Half-year Report

Nov 13 2019 07:00 GMTSource: RNS

RNS Number : 1879T

Biffa plc

13 November 2019

Biffa plc

HALF YEAR RESULTS FOR THE 26 WEEKS ENDED 27 SEPTEMBER 2019

STRONG FIRST HALF PERFORMANCE WITH GOOD PROGRESS AGAINST STRATEGIC PRIORITIES

13 November 2019

Biffa plc ('Biffa', 'the Group' or 'the Company') (LSE: BIFF), the UK's leading sustainable waste management company, announces its results for the 26 weeks ended 27 September 2019 and confirms that the Board's expectations for the full year remain unchanged.

Michael Topham, Chief Executive of Biffa, said:

"Biffa has delivered a strong performance in the first half of the year. Both of our operating divisions achieved their targets, with notable performances in our I&C and Recycling segments.

In Collections we have continued to deliver a good level of organic growth, supplemented with four small acquisitions in the year to date. Our future acquisition pipeline remains strong.

In Resources & Energy, our Recycling operations have seen good growth, and we have made further progress on our investment plans in Energy from Waste and plastics recycling.

Our funding position remains strong, with sufficient liquidity and leverage headroom available to fulfil our growth investment plans.

As a result of the sustained progress, and despite the uncertain political and economic environment, our full year expectations remain unchanged."

Financial highlights:

Ø Accelerated top line growth: Net Revenue¹ up 8.7% (H1 19 5.0%) to £560.8m (H1 19: £515.7m). Organic growth was 3.3% (H1 19 2.2%) and Inorganic growth was 5.4% (H1 19 2.8%). Statutory Revenue up 8.3% (H1 19 2.7%) to £594.6m (H1 19: £549.2m)

Ø Margin progression: Underlying Operating Profit³ up 12.0% to £45.7m (H1 19: £40.8m). This includes a £1.1m benefit of IFRS16 adjustments; Statutory Operating Profit down 2.6% to £33.9m (H1 19: £34.8m) reflecting discount rate movements on landfill provisions

Ø Strong EPS improvement: Underlying Earnings Per Share up 19% to 11.9p (H1 19 10.0p) reflecting the benefits of the prior year refinancing. Statutory Earnings per share up 7.9% to 8.2p (H1 19: 7.6p)

Ø Progressive dividend: Interim dividend up 7.5% to 2.47p per share declared (H1 19: 2.30p per share)

Ø Good cashflow management and stable leverage: Period end Reported Net Debt⁷ of £449.8m, including £139.5m of capitalised leases under IFRS16; (H1 19: £302.8m). Reported Net Debt: Underlying EBITDA (pre IFRS 16) flat at 2.0x⁸(H1 19: 2.0x)

Underlying Results (unaudited)	H1 20 £m	H1 19 £m	Change £m	Change %
Statutory Revenue	594.6	549.2	45.4	8.3
Net Revenue¹	560.8	515.7	45.1	8.7
Underlying EBITDA^2*	86.8	75.6	11.2	14.8
Underlying Operating Profit³	45.7	40.8	4.9	12.0
Underlying Operating Profit Margin⁴	7.7%	7.4%
Underlying Profit after Tax⁵	29.7	24.9	4.8	19.3
Underlying Free Cash Flow⁶	3.9	2.7	1.2	44.4
Reported Net Debt⁷	449.8	302.8
Reported Net Debt on pre-IFRS 16 basis	310.3	302.8

Statutory Results (unaudited)	H1 20 £m	H1 19 £m	Change £m	Change %
Statutory Operating Profit	33.9	34.8	(0.9)	(2.6)
Statutory Operating Profit Margin	5.7%	6.3%
Statutory Profit after Tax	20.6	19.0	1.6	8.4
Net Cash Flow	(14.0)	(9.6)	(4.4)	(45.8)
Net Debt	491.1	344.0

PRESENTATION OF RESULTS

There will be a presentation of the results to analysts and banks at 9:30am today. The webcast and associated materials will be available on Biffa's website - www.biffa.co.uk/investors.

ENQUIRIES:

Investors & Analysts

Michael Topham, Chief Executive Officer or Richard Pike, Chief Financial Officer

ir@biffa.co.uk

Media

Houston

+44 (0) 203 701 7660

biffa@houstonpr.co.uk

FORWARD-LOOKING STATEMENTS

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

NOTES:

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

1 Revenue excluding landfill tax. The net revenue for the 26 weeks ended 28 September 2018 has been increased by £13.9m to reflect an error made in eliminating landfill tax on internal revenue

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

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

4 Calculated as a percentage of statutory revenue

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

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

7 Excludes contingent balances in respect of EVP instrument, HY20 includes the impact of IFRS 16

8 Represents 2.0 x last twelve months' Underlying EBITDA (pre-IFRS 16)

9 Total Underlying Operating Profit includes central costs of £8.3m (H1 2019: £7.6m)

*Underlying EBITDA is not comparable due to the impact of IFRS 16.

CHIEF EXECUTIVE'S REVIEW

Operating Performance

We have delivered a strong performance in the first half, in line with our expectations. Revenue increased by 8.3% to £594.6m and Net Revenue increased by 8.7% to £560.8m. Underlying Operating Profit margin in the period increased to 7.7% compared to 7.4% last year, largely driven by an improvement within Collections. Statutory operating profit margin in the period is 5.7% compared to 6.3% last year, impacted significantly by the discount rate movement on landfill provisions.

As previously reported, at the start of the financial year Biffa simplified its organisational structure, aligning it to the Group's two key areas of strategic focus. The Industrial & Commercial ("I&C") and Municipal divisions have been merged with the Hazardous Waste subdivision to create a new Collections division. The Resource Recovery & Treatment division, excluding the Hazardous Waste subdivision, has been merged with the Energy division to create a new Resources & Energy division.

Collections

The Collections division comprises the I&C, Municipal and Specialist Services segments. It provides waste recycling, collections and related services to industrial, commercial, public sector and local authority customers.

	H1 20 £m	H1 19 £m	Change %
Revenue	438.0	398.9	9.8%
I&C	307.6	280.6	9.6%
Municipal	86.8	83.5	4.0%
Specialist services	43.6	34.8	25.3%
Underlying EBITDA	61.1	52.1	17.3%
Underlying Operating Profit	34.7	30.2	14.9%
Underlying Operating Profit Margin	7.9%	7.6%

H1 19 has been restated to reflect the new divisional structure but does not reflect the impact of IFRS16 due to the application of the modified retrospective approach.

Revenue increased by 9.8% (H1 19 5.1%) to £438.0m, through a combination of organic and acquisitive growth. Organic revenue growth was 2.7% (H1 19 1.5%) with acquisitions contributing a further 7.1% (H1 19 3.6%) to overall revenue growth.

The I&C business continues to focus on enhancing its market leading service proposition, the success of this being reflected in the very high customer retention rate. New contract wins also remain strong, with major wins during the period including Away Resorts, Alpha lSG Skychefs and Malmaison. The combination of organic and acquisition volume gains, strong price management, low churn and further operational improvement has underpinned further operating margin improvement over the period.

Municipal performance has stabilised as previously guided and during the period we successfully mobilised the East Sussex contract.

Specialist Services also delivered a strong performance with volume gains across Integrated Resource Management ('IRM') and improving underlying performance in Hazardous Waste and in Biffa's packaging producer responsibility scheme, Biffpack.

Underlying Operating Profit margin was 7.9% for the half year, improving from 7.6% in the prior half year. This reflects ongoing operational improvement in both I&C and Specialist Services while Municipal margins remained flat as previously guided.

Resources & Energy

The Resources & Energy division comprises the Recycling, Organics, Inerts and Landfill Gas segments. The division focuses on the treatment, recycling, energy recovery and disposal of waste.

	H1 20 £m	H1 19 £m	Change %
Revenue	156.6	150.3	4.2%
Recycling	45.9	38.0	20.8%
Organics	29.8	32.1	(7.2%)
Inerts	60.4	59.3	1.9%
Landfill gas	20.5	20.9	(1.9%)
Net Revenue	122.8	116.8	5.1%
Recycling	45.9	38.0	20.8%
Organics	29.8	32.1	(7.2%)
Inerts	26.6	25.8	3.1%
Landfill gas	20.5	20.9	(1.9%)
Underlying EBITDA	32.1	30.1	6.6%
Underlying Operating Profit	19.3	18.2	6.0%
Underlying Operating Profit Margin	12.3%	12.1%

H19 has been restated to reflect the new divisional structure but does not reflect the impact of IFRS16 due to the application of the modified retrospective approach.

The net revenue for the 26 weeks ended 28 September 2018 has been increased by £13.9m to reflect an error made in eliminating landfill tax on internal revenue.

The Resources & Energy division has also generated improved year on year performance with Net Revenue 5.1% ahead (all organic growth) (H1 19 4.9% of which 1.9% was inorganic). Underlying operating profit has improved by 6.0%, leading to operating margins rising from 12.1% to 12.3%.

