market for thermal
soil treatment. On the supply side our ATM production processes
provide an important environmental solution to manage contaminated
soil. Our inbound storage is approaching full capacity and we have
ongoing enquiries for the treatment of contaminated soil. The
situation is exacerbated as the industry-wide ban on the
application of thermal soil in the Netherlands has resulted in a
significant backlog of untreated soil on project sites across the
Netherlands. On the demand side, we have a pipeline of customers
who would like to use our product, representing several years of
production, with a number of projects in a position to take cleaned
soil with immediate effect. The Netherlands also has a strong
commitment to increase the use of secondary materials, such as
thermally treated soil.
We are also accelerating our longer-term, innovative project to
process thermal soil into other secondary products. This is
progressing well and is expected to be launched during 2019/20.
Looking ahead to the second half
Historically the Group has had a seasonal bias towards the first
half, driven by construction activity, organic growing seasons and
the impact of winter weather on the second half. This was
particularly the case last year following strong construction
activity in the summer and higher recyclate pricing. However, this
year, we expect a number of factors to improve performance in the
second half, including:
-- increased synergy delivery following successful process and IT migrations in October;
-- increased pricing in the fourth quarter, particularly in the
Commercial Division, to offset increased disposal costs;
-- non-recurrence of certain costs in the first half including
the landfill of burnable waste; and
-- cost actions across the Group including additional restructuring in Maltha and Coolrec
The recent request from the regulators for further technical
analysis relating to thermally treated soil is likely to delay a
resumption of soil shipments, in this financial year.
Outlook
The half year results were broadly in line with our
expectations. Merger integration continued as planned, with
successful key migrations to new Renewi platforms and processes.
The Group's cash performance was ahead of our expectations and
leverage remains well controlled.
We have been working closely with regulators in order to resume
full production at ATM and the supply of our cleaned soil into the
market. However, yesterday, we received notification from the
regulators requesting further analysis of our treated soil ahead of
future shipments. As a result, we will limit production until the
situation is resolved and this will reduce expected profit by up to
EUR3m per month for the current financial year.
More broadly, Renewi's growth is underpinned by increasing
demand for recycling services. Our end markets are being stimulated
by a clear environmental need, increasing regulation and customer
pull.
We are accelerating the execution of our strategy through a new
"Focus and Grow" approach. The Focus phase will include delivering
the committed EUR40m synergies and further benefits thereafter. We
are also focusing our portfolio on Benelux recycling with the
planned disposal of our Canadian business and our Reym industrial
cleaning business. The Grow phase will deliver shareholder value by
capturing the significant opportunities emerging in the circular
economy.
STRATEGY
Overview
Our strategy is focused on meeting the growing long-term demand
for recycling and for secondary materials. Renewi is an established
leader in some of the most advanced recycling markets in the world
and has an extensive range of waste-to-product services. We have a
clear plan to build on our leading market positions, deep
experience, capabilities and technologies to deliver value for our
customers, to have a positive impact on society and to deliver
returns for our shareholders.
We have four over-arching strategic levers which are applied
across Renewi: delivering merger benefits, expanding margins,
investing in strategic expansion and managing our business
portfolio. We are also investing in the digitalisation of our
existing operations and exploring new connected business
models.
To accelerate the execution of our strategy, we are today
announcing a new "Focus and Grow" approach.
Focus
The accelerated Focus phase will create a cash generative
business with competitive advantage in Benelux recycling. Key
elements of the Focus phase are to:
-- Deliver integration benefits: complete the original EUR40m
programme and then extend to integration phase 2 beyond 2019/20
-- Expand margins: use commercial effectiveness and operational
levers to improve profitability and returns
-- Dispose of non-core assets: Canadian business and Reym industrial cleaning business
-- Sustain UK platform: manage contracts within provisions and renegotiate where possible
-- Decrease leverage: net debt to EBITDA towards 2.0x by 31
March 2020 through core cash generation and active portfolio
management
This phase will result in expanded margins, lower leverage and
higher quality earnings.
Grow
The accelerated Grow phase will generate profitable growth and
attractive returns through market leadership in
Benelux recycling. Key elements of the Grow phase are to:
-- Extend existing business models through further treatment capability
-- Implement digitalisation through new digital channels and
break-through digital business models
-- Capture growth through circular innovation by deploying
capital in adjacent new recycling technologies
-- Continued portfolio management through tuck-in acquisitions
to accelerate growth and potential further non-core disposals
This phase will result in sustained growth in EPS, returns and
dividends.
Disposals
In line with the Focus phase of our strategy, the Board has
assessed the Group's portfolio and identified assets that do not
align with our waste-to-product vision. We have therefore decided
to initiate sale processes for the non-core Canadian business and
Reym industrial cleaning business which we expect to complete over
the next 12 months. The proceeds of these disposals will be used to
reduce the Group's leverage towards the planned level of 2.0x net
debt/EBITDA. The Canadian and Reym businesses are both profitable
and leaders in their respective markets. However, the Board has
concluded that both businesses are not fully aligned with the
Group's strategy and would be better in alternative ownership.
MARKET BACKDROP
The Group's markets have continued to be dynamic in the first
half of the year. In particular:
-- the Benelux economies continued to expand with 3.1% growth in
the Netherlands and 1.4% in Belgium;
-- the Dutch construction market has continued to show
encouraging growth of 6.5% since the beginning of 2018 and is
forecast to grow a further 3.5% next year. The summer months were a
little weaker for our customers than the very strong prior period,
partially as a result of labour shortages rather than lack of
projects;
-- Northern European incinerators are full, underpinning inbound
pricing in the Belgian and Dutch markets, but adding additional
operational costs for the Group due to periodic local capacity
shortages; and
-- recyclate prices were stable, albeit paper and plastic prices
remain at substantially lower levels than in the prior period.
At a structural level, the demand for our core recycling
services is driven by the need to address clear environmental
challenges: climate change, contamination and the use of finite
resources. Against this backdrop, there continues to be an
increased determination in society, and from governments and our
customers, to increase recycling. This is resulting in a sustained
regulatory 'push' to recycle additional waste volumes.
In July the European Circular Economy Package passed into law
for member states to progressively implement. The Circular Economy
Package sets tighter limits for landfill and increased targets for
recycling and the use of secondary materials in production. In
September, the Dutch government indicated that on 1 January 2019 it
plans to increase the incinerator tax by 120% to EUR31 per tonne, a
move which is intended to increase recycling rates. Public and
private parties, such as the Dutch Government, builders and cement
producers have also entered into the Dutch Concrete agreement to
support the recycling of 100% of concrete waste by 2030. Belgium
has also raised a EUR4.5 billion green bond to finance transitions
to a circular economy and Renewi has been working closely with
OVAM, the Flemish regulator, to stimulate higher levels of
effective source segregation of waste.
In parallel, there is increasing customer 'pull' both to manage
waste sustainably and to use secondary raw materials in production
processes. We are increasingly seeing sustainability as a
significant selection criterion in customer tenders and many
leading European businesses have set their own bold recycling
targets. We have held discussions with a number of original
equipment manufacturers (OEMs) over the summer to discuss how
Renewi can support their circular initiatives. These early moves
demonstrate the strategic shift in the recycling industry from a
supply driven model, collecting waste as a service, to a demand
driven model, producing value-added products. Renewi is well
positioned to benefit from this industry evolution given its
waste-to-product focus and advanced recycling capabilities.
INTEGRATION PROGRESS
Our integration programme is focused on much more than the
delivery of the committed EUR40m in cost synergies by March 2020.
Our goal is to create a strong cash generative business with one
efficient operating model with robust and scalable processes.
The programme is taking place in two phases. Phase 1, broadly
the first 2-3 years, involves moving to one system and set of
processes within each Division and delivering the EUR40m committed
cost synergies on time and on budget. Phase 2, starting in 2019/20,
is about moving increasingly to common platforms across the Group,
optimising and investing to create lean and efficient processes
that will further harmonise Renewi and reduce cost.
As previously reported, the first half 2018/19 was primarily
focused on the migration of our business units in the Commercial
Divisions onto common platforms and processes. This migration is an
essential precursor to structural synergy projects such as route
optimisation and site rationalisation that are expected to deliver
material value in the synergy programme. The migration is complex,
involving a significant IT investment and preparation prior to a
change process that impacts our customers, operations, people and
data.
Progress delivered in Phase 1 activities during the first half
included:
-- approximately EUR13m of savings delivered in the first half
and we remain on track to deliver the EUR30m of cost savings we
committed to for the full year. We have identified over 500
specific projects to meet the EUR40m target and are confident that
we are on track to deliver them on time and on budget;
-- in Belgium Commercial we are well on track to meet Year 2 and
Year 3 targets with the potential for upside. Two sites in Flanders
have successfully migrated processes onto the new Renewi IT
platform with no adverse effects and the Wallonia sites are all
scheduled to migrate around the year end. Our first route
optimisation projects can therefore go live in November and a
number of sites have been identified for rationalisation or the
reallocation of waste flows and activities;
-- in Netherlands Commercial we have integrated a major
division-wide systems upgrade in preparation for migration. After a
successful pilot in the summer, the whole of the former Shanks
roll-bin activities were migrated on to a new platform on 1 October
as planned. Regional route optimisations are expected to be
sequentially rolled out through the remainder of the calendar year.
Sites have also been identified for simplification or closure, most
notably in Rotterdam;
-- our Shared Service Centre (SSC) in Lommel has, in the first
half of the year, optimised Belgian processes following the
transfer in of activities from our Zaventem SSC last year and has
also been preparing to absorb the activities of our Amersfoort SSC
at the end of October. Further investment in robotics is delivering
value both to the integration programmes and to reduce ongoing
transaction costs; and
-- over 150 sites have now been rebranded along with 90% of our
trucks. Metal containers are being rebranded when they come in for
service or repair and over 285,000 containers were rebranded over
the summer.
As part of Phase 1 we are reviewing progress and assessing the
potential for further synergies. We believe that there is further
upside to be delivered in Phase 2 starting in 2019/20. Primary
additional savings will arise from a focus on a harmonised and
efficient overhead structure throughout the Group, benefiting from
further investment in optimised processes and systems and from a
focus on further economies of scale. The potential upside from
Phase 2 will be quantified when further work has been carried out
during 2019 to establish clear and deliverable objectives.
DIVISIONAL REVIEW
Commercial Waste
Revenue Underlying EBIT
--------------------------- ---------------------------------
Six months ended Six months ended
Sep Sep Variance Sep Sep Variance
18 17 18 17
Netherlands Commercial 375.8 363.9 11.9 3% 25.3 25.1 0.2 1%
Belgium Commercial 210.9 211.3 (0.4) 0% 15.2 16.0 (0.8) -5%
Intra-segment
revenue (0.4) (0.6) 0.2 - - -
------ ------ ------ --- --------- -------- ------ ----
Total EURm 586.3 574.6 11.7 2% 40.5 41.1 (0.6) -1%
------ ------ ------ --- --------- -------- ------ ----
Underlying Return on
EBIT Margin Operating Assets
-------------- -------------------
Netherlands Commercial 6.7% 6.9% 17.0% 14.8%
Belgium Commercial 7.2% 7.6% 29.5% 25.7%
------ ------ --------- --------
Total 6.9% 7.2% 20.2% 17.8%
------ ------ --------- --------
On 1 April 2018 the Dutch property portfolio entity was
transferred to the Netherlands Commercial division from Group
central services and the glass activities of van Tuijl were
transferred to the Monostreams division.
The return on operating assets for Belgium excludes all landfill
related provisions
The Commercial Waste Division comprises solid waste collection
and treatment activities across the Netherlands and Belgium.
