DJ Renewi plc: Final results
Renewi plc (RWI)
Renewi plc: Final results
04-Jun-2020 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement that contains inside information according
to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
4 June 2020
Renewi plc
Renewi plc (LSE: RWI), the leading international waste-to-product business, announces
its results for the year ended 31 March 2020.
ROBUST PROGRESS DURING FY20; ACTIONS TAKEN TO MITIGATE IMPACT OF Covid-19; ENHANCED
STRATEGY TO deliver sustained long-term growth
Otto de Bont, Chief Executive Officer, said:
"We made robust progress during the year, delivering financial results in line with
our expectations and a number of strategic and financial objectives including: raising
EUR 107m through strategic disposals, receiving permission to resume TGG shipments at
ATM, delivering our cost synergies and other restructuring projects, and we made good
progress with a growing pipeline of circular solutions and partnerships.
"Renewi provides an essential service in the front line of maintaining vital services
to hospitals, businesses and communities and our dedicated employees have been able to
keep serving our customers whilst we have innovated to ensure a safe working
environment. Our specific actions on cost and cash will preserve our liquidity even in
an extended crisis and we have secured amendments to our banking covenants until
September 2021. As a result of these actions, we are well placed to mitigate the
impact of Covid-19.
"Looking forward, the momentum towards a circular economy is unstoppable. Today, we
announce our enhanced strategy, which will enable us to capture the growth
opportunities from the circular economy, and our Renewi 2.0 programme, which will
deliver improved customer service as well as EUR 20m of cost benefits through
digitisation and optimised internal processes. Aligned with our enhanced strategy, we
have defined our ambitious sustainable development goals."
Financial Summary
· Financial performance in line with expectations
· Revenue from ongoing businesses up 2% to EUR 1.70bn1
· Underlying EBIT from ongoing businesses down 10% to EUR 72.0m1
· Underlying profit before tax from ongoing businesses down 23% to EUR 44.5m1
· Underlying EPS from ongoing businesses down 25% to 4.1 cents per share1
· Core net debt* of EUR 457m (2019: EUR 552m), representing 2.98x EBITDA and below
bank covenant of 3.5x
· As previously announced, total non-trading and exceptional items of EUR 120m,
EUR 35m of which were cash, resulting in a statutory loss after tax of EUR 77.1m
for the year and a basic loss per share of 7.7 cents per share (2019: loss per share
9.0 cents)
· As previously announced, no final dividend to be paid due to Covid-19, resulting
in a total dividend for the year of 0.45p per share
1Numbers quoted on an ongoing businesses basis (excluding the results of the
businesses sold during the year) and are stated on an IAS 17 basis, excluding the
positive impact of the implementation of IFRS 16 the new lease accounting standard to
enable meaningful comparisons. The definition and rationale for the use of non-IFRS
measures are included in note 18.
*Core net debt excludes the impact of IFRS 16 leases and net debt relating to the UK
PFI/PPP contracts.
Operational and Strategic Highlights
· Continued growth in core Commercial Division despite weaker markets and Covid-19
· Restrictions lifted on TGG soil shipments at ATM and first shipment made; initial
capacity installed to make construction materials from TGG
· Good performance in Monostreams and Municipal Divisions, with operational
improvements and restructuring delivering benefits; lower profits in Municipal as
expected
· Enhanced strategy announced to capture profitable growth in the circular economy
by being the leader in recycling and in secondary materials production
· EUR 40m integration cost synergies delivered. New EUR 20m Renewi 2.0 programme
to create a simpler, more efficient and more digital business with higher margins
and improved cash flows
· Divisional structure simplified from five to four, creating commercial synergy and
reducing cost and risk
· Ambitious new sustainability strategy, closely aligned with core business strategy
· Successful secondary listing on Euronext Amsterdam exchange
Covid-19 Update
· As previously announced on 29 May 2020, significant actions taken to mitigate the
impact of Covid-19 on our people, customers and operations
· EUR 252m of liquidity at 31 March 2020 and appropriate bank covenant amendments
secured to September 2021
· Swift and decisive action taken to reduce operating costs and preserve cash flows,
saving EUR 60m during FY21
· Executive Directors and Board elected to take a voluntary 20% cut in remuneration
during the period of lockdown and the Executive Committee has taken a voluntary 10%
cut, executive bonuses for last year will be paid in shares, preserving cash and the
bonus scheme for the current year is suspended
· Volume reductions during lockdown slightly lower than originally expected,
remaining cautious as to shape of economic recovery
Outlook
Based on our experience since the second half of March, we expect Covid-19 to result
in a potential reduction in EBIT and cash of up to EUR 20m in the first quarter
compared with our previous expectations. This outflow is comfortably contained within
our EUR 252m of liquidity as at 31 March 2020 and our revised banking covenants. The
outlook for the remainder of the year will be dependent on the nature and timing of
the lifting of lockdown restrictions and the speed of economic recovery. Longer term,
waste volumes are resilient through cycles and the transition to increased recycling
remains a strong long-term structural growth driver for the Group. The recovery of
earnings at ATM and our Renewi 2.0 programme are expected to further support sustained
future earnings growth.
March 2020 March 2020 March 2019 %
change
(IFRS16 basis) (IAS17 basis) (IAS17 basis)
(IAS17
basis)
Revenue+ EUR 1,697.0m EUR 1,697.0m EUR 1,670.9m 2%
ongoing
businesses
EBITDA+ EUR 187.6m EUR 157.5m EUR 165.5m -5%
ongoing
businesses
Underlying EUR 75.5m EUR 72.0m EUR 80.2m -10%
EBIT+
ongoing
businesses
Underlying EUR 42.5m EUR 44.5m EUR 57.5m -23%
profit
before tax+
ongoing
businesses
Underlying 3.9c 4.1c 5.5c -25%
EPS+ ongoing
businesses
(cents per
share)
Underlying EUR 119.9m EUR 93.0m EUR 30.3m
free cash
flow+
Exceptional EUR (120.2)m EUR (120.2)m EUR (146.0)m
and
non-trading
items
including
tax
Core net EUR 457.2m EUR 552.0m
debt
(excluding
asset held
for sale and
IFRS 16)
Core net 2.98x 3.06x
debt to
EBITDA
STATUTORY
Revenue from EUR 1,775.4m EUR 1,780.7m
continuing
operations
Operating EUR (28.1)m EUR (56.6)m
loss from
continuing
operations
Loss before EUR (59.4)m EUR (89.0)m
tax from
continuing
operations
Loss from EUR (16.6)m EUR (21.1)m
discontinued
operations
Basic loss (7.7)c (9.0)c
per share
from
continuing
operations
(cents)
Cash flow EUR 167.8m EUR 86.8m
from
operating
activities
Final - 0.5p
Dividend
(pence per
share)
+The definition and rationale for the use of non-IFRS measures are included in note
18. Ongoing businesses as presented exclude the financial results for the Canada
Municipal business which was sold on 30 September 2019 and the Reym business which was
sold on 31 October 2019. In addition, the Canada Municipal segment meets the
definition of a discontinued operation and is recorded as such.