The Recycling portfolio has had a strong performance versus prior year: The materials recycling facilities ("MRF's") are ahead of the prior year as a result of recovery from the impacts of the China import ban on recycled products, improving gate fees and lower commodity exposure. We have also accommodated the fine and associated costs from the EA court case and made a further provision for the costs of our appeal and other pending cases within the H1 numbers.

Also in the Recycling portfolio is the Polymers business, our industry leading food grade plastic recycling business. Polymers delivered a particularly strong performance as a result of a combination of a favourable commercial environment and an excellent operational performance.

Performance in Organics has been behind last year (6.6% revenue decrease) due to a combination of operational performance issues in West Sussex and the impact of planned maintenance downtime in Poplars. Our Leicester site has had a solid first half performance.

Landfill volumes are marginally down on last year but are anticipated to recover in the second half due to increased rail hub volumes. Performance has been further bolstered by higher gate fees.

In Landfill Gas, yield declines have been offset by higher selling prices, albeit with lower ROC upside when compared to FY19 H1.

Operational KPIs

The strong performance in the period is further evidenced by delivery of Biffa's operational KPIs. Tonnages collected remained in line with the prior year. The increase in processed tonnages has been driven by infrastructure investment, with landfill volumes showing a very slight decline which we expect to recover through rail hub volumes in H2. The reduction in energy generation reflects the gradual decline in landfill gas yields over time. Energy prices have increased from the prior year as a result of the hedges placed last year.

	H1 20	H1 19	Change %
Tonnes Collected (mt)	2.04	2.05	-0.5%
Tonnes Processed (mt)	2.13	2.10	1.4%
Tonnes Landfilled (mt)	1.49	1.53	-2.6%
Energy generation (GWh)	210.7	219.6	-4.1%
Energy price (£/MWh)	44.6	42.0	6.2%

Strategy Update

The Group has three strategic growth focus areas:

Acquisitions

We have acquired the trade and assets of four small businesses in the year to date for a combined consideration of £5.6m as shown in the table below. These businesses bring combined revenue of just under £10m.

The glass routes of Thamesdown Recycling were acquired in June 2019.

IWMS Wastecollection.com, which is a combination of both broker and collections, based in West London was acquired in July 2019. The brokerage arm of this business has now been integrated into Specialist Waste Recycling Limited (SWR).

The trade waste business of Ribbex UK Ltd and a Kier collections business were acquired just after the half year end.

We continue to have a strong pipeline of opportunities.

Acquisition	Date Acquired	Annualised Revenue ¹ £m	Value ² £m
Thamesdown Recycling	June 2019	0.1	0.0
IWMS Wastecollection.com	July 2019	5.1	2.9
Ribbex UK Limited	October 2019	4.1	2.5
Kier (I&C Collection business)	November 2019	0.5	0.2
Total		9.8	5.6

¹Annualised revenue is based on business case.

²Value comprises consideration plus net debt acquired

Plastics Recycling

We have a significant opportunity to grow our Biffa Polymers business, with strong demand for the closed loop food grade recycled plastic we produce. The construction of the £27.5m rPET plastic bottle recycling facility at Seaham is on budget and schedule and we are expecting the site to be operational at the start of FY21.

Energy from Waste ("EfW")

The UK has a deficit of EfW infrastructure and we have developed the opportunity to participate in two projects, in Leicestershire and Cheshire. We are continuing to progress with both projects, and they remain on track to reach financial completion in the coming months.

Summary and Outlook

Biffa has delivered a strong performance in the first half of the year. Both of our operating divisions achieved their targets, with notable performances in our I&C and Recycling segments.

In Collections we have continued to deliver a good level of organic growth, supplemented with four small acquisitions in the year to date. Our future acquisition pipeline remains strong.

In Resources & Energy, our Recycling operations have seen good growth, and we have made further progress on our investment plans in Energy from Waste and plastics recycling.

Our funding position remains strong, with sufficient liquidity and leverage headroom available to fulfil our growth investment plans.

As a result of the sustained progress, and despite the uncertain political and economic environment, our full year expectations remain unchanged.

BOARD OF DIRECTORS' STATEMENT

Biffa has delivered another period of revenue growth and solid underlying financial performance.

Results

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

Revenues increased by 8.3% to £594.6m and Net Revenues rose 8.7% to £560.8m, driven in the main by growth in our I&C division.

Underlying EBITDA increased by 14.8% to £86.8m (H1 19: £75.6m).

Underlying Operating Profit at £45.7m compares with £40.8m last year and the Underlying Operating Profit margin has moved from 7.4% to 7.7%. Statutory Operating Profit at £33.9m compares with £34.8m last year and the Statutory Operating Profit margin has moved from 6.3% to 5.7%.

The first half performance, when compared to last year, has improved primarily due to I&C and Recycling performance.

Biffa is a leader in UK sustainable waste management. In addition to investing in UK green economy infrastructure, the Group is moving waste up the hierarchy and reducing its carbon impact through its recycling and recovery operations. Biffa operates one of the most efficient collection fleet in the country and is innovating with trials underway for truck electrification.

Capital Allocation

A core part of our strategy is to selectively invest in businesses and infrastructure where we have a structural advantage and can generate attractive returns. The Board is encouraged by the level of growth achieved from acquisitions in the prior year, most notably the acquisition of SWR Newstar. We have acquired four more I&C businesses in the year to date for a combined consideration of £5.6m and both the corporate business and acquisition pipelines remain very healthy.

We are also allocating capital to Energy from Waste and PET plastic bottle recycling, that will support long-term sustainable growth.

Dividend

Reflecting the Board's continuing confidence in the prospects for the Group, we are pleased to announce an interim dividend of 2.47p per share, an increase of 7.5% from last year. This interim dividend will be paid on 20 December 2019 to shareholders on the register on 29 November 2019.

Summary

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

FINANCIAL REVIEW

Group Performance

During the first half of the year, the Group has adopted IFRS 16 which has replaced IAS 17. IFRS 16 removes the distinction between operating leases and finance leases. The result is that the majority of leases are capitalised on the statement of financial position as a right of use asset within property, plant and equipment, with a corresponding finance lease creditor. The cost of leasing these assets in the income statement is recognised as a depreciation charge and an interest charge, as opposed to the operating lease charge previously reflected under IAS17. On transition, the Group has adopted the modified retrospective approach which does not require the comparative period to be restated. In practical terms, this means that the periods presented are not comparable.

The impact of the application of IFRS 16 is detailed in the table below. To aid comparability the tables highlight the differences arising as a result of the adoption of IFRS 16.

Group £m (unless stated)	FY20 H1	IFRS 16	Pre-IFRS 16	FY19 H1
Revenue	594.6	-	594.6	549.2
Net Revenue	560.8	-	560.8	515.7
Underlying EBITDA	86.8	(8.7)	78.1	75.6
% margin	14.6%	-	13.1%	13.8%
Underlying Operating Profit	45.7	(1.1)	44.6	40.8
Depreciation	41.1	(7.6)	33.5	34.8
Finance charges	10.7	(1.9)	8.8	11.9
Underlying Profit before Tax	36.3	0.8	37.1	30.9
Underlying Profit after Tax	29.7	0.8	30.5	24.9
Statutory Profit before Tax	25.6	0.8	26.4	23.7

The net revenue for the 26 weeks ended 28 September 2018 has been increased by £13.9m to reflect an error made in eliminating landfill tax on internal revenue.

Finance Income

Finance income increased from £0.8m to £2.4m primarily driven by returns on pension assets and the result of an overprovision for EVP interest costs in the prior period.

Finance Charges

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

Underlying Finance charges remained static at £10.7m in the period, with structural savings being offset by the increase as a result of IFRS 16. Statutory finance charges have reduced by £1.2m from £11.9m to £10.7m mainly as a result of the refinancing completed earlier in the year.

Taxation

The effective tax rate on underlying profits was 18.2% (H1 2019: 19.4%), broadly consistent with the prevailing rate of Corporation Tax. The effective tax rate on statutory profits was 19.5% (H1 2019: 19.8%).

Other Items

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

The items are more fully explained in Note 4 to the condensed consolidated financial statements and include exceptional items, amortisation of acquisition intangibles, material impacts from changes in real discount rates on landfill provisions, and the fair value discount unwind on the EVP preference shares. After tax, these charges totalled £9.2m in the period (H1 2019: £5.9m). The principal reason for the increase in the current half year is the impact of the increase in the real discount rate on landfill provisions, which resulted in a debit of £2.4m in the period, compared to a £2.7m credit in the prior period and increased amortisation of acquired intangibles.

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

	H1 20 (£m)	IFRS 16 impact (£m)	Pre- IFRS 16 (£m)	H1 19 (£m)
Underlying Profit after Tax	29.7	0.8	30.5	24.9

Exceptional items	(0.9)	-	(0.9)	(0.5)
Amortisation of acquisition intangibles	(8.5)	-	(8.5)	(8.2)
Impact of changes in real discount rate on landfill provisions	(2.4)	-	(2.4)	2.7
Interest (net)	1.1	-	1.1	(1.2)
Tax	1.6	-	1.6	1.3

Statutory Profit after Tax	20.6	0.8	21.4	19.0

Earnings per Share

Total statutory earnings per share increased from 7.6 pence per share to 8.2 pence per share.