The Commercial Waste Division performed well, albeit slightly
lower than the very strong comparative period. Revenues increased
2% to EUR586m with underlying EBIT reducing 1% to EUR40.5m.
Netherlands
Market conditions in the Netherlands continued to be positive
for inbound waste and to provide a solid platform for the delivery
of our merger benefits. GDP grew 3.1% year-on-year in the quarter
to June and data from ING (Economisch Bureau Sector Building,
Construction & Property) showed that the important Dutch
construction market continued to show encouraging growth of 6.5%
since the beginning of 2018 and is forecast to grow an additional
3.5% next year. The commercial market segment was also positive
with further growth in recycling volumes in the face of full
capacity utilisation at the incinerators.
Revenue in the Netherlands increased 3% to EUR376m. Volumes grew
2%, with strong growth in bulky waste offsetting flat construction
and demolition volumes compared with a very strong prior period.
Pricing on inbound waste was positive, offsetting the expected fall
in recyclate income due to lower paper and plastic prices. Pricing
on long term tender renewals also continued to show a significant
increase in gross margin. Customer churn has remained stable.
Underlying EBIT was flat on the prior year at EUR25.3m. Lower
recyclate prices impacted the business by c. EUR2m. As reported
above, incinerators across northern Europe are operating at full
capacity and this has increased margin pressure in the year. While
the vast majority of the Division's needs are contracted under long
term fixed price agreements, the cost or indeed availability of
capacity to meet additional volumes is significantly increased.
Short term fluctuations in local incinerator capacity have also led
to additional logistics costs in order to reach an outlet that can
take the waste. We have also seen price increases in a wide range
of other disposal outlets, such as for sieve sands/organic wet
fraction. Finally, the Domestic segment saw profits reduce as a
result of a specific contract renewal on less favourable terms.
Belgium
The Belgian business performed steadily in the first six months.
Revenues were flat at EUR211m, while underlying EBIT reduced 5% to
EUR15.2m.
The inbound waste market was stable in the first half and price
increases were successfully implemented. Net customer numbers
continue to increase. The positive inbound revenue position was
offset by the sharp fall in primarily paper revenues, compared to
the peak prices seen in the prior year. Additionally, some
secondary disposer volumes were turned away because of the outlet
challenges referred to below.
The margin reduction arose as a result of previously announced
reduced profitability from recyclates (EUR3m) and due to sharp
increases in disposal costs for residues. The ongoing lack of
capacity at incinerators and cement kilns continued and was
exacerbated by a temporary lack of export permits being issued by
the regulators. This resulted in the unavoidable and expensive
landfill of burnable waste during the summer months. Outlet
capacity for other residues such as sieve sands has also led to
increasing disposal costs. The total additional cost of outlets was
EUR3m.
The Belgian market experienced a significant lack of capacity in
both incinerators and cement kilns in the first half as a result of
extended maintenance and unscheduled closures. This disrupted sales
of our solid recovered fuel (SRF) and impregnated sawdust in
particular, with our Gent facility temporarily reducing production
to one and a half shifts on average. Capacity is expected to return
to normal during the second half.
Outlook
The Commercial Division is expected to see a stronger
performance in the second half primarily as a result of further
price increases to offset the outlet cost pressures, additional
cost actions and synergy benefits.
Hazardous Waste
Revenue Underlying EBIT
---------------------------- ----------------------------------
Six months ended Six months ended
Sep Sep Variance Sep Sep Variance
18 17 18 17
Total EURm 108.0 117.3 (9.3) -8% 5.9 15.7 (9.8) -62%
------ ------ ------ ---- --------- -------- ------ -----
Underlying Return on
EBIT Margin Operating Assets
-------------- -------------------
Total 5.5% 13.4% 14.0% 28.1%
------ ------ --------- --------
The Hazardous Waste Division comprises ATM, one of Europe's
largest facilities for the treatment of contaminated soil, water,
sludges and packed chemical waste and the small specialist site at
Weert, and Reym (incorporating VGIS), one of the leading industrial
cleaning businesses in the Netherlands.
The Hazardous Waste Division performed as expected in the first
half, given the reduced output of thermally treated soil at ATM
compared with full production for most of the prior period.
Revenues decreased by 8% to EUR108m and underlying EBIT reduced to
EUR5.9m.
The thermal soil issue is covered in a separate section above.
Soil input has remained strong: our warehouses are full and further
soil awaits shipment to us from customers. Demand for our cleaned
product is also robust.
The core oil and gas market, which represents up to half of the
Division's revenues, saw an ongoing improvement in the oil price
and good overall activity levels. However, Reym has continued to
experience volatility in customer demand patterns, with late
changes to scheduling impacting productivity. As previously
reported, there are fewer major shutdowns scheduled this year
compared to the prior year. Water intake and treatment at the ATM
plant has been positive, supported by a major offshore project.
Outlook
The second half is now expected to see weaker than usual
performance continue due to the reduced soil production. Cost,
pricing and productivity actions are expected to improve underlying
Reym margins in the final quarter and going into 2019/20.
Monostreams
Revenue Underlying EBIT
----------------------------------- -------------------------------------
Six months ended Six months ended
Sep Sep Variance Sep Sep Variance
18 17 18 17
Total EURm 110.5 102.4 8.1 8% 8.8 10.8 (2.0) -19%
-------------- ------ ------ --- --------- -------- --------- -----
Underlying Return on
EBIT Margin Operating Assets
---------------------- -------------------
Total 8.0% 10.5% 22.8% 23.2%
-------------- ------ --------- --------
From 1 April 2018 the activities of van Tuijl have been
transferred from Netherlands Commercial.
The return on operating assets excludes all landfill related
provisions.
The Monostreams Division comprises four businesses focused on
creating materials from specially segregated waste streams:
Coolrec, a recycler of waste, electrical and electronic equipment
(WEEE) including white goods; Mineralz, a specialist landfill and
recycler of incinerator residues and other materials into
construction materials; glass activities at Maltha and van Tuijl
recycling flat and container glass into glass cullet and powder;
and Orgaworld, processor of waste food and other organic waste into
compost and green energy.
The Monostreams Division had a mixed performance in the first
half. Revenues grew 8% to EUR110m but underlying EBIT decreased 19%
to EUR8.8m.
Coolrec experienced a challenging first half with weaker than
expected volumes, especially in the declining old cathode ray tube
(CRT) television segment. The second quarter was also impacted by a
30% fall in prices for non-ferrous aluminium. Strong cost action is
being taken, including rationalisation of activities, for example,
at our Belgian Tisselt site.
Mineralz had a strong first half with encouraging volumes across
the various segments.
Maltha experienced challenges in the first half both in
commercial markets for its products, operational performance and
due to higher costs in its Benelux facilities. Changes have been
made to senior management and a recovery plan is expected to show
significant improvements later in the year.
Orgaworld had a good first half, continuing to show revenue and
earnings growth based on strong volumes and increased electricity
output.
Outlook
The Monostreams Division has a seasonal bias of earnings towards
the first half. It is expected to trade in line with our
expectations in the second half, positioning the business for
improved underlying margins going forward.
Municipal
Revenue Underlying EBIT
----------------------------- --------------------------
Six months ended Six months ended
Sep Sep Variance Sep Sep Variance
18 17 18 17
UK Municipal 91.7 91.8 (0.1) 0% 2.2 (3.5) 5.7
Canada Municipal 8.9 6.9 2.0 29% 1.7 (1.4) 3.1
Total GBPm 100.6 98.7 1.9 2% 3.9 (4.9) 8.8
------ ------- ------ ---- ----- -------- ---------
Total EURm 113.4 112.3 1.1 1% 4.3 (5.6) 9.9
------ ------- ------ ---- ----- -------- ---------
Underlying
EBIT Margin
---------------
UK Municipal 2.4% -3.8%
Canada Municipal
* 20.0% -25.4%
------ -------
Total * 3.9% -5.1%
------ -------
All numbers for Canada are shown at a constant exchange
rate.
*For comparability the margin excludes Surrey construction
revenue and profits.
The Municipal Division is a UK market leader in providing
mechanical biological treatment (MBT) and anaerobic digestion (AD)
solutions to divert municipal waste from landfill and is also a
leader in Canada in the diversion of municipal organic waste from
landfill through composting and AD.
As expected, the Division has demonstrated a strong recovery in
the first six months as a result of effective execution of planned
strategic, operational and financial actions.
UK Municipal
The UK business reported flat revenues at GBP91.7m. However, the
business showed a positive recovery in profitability and recorded a
profit of GBP2.2m in the first half, compared with a trading loss
of GBP3.5m in the prior comparable period.
This strong performance was despite the business facing ongoing
market challenges, particularly the pressure on output prices for
the products produced by our MBT facilities. The cost of disposing
of refuse derived fuel (RDF) was impacted by the further weakness
of Sterling and disruption to RDF exports caused by the lack of
incinerator capacity. Recyclate price pressures of over GBP1m in
2018/19 cannot be passed on to customers.
Highlights of the recovery at the Division included:
-- the exit from the Dumfries & Galloway PFI operating
contract on time and for the expected settlement cost. A
transitional agreement has been entered into ending on 11
November;
-- a benefit of over GBP1m from the sale of the loss-making
Westcott Park AD facility at the end of the prior year;
-- the profitable sale of our Energen Biogas (EBG) facility at
Cumbernauld in Scotland. This completed our strategic exit from
merchant AD plants in the UK, generated EUR19m in cash and an
exceptional profit on disposal of EUR11m; and
-- other one-off actions generating profits in excess of GBP1m.
In addition, reported results benefited by GBP2m as a result of
Wakefield now being accounted for as an onerous contract.
As previously reported, Interserve plc (Interserve) is working
to bring the Derby project into full service. This has made
significant progress over the past six months and waste has been
processed on all three lines. However, Interserve has missed the
project long stop date and we are working closely with all parties
to bring the facility into operation.
Canada Municipal
Revenues in Canada grew 29% to GBP8.9m and underlying EBIT
increased GBP3.1m to GBP1.7m with an improved performance in all
three facilities.
Our London facility returned to full operational performance,
having resolved issues with biology and odour. Having lost a major
contract with the City of Toronto at the end of last year, the new
management team have been able to replace most of these volumes
with a range of short-term contracts, several of which may be
extended for the long term, underpinning future profitability.
The Ottawa facility delivered a mixed operational performance as
historic residues were placed in the market. A new contract
offering enhanced services to the City that are expected to
increase organic diversion levels has been signed and a
longstanding commercial dispute with the City of Ottawa has been
successfully resolved.
The innovative Surrey bio-fuel facility near Vancouver entered
full service on its previously reported commissioning date and has
performed well in its initial months of operation. A one-off cash
payment of Canadian Dollars 12m was made by the City on achievement
of full service. Encouraging progress is being made to fill
remaining capacity at the facility as it ramps up.
Outlook
The Division is expected to deliver a result for the year in
line with management expectations.
PROPOSED SECONDARY LISTING
Approximately 90% of Renewi's activities are in continental
Europe, with the vast majority of these being in the Benelux. This,
coupled with Renewi's positioning as a green sustainability
investment, has resulted in increasing investor interest in the
Company securing a listing on a Eurozone exchange. Renewi believes
that admission to trading of the shares on Euronext Amsterdam will
be beneficial to the Company and its shareholders, for among
others, the following reasons: the secondary listing will provide
closer proximity to the Renewi brand, the strong regional focus on
the circular economy and the Group's core operations as a Benelux
recycling business. In addition, the secondary listing is expected
to increase visibility of Renewi in the region, expand research
coverage, widen investor interest in the Group and contribute to
liquidity in the Group's shares. The secondary listing process
benefits from existing EU legislation and we expect to conclude
this process in early 2019. No new shares will be issued at the
point of the secondary listing. The Company will remain listed on
the premium segment of the Official List in London.