For further information contact:
Renewi plc
Otto de Bont - Chief Executive Officer +44 (0)1908 650580
Toby Woolrych - Chief Financial Officer
FTI Consulting
Richard Mountain / Susanne Yule +44 (0)20 3727 1340
Notes:
1) Renewi will be holding an online analyst presentation at 10.30 a.m. today.
Webcast: https://channel.royalcast.com/webcast/renewi/20200604_1/ [1]
2) A copy of this announcement is available on the Company's website,
(www.renewiplc.com [2]). A copy of the presentation being made today to financial
institutions will also be available.
Forward-looking statements
**************************
Certain statements in this announcement constitute "forward-looking statements".
Forward-looking statements may sometimes, but not always, be identified by words such
as "will", "may", "should", "continue", "believes", "expects", "intends" or similar
expressions. These forward-looking statements are subject to risks, uncertainties and
other factors which, as a result, could cause Renewi plc's actual future financial
condition, performance and results to differ materially from the plans, goals and
expectations set out in the forward-looking statements. Such statements are made only
as at the date of this announcement and, except to the extent legally required, Renewi
plc undertakes no obligation to revise or update such forward-looking statements.
Chief Executive Officer's Statement
Overview
In this review we will:
· Review a successful FY20, with trading in line with expectations and delivery of
our key strategic goals;
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· Summarise the financial and operational impact of Covid-19, and our actions taken
in response, highlight our financial robustness and provide some outlook regarding
the impact on FY21; and
· Launch our enhanced strategy for growth, including our innovation funnel, our
EUR 20m Renewi 2.0 programme and our new sustainability strategy
Group financial performance
IFRS 16 is a new reporting standard that has had a material impact on our reported
results and the application of the modified retrospective approach has meant that
comparative information has not been restated. For the purpose of like for like
comparatives, the FY20 results have also been presented in accordance with the
previous leasing standard, IAS 17, and all variance analysis shown is on the IAS 17
basis.
Total Revenue Underlying EBIT
Operations
FY20 FY19 FY20 FY20 FY19 Variance
IFRS16 IAS17 Variance IFRS16 IAS17 IAS17 IAS17
basis basis basis basis basis basis
EUR m EUR m % EUR m EUR m EUR m %
Commercial 1,223. 1,194. 2% 89.9 87.6 86.5 1%
Waste 6 4
Hazardous 91.7 95.4 -4% (0.1) (1.1) 1.7 N/A
Waste
Monostreams 213.6 213.3 0% 14.5 14.1 12.9 9%
Municipal 197.2 195.2 1% (2.8) (2.5) 0.8 N/A
Group central - - (26.0) (26.1) (21.7) -20%
services
Inter-segment (29.1) (27.4) - - -
revenue
Ongoing 1,697. 1,670. 2% 75.5 72.0 80.2 -10%
Businesses 0 9
Reym 78.4 109.8 12.1 10.0 5.3
Continuing 1,775. 1,780. 0% 87.6 82.0 85.5 -4%
Operations 4 7
Discontinued 10.8 18.3 3.1 2.5 1.5
Operations
Total 1,786. 1,799. -1% 90.7 84.5 87.0 -3%
2 0
The underlying figures above are reconciled to statutory measures in note 3 in the
consolidated financial statements.
Reym revenue includes inter-segment revenue between Reym and other Group entities and
intra-segment revenue between Reym and other Hazardous Waste entities.
Discontinued operations include the results of the Canada Municipal segment which
meets the criteria as set out in IFRS 5.
Excluding discontinued and disposed operations and on an IAS 17 basis, revenues grew
by 2% to EUR 1,697m and, as expected, underlying EBIT decreased by 10% to EUR 72.0m.
Underlying profit before tax from ongoing businesses reduced by 23% to EUR 44.5m and
underlying earnings per share fell by 25% to 4.1c (2019: 5.5c).
The Commercial Division grew revenue by 2% to EUR 1,224m and underlying earnings by
1% to EUR 87.6m. This was a positive performance, with stronger inbound pricing and
the delivery of synergies more than offsetting weaker markets (including a slowdown in
Dutch construction), lower recyclate income and an estimated EUR 4m adverse impact
from Covid-19.
The Hazardous Waste Division revenues fell by 4% to EUR 92m and underlying EBIT
reduced, as expected, to a loss of EUR 1.1m due to lower soil volumes processed,
especially in the first half. The waterside had a good year with robust volumes and
pricing.
The Monostreams Division delivered ongoing benefits from its restructuring programmes,
with a particularly strong second half performance. Revenues were flat at EUR 213m
and underlying EBIT increased by 9% to EUR 14.1m.
Municipal performed as expected. Revenues increased by 1% to EUR 197m and the
business made a small underlying loss of EUR 2.5m, reflecting a lower contribution
from the Derby contract and one-off items.
Group Central Services increased slightly less than expected to EUR 26m. This was
primarily due to the non-recurrence of incentive and other accrual releases in the
prior year.
Total exceptional items of EUR 120m (2019: EUR 146m) were incurred in the year, of
which EUR 35m were cash. These items included EUR 56m of charges relating to the
disposal of Reym and Canada, the majority of which were non-cash. It also included
EUR 16m of planned synergy delivery and integration costs. We also recognised a
EUR 26m charge at ELWA as a result of additional taxation levied on burnable waste
imported into the Netherlands and a EUR 15m legal provision following an EU State Aid
claim against the Walloon region in respect of our Cetem facility. As a result, there
was a Group statutory loss for the year of EUR 77.1m (2019: loss of EUR 97.7m). We
remain focused on reducing the exceptional items incurred by the Group and delivering
statutory profits in the future.
The business delivered a positive net cash inflow of EUR 39m before the benefit of
disposals and a total net cash inflow of EUR 141m as a result of a strong focus on
cash management. Underlying free cash flow on an IAS 17 basis increased from EUR 30m
to EUR 93m, with improved working capital and tight control of capital expenditure.
Our core net debt at 31 March 2020 was EUR 457m, a 17% reduction on the previous
year. Leverage was 2.98x EBITDA (2019: 3.06x), within our covenant of 3.50x.
As previously announced, the total dividend for the year is 0.45p (2019: 1.45p),
reflecting our prudent decision not to pay a final dividend in light of the Covid-19
crisis.
Delivering our strategic and operational goals
During the year we delivered on a wide range of strategic and financial objectives
that have strengthened and de-risked the Group, including:
· the EUR 40m synergies promised when we completed the merger three years ago;
· a fifth consecutive year of underlying EBIT growth in the core Commercial Waste
Netherlands Division despite numerous market headwinds, including Covid-19;
· the reopening of the TGG market by the authorities and the first shipments from
ATM in two years as well as the installation of capacity to make building materials
from cleaned soil;
· the disposal of our Reym and Municipal Canada businesses for EUR 107m in cash,
reducing our net debt by 17%;
· strengthening the management team, with four important new hires to lead two of
the Divisions as well as Human Resources and IT;
· transitioning to a new profitable contract with the Derby City and Derbyshire
County Councils to manage their waste;
· EUR 8m investments in our innovation pipeline and in two niche acquisitions in
the growing circular economy, Rotie and RetourMatras; and
· the successful secondary listing on Euronext Amsterdam.