Underlying earnings per share increased by 19% to 11.9 pence per share (H1 2019 10.0p).

Dividend

An interim dividend of 2.47p per share has been declared and will paid on 20 December 2019 to shareholders on the register on 29 November 2019.

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

Retirement Benefits

The Group operates a defined benefit pension scheme for certain employees which is closed to new entrants and which closed to future accrual for the majority of its members as at 1 November 2013. At 27 September 2019, the net retirement benefit surplus was £94.4m compared to a surplus of £79.0m at 29 March 2019. The change in the financial position of the scheme reflects the performance of the Scheme's assets plus the receipt of the deficit contribution by the Group.

The scheme had an actuarial deficit of £22.2m as at the time of the last valuation in March 2018, and an ongoing inflation-linked contribution of £4.1m from March 2019 has been agreed with the trustees of the scheme.

Return on Capital

The Group operates a disciplined approach to capital investment.

Group Return on Capital Employed (see Basis of Preparation and Definitions) increased from 8.6% to 9.1%. This measure is materially affected by intangible assets held on the balance sheet which were initially recognised in 2008 upon the Lender Buy Out (LBO) of the Group including Landfill Gas Rights and Brand, but also as a result of the implementation of IFRS16. The average net debt for the period has increased as a result of IFRS but this has been offset to some extent by the movement in retirement benefits in the period.

Group Return on Operating Assets (see Basis of Preparation and Definitions) decreased from 24.7% to 21.3%. This has again been impacted by IFRS16 as the recognition of right to use assets has increased the underlying asset base as detailed in Note 4.

Cash Flow

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

	H1 FY20 (£m)	IFRS 16 impact (£m)	Pre-IFRS 16 (£m)	H1 FY19 (£m)
Underlying EBITDA	86.8	(8.7)	78.1	75.6
Working capital	(14.9)	-	(14.9)	(22.1)
Net capex	(26.1)	-	(26.1)	(22.3)
Net interest paid	(8.3)	1.9	(6.4)	(7.7)
Finance lease principal payments	(23.5)	6.8	(16.7)	(16.9)
Pension deficit payments	(4.1)	-	(4.1)	(4.0)
Purchase of own shares	(6.0)	-	(6.0)	-
Underlying free cash flow	3.9	-	3.9	2.7

Restructuring and exceptional items	(3.2)	-	(3.2)	(1.7)
Acquisitions, including net debt repaid	(2.5)	-	(2.5)	(18.2)
Dividends paid	(12.2)	-	(12.2)	(11.3)
Changes in borrowings and share capital	(3.0)	-	(3.0)	18.2
Movement in financial assets	3.0	-	3.0	0.7
Net cash flow	(14.0)	-	(14.0)	(9.6)

Underlying free cash flow of £3.9m compares to £2.7m last year, principally due to movements in working capital, finance lease principal payments and purchase of own shares.

There remains an ongoing focus on improving working capital management and in addition to the year on year first half improvement, the outflow in the period is expected to substantially reverse in the second half. Capital expenditure (comprising purchases of property, plant and equipment and purchases of intangibles) is up on last year at £25.5m from £22.3m due in the main to the ongoing spend on the rPET plant at Seaham.

Net interest paid increased due to the implementation of IFRS 16 Leases reclassifying operating lease payments out of EBITDA and into interest. The underlying interest payments are down £2.2m as a result of the benefits of the prior year refinancing and ongoing maturity of older finance leases.

The increase in net cash from operating activities is due to the reallocation of cash flows from operating leases into net cash flow used in financing activities of £8.7m, and net working capital movement increase of £14.0m.

A statutory group cash flow summary is set out below:

	H1 FY20 (£m)	H1 FY19 (£m)
Net cash from operating activities	67.0	48.2
Net cash used in investing activities	(27.9)	(36.6)
Net cash flow used in financing activities	(53.1)	(21.2)
Net decrease in cash and cash equivalents	(14.0)	(9.6)

Reported Net Debt and Borrowings

Group Reported Net Debt is £449.8m (FY19: £302.8m), representing 2.9x last twelve months' Underlying EBITDA (H1 19: 2.0x).

Underlying free cash flow was £3.9m in the period. As a result, the £147.0m increase in Reported Net Debt was principally due to the implementation of IFRS 16 resulting in the recognition of an additional £139.5m of finance lease liability.

When the impact of IFRS 16 is excluded Net Debt: Underlying EBITDA has remained at 2.0x.

	H1 FY20 (£m)	H1 FY19 (£m)
Cash	52.2	31.2
Loans	(245.2)	(213.4)
Finance leases	(250.5)	(114.3)
EVP preference liability	(6.3)	(6.3)
Reported Net Debt	(449.8)	(302.8)

Of the EVP preference liability, £6.3m has been included within Reported Net Debt as it will be payable to EVP Preference Shareholders irrespective of the outcome of the EVP dispute. The remainder (£41.3m) has been excluded on the basis that it will only become payable subject to the outcome of the EVP dispute and will be funded by recovery of funds from HMRC.

Landfill Tax Matters

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

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

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

Reporting Periods

The Group will report results for the 52 weeks to 27 March 2020. The prior year comparisons are in relation to the 52 weeks ended 29 March 2019.

Risks & Uncertainties

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

· Biffa operates in a highly regulated industry, and changing regulatory requirements and standards could have an adverse impact on the Group's operations and results

· Economic conditions in the United Kingdom may have an adverse impact on Biffa's operating performance, revenues and results of operations

· Biffa is exposed to risks inherent in long-term fixed-price contracts, in particular in its Municipal and related operations

· Fluctuations in electricity, fuel and other commodity prices could affect Biffa's operating results

· Competition in the waste management industry could reduce Biffa's revenues and net income

· Biffa faces risks arising from its acquisition strategy

· A significant disruption to Biffa's information technology system, or delay during its migration to new systems, could adversely affect the Company's performance

· A cybersecurity incident could negatively impact Biffa's business and its relationships with customers

· Biffa may fail to identify strategic developments and may be unsuccessful in developing new technologies, or its current technological capabilities may become obsolete

· Biffa's operations expose it to the risk of material health and safety liabilities

· Biffa faces risks related to its landfill gas operations

· Biffa is subject to risks arising from its bonding and other financial security arrangements

· Biffa may be subject to litigation, disputes or other legal proceedings

· Biffa is dependent on its senior personnel

· Risks relating to the export of RDF, including costs and availability of transportation, foreign exchange rates and potential taxes or levies

Potential Impact of Brexit

The Board believes that the potential impact of Brexit on the Group will be relatively limited given that it operates primarily within the UK. Principal risks include the impact of foreign exchange movements, particularly in relation to RDF exports, possible imposition of tariffs on capital goods and potential constraint of labour supplies.

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

BASIS OF PREPARATION AND DEFINITIONS

The reported financial information has been prepared on the basis of Note 1 of the interim financial statements. The financial information has been prepared on the basis of results for the 26 weeks ended 27 September 2019.

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

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

Accounting Basis	· Prepared in accordance with IFRS · H1 20 represents the 26 weeks ended 27 September 2019; H1 19 represents the 26 weeks ended 28 September 2018; FY19 represents the 52 weeks ended 29 March 2019
Net Revenue	· Statutory revenue excluding landfill tax, unless stated otherwise, 'revenue' refers to statutory revenue. Landfill tax is excluded as the rate is outside the Group's control
Organic Net Revenue Growth	· The increase/(decrease) in net revenue in the period excluding net revenue from acquisitions completed in the period and net revenue from acquisitions completed in the prior period up to the anniversary of the relevant acquisition date, to the extent such net revenue falls in the current period · Organic net revenue growth can be expressed both as an absolute financial value and as a percentage of prior period revenue
Acquisition Net Revenue Growth	· Acquisition Net Revenue Growth in any period represents the Net Revenue Growth in the relevant period from (i) acquisitions completed in the relevant period and (ii) acquisitions completed in the twelve months ended to the start of the relevant period up to the twelve-month anniversary of the relevant acquisition date (to the extent such Net Revenue falls in the current period). Acquisition Revenue Growth is calculated on the same basis, using revenue in place of Net Revenue.
Acquisition Net Revenue Growth Rate	· Acquisition Net Revenue Growth Rate in any period represents the Acquisition Net Revenue Growth for the period expressed as a percentage of the prior period's Net Revenue. Acquisition Revenue Growth Rate is calculated on the same basis, using revenue in place of Net Revenue
Underlying EBITDA	· Profit before depreciation and amortisation, exceptional items, impact of real discount rate changes to landfill provisions, finance costs and taxation · Divisional underlying EBITDA is stated after allocation of shared services costs
Underlying Operating Profit	· Profit before exceptional items, amortisation of acquisition intangibles, impact of real discount rate changes to landfill provisions, finance costs and taxation · Divisional underlying operating profit is stated after allocation of shared service costs
Reported Net Debt	· Net debt excluding contingent balances relating to EVP preference shares
Return on Capital Employed (ROCE)	· Operating Profit excluding exceptional items and impact of real discount rate changes to landfill provisions divided by average of opening and closing shareholder's equity plus net debt (including finance leases), pensions and environmental provisions
Return on Operating Assets (ROOA)	· Underlying Operating Profit divided by average of opening and closing Property, Plant & Equipment, plus net working capital
Underlying Free Cash Flow	· Net increase/(decrease) in cash and cash equivalents excluding dividends, restructuring and exceptional items, acquisitions, movement in financial assets and movements in borrowings or share capital (but including finance lease principal payments)