FINANCE REVIEW
As previously announced, all Group financial information is now
reported in Euros given the change in reporting currency from 1
April 2018 to reflect the fact that the majority of our revenues
and costs are Euro denominated. The impact of currency is therefore
much reduced and as such no comparisons at constant currency are
required.
Sep 18 Sep 17 Total
EURm EURm Change
%
Revenue 900.4 890.4 1%
Underlying EBIT 44.8 49.5 -9%
Underlying profit before
tax 33.9 38.7 -12%
Underlying earnings per
share (cents) 3.1 3.7 -16%
Renewi traded broadly in line with management expectations in
the first half. Group revenue increased 1% to EUR900m. Underlying
EBIT fell 9% to EUR44.8m and reported underlying profit before tax
fell by 12% to EUR33.9m as a result of the performances in the
Commercial, Hazardous and Monostreams Divisions.
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 from continuing
operations amounted to EUR10.4m (2017: EUR13.4m), of which EUR16.9m
(2017: EUR8.8m) related directly to the merger and synergy delivery
costs and EUR3.2m (2017: EUR3.3m) to the amortisation of acquired
intangible assets. Other charges of EUR1.3m (2017: EUR1.0m) have
been incurred in relation to additional logistics costs at ATM as a
result of the ongoing soil market offset issues and the prior year
included costs relating to two significant fires in the Commercial
Division. Portfolio management activity in the first six months has
delivered a profit on sale of EUR11.1m (2017: charge of EUR0.3m) as
a result of the sale of our 50% share in the UK Municipal AD
facility in Scotland and the transfer of 50% of an ATM subsidiary
to a joint venture partner. Including these disposal proceeds,
non-trading and exceptional charges resulted in a net cash inflow
of EUR5m. These items are explained further in note 5 to the
interim financial statements.
The expected total merger related costs to be incurred over the
next two years remain unchanged at EUR50m for the cash cost of
synergy delivery, EUR20m for other integration costs and EUR12m for
rebranding spend, which as reported in March, is no longer
considered capital in nature. As previously reported, we expect to
incur non-cash impairment costs as sites impacted by the
integration are identified. There have been no non-cash impairments
in the first six months as the site closure programme in Commercial
is due to start in the second half. The expected expenditure on IT
capital investment in this integration period remains unchanged at
around EUR23m.
Operating profit, after taking account of all non-trading and
exceptional items, was EUR34.5m (2017: EUR36.1m).
Net finance costs
Net finance costs, excluding the change in the fair value of
derivatives, were EUR0.4m lower period on period at EUR11.5m (2017:
EUR11.9m). The charge for discount unwind on provisions has
increased in the current year as a result of the onerous contract
provisions recorded at 31 March 2018. This increase in cost has
been compensated by savings in other areas as shown in note 6 to
the interim financial statements.
Share of results from associates and joint ventures
The principal return comes from the joint venture in the AD
facility in Scotland which was disposed of in August.
Profit before tax
Profit before tax from continuing operations on a statutory
basis, including the impact of non-trading and exceptional items,
was EUR23.5m (2017: EUR25.3m).
Taxation
The effective tax rate on underlying profits from continuing
operations was 25.0% (2017: 25.5%) based on management's best
estimate of the weighted average annual tax rate expected for the
full financial year. The period on period decline is attributable
to the fall in the Belgian statutory rate as enacted in December
2017. The Dutch government has proposed some corporate tax reforms
recently, including lower corporate tax rates. Nothing has been
enacted at the balance sheet date and so it is not applicable for
the current year estimated effective tax rate.
Earnings per share (EPS)
Underlying EPS from continuing operations, excluding non-trading
and exceptional items, decreased by 16% to 3.1 cents per share
(2017: 3.7 cents per share). Basic EPS from continuing operations
was 2.5 cents per share compared to a loss of 2.2 cents per share
in the prior period.
Dividend
The Board has declared an unchanged interim dividend of 0.95
pence per share that will be paid on 4 January 2019 to shareholders
on the register at the close of business on 30 November 2018.
Cash flow performance
A summary of the total cash flows in relation to core funding is
shown below.
Sep 18 Sep 17
EURm EURm
EBITDA 92.6 99.0
Working capital movement
and other (4.8) 14.0
Net replacement capital
expenditure (44.5) (40.5)
Interest and tax (15.1) (14.6)
------- -------
Underlying free cash flow 28.2 57.9
Growth capital expenditure (2.2) (1.4)
UK PFI funding (0.5) (2.0)
Canada Municipal funding 7.4 (6.6)
Acquisitions and disposals 23.0 -
Dividends paid (18.9) (19.0)
Restructuring spend (0.1) (0.9)
Synergy & integration
spend (19.2) (8.2)
Transaction related spend (0.1) (10.7)
Other (12.7) (12.7)
Net core cash flow 4.9 (3.6)
------- -------
Free cash flow conversion 63% 117%
Free cash flow conversion is underlying free cash flow as a
percentage of underlying EBIT
Net core cash flow reconciles to the movement in net debt of
GBP8.6m in note 11 after taking into account movements in PFI/PPP
non-recourse net debt, capitalisation and amortisation of loan fees
and foreign exchange.
Free cash flow conversion in the current period was better than
anticipated at 63%. The prior period benefited from a number of
one-off items and very strong collection activities. Capital spend
across all Divisions has remained tightly controlled in the first
half with replacement capital expenditure at EUR44.5m representing
92% of depreciation (2017: 81%). This is lower than our original
estimate of c.100% which included some larger capital expenditure
projects and the start of the investment in new IT platforms.
Capital spend in the second half will increase as these additional
projects and investments are delivered.
The growth capital expenditure of EUR2.2m includes EUR0.9m in
Monostreams relating to the initial spend on the extension at the
Maasvlakte landfill and EUR0.8m in Municipal UK relating to
operator enhancements which are classified as an intangible asset.
Group capital spend will increase in the second half as the
Maasvlakte extension is completed and the extension of the Ottawa
site in Municipal Canada starts.
The Canada Municipal funding includes the one-off cash payment
from the City of Surrey municipality as this facility entered into
full service. A small amount of final construction spend in Surrey
has been incurred in the period.
The acquisitions and disposals inflow includes EUR19m for the
sale of our 50% share in the Energen Biogas facility in Scotland
and EUR4m from the sale of 50% of the shareholding in a Hazardous
Waste subsidiary.
Synergy and integration related expenditure includes EUR11.2m
for synergy delivery costs and EUR8.0m for costs incurred in the
merger and integration of the two businesses. Transaction related
spend in the prior period included the settlement of a number of
fees and charges not paid by 31 March 2017 given that the merger
only legally completed on 28 February 2017.
The Other cash flows include the onerous contract provision
spend in UK Municipal of EUR4m, the ATM spend on additional
logistics costs of EUR2m and EUR6m relating to the purchase of
short term investments in the insurance captive. Final settlement
relating to the termination of the D&G contract of GBP10m was
made in early October.
Net cash generated from operating activities decreased from
EUR74.0m in the prior period to EUR66.5m in the six months ended 30
September 2018. A reconciliation to the underlying cash flow
performance as referred to above is included in note 18 in the
interim financial statements.
Group return on assets
The Group return on operating assets (excluding debt, tax and
goodwill) from continuing operations increased from 15.9% at 31
March 2018 to 16.3% at 30 September 2018. The Group post-tax return
on capital employed was 5.4% compared with 5.6% at 31 March
2018.
Treasury and cash management
Core net debt and gearing ratios
Core net debt excludes the net debt relating to the UK PFI/PPP
contracts which is non-recourse to the Group and is secured over
the assets of the special purpose vehicles (SPVs). The net core
cash inflow of EUR4.9m, along with an adverse exchange effect on
the translation into Euros of the Group's cash and debt balances
denominated in Sterling and Canadian Dollars, resulted in core net
debt decreasing to EUR496.1m. Core net debt was better than
management expectations at the half year with both integration
costs and capital expenditure well controlled. Net debt to EBITDA
was 2.99x, comfortably within our covenant limit of 3.5x. We
continue to expect net debt to peak in the next quarter as
integration costs and capital expenditure are incurred over the
coming months. The flow through of business growth, increasing
synergies and the planned resumption of soil production at ATM are
expected to drive a sustained fall in leverage thereafter, a
process that will be further boosted during 2019 by the intended
disposals announced above.
Debt structure and strategy
Core borrowings, excluding PFI/PPP non-recourse borrowings, are
mainly long term as set out in the table below. As noted in the
2018 Annual Report, on 22 May 2018 Renewi announced a new amendment
and extension to its main banking facility converting it to a
EUR550m Green Loan. In addition, this new facility was also one of
the first to introduce sustainability improvement to the terms
which will result in Renewi being able to benefit from a lower
margin in the event that it achieves each of five ambitious
sustainability objectives.
All figures in EURm Drawn Term
EUR100m Belgian retail bond 100.0 Jul-19
EUR100m Belgian Green retail 100.0 Jun-22
bond
EUR550m Main credit facility 365.0 May-23
--------
565.0
Finance leases and other 39.2
Loan fees (3.1)
Cash (105.0)
Core net debt 496.1
--------
The facility has been hedged with a EUR125m interest rate cap
and three cross currency swaps totalling EUR168m at fixed Euro
interest rates of 2.18%, 2.17% and 1.71%. The two retail bonds each
of EUR100m have an annual coupon of 4.23% and 3.65% respectively.
As at 30 September 2018, 100% of our core net debt was fixed or
hedged.
Debt borrowed in the special purpose vehicles (SPVs) created for
the financing of UK PFI/PPP programmes is separate from the Group
core debt and is secured over the assets of the SPVs with no
recourse to the Group as a whole. Interest rates are fixed by means
of interest rate swaps at contract inception. At 30 September 2018
this debt amounted to EUR90.5m (30 September 2017: EUR96.3m).
A EUR100m Belgian retail bond will mature in July 2019 and based
on expected business funding requirements there is liquidity
headroom within existing facilities without further issuance.
However, options are being considered to replace it in part or in
full.
Directors' valuation of UK PFI/PPP portfolio
The Directors provide a valuation of the financial investments
in the SPVs used to fund the contracts and into which the Group has
often invested in the form of subordinated debt and equity. The
benefits of these financial assets are not easily assessed from the
financial statements. As at 30 September 2018 the Directors
believed that this valuation was unchanged at GBP45m.
Retirement benefits
The Group operates a defined benefit pension scheme for certain
UK employees which has been closed to new entrants since September
2002. At 30 September 2018, the net retirement benefit deficit
relating to the UK scheme was EUR8.2m compared with EUR13.6m at 31
March 2018. The decrease in the deficit was a result of higher
corporate bond yields partly offset by lower than expected asset
returns over the period and an expected long term increase in
inflation. The actuarial valuation of the scheme at 5 April 2018 is
currently underway and the future funding plan will be agreed in
due course. In addition, it should be noted that the liability of
this legacy Shanks scheme is expected to increase due to the
guaranteed minimum pension equalisation following the ruling of the
recent high court case with Lloyds Banking Group. Certain legal and
actuarial issues remain unresolved and the Company is taking
further advice to determine the impact. There are also a number of
defined benefit pension schemes for employees in the Netherlands
and Belgium which had a net retirement benefit deficit of EUR6.8m
at 30 September 2018, a slight increase from 31 March 2018.