Managing the impact of Covid-19
We announced a full update relating to Covid-19 on 29 May 2020. In summary:
· we are an essential service and we have continued to provide seamless waste
collection and processing throughout the lockdowns, serving communities, businesses
and hospitals. We are deeply appreciative of the dedication and determination of our
colleagues who have provided this excellent service. We have partnered up with Van
Straten Medical and Greencycl for the collection, recycling and returning sanitised
PPE to Benelux healthcare workers;
· Renewi had liquidity of EUR 252m as at 31 March 2020, sufficient to trade through
the Covid-19 crisis with no need for additional funding from governments, banks or
shareholders. Appropriate covenant amendments have been agreed with our banks for
the period to September 2021;
· we have detailed scenarios for the potential economic impact of the lockdowns and
subsequent market recovery, and we are currently trading at the positive end of
those scenarios; and
· we have introduced measures to reduce operating costs (including a voluntary 20%
reduction in Board salaries and fees, and 10% reduction in Executive Committee
members salaries), capital expenditure and optimise cash flows, which will save over
EUR 60m of cash during the next financial year.
Our enhanced strategy for long-term profitable growth
Our purpose is to protect our planet by giving new life to used materials, and our
vision is to be the leading waste-to-product company in the world's most advanced
circular economies. This differentiates Renewi as a pure play recycler, a company that
focuses on supplying high quality secondary materials, which we believe is the best
way to extract value from waste.
Our industry is driven by increasing environmental legislation, particularly in the
European Union which on 11 March 2020 published "The Circular Economy Action Plan", as
a promising continuation of the EU executive's ambition from 2015. The plan
acknowledges the need to address the block's resource consumption and to reduce
environmental pressures driven by consumption. More recently, on 28 April 2020, the
Dutch Government reconfirmed its intent to impose rising tariffs on CO2 emitters to
encourage the carbon transition. These taxes, to be imposed over the coming decade,
are expected to have a significant positive impact on demand for secondary products
and will increase the cost of incineration.
After a year of successful repositioning of the Group, we are pleased to outline our
enhanced strategy to ensure that Renewi captures the profitable growth opportunities
arising from carbon reduction and the transition to a circular economy. This strategy
will transition Renewi from a waste collection company to a company focused on
production of secondary raw materials to the highest possible quality.
Our enhanced strategy and innovation funnel
To expand our position as a secondary raw material producer, our strategy is based on
three pillars:
1) Divert more into products from waste streams currently being incinerated or
landfilled. We will invest to start or expand production of secondary raw materials
out of waste streams currently going to incineration or landfill. This will further
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increase our recycling rate, which we believe is already the highest in the industry
at 65%. Over the next five years we intend to decrease our incineration and landfill
rate further by a minimum of 25% and convert this waste into new products. Some
examples of projects that will fuel our growth are the recycling of mattresses and
diapers and the advanced recycling of waste plastics and wood.
2) Improve the quality of the products we produce. To build a circular economy the
usage of secondary raw materials must increase. For production companies currently
using primary raw materials, the easiest way to convert is by using high quality
secondary raw materials that they can "drop-in". We aim to significantly increase
the value of our products by investing in advanced processing of our materials;
which we call "spread expansion". Examples include the 4Terra project at ATM to make
clean sand and gravel from contaminated soil, to make clean HIPS and ABS plastic
from fridges at Coolrec and to manufacture bio-LNG from food waste in Organics.
3) Selectively gain market share. Our primary focus is on driving margin expansion
from existing waste flows through the first two pillars of our strategy. In
addition, we will continue to selectively increase volumes through net customer
gains, niche acquisitions and potentially, in the longer term, through geographic
expansion.
Innovation is one of our core values and we are working on a number of initiatives to
deliver our growth strategy. Going forward, we will report on this funnel with our
results, demonstrating the breadth of opportunities for growth that we are able to
pursue. Given that a number of these relate to new products or technologies, we do not
expect them all to proceed to commercialisation.
Project Partner Opportunity Status
Sand, gravel Stand-alone EUR EUR EUR EUR EUR Successful
& filler at trials
ATM for complete
construction and
materials customers
engaged.
Capacity
expansion
underway.
Expansion in Stand-alone EUR Permits
bio-gas awaited to
production construct
expanded
food waste
processing
hall in
2020.
Expansion of IKEA EUR EUR EUR Third
mattress facility
recycling opening May
2020,
increasing
capacity to
1 million
mattresses.
Upgraded SABIC EUR EUR - Commercial
feedstock EUR EUR EUR EUR EUR contracts
for chemical being
recycling of negotiated
plastics with major
plastics
producer
and
technology
company.
Engineering
designs
being
finalised
for 30KT
line.
Transition SHELL EUR EUR Commercial
bio-gas from contracts
electricity being
to bio-LNG finalised
with major
gas company
and
technology
provider.
Gas
cleaning
upgrade
underway.
Upgraded ARCELOR-MITTAL EUR EUR - Technical
wood flake EUR EUR EUR EUR trials and
supply for commercial
low-carbon feasibility
steel alongside
major steel
producer.
Cellulose FMCG major EUR - EUR EUR EUR Transition
from diapers to new
and technology
incontinence and
products commercial
partners.
Technical
feasibility
underway.
Next Energy-from-waste EUR EUR EUR Engineering
generation major feasibility
bottom ash underway
conversion with
to waste-to-en
construction ergy
materials partner.
Polyurethane Chemical recycler EUR - EUR EUR EUR Development
recycling project to
purify
polyurethan
e from
mattresses.
Shifting from collection to secondary material production
We have a large fleet of trucks collecting commercial waste to supply our recycling
operations and today Renewi is the clear market leader in the Benelux. The collection
provides an essential service to waste producers and it marks the beginning of
Renewi's value chain, as we become the owner of the commercial waste. That waste
provides the raw materials for Renewi to generate value from the products it makes.
Waste collection is expected to transform in the coming years to reduce carbon
emissions and traffic congestion in cities. This will include "white label" collection
collaborations between waste companies to share logistics as well as a transition to
low and ultimately zero emission collection vehicles. Renewi will actively drive this
transition, securing the waste streams with smart and innovative collection methods.
This should ultimately lead to a reduced investment in our own fleet, allowing capital
to be deployed in the production of secondary materials.
Our strategy is underpinned by the Renewi 2.0 programme.
Renewi 2.0
As previously announced, while we have successfully delivered the EUR 40m of cost
synergies following the merger of Shanks and VGG, we have identified the opportunity
to drive further improvement through a three-year programme to make the company
simpler, more customer-focused, more efficient and a better place to work. This
comprises multiple projects, orientated around two key themes:
· Digitisation of the business. The waste industry currently lags other industries
in providing a fully digital solution for its customers. We are developing a new
front-end interface for customers that will allow them to place and amend orders,
have full visibility on our services and related cost as well as on the circular
benefits their waste is creating. This digitisation will deliver a better 24/7
customer experience, while reducing our cost to serve.