Statement of Directors' Responsibilities

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

We confirm that to the best of our knowledge:

a) The condensed set of financial statements has been prepared in accordance with IAS 34

'Interim Financial Reporting' as issued by the International Accounting Standards Board and adopted by the European Union;

b) The interim management report includes a fair view of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c) The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

By Order of the Board

Richard Pike

Chief Financial Officer

13 November 2019

INDEPENDENT REVIEW REPORT TO BIFFA PLC

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the 26 weeks ended 27 September 2019 which comprises the Condensed Consolidated Interim Income, Condensed Consolidated Interim Statement of Financial Position, Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated Statement of Cash Flows and related notes 1 to 17. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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

Directors' responsibilities

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

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

Our responsibility

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

Scope of review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 28 September 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Deloitte LLP

Statutory Auditor

London, United Kingdom

13 November 2019

HALF YEAR RESULTS FOR THE 26 WEEKS ENDED 27 SEPTEMBER 2019

Condensed Consolidated Interim Income Statement

For the half year ended 27 September 2019

26 weeks to 27 September 2019 (unaudited)						26 weeks to 28 September 2018 (unaudited)			52 weeks to 29 March 2019 (audited)
	Notes		Underlying Activities¹ £m	Other Items £m (note 4)	Total £m	Underlying Activities¹ £m	Other Items £m (note 4)	Total £m	Underlying Activities¹ £m	Other Items £m (note 4)	Total £m
Continuing operations:
Revenue	3		594.6	-	594.6	549.2	-	549.2	1,091,2	-	1,091.2
Cost of sales			(519.1)	(9.3)	(528.4)	(483.5)	(5.2)	(488.7)	(959.0)	(34.5)	(993.5)
Gross profit			75.5	(9.3)	66.2	65.7	(5.2)	60.5	132.2	(34.5)	97.7
Operating costs			(29.8)	(2.5)	(32.3)	(24.9)	(0.8)	(25.7)	(50.5)	(1.8)	(52.3)
Operating profit	3		45.7	(11.8)	33.9	40.8	(6.0)	34.8	81.7	(36.3)	45.4
Finance income			1.3	1.1	2.4	0.8	-	0.8	1.5	-	1.5
Finance charges			(10.7)	-	(10.7)	(10.7)	(1.2)	(11.9)	(19.2)	(6.2)	(25.4)
Profit/(loss) before taxation			36.3	(10.7)	25.6	30.9	(7.2)	23.7	64.0	(42.5)	21.5
Taxation	5		(6.6)	1.6	(5.0)	(6.0)	1.3	(4.7)	(12.5)	9.0	(3.5)
Profit/(loss) for the period			29.7	(9.1)	20.6	24.9	(5.9)	19.0	51.5	(33.5)	18.0

Basic and diluted earnings/(loss) per share (pence)		6	11.9	(3.7)	8.2	10.0	(2.4)	7.6	20.6	(13.4)	7.2

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

Condensed Consolidated Interim Statement of Comprehensive Income

For the half year ended 27 September 2019

	Notes	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks Ended 29 March 2019 £m (audited)
Profit for the period		20.6	19.0	18.0
Other comprehensive (loss)/income
Items that will not be reclassified subsequently to income:
Actuarial gain on defined benefit pension scheme		10.9	2.4	27.3
Tax relating to items that will not be reclassified subsequently		(1.9)	(1.7)	(4.9)
		9.0	0.7	22.4
Other comprehensive income
items that may be reclassified subsequently to income:
Net gains/(loss) on cash flow hedge		0.5	0.2	(0.4)
Other comprehensive loss for the period, net of income tax		9.5	0.9	22.0
Total comprehensive income for the period		30.1	19.9	40.0

Condensed Consolidated Interim Statement of Financial Position

As at 27 September 2019

	Notes	As at 27 September 2019 £m (unaudited)	As at 28 September 2018 £m (unaudited)	As at 29 March 2019 £m (audited)
Assets
Non-current assets
Goodwill	7	131.3	110.7	128.2
Other intangible assets		206.9	206.5	213.0
Property, plant and equipment	9	503.1	354.2	365.4
Long term receivables		66.1	73.7	68.9
Deferred tax assets		-	8.6	2.1
Retirement benefit surplus	13	94.4	57.8	79.0
		1,001.8	811.5	856.6
Current assets
Inventories		15.5	14.1	14.4
Trade and other receivables		234.4	210.5	196.2
Financial assets		12.9	8.7	15.7
Current tax asset		-	-	0.5
Cash and cash equivalents		52.2	31.2	66.2
Assets held for sale		0.1	0.1	0.1
		315.1	264.6	293.1
Current liabilities
Borrowings		(43.2)	(49.1)	(31.7)
Derivative financial liabilities	10	(0.1)	-	(0.7)
Trade and other payables		(277.5)	(240.9)	(249.6)
Current tax liabilities		(0.2)	(1.2)	-
Provisions	11	(10.5)	(12.6)	(16.0)
Total current liabilities		(331.5)	(303.8)	(298.0)
Net current liabilities		(16.4)	(39.2)	(4.9)
Non-current liabilities
Borrowings		(500.1)	(326.1)	(387.5)
Trade and other payables		(13.7)	(13.8)	(13.7)
Provisions	11	(95.8)	(86.8)	(90.3)
Deferred tax liabilities		(5.3)	-	-
Total non-current liabilities		(614.9)	(426.7)	(491.5)
Net assets/(liabilities)		370.5	345.6	360.2
Equity
Called up share capital		2.5	2.5	2.5
Share premium		235.3	235.3	235.3
Hedging reserves		0.1	0.2	(0.4)
Merger reserve		74.4	74.4	74.4
Retained earnings surplus/(deficit)		58.2	33.2	48.4
Total equity surplus/(deficit) attributable to shareholders		370.5	345.6	360.2

Condensed consolidated Statement of Changes in Equity

For the half year ended 27 September 2019

	Called up share capital £m	Share premium £m	Merger reserve £m	Hedging and other reserves £m	Retained earnings £m	Total equity £m
As at 29 March 2019	2.5	235.3	74.4	(0.4)	48.4	360.2
Profit for the period	-	-	-	-	20.6	20.6
Cashflow hedges	-	-	-	0.5	-	0.5
Other comprehensive income for the period	-	-	-	-	9.0	9.0
Value of employee service in respect of share option schemes	-	-	-	-	(7.6)	(7.6)
Total comprehensive income for the period	-	-	-	0.5	22.0	22.5
Transactions with owners:
Dividends paid	-	-	-	-	(12.2)	(12.2)
As at 27 September 2019 (unaudited)	2.5	235.3	74.4	0.1	58.2	370.5

	Called up share capital £m	Share premium £m	Merger reserve £m	Hedging and other reserves £m	Retained earnings £m	Total equity £m
As at 30 March 2018	2.5	235.3	74.4	-	29.0	341.2
Closing reserves adjustment in respect of IFRS 15 adoption. (note 2)	-	-	-	-	(6.2)	(6.2)
Restated total	2.5	235.3	74.4	-	22.8	335.0
Profit for the period	-	-	-	-	19.0	19.0
Cashflow hedges	-	-	-	0.2	-	0.2
Other comprehensive income for the period	-	-	-	-	0.7	0.7
Value of employee service in respect of share option schemes	-	-	-	-	2.0	2.0
Total comprehensive income for the period	-	-	-	0.2	21.7	21.9
Transactions with owners:
Dividends paid	-	-	-	-	(11.3)	(11.3)
As at 28 September 2018 (unaudited)	2.5	235.3	74.4	0.2	33.2	345.6

	Called up share capital £m	Share premium £m	Merger reserve £m	Hedging and other reserves £m	Retained (deficit)/ earnings £m	Total equity £m
As at 30 March 2018 (audited)	2.5	235.3	74.4	-	29.0	341.2
Adjustment in respect of IFRS 15 adoption	-	-	-	-	(6.2)	(6.2)
Restated opening position	2.5	235.3	74.4	-	22.8	335.0
Profit for the period	-	-	-	-	18.0	18.0
Other comprehensive (loss)/income	-	-	-	(0.4)	22.4	22.0
Total comprehensive (loss)/income for the period	-	-	-	(0.4)	40.4	40.0
Value of employee service in respect of share option schemes					2.2	2.2
Dividends paid	-	-	-	-	(17.0)	(17.0)
As at 29 March 2019 (audited)	2.5	235.3	74.4	(0.4)	48.4	360.2