Principal risks and uncertainties
Renewi operates a risk management framework to identify, assess
and control the most serious risks facing the Group. The Board
believes that the key risks and associated mitigation strategies
have not changed in the period. The 2018 Annual Report (pages 70 to
79) provides a discussion of the Group's principal risks and
uncertainties and these are as follows:
-- Output pricing and demand - that the value we receive for
recycled and recovered product falls or worsened
-- Outlet capacity - lack of capacity / increased price of
disposal of burnable waste and other residues
-- Environmental permit risk - that our environmental permits to
operate are restricted or removed
-- Changes in law and policy - adverse impacts from changes in
law and policy including environmental, tax and similar legal and
policy regimes
-- Long-term contracts - that we enter into long-term contracts
at disadvantageous terms or we rely on a small number of large
contracts
-- Labour availability and costs - that there are shortages of
certain labour types leading to unavailability or severe wage
inflation
-- Merger integration risks - that the integration of the two
businesses, including the creation of a strong corporate culture
and migration of IT systems, is ineffective and/or fails to deliver
anticipated synergies
-- Brexit - that a hard Brexit disrupts the export of waste and
recyclates internationally, creating off-take costs in the UK and
over-capacity of incineration in the Benelux
-- Input pricing competition - that market pricing may put pressure on our margins
-- Talent development/leadership - that we lack the required management capabilities
-- Operational failure - operational failure at a key facility
leading to business interruption and other costs
-- Investment and growth - that funding is not available or that
funding sources are available but that cash generation is
insufficient to allow access to funding
-- Digitalisation - that a disruptive technology or business
model deployed by a competitor or new entrant impacts our ability
to compete
-- Health and safety risk - that injury or loss of life incurs
reputational loss or civil and criminal costs
-- Input volumes - that incoming waste volumes in the market may
fall should macroeconomic conditions reverse
-- ICT failure and cyber threat - that ICT failure and/or cyber
crime causes business interruption or loss
In addition to the known risk at ATM, the Board is specifically
focusing on two further core risks: Derby commissioning and
Brexit.
While principal responsibility for the commissioning of the
Derby facility rests with Interserve, a failure to bring it into
full service could result in Interserve meeting the ceiling of its
liquidated damages obligations to Renewi, exposing the Group to
certain future operating costs. Interserve also provide financial
guarantees on plant reliability.
The Board continues to monitor and review the potential impact
on the Group of Brexit. With an orderly Brexit process, we expect
the export of waste from the UK to continue for some time, as there
is a strong economic incentive for both the Netherlands and the UK
to do so. Longer term, we believe the impact on the Dutch market is
likely to remain limited. This is because an ultimate reduction in
UK imports was already expected due to the commissioning of
incinerator capacity in the UK and because increasing domestic
demand in the Netherlands supplemented by new waste imports from
other EU nation states into the Dutch incinerators are expected to
take up any vacated capacity. Providing that there is no
significant degradation in Dutch incinerator utilisation and
pricing, the impact of Brexit on our Benelux Divisions is therefore
likely to be limited. We also believe that the UK Government will
continue to drive environmental policies that will encourage
recycling after the exit from the European Union. In the event of a
disorderly Brexit, we are taking action to minimise the impact of
disruption in logistics flows relating to the export of RDF to the
Netherlands. We are reviewing other anticipated risks so that we
can offset them to the best of our ability and forecast them in the
event that no deal is secured.
Statement of the Directors' responsibilities
The Directors confirm that these condensed consolidated interim financial statements have
been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting
as adopted by the European Union and that the interim management report includes a fair review
of the information required by DTR 4.2.7 R and DTR 4.2.8 R, namely:
* an indication of important events that have occurred
during the first six months and their impact on the
condensed set of financial statements, and a
description of the principal risks and uncertainties
for the remaining six months of the financial year;
and
* material related-party transactions in the first six
months and any material changes in the related-party
transactions described in the last Annual Report.
A list of current Directors is maintained on the Renewi plc
website: www.renewiplc.com.
By order of the Board
P Dilnot T Woolrych
Chief Executive Officer Chief Financial Officer
8 November 2018 8 November 2018
Explanation of non-IFRS measures
The Directors use alternative performance measures as they
believe these measures provide additional useful information on the
underlying trends, performance and position of the Group. These
measures are used for internal performance analysis. These terms
are not defined terms under IFRS and may therefore not be
comparable with similarly titled measures used by other companies.
These measures are not intended to be a substitute for, or superior
to, IFRS measurements. The alternative performance measures used
are set out below.
Financial Measure How we define it Why we use it
Underlying EBIT Operating profit from Provides insight into
continuing operations ongoing profit generation
excluding amortisation and trends
of intangible assets
arising on acquisition,
fair value remeasurements,
non-trading and exceptional
items
--------------------------------- ------------------------------
Underlying EBIT Underlying EBIT as a Provides insight into
margin percentage of revenue ongoing margin development
and trends
--------------------------------- ------------------------------
EBITDA Underlying EBIT before Measure of earnings and
depreciation, amortisation cash generation to assess
and profit or loss on operational performance
disposal of plant, property
and equipment
--------------------------------- ------------------------------
Underlying profit Profit before tax from Facilitates underlying
before tax continuing operations performance evaluation
before non-trading and
exceptional items, amortisation
of intangible assets
arising on acquisition
and fair value remeasurements
--------------------------------- ------------------------------
Underlying EPS Earnings per share before Facilitates underlying
non-trading and exceptional performance evaluation
items, amortisation of
intangible assets arising
on acquisition and fair
value remeasurements
--------------------------------- ------------------------------
Return on operating Last 12 months underlying Provides a measure of
assets EBIT divided by a 13 the return on assets
month average of total across the Divisions
net assets excluding and the Group excluding
core net debt, derivatives, goodwill and acquisition
tax balances, goodwill intangible balances
and acquisition intangibles
--------------------------------- ------------------------------
Post-tax return Last 12 months underlying Provides a measure of
on capital employed EBIT as adjusted by the the Group return on assets
Group effective tax rate taking into account the
divided by a 13 month goodwill and acquisition
average of total net intangible balances
assets excluding core
net debt and derivatives
--------------------------------- ------------------------------
Underlying free Net cash generated from Measure of cash available
cash flow operating activities after regular replacement
principally excluding capital expenditure to
non-trading and exceptional pay dividends, fund growth
items and including interest, capital projects and
tax and replacement capital invest in acquisitions
spend
--------------------------------- ------------------------------
Free cash flow The ratio of underlying Provides an understanding
conversion free cash flow to underlying of how our profits convert
EBIT into cash
--------------------------------- ------------------------------
Core net debt Core net debt includes The borrowings relating
cash and cash equivalents to the UK PFI/PPP contracts
but excludes the net are non-recourse to the
debt relating to the Group and excluding these
UK PFI/PPP contracts gives a suitable measure
of indebtedness for the
Group
--------------------------------- ------------------------------
Net debt to Core net debt divided Commonly used measure
EBITDA by an annualised EBITDA of financial leverage
with a net debt value and consistent with covenant
based on the terminology definition
of financing arrangements
and translated at an
average rate of exchange
for the period
--------------------------------- ------------------------------
Underlying effective The effective tax rate Provides a more comparable
tax rate on underlying profit basis to analyse our
before tax tax rate
--------------------------------- ------------------------------
Consolidated Interim Income Statement
(unaudited)
First half ended 30 September 2018
First half 2018/19 First half 2017/18
------------------------------------------ ------------------------------------------
Non-trading &
Non-trading & exceptional
Underlying exceptional items Total Underlying items Total
Note EURm EURm EURm EURm EURm EURm
-------------------- ---- ------------ ------------------- ------- ------------ ------------------- -------
Revenue 3,4 900.4 - 900.4 890.4 - 890.4
Cost of sales (731.6) (9.6) (741.2) (713.4) (4.2) (717.6)
-------------------- ---- ------------ ------------------- ------- ------------ ------------------- -------
Gross profit (loss) 168.8 (9.6) 159.2 177.0 (4.2) 172.8
Administrative
expenses (124.0) (0.7) (124.7) (127.5) (9.2) (136.7)
-------------------- ---- ------------ ------------------- ------- ------------ ------------------- -------
Operating profit
(loss) 3,5 44.8 (10.3) 34.5 49.5 (13.4) 36.1
Finance income 6 6.9 - 6.9 7.0 - 7.0
Finance charges 5,6 (18.4) (0.1) (18.5) (18.9) - (18.9)
Share of results
from associates and
joint ventures 0.6 - 0.6 1.1 - 1.1
-------------------- ---- ------------ ------------------- ------- ------------ ------------------- -------
Profit (loss) before
taxation 3 33.9 (10.4) 23.5 38.7 (13.4) 25.3
Taxation 5,7 (8.5) 5.5 (3.0) (9.7) 2.0 (7.7)
-------------------- ---- ------------ ------------------- ------- ------------ ------------------- -------
Profit (loss) for
the period from
continuing
operations 25.4 (4.9) 20.5 29.0 (11.4) 17.6
Discontinued
operations
Result (loss) for
the period from
discontinued
operations - - - (0.1) - (0.1)
-------------------- ---- ------------ ------------------- ------- ------------ ------------------- -------
Profit (loss) for
the period 25.4 (4.9) 20.5 28.9 (11.4) 17.5
==================== ==== ============ =================== ======= ============ =================== =======
Attributable to:
Owners of the parent 25.1 (4.9) 20.2 29.3 (11.4) 17.9
Non-controlling
interests 0.3 - 0.3 (0.4) - (0.4)
-------------------- ---- ------------ ------------------- ------- ------------ ------------------- -------
25.4 (4.9) 20.5 28.9 (11.4) 17.5
==================== ==== ============ =================== ======= ============ =================== =======
Continuing operations
Earnings (loss) per share attributable to owners of the parent (cents per share)
------------------------------------------------------------------------------------------------------------------
Basic 9 3.1 (0.6) 2.5 3.7 (1.5) 2.2
Diluted 9 3.1 (0.6) 2.5 3.7 (1.5) 2.2
==================== ==== ============ =================== ======= ============ =================== =======
Consolidated Interim Statement of Comprehensive Income
(unaudited)
First half ended 30 September 2018
First half First half
2018/19 2017/18
EURm EURm
------------------------------------------------------------------------------------- ---------- ----------
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign subsidiaries 2.2 (1.8)
Fair value movement on cash flow hedges 5.8 5.5
Deferred tax on fair value movement on cash flow hedges (1.2) (1.1)
Share of other comprehensive income of investments accounted for using the equity method 0.2 0.4
7.0 3.0
------------------------------------------------------------------------------------- ---------- ----------
Items that will not be reclassified to profit or loss:
Actuarial gain (loss) on defined benefit pension schemes 4.8 (1.8)
Deferred tax on actuarial gain (loss) on defined benefit pension schemes (0.8) 0.3
---------------------------------------------------------------------------------------- ---------- ----------
4.0 (1.5)
---------------------------------------------------------------------------------------- ---------- ----------
Other comprehensive income for the period, net of tax 11.0 1.5
Profit for the period 20.5 17.5
---------------------------------------------------------------------------------------- ---------- ----------
Total comprehensive income for the period 31.5 19.0
======================================================================================== ========== ==========
Attributable to:
Owners of the parent 30.9 18.9
Non-controlling interests 0.6 0.1
---------------------------------------------------------------------------------------- ---------- ----------
Total comprehensive income for the period 31.5 19.0
======================================================================================== ========== ==========
Total comprehensive income attributable to owners of the parent arising from:
Continuing operations 30.9 19.0
Discontinued operations - (0.1)
---------------------------------------------------------------------------------------- ---------- ----------
30.9 18.9
===================================================================================== ========== ==========
Consolidated Interim Balance Sheet
(unaudited)
As at 30 September 2018
30 September 30 September 31 March
2018 2017 2018
Note EURm EURm EURm
Assets
Non-current assets
Intangible assets 10 680.6 680.2 691.1
Property, plant and equipment 10 701.1 711.0 710.8
Investments 16.1 19.6 19.1
Loans to associates and joint ventures 13.9 15.8 15.7
Financial assets relating to PFI/PPP contracts 187.2 189.9 189.9
Trade and other receivables 5.0 3.4 5.3
Derivative financial instruments 15 0.3 0.2 0.6
Deferred tax assets 24.4 35.5 28.5
------------------------------------------------ ---- ------------- ------------ ---------
1,628.6 1,655.6 1,661.0
----------------------------------------------- ---- ------------- ------------ ---------
Current assets
Inventories 29.0 25.9 26.6
Investments 5.9 - -
Loans to associates and joint ventures 6.8 6.7 6.8
Financial assets relating to PFI/PPP contracts 8.9 14.7 15.4
Trade and other receivables 288.7 274.2 294.1
Derivative financial instruments 15 3.9 0.6 1.6
Current tax receivable 0.1 0.1 0.1
Cash and cash equivalents 105.2 82.9 73.0
------------------------------------------------ ---- ------------- ------------ ---------
448.5 405.1 417.6
Assets classified as held for sale - 0.4 0.4
------------------------------------------------ ---- ------------- ------------ ---------
448.5 405.5 418.0
----------------------------------------------- ---- ------------- ------------ ---------
Total assets 2,077.1 2,061.1 2,079.0
------------------------------------------------ ---- ------------- ------------ ---------
Liabilities
Non-current liabilities
Borrowings - PFI/PPP non-recourse net debt (88.9) (94.8) (93.3)
Borrowings - Other (489.1) (562.4) (558.9)
Derivative financial instruments 15 (28.7) (32.4) (33.3)
Other non-current liabilities (7.6) (6.0) (7.7)
Deferred tax liabilities (69.9) (91.9) (71.2)
Provisions 13 (212.7) (169.2) (230.1)
Defined benefit pension schemes deficit 14 (19.1) (31.6) (25.4)
------------------------------------------------ ---- ------------- ------------ ---------
(916.0) (988.3) (1,019.9)
----------------------------------------------- ---- ------------- ------------ ---------
Current liabilities
Borrowings - PFI/PPP non-recourse net debt (1.6) (1.5) (1.3)
Borrowings - Other (112.2) (15.1) (14.7)
Derivative financial instruments 15 (1.0) (0.5) (0.1)
Trade and other payables (519.1) (475.2) (538.9)
Current tax payable (22.7) (22.6) (20.9)
Provisions 13 (56.5) (44.9) (46.9)
------------------------------------------------ ---- ------------- ------------ ---------
(713.1) (559.8) (622.8)
----------------------------------------------- ---- ------------- ------------ ---------
Total liabilities (1,629.1) (1,548.1) (1,642.7)
------------------------------------------------ ---- ------------- ------------ ---------
Net assets 448.0 513.0 436.3
================================================ ==== ============= ============ =========
Equity
Share capital 99.5 99.5 99.5
Share premium 473.6 473.4 473.6
Exchange reserve (16.0) (15.5) (18.2)
Retained earnings (115.8) (49.8) (124.7)
------------------------------------------------ ---- ------------- ------------ ---------
Equity attributable to owners of the parent 441.3 507.6 430.2
Non-controlling interests 6.7 5.4 6.1
------------------------------------------------ ---- ------------- ------------ ---------
Total equity 448.0 513.0 436.3
================================================ ==== ============= ============ =========
Consolidated Interim Statement of Changes in Equity
(unaudited)
First half ended 30 September 2018
Share Share Exchange Retained Non-controlling Total
capital premium reserve earnings interests equity
EURm EURm EURm EURm EURm EURm
Balance at 1 April 2018 99.5 473.6 (18.2) (124.7) 6.1 436.3
Profit for the period - - - 20.2 0.3 20.5
Other comprehensive income - - 2.2 8.5 0.3 11.0
Total comprehensive income
for the period - - 2.2 28.7 0.6 31.5
---------------------------------------- -------- -------- -------- --------- --------------- -------
Share-based compensation - - - 0.8 - 0.8
Movement on tax arising on share-based
compensation - - - (0.6) - (0.6)
Own shares purchased by the Employee
Share Trust - - - (1.1) - (1.1)
Dividends - - - (18.9) - (18.9)
---------------------------------------- -------- -------- -------- --------- --------------- -------
Balance as at 30 September
2018 99.5 473.6 (16.0) (115.8) 6.7 448.0
======================================== ======== ======== ======== ========= =============== =======
Balance at 1 April 2017 99.5 473.4 (13.5) (53.1) 5.2 511.5
(Loss) profit for the year - - - (54.2) 0.3 (53.9)
Other comprehensive (loss)
income - - (4.7) 9.4 0.6 5.3
---------------------------------------- -------- -------- -------- --------- --------------- -------
Total comprehensive (loss)
income for the year - - (4.7) (44.8) 0.9 (48.6)
---------------------------------------- -------- -------- -------- --------- --------------- -------
Share-based compensation - - - 2.1 - 2.1
Movement on tax arising on share-based
compensation - - - (0.2) - (0.2)
Proceeds from exercise of employee
options - 0.2 - - - 0.2
Own shares purchased by the Employee
Share Trust - - - (1.1) - (1.1)
Dividends - - - (27.6) - (27.6)
---------------------------------------- -------- -------- -------- --------- --------------- -------
Balance as at 31 March 2018 99.5 473.6 (18.2) (124.7) 6.1 436.3
======================================== ======== ======== ======== ========= =============== =======
Balance at 1 April 2017 99.5 473.4 (13.5) (53.1) 5.2 511.5
Profit (loss) for the period - - - 17.9 (0.4) 17.5
Other comprehensive (loss)
income - - (2.0) 2.9 0.6 1.5
Total comprehensive (loss)
income for the period - - (2.0) 20.8 0.2 19.0
---------------------------------------- -------- -------- -------- --------- --------------- -------
Share-based compensation - - - 1.5 - 1.5
Dividends - - - (19.0) - (19.0)
---------------------------------------- -------- -------- -------- --------- --------------- -------
Balance as at 30 September
2017 99.5 473.4 (15.5) (49.8) 5.4 513.0
======================================== ======== ======== ======== ========= =============== =======
The exchange reserve comprises all foreign exchange differences
arising since 1 April 2005 from the translation of the financial
statements of non-Euro denominated operations as well as from the
translation of liabilities that hedge the Group's net investment in
foreign operations.
Consolidated Interim Statement of Cash Flows
(unaudited)
First half ended 30 September 2018
First half First half
2018/19 2017/18
EURm EURm
Profit before tax 23.5 25.3
Finance income (6.9) (7.0)
Finance charges 18.5 18.9
Share of results from associates and joint ventures (0.6) (1.1)
---------------------------------------------------------------------------------- ---------- ----------
Operating profit from continuing operations 34.5 36.1
Operating loss from discontinued operations - (0.1)
Amortisation and impairment of intangible assets 6.7 8.2
Depreciation and impairment of property, plant and equipment 44.9 48.2
Gain on disposal of property, plant and equipment (0.6) (0.2)
Increase in service concession arrangement receivable (1.2) (6.6)
Repayment of service concession arrangement receivable 8.6 -
Exceptional gain on disposal of joint venture (10.9) -
Exceptional gain on disposal of subsidiaries (0.3) -
Net decrease in provisions (12.2) (11.5)
Payments to fund defined benefit pension scheme deficits (1.7) (1.7)
Share-based compensation 0.8 1.5
Operating cash flows before movement in working capital 68.6 73.9
Increase in inventories (2.2) (2.7)
Decrease in receivables 6.5 0.6
(Decrease) increase in payables (4.9) 3.3
---------------------------------------------------------------------------------- ---------- ----------
Cash flows from operating activities 68.0 75.1
Income tax paid (1.5) (1.1)
---------------------------------------------------------------------------------- ---------- ----------
Net cash inflow from operating activities 66.5 74.0
---------------------------------------------------------------------------------- ---------- ----------
Investing activities
Purchases of intangible assets (2.3) (3.9)
Purchases of property, plant and equipment (46.4) (39.6)
Disposals of property, plant and equipment 2.2 1.2
Insurance proceeds in relation to fires in the Netherlands and Belgium - 0.8
Proceeds from disposal of subsidiary 7.4 -
Purchase of joint venture (3.8) -
Proceeds from disposal of joint venture 19.4 -
Purchase of other short-term investments (5.9) -
Receipt of deferred consideration 0.1 0.1
Payment of deferred consideration - (0.7)
Dividends received from associates and joint ventures 0.5 0.2
Repayment of loans granted to associates and joint ventures 1.5 0.1
Outflows in respect of PFI/PPP arrangements under the financial asset model (0.1) (1.8)
Capital received in respect of PFI/PPP financial assets 2.2 2.3
Finance income 5.8 5.7
Net cash outflow from investing activities (19.4) (35.6)
---------------------------------------------------------------------------------- ---------- ----------
Financing activities
Finance charges and loan fees paid (19.4) (20.2)
Investment in own shares by the Employee Share Trust (1.1) -
Dividends paid (18.9) (18.9)
Proceeds from bank borrowings 33.3 7.8
Repayment of PFI/PPP net debt (2.6) (2.5)
Repayments of obligations under finance leases (6.1) (9.1)
Net cash outflow from financing activities (14.8) (42.9)
---------------------------------------------------------------------------------- ---------- ----------
Net increase (decrease) in cash and cash equivalents 32.3 (4.5)
Effect of foreign exchange rate changes (0.1) (0.1)
Cash and cash equivalents at the beginning of the period 73.0 87.5
---------------------------------------------------------------------------------- ---------- ----------
Cash and cash equivalents at the end of the period 105.2 82.9
================================================================================== ========== ==========
Notes to the Consolidated Interim Financial Statements
(unaudited)
1. General information
Renewi plc is a public limited company listed on the London
Stock Exchange and is incorporated and domiciled in Scotland under
the Companies Act 2006, registered number SC077438. The address of
the registered office is 16 Charlotte Square, Edinburgh, EH2 4DF.
The nature of the Group's operations and its principal activities
are set out in note 3.
2. Basis of preparation
This condensed set of consolidated interim financial statements
for the six months ended 30 September 2018 reflects the change in
presentational currency as detailed below. They have been prepared
in accordance with the Disclosure and Transparency Rules of the
United Kingdom Financial Conduct Authority and with IAS 34 Interim
Financial Reporting as adopted by the European Union (EU). They
should be read in conjunction with the 2018 Annual Report and
Accounts, which have been prepared in accordance with International
Financial Reporting Standards (IFRS) and related interpretations
issued by the IFRS Interpretations Committee (IFRS IC) adopted by
EU and comply with Article 4 of the EU IAS Regulation and with
those parts of the Companies Act 2006 applicable for companies
reporting under IFRS. The 2018 Annual Report and Accounts are
available from the Company's website www.renewiplc.com.