· Simplification and harmonisation of processes. Our core processes can be
simplified and standardised across our divisions to reduce cost, reduce errors, and
improve customer, supplier and employee experiences. We are implementing global
process owners for our core processes and centres of excellence to simplify our
product offering, improve our core data and eliminate wasted activity.
The programme is expected to deliver a minimum of EUR 20m of annual cost benefits on
a run-rate basis after completion of this three year programme (March 2023) for a
total cash cost of EUR 40m, which will be split into an exceptional cost (EUR 33m)
and capital investment (EUR 7m).
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Our focus on a simpler and lower risk business has included a divisional
restructuring. We have created three strong divisions, combining similar activities
into one division, and we have disbanded the Monostreams Division, reallocating its
four business units. From 1 April 2020 our new divisional structure comprises:
· Commercial Waste (Belgium and Netherlands): unchanged except that Orgaworld is now
included within the combined organics activities of Commercial Waste Netherlands;
· Mineralz & Water. This new division comprises ATM and CFS from Hazardous Waste and
Mineralz from Monostreams Division. The focus of all these units is on the creation
of clean mineral products or water creating commercial and operational synergy; and
· Specialities, comprising Municipal, Coolrec and Maltha. All three of these
businesses are international in nature and have larger scale process-based
facilities focused on operational excellence and recycling. None have collection
activities.
In addition, we are centralising group functions further to drive consistency across
the Group and leverage expertise and optimise capacity. Central Services costs will be
increasingly recharged to the Divisions, reflecting that they are the drivers and
causes of these charges. Around EUR 10m of central costs relating to the Board,
strategy and investor relations will be retained as a separate reported cost.
Sustainability is at the core of all we do
We are also launching Renewi's first long-term sustainability strategy and our new
sustainable development objectives for the next three and five years. These have been
developed using current best practice, drawing together our input capital sources and
our business strategy to develop three key themes for our SDG policy which contribute
towards six of the UN Sustainable Development Goals. These are: Enable the circular
economy; Reduce carbon emissions and waste; and Care for people and from these three
themes, we have developed six key objectives:
· turn our customers' waste into new products. By doing so we reduce carbon
emissions and reduce depletion of the world's finite natural resources. The key
metric for this is the recycling rate;
· be a leader in clean and green waste collection. The collection of waste is
essential and we aim to reduce the pollution and carbon emissions it causes through
deployment of low and ultimately zero emission trucks, white label collection and
route optimisation;
· reduce the carbon impact of our operations. By their nature, our operations reduce
total carbon emissions elsewhere by returning materials for reuse. Nevertheless, we
aim to reduce our own energy consumption where we can and increase use of renewable
energy;
· positively impact our communities. Providing an essential service to our
communities as the national champion of recycling and circularity, we seek a
positive impact in the locations where we work, engaging closely with communities,
supporting them, and minimising any negative aspects of the work that we do;
· deliver people home safe and well, every day. Safety is our first value and we
continue to strive to improve our accident rates and to avoid all serious incidents.
In addition, we wish to support the health and mental well-being of all our
employees; and
· make Renewi an even more rewarding, diverse and inclusive working environment. We
seek an engaged workforce drawing on a wide range of backgrounds, all with the
opportunity to thrive and achieve their potential within our organisation.
Each of these objectives has challenging targets set against them, which are detailed
in full in both our forthcoming Annual Report and our Corporate Sustainability Report.
Outlook
Based on our experience in March and April, we expect Covid-19 to cause a potential
earnings and cash shortfall of up to EUR 20m in the first quarter against our
previous expectations. This outflow is comfortably contained within our EUR 252m of
liquidity as at 31 March 2020 and our revised banking covenants. The outlook for the
remainder of the year will be dependent on the speed of recovery of the economy and
the extent of ongoing restrictions on certain sectors such as hospitality. Longer
term, waste volumes are resilient through cycles and the transition to increased
recycling is expected to continue to support our business model. The recovery of
earnings at ATM and our Renewi 2.0 programme are expected to further support sustained
future earnings growth.
Operating Review for the year ended 31 March 2020
The operating review reports on the business using the historic divisional structure.
A reconciliation of the historic performance to the new divisional structure,
including a reallocation of central services cost, is shown on our website. All
percentage comparatives to the prior year in the following section exclude the
positive impact of IFRS 16 which amounted to EUR 3.5m EBIT in the year to March 2020
for the ongoing businesses.
Commercial Waste
Divisional strategy
The Commercial Division creates value from its leadership position in waste collection
and treatment in the Netherlands and Belgium. Its national coverage, density,
operational scale and advantaged technology positions it strongly in its core markets.
The division will deliver long-term growth and attractive returns by increasing
diversion from incineration and landfill and through increasing demand for its wide
range of recycling services and products. This will be reinforced through the delivery
of the benefits of Renewi 2.0 and the application of margin enhancing initiatives such
as commercial effectiveness and continuous improvement.
Financial performance
The Commercial Division performed well in FY20 given weaker markets and the EUR 4m
estimated impact of Covid-19 in the second half of March. Revenues increased by 2% to
EUR 1,224m and underlying EBIT increased by 1% to EUR 87.6m. Margins were constant
at 7.2% and the return on operating assets rose a further 50 basis points to 23.6% on
an IAS 17 basis (19.2% on an IFRS 16 basis).
Revenue Underlying EBIT
FY20 FY19 FY20 FY20 FY19 Variance
IFRS16 IAS17 Variance IFRS16 IAS17 IAS17 IAS17
basis basis basis basis basis basis
EUR m EUR m % EUR m EUR m EUR m %
Netherlands 786.0 764.7 3% 56.0 54.3 53.2 2%
Commercial
Belgium 439.1 430.8 2% 33.9 33.3 33.3 0%
Commercial
Intra-segment (1.5) (1.1) - - -
revenue
Total 1,223. 1,194. 2% 89.9 87.6 86.5 1%
6 4
Underlying EBIT Return on
Margin Operating Assets
FY20 FY20 FY19 FY20 FY20 FY19
IFRS16 IAS17 IAS17 IFRS16 IAS17 IAS17
basis basis basis basis basis basis
Netherlands 7.1% 6.9% 7.0% 15.9% 19.0% 18.7%
Commercial
Belgium 7.7% 7.6% 7.7% 29.5% 38.8% 37.3%
Commercial
Total 7.3% 7.2% 7.2% 19.2% 23.6% 23.1%
The return on operating assets for Belgium excludes all landfill related provisions.
Revenues in the Netherlands grew by 3% to EUR 786.0m and underlying EBIT by 2% to
EUR 54.3m. Margins fell by 10 basis points to 6.9%. Return on operating assets
increased by 30 basis points to 19.0% (15.9% on the IFRS 16 basis).