Condensed Consolidated Statement of Cash Flows

	Notes	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks ended 29 March 2019 £m (audited)
Cash flows from operating activities
Cash generated from operations	12	69.4	50.0	133.0
Restructuring and exceptional costs		(3.2)	(1.7)	(4.5)

Net cash from operating activities		66.2	48.3	128.5
Taxation (paid)/received		0.8	(0.1)	(0.2)
Net cash inflow from operating activities		67.0	48.2	128.3
Cash flows from investing activities
Purchases of property, plant and equipment		(24.7)	(20.2)	(42.4)
Purchases of intangible assets		(1.8)	(2.1)	(3.7)
Acquisitions		(2.5)	(14.9)	(41.5)
Proceeds from the sale of property, plant and equipment		1.0	0.5	0.9
Interest received		0.1	0.1	0.3
Net cash used in investing activities		(27.9)	(36.6)	(86.4)
Cash flows from financing activities
Interest paid		(8.4)	(7.8)	(16.3)
Repayment of borrowings		(90.0)	(187.2)	-
Finance lease principal payments		(23.5)	(16.9)	(33.0)
Drawdown of new borrowings		87.0	202.0	45.1
Receipt of funds held on long term deposit		-	-	6.1
Dividends paid		(12.2)	(11.3)	(17.0)
Employee share scheme purchase		(6.0)	-	(1.4)
Net cash flow used in financing activities		(53.1)	(21.2)	(16.5)
Net decrease in cash and cash equivalents		(14.0)	(9.6)	25.4
Cash and cash equivalents at the beginning of the period		66.2	40.8	40.8
Cash and cash equivalents at the end of the period		52.2	31.2	66.2

Notes to the Condensed Interim Financial Information

1. Basis of Preparation

This condensed consolidated interim financial information for 26 weeks ended 27 September 2019 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 "Interim Financial Reporting" as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual report dated 13 June 2019 which is available on the Company website, and has been prepared in accordance with the IFRSs as adopted by the European Union.

The condensed consolidated interim financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory financial statements for the 52 weeks ended 29 March 2019 were approved by the Board of Directors on 5 June 2019 and delivered to the Registrar of Companies. The independent auditor's report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The Group's income statement and segmental analysis separately identify financial results before exceptional and other items. The Directors believe that the presentation of the results in this way is relevant to an understanding of the Group's financial performance. Presenting financial results before exceptional and other items is consistent with the way that the financial performance is measured by management and reported to the Board and aids the comparability of reported results from year to year in this context.

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

1.1 Going concern basis

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

2. Accounting policies

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

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

IFRS 16 Leases was adopted by the Group on 30 March 2019 and replaces IAS 17 Leases. IFRS 16 removes the distinction between operating leases and finance leases. The result is that the majority of leases are capitalised on the statement of financial position as a right of use asset within property, plant and equipment, with a corresponding finance creditor. The cost of leasing these assets in the income statement is recognised as a depreciation charge and an interest charge, opposed to the operating lease charge previously reflected under IAS 17. The exception to this is the leasing of assets for a period of less than twelve months and the leasing of low value assets which do not require the recognition of a right of use asset or corresponding creditor.

On transition, IFRS 16 allows for either a full retrospective approach whereby all prior year comparatives are restated or the modified retrospective approach. The Group has adopted the modified retrospective approach. On transition the Group has made use of the practical expedients to exclude leases where the term ends within 12 months from the date of initial application, and to not reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to apply to those leases entered or modified before 30 March 2019. The Group has applied a single discount rate to portfolios of assets with similar characteristics.

The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value assets (defined by IFRS 16 to not exceed £5,000). For these leases, the Group recognises the lease payments as an operating expense on a straight line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The Group's incremental borrowing rate is defined as the rate of interest that the lessee would have to pay to borrow over a similar term and with a similar security the funds necessary to obtain an asset of a similar value in a similar economic environment.

Lease payments included in the measurement of the liability comprise:

· Fixed lease payments, less any lease incentives;

· Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

· The amount expected to be payable by the lessee under residual value guarantees;

· The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

· Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease

The lease liability is presented within borrowings in the consolidated statement of financial position.

The lease liability is subsequently measured by increasing the carrying amount to reflect the interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made.

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

· The lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

· The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate (unless the lease payment change is due to a change in floating rate, in which case a revised discount rate is used).

· A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payment at or before the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. The costs are included in the related right-of-use asset.

Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.

Variable rents that do not depend on an index or rate that are not included in the measurement of the lease liability and the right-of-use asset. The related payments are not recognised as an expense in the period in which the event or condition that triggers those payments occurs.

At implementation the group recognised right of use assets of £134.1m and the corresponding lease liability of £134.1m.

To aid comparability the below tables highlight the differences arising as a result of the adoption of IFRS 16

Group £m (unless stated)	FY20 H1	IFRS 16	Pre-IFRS 16	FY19 H1
Revenue	594.6	-	594.6	549.2
Net Revenue	560.8	-	560.8	515.7
Underlying EBITDA	86.8	(8.7)	78.1	75.6
% margin	14.6%		13.1%	13.8%
Underlying Operating Profit	45.7	1.1	46.8	40.8
Underlying Finance charges	(10.7)	1.9	(8.8)	(10.7)
Underlying Profit before Tax	36.3	0.8	37.1	30.9
Underlying Profit after Tax	29.7	0.8	30.5	24.9

The table above shows underlying measurements, IFRS 16 has no further impact on statutory measures.

Group £m (unless stated)	FY20 H1	IFRS 16	Pre-IFRS 16	FY19 H1
Return	69.8	(1.1)	68.7	59.8
Average Capital Employed	769.0	(139.5)	629.5	693.9
ROCE	9.1%		10.9%	8.6%

Group £m (unless stated)	FY20 H1	IFRS 16	Pre-IFRS 16	FY19 H1
Net Debt	(491.1)	139.5	(351.6)	(344.0)

Collections £m	FY20 H1	IFRS 16	Pre-IFRS 16	FY19 H1
Revenue	438.0	-	438.0	398.9
Net Revenue	438.0	-	438.0	398.9
Underlying EBITDA	61.1	(4.9)	56.2	52.1
% margin	14.0%		12.8%	13.1%
Underlying Operating Profit	34.7	(0.6)	34.1	30.2
% margin	7.9%		7.8%	7.6%

Resources & Energy £m	FY20 H1	IFRS 16	Pre-IFRS 16	FY19 H1
Revenue	156.6	-	156.6	150.3
Net Revenue	122.8	-	122.8	116.8
Underlying EBITDA	32.1	(2.7)	29.4	30.1
% margin	20.5%	-	18.8%	20.0%
Underlying Operating Profit	19.3	(0.3)	19.0	18.2
% margin	12.3%	-	12.1%	12.1%

The net revenue for the 26 weeks ended 28 September 2018 has been increased by £13.9m to reflect an error made in eliminating landfill tax on internal revenue.

At the date of authorisation of these Financial Statements, the below Standards are effective, however have not impacted on the Group's reporting.

IFRS 17 Insurance Contracts

IFRS 9 (amendments) Prepayment Features with Negative Compensation

IAS 28 (amendments) Long-term Interests in Associates and Joint Ventures

IAS 19 (amendments) Plan Amendment, Curtailment or Settlement

IFRS 10 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

IFRIC 23 Uncertainty over Income Tax Treatments

Annual Improvements to IFRS Standards 2015-2017 Cycle Amendments to IFRS 3 Business Combinations, IFRS 11 Joint Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs

3. Segmental Information

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

With effect from the start of the 26 weeks ended 27 September 2019, the Group has been reorganised into two operating divisions. The historic Municipal and Industrial & Commercial divisions have been merged into the Collections division. The Resource Recovery & Treatment and Energy divisions have been merged into the Resources & Energy division. The Hazardous Waste business was transferred from the Resource, Recovery & Treatment division into the new Collections division. The prior period results have therefore been restated for comparison purposes.

The Group's segmental results are as follows:

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks Ended 29 March 2019 £m (audited)
Revenue		Restated	Restated
Collections¹	438.0	398.9	797.2
Resources & Energy¹	156.6	150.3	294.0
	594.6	549.2	1,091.2

¹The prior periods shown above have been restated to reflect the new divisional group structure

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks Ended 29 March 2019 £m (audited)
Revenue reconciliation
Statutory Revenue	594.6	549.2	1,091.2
Landfill tax	(33.8)	(33.5)	(60.4)
Net revenue	560.8	515.7	1,030.8

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks Ended 29 March 2019 £m (audited)
Net revenue	515.7	492.2	1,006.1
Acquisition revenue growth	27.9	15.7	29.1
Organic revenue growth	17.2	7.8	(4.4)
Net revenue	560.8	515.7	1,030.8

The net revenue for the 26 weeks ended 28 September 2018 has been increased by £13.9m to reflect an error made in eliminating landfill tax when calculating net revenue.