These primary statements and selected notes comprise the
unaudited consolidated interim financial statements of the Group
for the six months ended 30 September 2018 and 2017, together with
the audited results for the year ended 31 March 2018 which have
been restated as explained below. These interim financial results
do not comprise statutory accounts within the meaning of Section
434 of the Companies Act 2006. The comparative figures as at 31
March 2018 have been extracted from the Group's statutory Annual
Report and Accounts for that financial year and restated as
explained below, but do not constitute those accounts. Those
statutory accounts for the year ended 31 March 2018 were approved
by the Board of Directors on 24 May 2018 and delivered to the
Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under Section 498 of
the Companies Act 2006.
Having reassessed the principal risks, the directors consider it
appropriate to adopt the going concern basis of accounting in
preparing the consolidated interim financial statements.
The Board of Directors approved, on 8 November 2018, these
consolidated interim financial statements which have been reviewed
by PricewaterhouseCoopers LLP but not been audited (see page
40).
Change in presentational currency
On 12 July 2018 the Group announced that from the beginning of
the current financial year it would be changing the currency in
which it presents its financial results from Sterling to Euros. The
comparative information has been restated to Euros in accordance
with the guidance in IAS 21 The Effects of Changes in Foreign
Exchange Rates as follows:
-- Assets and liabilities are translated into Euros at closing rates of exchange.
-- Income and expense items and cash flows are translated into
Euros at average rates of exchange.
-- Share capital and share premium are translated at historic
rates prevailing at the dates of transactions
-- The exchange reserve was set to nil at the transition date to
IFRS and subsequent differences resulting from the retranslation to
Euros have been taken to the exchange reserve.
The most significant currencies for the Group were translated at
the following exchange rates:
Closing rates
Value of 30 September 30 September 31 March
EUR1 2018 2017 Change 2018 Change
------------ ------------- ------------- --------- --------- ---------
Sterling 0.891 0.881 1.1% 0.876 1.7%
Canadian
dollar 1.501 1.478 1.6% 1.586 (5.4)%
Average rates
Value of 30 September 30 September Change
EUR1 2018 2017
------------ ------------- ------------- ---------
Sterling 0.880 0.878 0.2%
Canadian
dollar 1.527 1.489 2.6%
2. Basis of Preparation - continued
Accounting policies and principal risks
The results have been prepared applying the accounting policies
that were used in the preparation of the 2018 Annual Report and
Accounts except for the adoption of new standards as set out below.
Taxes on income in the interim periods are accrued using the
estimated tax rate that is expected for the full financial
year.
Accounting standard Details
----------------------------- -----------------------------------------------
IFRS 15 Revenue from The Group has adopted IFRS 15 from
Contracts with Customers 1 April 2018 and has amended its accounting
policies which are explained in note
4.
IFRS 9 Financial Instruments The Group has adopted IFRS 9 from 1
April 2018 and has amended its accounting
policies accordingly, replacing the
provisions of IAS 39 that related to
the recognition, classification and
measurement of financial assets and
financial liabilities, financial instruments,
impairment of financial assets and
hedge accounting. In accordance with
the provisions of IFRS 9, the Group
has adopted the new rules retrospectively
but has not identified any material
amendments therefore no restatement
is required.
At the date of approval of these financial statements, the
following standard was in issue but not yet effective:
IFRS 16 Leases, effective for annual periods beginning on or
after 1 January 2019. The standard requires almost all operating
leases to be recognised as a lease liability together with a
corresponding "right of use asset". The Group is currently
performing an assessment of the impact which is expected to have a
material impact on the Balance Sheet. The right of use assets will
be depreciated and interest charged on the lease liabilities, which
replace the operating lease costs currently recognised in the
Income Statement.
There are no other IFRSs or IFRS IC interpretations not yet
effective that would be expected to have a material impact on the
Group and there were no new IFRSs or IFRS IC interpretations which
were early adopted by the Group.
The Financial Review includes consideration of the principal
risks and uncertainties affecting the Group in the remaining six
months of the year.
Estimates
The preparation of consolidated interim financial statements
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these consolidated interim financial statements,
the nature of the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation were the same as those that were applied to the
financial statements for the year ended 31 March 2018 and can be
found on page 130 of the 2018 Annual Report and Accounts.
Underlying business performance
The Group uses alternative performance measures as they believe
these measures provide additional useful information on the
underlying trends, performance and position of the Group. These
measures are used by the Group for internal performance analysis
and incentive compensation arrangements for employees. The term
'underlying' refers to the relevant measure being reported for
continuing operations excluding non-trading and exceptional items,
financing fair value remeasurements and amortisation of acquisition
intangibles. These include underlying earnings before interest and
tax (underlying EBIT), underlying profit before tax, underlying
profit after tax, underlying free cash flow, underlying earnings
per share and EBITDA (earnings before interest, tax, depreciation
and amortisation). The terms 'EBIT', 'exceptional items' and
'underlying' are not defined terms under IFRS and may therefore not
be comparable with similarly titled profit measures reported by
other companies. They are not intended to be a substitute for, or
superior to, GAAP measurements of profit. 'Underlying EBIT' is
defined as continuing operating profit before amortisation of
acquisition intangibles and exceptional items.
A full list of alternative performance measures and non-IFRS
measures is set out before the Consolidated Interim Income
Statement and for reconciliations of non-IFRS measures see note
18.
. 2. Basis of Preparation - continued
Non-trading and exceptional items
Items are classified as non-trading and exceptional to improve
the understanding of the Group's financial performance as they are
not considered to reflect the underlying performance. Items
classified as non-trading and exceptional are disclosed separately
due to their size or incidence. These include, but are not limited
to, significant impairments, significant restructuring of the
activities of an entity including employee associated severance
costs, acquisition and disposal related transaction costs,
integration costs, synergy delivery costs, significant fires,
onerous contracts, profit or loss on disposal of properties or
subsidiaries, as these items are irregular and amortisation of
acquisition intangibles. The Group incurs costs each year in
maintaining intangible assets which include acquired customer
relationships, permits and licences and excludes amortisation of
these assets from underlying EBIT to avoid double counting such
costs within underlying results. A full listing of those items
presented as non-trading and exceptional is shown in note 5.
3. Segmental reporting
The Group's chief operating decision maker is considered to be
the Board of Directors. The Group's reportable segments determined
with reference to the information provided to the Board of
Directors in order for it to allocate the Group's resources and to
monitor the performance of the Group are set out below.
The Group's reportable segments are:
Commercial Waste Collection and treatment of commercial waste in the Netherlands and Belgium.
Hazardous Waste Industrial cleaning and treatment of hazardous waste in the Netherlands.
Monostreams Production of materials from waste streams in specific end markets such as glass, electrical
and electronic equipment, organics and minerals in the Netherlands, Belgium, France,
Germany,
Hungary and Portugal.
Municipal Operation of waste management facilities under long-term municipal contracts in the UK and
Canada.
Group central services Head office corporate function.
The Commercial Waste reportable segment includes the Netherlands
and Belgium operating segments and the Municipal reportable segment
includes the UK and Canada operating segments, based on
geographical location. Operating segments within the Commercial
Waste and Municipal divisions have been aggregated and reported as
one as they operate in similar markets in relation to the nature of
the products, services, production processes and type of
customer.
The profit measure the Board of Directors uses to evaluate
performance is underlying EBIT. Underlying EBIT is continuing
operating profit before non-trading and exceptional items, the
amortisation of acquisition intangibles and fair value
remeasurements. The Group accounts for inter-segment trading on an
arm's length basis.
First half First half
2018/19 2017/18
Revenue EURm EURm
Netherlands Commercial Waste 375.8 363.9
Belgium Commercial Waste 210.9 211.3
Intra-segment revenue (0.4) (0.6)
---------- ----------
Commercial Waste 586.3 574.6
---------- ----------
Hazardous Waste 108.0 117.3
---------- ----------
Monostreams 110.5 102.4
---------- ----------
UK Municipal 103.6 104.4
Canada Municipal 9.8 7.9
---------- ----------
Municipal 113.4 112.3
---------- ----------
Inter-segment revenue (17.8) (16.2)
------------------------------------------- ---------- ----------
Total revenue from continuing operations 900.4 890.4
=========================================== ========== ==========
3. Segmental reporting - continued
First half First half
2018/19 2017/18
Results EURm EURm
---------------------------------------------------- ----------- ----------
Netherlands Commercial Waste 25.3 25.1
Belgium Commercial Waste 15.2 16.0
----------- ----------
Commercial Waste 40.5 41.1
----------- ----------
Hazardous Waste 5.9 15.7
----------- ----------
Monostreams 8.8 10.8
----------- ----------
UK Municipal 2.5 (4.0)
Canada Municipal 1.8 (1.6)
----------- ----------
Municipal 4.3 (5.6)
Group central services (14.7) (12.5)
----------- ----------
Total underlying EBIT 44.8 49.5
Non-trading and exceptional items (10.3) (13.4)
------------------------------------------------------ ----------- ----------
Total operating profit from continuing operations 34.5 36.1
Finance income 6.9 7.0
Finance charges (18.4) (18.9)
Finance charges - non-trading and exceptional items (0.1) -
Share of results from associates and joint ventures 0.6 1.1
------------------------------------------------------ ----------- ----------
Profit before taxation and discontinued operations 23.5 25.3
====================================================== =========== ==========
Tax, net debt
Commercial Group central and
Waste Hazardous Waste Monostreams Municipal services derivatives Total
Net assets EURm EURm EURm EURm EURm EURm EURm
---------------- --------------- --------------- ----------- --------- --------------- -------------- ---------
30 September
2018
Gross
non-current
assets 878.2 249.4 188.0 274.9 13.4 24.7 1,628.6
Gross current
assets 185.6 34.9 46.6 64.3 7.9 109.2 448.5
Gross
liabilities (348.3) (80.5) (155.5) (174.8) (55.9) (814.1) (1,629.1)
---------------- --------------- --------------- ----------- --------- --------------- -------------- ---------
Net assets
(liabilities) 715.5 203.8 79.1 164.4 (34.6) (680.2) 448.0
---------------- --------------- --------------- ----------- --------- --------------- -------------- ---------
31 March 2018
Gross
non-current
assets 804.2 255.0 188.2 285.3 99.2 29.1 1,661.0
Gross current
assets 197.5 37.5 43.6 59.8 4.9 74.7 418.0
Gross
liabilities (358.2) (88.0) (150.7) (181.7) (70.4) (793.7) (1,642.7)
---------------- --------------- --------------- ----------- --------- --------------- -------------- ---------
Net assets
(liabilities) 643.5 204.5 81.1 163.4 33.7 (689.9) 436.3
---------------- --------------- --------------- ----------- --------- --------------- -------------- ---------
4. Revenue
The Group has adopted IFRS 15 Revenue from Contracts with
Customers from 1 April 2018 and has amended its accounting
policies. In accordance with the new rules the Group elected to
apply the cumulative effect method and after a detailed assessment
the Group has identified no material impact. Under IFRS 15 Revenue
is defined as income arising in the course of the Group's ordinary
activities and is recognised when control of goods or services
transfer to the customer and is allocated to individual performance
obligations.
In the Commercial segment where the contract with a customer
includes the collection of waste with a positive value the
transaction price includes an element of non-cash consideration.
This has resulted in a change in accounting policy which increases
revenue with a corresponding increase in cost of sales for the
value of the waste collected and no impact on or change to
operating profit.
Revenue recognition criteria for the key types of transactions
under IFRS 15 are as follows:
-- Inbound revenue relates to the collection and/or processing
of waste which in most cases is considered to be at a point in
time. However, in the Hazardous Waste Division the majority of
revenue at ATM is recognised over time based on the status of
processing the waste.
-- Outbound revenue relates to the sale of recyclate products
and the generation of power from gas produced by processes at
anaerobic digestion facilities and landfill sites. The performance
obligations are satisfied at a point of time when control of the
product/power is transferred to the customer.