As previously reported, the core market has been softer this year. Dutch construction
was slower after four strong growth years and was further impacted from July 2019 by
regulatory rulings about the chemical PFAS in soil, an issue partially resolved in
December, and by limitations being imposed to manage nitrogen deposition near sites of
environmental importance. Recyclate markets have also been weaker with generally lower
volumes and prices. The Covid-19 related lockdown in the second half of March has
primarily affected roller bins (commercial waste) and food waste. Core volumes fell by
2% in the year, with construction and bulky waste down by 3.5%. Recyclate volumes fell
by 1%, with paper down 1.6% and metals down 11%. Other volumes were down by 5%, mainly
lower value rubble and soil/sludges. Pricing per tonne for inbound waste increased by
over 12% as we successfully passed on significant increases in incinerator taxes,
other disposal costs and higher than usual labour cost increases and saw the positive
impact of dynamic pricing adjustments to offset lower recyclate income, which fell by
23%.
The stable operating margin was encouraging, particularly given the headwind from
lower volumes, lower recyclate prices, the increasing costs of disposal of residues
and a EUR 1m year-end provision for potential Covid-19 related bad debts. Total
synergies were EUR 17.7m, with additional synergies of EUR 6.4m delivered during the
year.
Belgium revenues increased by 2% to EUR 439.1m and underlying EBIT was flat at
EUR 33.3m. Margins were broadly flat at 7.6%, which was encouraging given the cost
pressures and the closure in the year of the landfill at Cetem. Underlying volumes
were flat, in line with the market. Market trends were similar to the Netherlands,
with price increases offsetting inflation in disposal and labour costs and a reduction
in recyclate income. The impact of Covid-19 in March was greater than in the
Netherlands as a result of a more severe lockdown. Total synergies were EUR 10.6m,
with additional synergies of EUR 2.8m delivered during the year.
Operational review
Our Commercial Division has made good progress in all its market facing strategies and
also in completing integration and preparing for Renewi 2.0.
Clean and green collection
The efficient collection of waste provides an essential service to customers and
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provides us with the raw materials from which to create new products. However, the process of collection creates pollution and traffic. We expect that waste collection will transform in the coming years to be cleaner, greener and more efficient. Renewi will be a leader in that transformation. It starts with reducing pollution using today's technologies. During the past year we invested EUR 64m in purchasing 423 trucks with the latest Euro VI emission technologies. Euro VI trucks reduce pollutants by over 90% compared to the older trucks they are replacing, significantly improving the air quality of the cities in which they operate. Over 45% of our fleet is now Euro VI and we are targeting 100% by 2025. Our route optimisation software further minimises the number of collection kilometres driven and in the last year our lifts/km metric improved by 27% in the Netherlands. We expect that governments will soon ban or fine more polluting trucks in inner cities and that our investments will give us a strong operating position. Over the next decade, we expect a step change in the reduction of carbon emissions from waste collection through two approaches. The first is a requirement that waste companies combine to collect waste in single "white label" truck fleets per town, increasing route efficiency and reducing the number of vehicles. Initial trials in Gouda and Haarlem have now been expanded in the area of Roosendaal/Bergen om Zoom in the Netherlands and Oost-Vlaanderen in Belgium and several projects in other city centres in the Netherlands are in the preparation phase. The second will be a transition to use of zero emission vehicles (ZEV), likely electric or hydrogen powered. During the last year we ordered the first two ZEV waste trucks in the Netherlands for trials. We will continue working with all major truck manufacturers to develop this technology. Given that ZEVs are much more expensive than current diesel models, we anticipate that, once the technology is proven, governments will need to mandate their use in order to stimulate the transition. Increasing diversion from landfill and incineration Waste volumes overall are relatively flat, with modest further growth for Renewi expected from share gain or tuck-in acquisitions. We expect to continue to drive our margin expansion by increasing the diversion of waste we collect away from landfill and incineration. An example of this was our EUR 1.7m investment in June 2019 in RetourMatras, a company that has technology to recycle mattresses. Mattresses are difficult to handle, prone to cause fires, and are expensive to transport and to incinerate. The RetourMatras technology separates mattresses into textiles, foam and metals for recycling, creating a full circular solution. We were pleased to co-invest in this technology with IKEA, a leading seller of mattresses with a strong commitment to sustainability. Our initial goal is to complete coverage in the Netherlands by installing sufficient capacity to recycle all waste mattresses - at which point we anticipate that regulators will mandate that they should no longer be incinerated. In parallel we are assessing international expansion opportunities. In Belgium we have an unparalleled range of sorting capabilities. In the last year, we have installed a new 60KT sorting line in Liege to cycle waste into eleven different product streams and our wood sorting line at Eeklo is separating up to 35-40% of waste wood for reuse in furniture instead of as biomass. Investing in added value secondary materials production Having diverted waste from landfill and incineration, our second strategy is to increase the value we add from the products we make through increased quality. We call this "spread expansion". Examples of spread expansion include the final commissioning of our Wateringen stonecrusher and the wood treatment line in Vlaardingen. We have also consolidated some of our materials processing capabilities to our Gent master plant, including a new higher quality plastics sorting line. A new baling press in Vilvoorde is improving the quality and value of our recycled paper and cardboard streams. Our innovation funnel contains numerous other projects to increase the value-add from our materials. For example, at RetourMatras we are undertaking research to extract additional value by bonding the foam to create carpet underlay or alternatively reprocessing the foam to create polyurethane. We are in commercial discussions to repurpose part of our anaerobic digestion site in Amsterdam to produce bio-LNG for one of the world's leading petrochemical companies as a higher value-add alternative to green electricity. We are also in commercial discussions to build a sorting line near Eindhoven to produce a high-quality plastics feedstock for chemical plastics recycling in partnership with a leading global plastics manufacturer. Integration, synergies and Renewi 2.0 FY20 also saw the successful completion of our synergy programme with the EUR 40m target delivered on time. Most of the synergy benefits in the year were the full-year effects of major projects from the year before, especially site rationalisation and route optimisation. New projects that were completed towards the end of the year included the harmonisation of CLA terms and conditions in Belgium, the roll-out of the E-hour time registration system across all employees, and the implementation of digital acceptance of waste. Site migration of the former Shanks construction business onto the Renewi operations platform and the harmonisation of Dutch CLA terms and conditions are expected to take place during 2020, completing the integration with a final further exceptional cost of EUR 4m. Focus turned in the second half towards projects that would form part of Renewi 2.0, the group-wide programme to modernise Renewi. A large part of Renewi 2.0 focuses on the customer and in Belgium a customer centric project has been rolled out to engage and enthuse our employees in how to look after customers, and to measure customer satisfaction more deeply. At the heart of the new customer experience will be MyRenewi - a portal where customers can place, amend