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks Ended 29 March 2019 £m (audited)
Collections revenue		Restated	Restated
I&C	307.6	280.6	560.2
Municipal	86.8	83.5	164.6
Specialist Services	43.6	34.8	72.4
	438.0	398.9	797.2

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks Ended 29 March 2019 £m (audited)
Resources & Energy revenue		Restated	Restated
Recycling	45.9	38.0	79.2
Organics	29.8	32.1	61.7
Inerts	60.4	59.3	10.7.5
Landfill Gas	20.5	20.9	45.6
	156.6	150.3	294.0

All revenue is with external third parties. There is no single customer that accounts for more than 10% of Group revenue (26 weeks to 28 September 2018: none, 52 weeks to 29 March 2019: none).

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks Ended 29 March 2019 £m (audited)
Underlying EBITDA¹		Restated	Restated
Collections²	61.1	52.1	106.5
Resources & Energy²	32.1	30.1	59.1
Group costs	(6.4)	(6.6)	(14.9)
Underlying EBITDA¹	86.8	75.6	150.7
Depreciation and amortisation	(41.1)	(34.8)	(69.0)
Underlying Operating Profit³	45.7	40.8	81.7
Exceptional items (note 4)	(0.9)	(0.5)	(18.2)
Impact of real discount rate changes to landfill provisions	(2.4)	2.7	(1.6)
Amortisation of acquisition intangibles	(8.5)	(8.2)	(16.5)
Operating Profit	33.9	34.8	45.4
Finance income	2.4	0.8	1.5
Finance charges	(10.7)	(11.9)	(25.4)
Profit/(loss) before taxation	25.6	23.7	21.5

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

² The prior periods shown above have been restated to reflect the new divisional group structure.

³ Presented before other items as disclosed in Note 4.

	26 weeks	26 weeks	52 weeks
	ended	ended	ended
	27	28	29
	September	September	March
	2019	2018	2019
	£m	£m	£m
	(unaudited)	(unaudited)	(audited)
Underlying operating profit		Restated	Restated
Collections¹	34.7	30.2	61.5
Resources & Energy¹	19.3	18.2	37.1
Group costs	(8.3)	(7.6)	(16.9)
	45.7	40.8	81.7

¹The prior periods shown above have been restated to reflect the new divisional group structure

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

	As at 27 September 2019 £m (unaudited)	As at 28 September 2018 £m (unaudited)	As at 29 March 2019 £m (audited)
Tangible and other intangible assets		Restated	Restated
Collections¹	316.9	241.5	247.0
Resources & Energy¹	294.7	265.9	256.5
Shared services and corporate	98.5	53.3	74.9
	710.1	560.7	578.4

¹ The prior periods shown above have been restated to reflect the new divisional group structure

	26 weeks	26 weeks	52 weeks
	ended	ended	Ended
	27	28	29
	September	September	March
	2019	2018	2019
	£m	£m	£m
	(unaudited)	(unaudited)	(audited)
Capital expenditure		Restated	Restated
Collections¹	28.1	27.6	79.8
Resources & Energy¹	18.1	9.8	19.5
Shared services and corporate	1.8	3.7	7.1
	48.0	41.1	106.4

¹ The prior periods shown above have been restated to reflect the new divisional group structure

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

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks ended 29 March 2019 £m (audited)
Depreciation and amortisation		Restated	Restated
Collections¹	26.4	21.9	45.0
Resources & Energy¹	12.8	11.9	22.0
Shared services and corporate	1.9	1.0	2.0
	41.1	34.8	69.0
Amortisation of acquisition intangibles	8.5	8.2	16.5
Total	49.6	43.0	85.5

¹ The prior periods shown above have been restated to reflect the new divisional group structure

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

4. Other Items

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks ended 29 March 2019 £m (audited)
Exceptional items:
Acquisition related costs	0.4	1.3	2.8
Corporate restructuring costs	-	-	0.2
Onerous contracts	(2.0)	(1.6)	10.2
Strategy related costs	2.5	0.8	1.9
Pensions GMP equalisation	-	-	3.1
	0.9	0.5	18.2
Impact of real discount rate changes to landfill provisions	2.4	(2.7)	1.6
Amortisation of acquisition intangibles	8.5	8.2	16.5
	11.8	6.0	36.3
Included within finance costs
Finance charges	(1.1)	1.2	6.2
Taxation impact of other items	(1.6)	(1.3)	(9.0)

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

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

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

Acquisition related costs

The £2.8m of acquisition-related expenditure in the 52 weeks ended 29 March 2019 relates to professional fees and other costs which are directly attributable to acquisitions. This includes £0.7m in relation to the acquisition of 100% of the issued share capital of Specialist Waste Recycling Limited and £0.9m in relation to the acquisition of Weir Waste Services Limited.

Corporate restructuring costs

Corporate restructuring costs mostly relate to professional fees.

Onerous contracts

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

Strategy-related costs

Strategy-related costs arise from Group-wide initiatives to reduce the ongoing cost base and improve efficiency in the business. These costs are substantial in scope and impact, and do not form part of recurring operational or management activities that the Directors would consider part of our underlying performance. Adjusting for these charges provides a measure of operating profitability that is comparable over time. Strategy related costs relate primarily relate to the Group's system replacement programme Project Fusion.

Amortisation of acquisition intangibles

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

Impact of real discount rate changes to landfill provisions

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

Finance charges

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

The tax impact of other items is calculated as 19% (19%: 2018) of the expenses allowable in calculating the taxable profit.

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks ended 29 March 2019 £m (audited)
Segmental exceptional items:
Collections	(1.1)	0.8	9.3
Resources & Energy	(0.6)	(1.2)	3.7
Group costs	2.6	0.9	5.1
	0.9	0.5	18.2

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

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks ended 29 March 2019 £m (audited)
Operating costs
Distribution costs	9.9	10.7	21.7
Administrative expenses	19.9	14.2	28.8
	29.8	24.9	50.5

In addition to the Other items disclosed above, the Group uses Return on Operating Assets and return on capital employed as performance measures. These are aligned to the strategy and are reported internally to the Board and Operating Committees to aid their decision making. These are calculated as below:

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks ended 29 March 2019 £m (audited)
Return on Operating Assets
Underlying Operating Profit	86.6	78.6	81.7
Average of Property, Plant and Equipment	428.7	340.8	357.5
Net working capital	(22.0)	(22.1)	(37.6)
Total average of Property, Plant and Equipment plus net working capital	406.7	318.7	319.9
Return on Operating Assets	21.3%	24.7%	25.5%

Return on Operating Assets is determined by adjusted operating profit for the prior 12 months divided by the average of opening and closing PP&E plus net working capital. Net working capital is the average in the prior 12 months of the net of inventories, trade and other receivables and trade and other payables.

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks ended 29 March 2019 £m (audited)
Return on Capital Employed
Operating Profit	44.5	56.7	45.4
Exceptional items	18.6	6.8	18.2
Impact of real discount rate changes to landfill provisions	6.7	(3.7)	1.6
Adjusted Operating profit	69.8	59.8	65.2
Average of shareholders equity	358.0	328.7	350.7
Net debt	417.6	330.6	336.0
Retirement benefits	(76.1)	(39.1)	(65.2)
Environmental provisions	69.5	73.6	70.8
	769.0	693.9	692.3
Return on Capital Employed	9.1%	8.6%	9.4%

Return on capital employed is determined by adjusted operating profit for the prior 12 months divided by the average of opening and closing shareholders equity, plus the average of net debt, pensions and environmental provisions.

5. Income Tax Recognised in Profit or Loss

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks ended 29 March 2019 £m (audited)
Current tax:
In respect of the current period	-	1.3	0.2
Adjustment in respect of prior periods	-	0.1	(0.1)
	-	1.4	0.1
Deferred tax:
Adjustment in respect of the current period	5.6	3.6	5.0
Adjustment in respect of prior periods	-	0.1	(1.1)
Adjustments attributable to changes in tax rates and laws	(0.6)	(0.4)	(0.5)
	5.0	3.3	3.4

Total tax charge	5.0	4.7	3.5

Corporation tax is calculated at 19% (26 weeks to 28 September 2018: 19%, 52 weeks to 29 March 2019: 19%) of the estimated assessable profit/(loss) for the period. The charge for the period can be reconciled to the profit/(loss) per the Statement of Comprehensive Income as follows:

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks Ended 29 March 2019 £m (audited)
Profit on ordinary activities before tax	25.6	23.7	21.5
Profit on ordinary activities before tax multiplied by the standard rate of corporation tax in the UK of 19%	4.9	4.5	4.1
Expenses not deductible for tax purposes	0.7	0.6	1.3
Non-taxable income	-	(0.1)	(0.2)
Adjustment in respect of prior periods	-	0.1	(1.2)
Adjustments attributable to changes in tax rates and laws	(0.6)	(0.4)	(0.5)
Total taxation	5.0	4.7	3.5

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

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

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

6. Earnings per share

From continuing and discontinued operations

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

Earnings

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks ended 29 March 2019 £m (audited)
Earnings for the purposes of basic earnings per share being net profit attributable to owners	20.6	19.0	18.0
Earnings for the purposes of diluted earnings per share	20.6	19.0	18.0
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share	250,000,000	250,000,000	250,000,000
Weighted average number of ordinary shares for the purposes of diluted earnings per share	250,000,000	250,000,000	250,000,000
Earnings per share (pence)	8.2	7.6	7.2