-- On-site revenue relates to activities and services provided
to the customer on their own site and includes primarily industrial
cleaning services and waste treatment where the performance
obligations are mainly recognised over time.
-- Other includes liquidated damages in the Municipal Division and other sundry items.
Following the implementation of IFRS 15 the Group presents a
disaggregation of its revenue according to the type of service
delivered and the primary geographic markets the Group operates
in:
Commercial Waste Hazardous Waste Monostreams Municipal Inter-segment Total
Revenue by type of service EURm EURm EURm EURm EURm EURm
--------------------------- ---------------- --------------- ----------- --------- --------------- -----
30 September 2018
Inbound 488.5 49.1 29.6 97.9 (17.7) 647.4
Outbound 70.9 3.0 79.6 3.0 (0.1) 156.4
On-Site 24.3 55.9 - - - 80.2
Other 2.6 - 1.3 12.5 - 16.4
--------------------------- ---------------- --------------- ----------- --------- --------------- -----
Total revenue 586.3 108.0 110.5 113.4 (17.8) 900.4
--------------------------- ---------------- --------------- ----------- --------- --------------- -----
30 September 2017
Inbound 460.6 56.5 25.8 95.0 (16.1) 621.8
Outbound 85.8 9.6 75.2 3.9 (0.1) 174.4
On-Site 25.0 51.2 - - - 76.2
Other 3.2 - 1.4 13.4 - 18.0
Total revenue 574.6 117.3 102.4 112.3 (16.2) 890.4
--------------------------- ---------------- --------------- ----------- --------- --------------- -----
4. Revenues - continued
Commercial Waste Hazardous Waste Monostreams Municipal Inter-segment Total
Revenue by geographic market EURm EURm EURm EURm EURm EURm
----------------------------- ---------------- --------------- ----------- --------- --------------- -----
30 September 2018
Netherlands 375.5 108.0 55.3 - (12.6) 526.2
Belgium 210.8 - 34.1 - (3.1) 241.8
UK - - - 103.6 - 103.6
Canada - - - 9.8 - 9.8
France - - 13.2 - (1.1) 12.1
Other - - 7.9 - (1.0) 6.9
----------------------------- ---------------- --------------- ----------- --------- --------------- -----
Total revenue 586.3 108.0 110.5 113.4 (17.8) 900.4
----------------------------- ---------------- --------------- ----------- --------- --------------- -----
30 September 2017
Netherlands 363.5 117.3 44.9 - (11.1) 514.6
Belgium 211.1 - 38.2 - (3.4) 245.9
UK - - - 104.4 - 104.4
Canada - - - 7.9 - 7.9
France - - 12.6 - (0.7) 11.9
Other - - 6.7 - (1.0) 5.7
Total revenue 574.6 117.3 102.4 112.3 (16.2) 890.4
----------------------------- ---------------- --------------- ----------- --------- --------------- -----
Revenue recognised at a point in time amounted to EUR778.1m
(2017/18: EUR761.8m) with the remainder recognised over time. The
majority of the Commercial, Municipal and Monostreams revenue is
recognised at a point in time, whereas for Hazardous Waste the
majority is recognised over time.
5. Non-trading and exceptional items
The following items are presented in non-trading and exceptional
items.
First half First half
2018/19 2017/18
EURm EURm
------------------------------------------------------------------------------------
Merger related costs:
Synergy delivery costs - cash 8.9 3.8
Synergy delivery costs - non-cash - 1.2
Integration costs 8.0 3.8
------------------------------------------------------------------------------------- ---------- ----------
16.9 8.8
------------------------------------------------------------------------------------ ---------- ----------
Portfolio management activity:
Disposals (11.2) -
Acquisition costs 0.1 0.3
(11.1) 0.3
------------------------------------------------------------------------------------ ---------- ----------
Other items:
ATM soil issues 1.3 -
Costs relating to fires - 1.1
Restructuring charges and employee related costs - 0.1
Municipal contract issues - (0.2)
1.3 1.0
------------------------------------------------------------------------------------ ---------- ----------
Amortisation of acquisition intangibles 3.2 3.3
Change in fair value of derivatives at fair value through profit or loss 0.1 -
Non-trading and exceptional items in profit before tax (continuing operation) 10.4 13.4
Tax on non-trading and exceptional items (5.5) (2.0)
Total non-trading and exceptional items in profit after tax (continuing operations) 4.9 11.4
===================================================================================== ========== ==========
Merger related costs
Due to the significance of the merger on the Group and the
associated synergy delivery projects these costs are considered to
be exceptional. Synergy delivery costs of EUR8.9m (2017/18:
EUR5.0m) and integration costs of EUR8.0m (2017/18: EUR3.8m) were
incurred as the Group executes merger plans for generating value.
Synergy delivery costs in 2017/18 included: EUR1.2m of non-cash
impairments of assets at the Belgium Commercial Zaventem Shared
Service Centre. The total charge of EUR16.9m (2017/18: EUR8.8m) is
recorded as EUR5.1m (2017/18: EURnil) in cost of sales and EUR11.8m
(2017/18: EUR8.8m) in administrative expenses.
Portfolio management activity
The disposals credit includes the profit on the sale of the
Group's share in the UK joint venture Energen Biogas of EUR10.9m
and the profit on sale of transferring 50% of a Hazardous Waste ATM
subsidiary to a joint venture. The total credit of EUR11.1m is
recorded in administrative expenses.
Other items
The charge for ATM soil issues of EUR1.3m (2017/18: EURnil)
relates to the soil offset market issues as reported in the year
ended 31 March 2018 and includes additional costs of logistics and
off-site storage. The total charge of EUR1.3m (2017/18: EUR1.0m) is
recorded as EUR1.3m (2017/18: EUR0.9m) cost of sales and EURnil
(2017/18: EUR0.1m) in administrative expenses.
Amortisation of intangible assets acquired in business
combinations of EUR3.2m (2017/18: EUR3.3m) is all recorded in cost
of sales.
6. Net finance charges
First half First half
2018/19 2017/18
Continuing operations EURm EURm
Finance charges
Interest payable on borrowings wholly repayable within five years 9.2 9.8
Interest payable on PFI/PPP non-recourse net debt 3.9 4.1
Unwinding of discount on provisions 4.2 3.0
Interest charge on the retirement benefit schemes 0.3 0.3
Amortisation of loan fees 0.3 0.1
Other finance costs 0.5 1.6
-------------------------------------------------------------------------- ---------- ----------
Total finance charges 18.4 18.9
-------------------------------------------------------------------------- ---------- ----------
Finance income
Interest receivable on financial assets relating to PFI/PPP contracts (5.4) (5.5)
Unwinding of discount on deferred consideration receivable (0.1) (0.1)
Interest receivable on other loans and receivables (1.4) (1.4)
-------------------------------------------------------------------------- ---------- ----------
Total finance income (6.9) (7.0)
------------------------------------------------------------------------------ ---------- ----------
Non-trading and exceptional finance charges
Change in fair value of derivatives at fair value through profit or loss 0.1 -
------------------------------------------------------------------------------- ---------- ----------
Net finance charges 11.6 11.9
=============================================================================== ========== ==========
7. Taxation
Tax expense is recognised based on management's best estimate of
the full year effective tax rate on expected full year profits to
March 2019. The estimated average underlying annual tax rate on
continuing operations for the year to 31 March 2019 is 25%
(2017/18: 25.5%).
The rate of UK corporation tax changed from 20% to 19% on 1
April 2017 and will change to 17% on 1 April 2020. As a result, the
UK deferred tax for the period has been calculated based on the
enacted rates.
Under the corporate income tax reform as enacted by the Belgian
government on 22 December 2017, the Belgian corporate income tax
rate has reduced to 29.58% for accounting periods starting on or
after 1 January 2018 and furthermore 25% from 1 January 2020. As a
result, the Belgian deferred tax has been calculated at the
substantively enacted rates depending on when the timing
differences are expected to reverse.
8. Dividends
An interim dividend of 0.95 pence (2017/18: 0.95 pence) per
ordinary share was approved by the Board on 8 November 2018 and
will be paid on 4 January 2019 to shareholders on the register at
close of business on 30 November 2018.
The final dividend for the year ended March 2018 EUR18.9m (2017:
EUR19.0m) being 2.1 pence (2017: 2.1 pence) per share.
9. Earnings per share
First half 2018/19 First half 2017/18
--------------------------------- ---------------------------------
Weighted Weighted
average Earnings average Earnings
number per number per
Earnings of shares share Earnings of shares share
EURm million cents EURm million cents
------------------------------------ --------- ----------- --------- --------- ----------- ---------
Underlying profit after
tax 25.4 29.0
Non-controlling interests (0.3) 0.4
------------------------------------ --------- ----------- --------- --------- ----------- ---------
Underlying earnings
per share 25.1 798.7 3.1 29.4 799.8 3.7
Adjustments:
Non-trading and exceptional
items (10.4) (13.4)
Tax on non-trading and
exceptional items 5.5 2.0
Basic earnings per share 20.2 798.7 2.5 18.0 799.8 2.2
Dilutions - 0.6 - - 1.3 -
------------------------------------ --------- ----------- --------- --------- ----------- ---------
Diluted earnings per
share 20.2 799.3 2.5 18.0 801.1 2.2
------------------------------------ --------- ----------- --------- --------- ----------- ---------
Underlying earnings
per share 25.1 798.7 3.1 29.4 799.8 3.7
Dilutions - 0.6 - - 1.3 -
------------------------------------ --------- ----------- --------- --------- ----------- ---------
Underlying diluted earnings
per share 25.1 799.3 3.1 29.4 801.1 3.7
==================================== ========= =========== ========= ========= =========== =========
The weighted average number of shares excludes ordinary shares
held by the Employee Share Trust.
The Directors believe that adjusting earnings per share for the
effect of the non-trading and exceptional items, amortisation of
acquisition intangibles and the change in fair value of derivatives
enables comparison with historical data calculated on the same
basis. Exceptional items are those items that are disclosed
separately on the face of the Consolidated Interim Income
Statement, because of their size or incidence, to enable a better
understanding of performance.
10. Goodwill, intangible assets and property, plant and equipment
Goodwill Intangible assets Property, plant and equipment Total
EURm EURm EURm EURm
Net book value at 1 April 2017 597.1 87.8 720.2 1,405.1
Additions - 10.8 93.9 104.7
Acquisition through business
combination 14.1 0.2 8.7 23.0
Disposals - - (15.6) (15.6)
Depreciation and amortisation - (14.5) (89.7) (104.2)
Impairment - (3.7) (3.3) (7.0)
Exchange (0.1) (0.6) (3.4) (4.1)
Net book value at 31 March 2018 611.1 80.0 710.8 1,401.9
Additions - 1.6 43.0 44.6
Disposals (5.1) (0.1) (9.2) (14.4)
Depreciation and amortisation - (6.7) (44.9) (51.6)
Exchange - (0.2) 1.4 1.2
--------------------------------------- -------- ----------------- ----------------------------- -------
Net book value at 30 September 2018 606.0 74.6 701.1 1,381.7
======================================= ======== ================= ============================= =======
At 30 September 2018 the Group had property, plant and equipment
capital commitments of EUR24.8m (2017/18: EUR25.0m).
11. Borrowings
As announced on 22 May 2018 the Group amended and extended its
multicurrency bank facility to a Green multi-currency credit
facility of EUR550m maturing in May 2023 with options to extend to
2025. At 30 September 2018 EUR365m was drawn under this facility
and in addition the Group has two retail bonds of EUR100m each
expiring in July 2019 and June 2022.