and review orders, and manage their accounts. This meets a clear demand in terms of service, while improving the data quality that flows into our systems. Internally we will be investing in automation of many core processes. We will be implementing a Renewi source-to-pay system, starting with the shared service centre and preparation for Commercial Waste Belgium during the next year. We are also creating a global process management team, centres of excellence for product management and reporting, and a team to improve data quality. These teams, funded by other efficiencies, are expected to transform the efficiency of our core processes over the coming three years, improving customer and employee satisfaction and reducing cost. Managing headwinds As reported earlier, the year has contained its headwinds. Recyclate prices hit multi-year lows, especially paper which has fallen by 75% from peak to trough. There have also been significant inflationary pressures from the increased incinerator taxes, higher disposal costs and increased labour costs. We have successfully mitigated these headwinds, passing on these cost pressures in full in the form of higher prices for inbound waste. Dynamic pricing contracts for recyclates provides a mechanism to automatically adjust for changes in paper, plastic and metal prices for up to 75% of our volumes. The year was also made more complex when AEB, one of the largest incinerators in the Netherlands, closed unexpectedly for four months in the summer of 2019 for technical reasons. This sudden loss of capacity could have caused a severe disruption to our customer service and a material economic loss for Renewi. However, using our crisis protocols, we were able to react swiftly to lobby governments to open new outlets and storage, to communicate with customers and to redirect waste to new locations. A EUR 3m provision for uncovered costs taken at the half year was not required as all additional costs were settled and our business and our customers were unaffected. Divisional outlook As reported earlier, during the lockdown period waste volumes have fallen by up to 35% in Belgium and up to 15% in the Netherlands, the latter supported by resilience in construction waste volumes. We anticipate a gradual recovery from these lows as the lockdowns ease through the first quarter. We anticipate that volumes for the remainder of the next financial year will be lower than previously expected, dependent upon the easing of lockdown restrictions, including in specific sectors such as hospitality, and the speed of economic recovery. Construction may also reduce somewhat in the near term in response to lower GDP. Recyclate prices are expected to remain low as a result of reduced demand and lower oil and commodity prices. Other inbound and outbound pricing has remained stable. Swift cost actions have been taken to reduce the impact and additional plans are in place should volumes reduce further. Longer term, waste volumes are historically resilient, and we expect governments to continue to stimulate recycling and the use of secondary materials. Hazardous Waste Divisional strategy Our initial focus is to return ATM to normal operation on the soil line. In the future we intend to refine soil outputs further into higher value secondary raw materials. Following the successful sale of the Reym industrial cleaning business, we are merging ATM (and the smaller treatment site CFS) with our Mineralz business to create the Mineralz & Water Division from 1 April 2020. Financial performance ATM performed as expected as a result of the ongoing restrictions on the shipments of thermally cleaned soil in the Dutch market which ended in December 2019. Revenues fell by 4% to EUR 92m and underlying EBIT fell to a loss of EUR 1.1m. An exceptional item
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of EUR 3.1m (2019: EUR 6.5m) was additionally reported in relation to the ATM soil
issue. Now that the TGG market has been reopened, the cost of storing TGG stocks
(currently EUR 3m per annum) will in future be taken in ordinary trading. Reym was
sold on 31 October 2019.
Revenue Underlying EBIT
FY20 FY19 FY20 FY20 FY19 Variance
IFRS16 IAS17 Variance IFRS16 IAS17 IAS17 IAS17
basis basis basis basis basis basis
EUR m EUR m % EUR m EUR m EUR m %
ATM & 91.7 95.4 -4% (0.1) (1.1) 1.7 N/A
Other
s
Reym 81.3 115.9 -30% 12.1 10.0 5.3 89%
Total 173.0 211.3 -18% 12.0 8.9 7.0 27%
Underlying EBIT Margin Return on Operating
Assets
FY20 FY20 FY19 FY20 FY20 FY19
IFRS16 IAS17 IAS17 IFRS16 IAS17 IAS17
basis basis basis basis basis basis
ATM & -0.1% -1.2% 1.8% -0.2% -8.6% 9.5%
Other
s
Reym 14.9% 12.3% 4.6%
Total 6.9% 5.1% 3.3%
Reym revenue includes intra-segment revenue between Reym and other Hazardous Waste
entities
Operational review
FY20 has been an important year of turnaround for ATM. During the year ATM worked
closely with IL&T and other local regulators such as DCMR to specify and then conduct
detailed tests on our stockpiles in order to fully characterise the soil beyond the
usual norms of the industrial code (BRL) under which it was shipped. These tests
demonstrated clearly that our thermally treated soil (TGG) can be applied in the right
industrial locations and poses no risk to health or to the environment. The IL&T
confirmed these results and reported in December 2019 that the analytical results of
the TGG provide a thorough representation of the TGG quality and that the TGG can be
applied in industrial locations, subject to the usual review for the intended
application by the local regulators. At the end of the year, we started shipment of
200KT of TGG for a project in Amsterdam. We maintain an encouraging pipeline of
potential customers for TGG, both domestically and internationally, and we are working
through permitting requirements with respective local authorities to allow their
shipment. At the same time, we are reviving the inbound soil pipeline, which will take
some time to recover to historic levels as it is generally project/contract based.
ATM has also been investing in a new process to convert TGG, hot from the kiln, into
gravel, sand and a filler that can be used in the manufacture of asphalt, concrete and
cement. Following successful pilot scale trials, a full-size separator was installed
at the end of 2019 which is being progressively commissioned. The quality of the
products appears to be good and customer trials have gone well. Product certification
is also underway for different grades of product. We believe that a market for these
secondary construction materials exists that will over time absorb most or all of
ATM's production, at a positive selling price compared to the negative consideration
for placing TGG. Production of these construction materials is constrained by a lack
of logistics and storage, for the filler in particular, and a lack of space on site
pending the shipment of more TGG. We are investing during 2020 to increase functional
capacity.
The other core waste treatment processes for the Division performed well. Water intake
and treatment at ATM increased slightly compared to the prior year. Treatment of
packed chemical waste through the ATM pyro plant was slightly lower than prior year
due to significant maintenance activities and the new inbound warehouse was
commissioned during the second half of the year. The CFS water treatment facility in
the southern part of the Netherlands did well, maintaining flat revenue against lower
volumes.
Divisional outlook
We expect to increase throughput on the TRI line from 20% to c40% of capacity, as
previously forecast, mainly supported by increased offtake of the new products to
construction customers. Capacity will continue to be constrained for these products
during FY21 as additional silos and handling capacity are being installed. We expect
TGG outlets to be secured during the year which will initially be used to reduce
excess inventory, particularly of soil produced before 2018. Following the reopening
of the end market, the EUR 3m of annual storage costs for this inventory will now be
accounted for in ordinary trading rather than as an exceptional item. Covid-19 has had
a lower impact on ATM as water volumes are not directly affected by the lockdown and
we have soil stocks sufficient to keep processing. However, the low oil price is
expected to reduce water volumes over the year and we anticipate delays in some
construction projects, slowing the recovery of inbound contaminated soil volumes. Over
the longer term we continue to target a recovery at ATM to historic levels of
profitability.