From continuing operations

	26 weeks	26 weeks	52 weeks
	Ended	ended	Ended
	27	28	29
	September	September	March
	2019	2018	2019
	£m	£m	£m
	(unaudited)	(unaudited)	(audited)
Net profit attributable to equity holders of the parent	20.6	19.0	18.0
Earnings from continuing operations for the purpose of basic earnings per share excluding discontinued operations	20.6	19.0	18.0
Earnings from continuing operations for the purpose of diluted earnings per share excluding discontinued operations	20.6	19.0	18.0

7. Goodwill

	Total £m
Goodwill
As at 30 March 2019	128.7
Additions (note 8)	1.3
Purchase price adjustment	1.8
As at 28 September 2019	131.8
Accumulated impairment:
As at 30 March 2019	(0.5)
Impairment Charge	-
As at 28 September 2019	(0.5)
Net book amount:
As at 28 September 2019	131.3

As at 29 March 2019	128.2

8. Acquisitions

On 1 July 2019, the Group acquired the trade and assets of IWMS Wastecollection.com Limited which operated a national waste brokerage service and runs a small number of collection vehicles in the London area.

The preliminary amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below.

	Preliminary total
	£m
Property, plant and equipment	0.1
Brand	0.3
Customer lists	1.0
Deferred tax liability	(0.2)
Total net assets	1.2
Goodwill	1.3
Total consideration	2.5
Satisfied by:
Cash	2.5
Total consideration transferred	2.5
Net cash outflow arising on acquisition:
Cash consideration	2.5
Less: cash and cash equivalent balances acquired	-
	2.5

No contingent liabilities were identified at the acquisition date.

Acquisition-related costs amount to £0.1 million.

IWMS Wastecollection.com Limited contributed £1.1 million revenue and £0.1 million to the Group's profit for the period between the date of acquisition and the balance sheet date.

If the acquisition of IWMS Wastecollection.com Limited had been completed on the first day of the period, group revenues for the period to 27 September 2019 would have increased by £2.2 million and group profit would have increased by £0.2 million.

The preliminary goodwill of £1.3 million arising from the acquisition represents future opportunities in the UK integrated waste management sector. None of the goodwill is expected to be deductible for income tax purposes.

In addition the trade and assets of Thamesdown Glass Recycling Limited were acquired in August 2019 for consideration of £15k. It is expected to contribute £0.1m of revenue per annum.

9. Property, plant and equipment

During the 26 weeks ended 27 September 2019, the Group acquired property, plant and equipment including leased assets, but excluding property, plant and equipment acquired through business combinations, with a cost of £44.7 million (28 September 2018: £31.8 million).

Assets with a net book value of £0.4 million were disposed of by the Group during the 26 weeks ended 27 September 2019 (28 September 2018: £0.1 million) resulting in a net profit on disposal of £0.6 million (28 September 2018: £0.4 million).

The Group's capital commitments at 27 September 2019 were £9.1 million (28 September 2018: £5.0 million).

10. Financial risk management and financial instruments

The Group's activities expose it to a variety of financial risks: market risk (including capital risk management, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management programmes focus on the unpredictability of financial markets and seek to minimise potential adverse effects on the Group's financial performance.

The condensed interim financial statements do not include all financial risk management information and disclosures set out in the annual report and hence they should be read in conjunction with the Group's annual report. There have been no changes in the risk management policies since the year end.

Liquidity risk

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

· Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities

· Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices)

· Level 3 - Inputs for the asset or liability that are not based on observable market data

There have been no transfers between these categories in either the current or preceding period.

The following table presents the Group's derivative financial assets and liabilities at fair value at 27 September 2019:

	Level 1 £m (unaudited)	Level 2 £m (unaudited)	Level 3 £m (unaudited)	Total £m (unaudited)
Assets/(Liabilities)
Derivatives	(0.1)	-	-	(0.1)
	(0.1)	-	-	(0.1)

The following table presents the Group's financial assets and liabilities at fair value at 28 September 2018:

	Level 1 £m (unaudited)	Level 2 £m (unaudited)	Level 3 £m (unaudited)	Total £m (unaudited)
Assets/(Liabilities)
Derivatives	-	-	-	-
	-	-	-	-

The following table presents the Group's financial assets and liabilities at fair value at 29 March 2019:

	Level 1 £m (unaudited)	Level 2 £m (unaudited)	Level 3 £m (unaudited)	Total £m (unaudited)
Assets/(Liabilities)
Derivatives	(0.7)	-	-	(0.7)
	(0.7)	-	-	(0.7)

Fair value measurement

In accordance with IFRS 13, disclosure is required for financial instruments that are measured in the Group balance sheet at fair value. The fair value of trade and other receivables, cash and cash equivalents, borrowings and trade and other payables approximates to their carrying amounts.

Valuation techniques and assumptions applied in determining fair values of each class of asset or liability are consistent with those used as at 29 March 2019 and reflect the current economic environment. The fair value measurements of the derivatives are classified as Level 2 in the fair value hierarchy as defined by IFRS 13.

11. Provisions
		Landfill restoration & aftercare £m	Insurance £m	Other £m	Total £m
As at 29 March 2019	67.4		11.5	27.4	106.3
Utilised	(3.2)		(1.0)	(0.7)	(4.9)
Impact of change in real discount rate charged to profit and loss account	2.4		-	-	2.4
Charged/(credited) to profit and loss account	1.3		0.1	0.3	1.7
Unwinding of discount	0.8		-	-	0.8
Transfers from fixed/other assets	0.1		0.6	(0.7)	-
As at 27 September 2019	68.8		11.2	26.3	106.3

Provisions have been analysed between current and non-current as follows:

	As at 27 September 2019 £m (unaudited)
Current	10.5
Non-current	95.8
	106.3

Landfill restoration and aftercare

As part of its normal activities, the Group undertakes to restore its landfill sites and to maintain the sites and control leachate and methane emissions from the sites. Provision is made for these anticipated costs. A number of estimate uncertainties affect the calculation, including the impact of regulation, accuracy of site surveys, transportation costs and changes in the real discount rate. The provisions incorporate our best estimates of the financial effects of these uncertainties, but future changes in any of these estimates could materially impact the calculation of the provision. Restoration costs are incurred as each site is filled, and in the period immediately after its closure. The provision incorporates the best estimate of the financial effect of these uncertainties, but future changes in any of the assumptions could materially impact the calculation of the provision.

Maintenance and leachate and methane control costs are incurred as each site is filled and for a number of years post closure.

Aftercare costs are incurred as each site is filled and for a number of years post closure. This period can vary significantly from site to site, depending upon the types of waste landfilled and the speed at which it decomposes, the way the site is engineered and the regulatory requirements specific to the site.

Changes in the provision arising from revised estimates or discount rates or changes in the expected timing of expenditures that relate to property, plant and equipment are recorded as adjustments to their carrying value and depreciated prospectively over their remaining useful economic lives; otherwise such changes are recognised within the income statement.

The associated outflows are estimated to arise over a period of up to 60 years depending on the date of each site closure. In determining the provision, the estimates for future expenditure required to settle the obligation are inflated using longer term inflation rates, and discounted using the nominal discount rate. The rates utilised reflect the period of the obligation on a site by site basis which varies between 10 and 60 years.

Long-term aftercare provisions included in landfill restoration and aftercare provisions have been inflated and discounted using the below nominal rates:

	Inflation rate		Discount rate
Period of obligation	As at 27 September 2019	As at 29 March 2019	As at 27 September 2019	As at 29 March 2019
5 years	3.5%	3.4%	1.0%	1.4%
10 years	3.5%	3.4%	1.3%	1.9%
20 years	3.5%	3.7%	1.9%	2.5%
30 years	3.2%	3.5%	1.9%	2.5%
60 years	2.8%	3.1%	1.9%	2.4%

Insurance

The associated outflows are estimated to arise over a period of up to five years from the Balance Sheet date.