Movement in net debt
At 1
April Other At 30 September
2018 Cash flows non-cash changes Exchange movements 2018
EURm EURm EURm EURm EURm
Cash and cash equivalents 73.0 32.3 - (0.1) 105.2
Bank loans and overdrafts (335.4) (33.3) 1.6 (1.8) (368.9)
Retail bonds (199.3) - (0.1) - (199.4)
Finance leases (38.9) 6.1 (0.2) - (33.0)
------------------------------- ------- ---------- ----------------- ------------------ ---------------
Total core net debt (500.6) 5.1 1.3 (1.9) (496.1)
PFI/PPP non-recourse net debt (94.6) 2.6 - 1.5 (90.5)
Total net debt (595.2) 7.7 1.3 (0.4) (586.6)
=============================== ======= ========== ================= ================== ===============
Analysis of movement in net debt
First half First half Full year
2018/19 2017/18 2017/18
EURm EURm EURm
Net increase (decrease) in cash and cash equivalents 32.3 (4.5) (14.4)
Net (increase) decrease in borrowings and finance leases (24.6) 3.9 7.2
Capitalisation of loan fees 1.8 1.1 1.1
---------------------------------------------------------- ---------- ---------- ---------
Total cash flows in net debt 9.5 0.5 (6.1)
Finance leases entered into during the period (0.2) (0.4) (1.1)
Amortisation of loan fees (0.3) (0.1) (0.4)
Exchange loss (0.4) 6.7 10.0
Movement in net debt 8.6 6.7 2.4
Net debt at beginning of period (595.2) (597.6) (597.6)
---------------------------------------------------------- ---------- ---------- ---------
Net debt at end of period (586.6) (590.9) (595.2)
========================================================== ========== ========== =========
12. Acquisitions and disposals
On 30 August 2018 the UK joint venture Energen Biogas was sold
for EUR19.4m generating a profit on disposal of EUR10.9m.
On 27 September 2018 the Hazardous Waste division sold 50% of
the shareholding of ATM Terra BV for EUR3.6m. On that date the
entity changed its name to AP4Terra BV.
13. Provisions
Site restoration and
aftercare Restructuring Onerous contracts Other Total
EURm EURm EURm EURm EURm
At 1 April 2017 132.5 7.7 53.8 30.4 224.4
Provided in the year 0.4 9.9 74.5 3.8 88.6
Released in the year - (0.2) (4.5) (0.7) (5.4)
Finance charges - unwinding of
discount 4.6 - 1.6 0.1 6.3
Utilised in the year (3.9) (8.4) (15.0) (4.7) (32.0)
Reclassifications to deferred
revenue - - - (3.9) (3.9)
Exchange - - (0.9) (0.1) (1.0)
------------------------------ ----------------------------- ------------- ----------------- ----- ------
At 31 March 2018 133.6 9.0 109.5 24.9 277.0
Provided in the period 0.3 1.7 - 3.3 5.3
Released in the period - (0.1) - - (0.1)
Finance charges - unwinding of
discount 2.3 - 1.8 0.1 4.2
Utilised in the period (1.0) (4.6) (8.6) (1.2) (15.4)
Transfers between provisions 2.9 - (2.9) - -
Exchange (0.1) - (1.6) (0.1) (1.8)
------------------------------ ----------------------------- ------------- ----------------- ----- ------
At 30 September 2018 138.0 6.0 98.2 27.0 269.2
============================== ============================= ============= ================= ===== ======
Current 6.4 6.0 32.5 11.6 56.5
Non-current 131.6 - 65.7 15.4 212.7
------------------------------ ----------------------------- ------------- ----------------- ----- ------
At 30 September 2018 138.0 6.0 98.2 27.0 269.2
============================== ============================= ============= ================= ===== ======
Current 5.4 9.0 23.1 9.4 46.9
Non-current 128.2 - 86.4 15.5 230.1
------------------------------ ----------------------------- ------------- ----------------- ----- ------
At 31 March 2018 133.6 9.0 109.5 24.9 277.0
============================== ============================= ============= ================= ===== ======
Current 3.5 6.2 24.0 11.2 44.9
Non-current 129.4 - 21.7 18.1 169.2
------------------------------ ----------------------------- ------------- ----------------- ----- ------
At 30 September 2017 132.9 6.2 45.7 29.3 214.1
============================== ============================= ============= ================= ===== ======
Site restoration and aftercare
The site restoration provision as at 30 September 2018 related
to the cost of final capping and covering of the landfill sites.
These costs are expected to be paid over a period of up to 33 years
from the balance sheet date and may be impacted by a number of
factors including changes in legislation and technology.
Post-closure costs of landfill sites, including such items as
monitoring, gas and leachate management and licensing, have been
estimated by management based on current best practice and
technology available. The dates of payments of these aftercare
costs are uncertain but are anticipated to be over a period of at
least 30 years from closure of the relevant landfill site.
Restructuring
The restructuring provision relates to redundancy and related
costs incurred as part of the recent structural cost programmes
along with restructuring initiatives including the delivery of
merger related synergies. During the period a further EUR4.6m has
been utilised (2017/18: EUR4.0m).
Onerous contracts
Onerous contracts are provided at the net present value of the
least net cost of either exiting the contracts or fulfilling our
obligations under the contracts. The provisions are to be utilised
over the period of the contracts to which they relate with the
latest date being 2040.
Other
Other provisions principally cover dilapidations, long-service
employee awards, lifecycle expenditure obligations, legal claims,
indirect tax, warranties and indemnities.
14. Retirement benefit schemes
The Group has the legacy Shanks UK defined benefit scheme which
covers UK employees and is closed to new entrants and the legacy
VGG defined benefit schemes eligible for certain employees in both
the Netherlands and Belgium.
The amounts recognised in the Income Statement were as
follows:
First half First half
2018/19 2017/18
EURm EURm
Current service cost 1.4 1.3
Interest expense on scheme net liabilities 0.3 0.3
Net retirement benefit charge before tax 1.7 1.6
============================================= ========== ==========
The amounts recognised in the balance sheet were as follows:
As at 30 As at 31
As at 30 September September March
2018 2017 2018
EURm EURm EURm
Present value of funded obligations (255.4) (274.0) (271.9)
Fair value of plan assets 236.3 242.4 246.5
Pension scheme deficit (19.1) (31.6) (25.4)
Related deferred tax asset 4.1 6.3 5.1
------------------------------------- ------------------ ---------- --------
Net pension deficit (15.0) (25.3) (20.3)
===================================== ================== ========== ========
The legacy Shanks UK defined benefit scheme deficit decreased by
EUR6.4m from 31 March 2018 as a result of higher corporate bond
yields partly offset by a higher long-term expectation for
inflation and lower than expected asset returns over the period.
The legacy VGG defined benefit schemes increased by EUR0.1m from 31
March 2018.
The liabilities of the legacy Shanks UK defined benefit scheme
are expected to increase in the future in relation to the
guaranteed minimum pension equalisation. At present there is an
inequality of benefits between male and female members who have a
guaranteed minimum pension. Following the ruling in the High Court
case on 26 October 2018, the Lloyds Banking Group case, certain
legal and actuarial issues remain unresolved and the Company is
taking further advice to determine the impact.
15. Financial instruments at fair value
The Group holds certain financial instruments on the balance
sheet at their fair values. The following hierarchy classifies the
valuation techniques to determine the fair value of financial
instruments:
-- Level 1: quoted (unadjusted) prices in active markets for
identical assets or liabilities;
-- Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly;
-- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
The Group does not hold any financial instruments at fair value
which are valued using Level 1 or Level 3 techniques and there have
been no transfers between categories in the current or preceding
periods.
Valuation techniques used to derive Level 2 fair values
-- Short term investment valuations are provided by the fund manager
-- Unlisted non-current investments comprise unconsolidated
companies where the fair value approximates the book value
-- Derivative financial instruments are determined by
discounting the future cash flows using the applicable period-end
yield curve.
-- Retail bonds, the fair value is based on indicative market pricing.
15. Financial instruments at fair value - continued
The table below presents the Group's financial instruments
measured at fair value:
As at 30 As at 30 As at 31
September September March
2018 2017 2018
EURm EURm EURm
--------------------------------- ---------- ---------- --------
Assets
Unlisted non-current Investments 4.3 4.3 4.3
Short term investments 5.9 - -
Derivative financial instruments 4.2 0.8 2.2
---------------------------------- ---------- ---------- --------
14.4 5.1 6.5
================================= ========== ========== ========
Liabilities
Derivative financial instruments 29.7 32.9 33.4
Retail bonds 203.5 206.7 201.6
233.2 239.6 235.0
================================= ========== ========== ========
The Group considers that the fair value of all other financial
assets and financial liabilities was not materially different to
their carrying value. The retail bonds are held at their carrying
value in the balance sheet.
16. Contingent liabilities
The nature of the Group's contingent liabilities remains
consistent with those as listed in the 2018 Annual Report and
Accounts.
17. Related party transactions
The Group's significant related parties remain as disclosed in
note 8.2 of the 2018 Annual Report and Accounts. There were no
material differences in related parties or related party
transactions in the period compared to the prior year.
18. Reconciliation of non-IFRS measures
First half First half
2018/19 2017/18
Reconciliation of underlying EBIT to EBITDA from continuing operations EURm EURm
Underlying EBIT 44.8 49.5
Depreciation of property, plant and equipment 44.9 45.9
Amortisation of intangible assets (excluding acquisition intangibles) 3.5 3.9
Non-exceptional gains on property, plant and equipment (0.6) (0.2)
Underlying EBITDA from continuing operations 92.6 99.1
========================================================================= ========== ==========
First half First half
2018/19 2017/18
Reconciliation of underlying free cash flow as presented in the Finance Review EURm EURm
----------------------------------------------------------------------------------------- ---------- ----------
Net cash generated from operating activities 66.5 74.0
Exclude reclassification for provisions and working capital 25.5 29.7
Exclude payments to fund defined benefit pension scheme 1.7 1.7
Exclude (decrease) increase in service concession arrangement (7.4) 6.6
Include finance charges and loan fees paid (excluding exceptional finance charges) (19.4) (19.3)
Include finance income received 5.8 5.7
Include purchases of replacement items of intangible assets (2.3) (3.9)
Include purchases of replacement items of property, plant and equipment (44.4) (37.8)
Include proceeds from disposals of property, plant and equipment 2.2 1.2
Underlying free cash flow 28.2 57.9
=================================================================================== === ========== ==========
19. Post balance sheet events
Subsequent to the period end management have decided to dispose
of the Canadian and Reym businesses. These have not been classified
as held for sale at period end as they do not meet the criteria
under IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations.
Independent review report to Renewi plc
Report on the Consolidated Interim Financial Statements
Our conclusion
We have reviewed Renewi plc's Consolidated Interim Financial
Statements (the "interim financial statements") in the interim
financial report of Renewi plc for the six month period ended 30
September 2018. Based on our review, nothing has come to our
attention that causes us to believe that the interim financial
statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Consolidated Interim Balance Sheet as at 30 September 2018;
-- the Consolidated Interim Income Statement and Consolidated
Interim Statement of Comprehensive Income for the period then
ended;
-- the Consolidated Interim Statement of Changes in Equity for the period then ended;
-- the Consolidated Interim Statement of Cash Flows for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim
financial report have been prepared in accordance with the
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim financial report, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the interim
financial report in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim financial report based on our
review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
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 Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, 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.
We have read the other information contained in the interim
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed consolidated interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
8 November 2018
Notes:
(i) The maintenance and integrity of the Renewi plc website is
the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
(ii) Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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