Monostreams
Divisional strategy
Monostreams incorporates Maltha, Coolrec, Mineralz and Orgaworld. All four focus on
producing high quality products from specific source segregated input streams.
Following acquisitions and disposals during FY20, the Monostreams Division was
disbanded on 31 March 2020. Maltha and Coolrec form part of the new Specialities
Division, Mineralz joins ATM as the Mineralz & Water Division and Orgaworld becomes
part of an Organics business unit in Commercial Waste Netherlands.
Financial performance
Revenue Underlying EBIT
FY20 FY19 FY20 FY20 FY19 Variance
IFRS16 IAS17 Variance IFRS16 IAS17 IAS17 IAS17
basis basis basis basis basis basis
EUR m EUR m % EUR m EUR m EUR m %
Total 213.6 213.3 0% 14.5 14.1 12.9 9%
Monos
tream
s
Underlying EBIT Margin Return on Operating
Assets
FY20 FY20 FY19 FY20 FY20 FY19
IFRS16 IAS17 IAS17 IFRS16 IAS17 IAS17
basis basis basis basis basis basis
Total 6.8% 6.6% 6.0% 17.9% 21.3% 18.1%
Monos
tream
s
The return on operating assets excludes all landfill related provisions.
Monostreams recovered well in FY20, particularly with a strong second half as
restructuring benefits were realised. Underlying EBIT increased by 9% to EUR 14.1m,
on flat revenues at EUR 213.6m. Margins increased by 60 basis points to 6.6% with
return on operating assets up by 320 basis points from 18.1% to 21.3% (17.9% on an
IFRS 16 basis). Coolrec, Maltha and Orgaworld all delivered strong earnings growth,
offset by an expected decline in Mineralz due to previously announced margin pressures
in the landfill sites.
Operational review
The Coolrec business recycles e-waste and white goods into plastics and metals. As
announced last year, we have significantly simplified the business offering, exiting
loss-making product lines and territories. Profits increased as a result, while
revenues were significantly reduced. We are investing to improve quality and capacity
in the core fridge recycling lines and in improving plastic quality at our Waalwijk
facility.
Maltha, jointly owned with Owens-Illinois, also made good progress in recovering
margin in the year. New management has driven a sustained improvement in commercial
and operational performance, especially at the Dintelmond site. The overall glass
market is set for growth due to a shift from plastic packaging towards glass products.
Mineralz showed a decline in margins, as expected, following the increased landfill
tax in the Netherlands which could not fully be passed on to customers, as well as
lower volumes in soil cleaning following the nitrogen deposition concerns in the
Netherlands.
Orgaworld had another strong year, with organic revenue growth boosted by the
acquisition of Rotie, a collection and depackaging business adjacent to our Amsterdam
digester. Good volumes were supported by increased electricity generation at improved
prices.
Divisional outlook
All business units were significantly impacted during April by the lockdown, through a
mix of lower volumes, lower demand for product or loss of production capacity.
Performance is expected to improve through May and thereafter will be driven by the
speed of economic recovery and the easing of lockdown restrictions. No long-term
impact is expected on any of the business units.
Municipal
Divisional strategy
We have greatly simplified the Municipal portfolio, including the disposal of our
Canadian assets during FY20. The core focus is on continuing to improve the operating
performance of the remaining assets to reduce cash losses and create a platform for
future growth. Municipal has been combined with Coolrec and Maltha to create the new
Specialities Division going forward, an international division with a strong focus on
operational and margin improvement.
Financial performance
The Municipal Division made a small underlying loss of EUR 2.5m, as expected,
compared to a profit of EUR 0.8m in the prior year, on revenues 1% higher at
EUR 197m. The prior year included higher profits on the original Derby contract
before it was terminated and one-off items such as rates rebates.
Revenue Underlying EBIT
FY20 FY19 FY20 FY20 FY19
IFRS16 IAS17 Variance IFRS16 IAS17 IAS17
basis basis basis basis basis
EUR m EUR m % EUR m EUR m EUR m
Total 197.2 195.2 1% (2.8) (2.5) 0.8
UK
Munic
ipal
Underlying EBIT Margin
FY20 FY20 FY19
IFRS16 IAS17 IAS17
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basis basis basis
Total -1.4% -1.3% 0.4%
UK
Munic
ipal
Underlying EBIT includes utilisation of EUR 12.2m (2019: EUR 10.0m) from onerous
contract provisions
Current year performance saw underlying improvement, particularly at Cumbria, BDR and
ELWA. The introduction of a EUR 32 per tonne import tax on burnable waste to the
Netherlands from 1 January 2020 added significantly to the cost base of ELWA,
resulting in an exceptional charge of EUR 25.9m reflecting an onerous contract
provision of EUR 15.5m and an asset impairment of EUR 10.4m.
Operational review - UK
Municipal delivered significant underlying operational improvements and a successful
transition to a new contract directly with Derby City and Derbyshire County Councils,
The impact of the Dutch import tax on ELWA cast a shadow over what was otherwise a
positive year.
Improving operational performance
Achieving stable operations gives Renewi a platform to drive continuous improvement
through all contracts. This includes optimising operating costs, eliminating cost of
failure, and reducing exposure to difficult offtake markets. During the past year we
have delivered 36 projects across our contracts, including a project increasing the
gas generation and performance of our AD composting process in BDR; and in ELWA, a
focus on asset maintenance delivered a reduction in spend on parts, decreased our
reliance on third party contractors and has improved the condition and performance of
our assets. Looking forward, an expanding continuous improvement programme will
deliver further improvements.
New contract at Derby
We had for some years a contract to be long-term operator of Sinfin Lane, a
gasification facility, as part of a PPP contract between Renewi and the constructor,
Interserve, and Derby City and Derbyshire County Councils. Last year, we wrote off our
investment in the contract as Interserve were over two years behind schedule
delivering the project. In August 2019 the contract was terminated by the lenders. We
have continued to work with and support Derby City and Derbyshire County Councils and
have entered into a continuity services contract directly with them to manage their
waste. This contract no longer carries the long term operational or financial risk
associated with the original contracts.
Incinerator taxes, Brexit and ELWA
Our ELWA facility has for many years exported the majority of its 200,000 tonnes of
burnable waste per year to the Netherlands. The unexpected introduction of a EUR 32
per tonne import tax on burnable waste from 1 January 2020 has added up to EUR 6m per
annum of extra costs, which makes the ELWA contract onerous. An exceptional charge of
EUR 25.9m was announced in January to address the increased future costs of disposal.
We have also included expected additional future costs of haulage and tariffs relating
to Brexit once the transition period ends.
Divisional outlook
Covid-19 is having a moderate impact on Municipal during the lockdown period due to
the closure of household waste recycling centres (HWRCs) and lower recyclate income.
This loss of profitability should be restored towards prior levels as HWRCs reopen and
no long-term impact is expected.
CFO REVIEW
INTRODUCTION
FY20 was a successful year in which we made good progress in strengthening the balance
sheet, improving underlying margins and returns and increasing free cash flow.