Other

Other provisions include a provision for dilapidations for £7.9 million (52 weeks ended 29 March 2019: £8.0 million, 26 weeks ended 28 September 2018: £8.5 million) and £15.2 million (52 weeks ended 29 March 2019: £17.1 million, 26 weeks ended 28 September 2018: £6.1 million) relating to onerous contracts. The associated outflows are estimated to arise over a period of up to 20 years from the Balance Sheet date

12. Cash flows from operations

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks ended 29 March 2019 £m (audited)
Profit for the period	20.6	19.0	18.0
Adjustments for:
Finance income	(2.4)	(0.8)	(1.5)
Finance charges	10.7	11.9	25.4
Taxation	5.0	4.7	3.5
Operating profit	33.9	34.8	45.4
Exceptional items	0.9	0.5	18.2
Amortisation of intangibles	9.2	8.8	17.8
Depreciation of property, plant and equipment	40.4	34.2	67.7
Profit on disposal of fixed assets	(0.6)	(0.4)	(2.2)
Increase in inventories	(1.1)	(1.3)	(1.7)
Increase in debtors	(38.9)	(21.8)	(0.9)
Increase in creditors	22.0	0.4	4.1
Decrease/(increase) in financial asset	3.0	0.7	(4.4)
Increase/(decrease) in provisions	0.6	(5.9)	(11.0)
Total cash generated from operations	69.4	50.0	133.0

Reconciliation of net cash flow to movement in debt

	26 weeks	26 weeks	52 weeks
	ended	Ended	ended
	27	28	29
	September	September	March
	2019	2018	2019
	£m	£m	£m
	(unaudited)	(unaudited)	(audited)
Net (decrease)/increase in cash and cash equivalents	(14.0)	(9.6)	25.4
Net (increase) in borrowings	(124.1)	(15.5)	(59.5)
Movement in net debt in the period	(138.1)	(25.1)	(34.1)
Net debt at start of period	(353.0)	(318.9)	(318.9)
Net debt at end of period	(491.1)	(344.0)	(353.0)

	26 weeks ended 27 September 2019 £m (unaudited)	26 weeks ended 28 September 2018 £m (unaudited)	52 weeks Ended 29 March 2019 £m (audited)
Cash and cash equivalents	52.2	31.2	66.2
Finance leases	(250.5)	(114.3)	(122.6)
Bank loans	(245.2)	(213.4)	(248.0)
EVP preference liability	(6.3)	(6.3)	(6.3)
Reported net debt	(449.8)	(302.8)	(310.7)
EVP preference liability	(41.3)	(41.2)	(42.3)
Net debt	(491.1)	(344.0)	(353.0)

13. Pension and post retirement benefits

Defined benefit schemes

The amounts recognised in the balance sheet are determined as follows:

	As at	As at
	27 September	29 March
	2019	2019
	£m	£m
	(unaudited)	(audited)
Present value of funded defined benefit obligation	(588.8)	(523.8)
Fair value of funded plan assets	662.7	587.6
Adjustment for the restriction in asset benefit	(0.2)	(0.3)
Adjustment in respect of GMPF Admission agreement	20.7	15.5
Net asset arising from defined benefit obligation	94.4	79.0

Reconciliation of opening and closing balances of the present value of the defined benefit obligation

	As at 27 September 2019 £m (unaudited)
Benefit obligation at beginning of period	523.8
Service cost	1.6
Interest cost	6.4
Contributions by plan participants	0.2
Net remeasurement gains - financial	63.9
Benefits paid	(7.1)
Benefit obligation at end of period	588.8

Reconciliation of opening and closing balances of the fair value of plan assets

	As at 27 September 2019 £m (unaudited)
Fair value of plan assets at beginning of period	587.6
Interest income on scheme assets	7.4
Return on assets, excluding interest income	70.2
Contributions by employers	5.0
Contributions by plan participants	0.2
Benefits paid	(7.1)
Scheme administrative cost	(0.6)
Fair value of plan assets at end of period	662.7

14. Related party transactions

The nature of related parties as disclosed in the consolidated financial statements for the Group as at and for the 52 weeks ended 29 March 2019 has not changed. Further, there have been no related party transactions in the 26 weeks to 27 September 2019.

15. Contingent liabilities

The Group must satisfy the financial security requirements of environmental agencies in order to ensure that it is able to discharge the obligations in the licences or permits that the Group holds for its landfill sites. The Group satisfies these financial security requirements by providing financial security bonds. The amount of financial security which is required is determined in conjunction with the regulatory agencies, as is the method by which assurance is provided. The Group has existing bond arrangements in England and Wales of approximately £85.3 million outstanding at 27 September 2019 (29 March 2019: £84.9 million, 28 September 2018: £85.6 million) in respect of the Group's permitted waste activities where the Group has obligations under the Environment Agency's "fit and proper person" test to make adequate financial provision in order to undertake those activities. Additionally, the Group has bonds to a value of £17.8 million (29 March 2019: £19.8 million, 28 September 2018: £18.5 million) in connection with security for performance of local authority contracts and the shipment of waste under the trans-frontier shipment of waste regulations. No liability is expected to arise in respect of these bonds.

The Group is engaged in a dispute with HMRC in relation to the landfill tax treatment of certain materials used in the engineering of landfill sites from September 2009 to May 2012, which is fully explained in Note 16.

The Group is also engaged in a dispute with HMRC in relation to the landfill tax treatment of sub-soils with low levels of contamination from asbestos. At the date of signing of the accounts the outcome is not certain, however the Group has received a protective assessment of £8.6 million that the Group is disputing. Having taken independent professional advice, the Directors do not reasonably expect a liability of this order to crystallise. Discussions with HMRC are on-going and management are not able reliably to estimate the amount of any potential liability, and accordingly no provision has been made in these financial statements.

16. EVP related items

The Group is engaged in a dispute with HMRC concerning historical Landfill Tax.

HMRC claims that the Group is liable for £61.9 million of Landfill Tax in respect of certain waste materials deposited in Biffa's landfill sites from 2009 to 2012 (EVP). Biffa contests that the material was used in the sites for an engineering purpose and is not therefore subject to Landfill tax. Notwithstanding the Group's opinion on the tax treatment of this material, since 2012 all materials of this nature have been subjected to Landfill Tax.

The matter was heard by the First tier Tax Tribunal which found in HMRC's favour.

The Directors have taken independent advice and been granted leave to appeal the decision.

The contested amount was paid to HMRC following the refinancing of the Group upon its IPO in October 2016. In addition to the payment of £61.9 million, the Group paid £1.7 million in interest in the period ended 24 March 2017.

The Directors, having taken appropriate advice, do not believe that a liability to tax exists, and accordingly have treated the payment of the tax and associated interest as a prepayment.

As part of the IPO of the Group, arrangements were put in place to make certain payments to the shareholders and certain members of employee incentive schemes of the Group immediately prior to its Listing, subject to and in respect of the outcome of the dispute. A liability of £47.6 million has been recognised in borrowings, an accrual of £13 million has been recognised in non-current liabilities. Of the liability of £47.6 million, £6.3 million has been included within Reported Net Debt as it will be payable irrespective of the outcome of the dispute.

The remaining balance of £41.3 million has been excluded from Reported Net Debt.

17. Post balance sheet events

On 1 October 2019, the Group acquired certain of the trade and assets of Ribbex UK Limited for a total consideration of £2.5m. On 1 November 2019, the Group acquired certain trade and assets of the Kier Group I&C collection business for a total consideration of £0.2m. The acquisition accounting remains under review for the above acquisitions.

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

IR BLLLFKFFFFBQ

Company Announcements

Half-year Report

Biffa plc

HALF YEAR RESULTS FOR THE 26 WEEKS ENDED 27 SEPTEMBER 2019

STRONG FIRST HALF PERFORMANCE WITH GOOD PROGRESS AGAINST STRATEGIC PRIORITIES

Michael Topham, Chief Executive of Biffa, said:

PRESENTATION OF RESULTS

ENQUIRIES:

FORWARD-LOOKING STATEMENTS

NOTES:

Collections

The Collections division comprises the I&C, Municipal and Specialist Services segments. It provides waste recycling, collections and related services to industrial, commercial, public sector and local authority customers.

Resources & Energy

The Resources & Energy division comprises the Recycling, Organics, Inerts and Landfill Gas segments. The division focuses on the treatment, recycling, energy recovery and disposal of waste.

Operational KPIs

Strategy Update

Summary and Outlook

BOARD OF DIRECTORS' STATEMENT

Results

Capital Allocation

Dividend

Summary

FINANCIAL REVIEW

Finance Income

Finance Charges

Taxation

Other Items

Earnings per Share

Dividend

Retirement Benefits

Return on Capital

Cash Flow

Reported Net Debt and Borrowings

Landfill Tax Matters

Risks & Uncertainties

BASIS OF PREPARATION AND DEFINITIONS

Statement of Directors' Responsibilities

Condensed Consolidated Interim Statement of Comprehensive Income

For the half year ended 27 September 2019

1. Basis of Preparation

1.1 Going concern basis

2. Accounting policies

3. Segmental Information

4. Other Items

Acquisition related costs

Corporate restructuring costs

Onerous contracts

Strategy-related costs

Amortisation of acquisition intangibles

Impact of real discount rate changes to landfill provisions

Finance charges

5. Income Tax Recognised in Profit or Loss

6. Earnings per share

Earnings

7. Goodwill

8. Acquisitions

9. Property, plant and equipment

10. Financial risk management and financial instruments

Liquidity risk

Fair value measurement

11. Provisions

Landfill restoration and aftercare

Long-term aftercare provisions included in landfill restoration and aftercare provisions have been inflated and discounted using the below nominal rates:

Inflation rate

Discount rate

Period of obligation

As at 27 September 2019

As at 29 March 2019

As at 27 September 2019

As at 29 March 2019

5 years

3.5%

3.4%

1.0%

1.4%

10 years

3.5%

3.4%

1.3%

1.9%