· We successfully strengthened the balance sheet through disposals and the issuance
of a new EUR 75m green bond. This resulted in our reducing core net debt from
EUR 552m to EUR 457m, and having EUR 252m of liquidity as at 31 March 2020
· We delivered underlying growth of 30 bps to 7.4% in our operating margin and 180
bps in our return on operating assets to 24.1% (19.8% on an IFRS16 basis) in our
Commercial and Monostreams Divisions (83% of revenue)
· We increased our free cash flow by EUR 85m to EUR 96m and, excluding the benefit
of the disposals, we generated net positive cash , a year ahead of schedule
· We completed our secondary listing on Euronext Amsterdam and we have seen
increasing investment by funds with a significant environmental mandate
Exceptional items were again significant. The majority were non-cash such as disposals
(EUR 56m) or related to value creating activities like synergy delivery (EUR 13m).
The introduction in the Netherlands on 1 January 2020 of a EUR 32 per tonne tax on
the import of burnable waste from the UK necessitated a EUR 26m charge at our ELWA
municipal contract. We have also taken a provision of EUR 15m following the ruling by
the European Union in February 2020 that it will be further investigating alleged
state aid provided by the Walloon region of Belgium to our landfill site at Cetem in
the period 2010-2015. The Walloon region and Renewi remain confident in our case,
which is expected to take several years to resolve.
Looking forward, our financial strategy for Renewi is centred on:
· improving margins and returns through increased diversion, higher value products
and more efficient processes including through the Renewi 2.0 programme;
· increasing free and net cash flows and reducing leverage towards the Board's
target of 2x, taking into account the challenge of Covid-19; and
· eliminating unplanned exceptional items.
FINANCIAL REVIEW
Financial Performance FY20 FY20 FY19
IFRS16 basis IAS17 basis IAS17 basis
EUR m EUR m EUR m
Continuing operations
Revenue 1,775.4 1,775.4 1,780.7
EBITDA 199.7 167.5 177.4
Underlying EBIT 87.6 82.0 85.5
Underlying profit 54.1 54.3 62.5
before tax
Non-trading & (113.5) (113.5) (151.5)
exceptional items
Loss before tax (59.4) (59.2) (89.0)
Total tax (charge) (1.1) (1.1) 12.4
credit for the year
Loss for the year from (60.5) (60.3) (76.6)
continuing operations
Loss for the year from (16.6) (17.0) (21.1)
discontinued
operations
Total operations: loss (77.1) (77.3) (97.7)
for the year
IFRS 16 is a new reporting standard that has had a material impact on our reported
results: for continuing operations increasing EBITDA by EUR 32.2m, EBIT by EUR 5.6m
and interest costs by EUR 5.8m as well as increased year end assets and debt. The
full impact is shown in note 19 to the financial statements. As we have applied the
modified retrospective approach prior year comparatives are not restated. The above
table shows the reported performance on an IFRS 16 basis along with IAS17 to provide a
comparative with 2019.
As well as IFRS 16, the performance in the year has been impacted by the disposals.
Reym is recorded as part of continuing operations with seven months in FY20 compared
to the full year in 2019. The Canadian business however met the definition of a
discontinued operation. Group revenue on a continuing operations basis increased
marginally to EUR 1,775m. Underlying EBIT from continuing operations decreased by
EUR 3.5m or 4% to EUR 82.0m on an IAS 17 basis.
IFRS 16 also has a significant impact on underlying EBITDA given the depreciation on
right-of-use assets which amounted to EUR 27m in the year. The table below sets out
the EBITDA by division on both an IFRS 16 and IAS 17 basis for the current year.
Underlying FY20 FY20 FY19 Variance
EBITDA
IFRS16 IAS17 IAS17 IAS17 basis
basis basis basis
EUR m EUR m EUR m %
Netherlands 107.3 93.8 92.5 1%
Commercial
Belgium 60.7 53.8 53.6 0%
Commercial
Commercial Waste 168.0 147.6 146.1 1%
Hazardous Waste 10.7 7.1 9.9 -28%
(excluding Reym)
Monostreams 28.1 25.5 24.1 6%
Municipal (0.9) (1.8) 1.9 N/A
Group central (18.3) (20.9) (16.5) -27%
services
Ongoing 187.6 157.5 165.5 -5%
Businesses
Reym 12.1 10.0 11.9
Continuing 199.7 167.5 177.4 -6%
Operations
Discontinued 3.1 2.5 3.9
Operations
Total 202.8 170.0 181.3 -6%
As both disposed businesses were reported as assets held for sale at March 2019 the
current year results have been favourably impacted by the suspension of depreciation
at Reym and Canada for the periods up to sale. The table below bridges the year on
year performance excluding IFRS 16. This shows that for the ongoing businesses
underlying EBIT fell by EUR 8.2m or 10%, in line with our expectations, primarily due
to reduced output at ATM, the profitable legacy Derby contract last year and the
reinstatement of bonus and LTIP provisions as forecast.
FY20 FY19 Variance
EUR m EUR m EUR m %
Underlying EBIT: Continuing 87.6 85.5 2.1 2%
operations
Impact of Reym (12.1) (5.3) (6.8)
Underlying EBIT: Ongoing 75.5 80.2 (4.7) -6%
businesses excluding IFRS 16
impact
Impact of IFRS 16 (3.5) - (3.5)
Underlying EBIT: Ongoing 72.0 80.2 (8.2) -10%
businesses
Non-trading and exceptional items excluded from pre-tax underlying profits
To enable a better understanding of underlying performance, certain items are excluded
from underlying EBIT and underlying profit before tax due to their size, nature or
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incidence. The Group reported significant non-trading and exceptional items, under the
main headings as follows:
· merger and integration costs: items that were known and planned for in relation to
the costs of integrating Renewi. These costs are one-off relating to the merger with
VGG and exceptional in nature;
· portfolio costs: items associated with the acquisition or disposal of assets,
including profit or loss on sale, goodwill impairments and transaction costs;
· UK Municipal contract issues: including onerous contract provisions and
impairments;
· other changes in long- term provisions: including significant legal provisions and
changes in discount rates; and
· other items.
Total non-trading and exceptional items amounted to EUR 120.2m (2019: EUR 146.0m) as
set out in the table below with cash items of EUR 35m. Further details are provided
in note 5 to the consolidated financial statements.
Non-trading & exceptional items FY20 FY19
EUR m EUR m
Merger related costs 16.3 56.8
Portfolio management activity 29.8 8.7
UK Municipal contract issues 25.9 64.3
Other changes in long term provisions 33.0 -
Other items 4.3 5.9
Amortisation of acquisition intangibles 6.4 6.4
Exceptional finance costs (2.2) 9.4
Non-trading & exceptional items in loss before 113.5 151.5
tax
Tax on non-trading & exceptional items (9.8) (12.4)
Exceptional tax (2.4) (15.6)
Discontinued operations 18.9 22.5
Total 120.2 146.0
The portfolio management activity charge of EUR 29.8m includes the final charge for
the loss on disposal of the Reym business. Credits of EUR 6.1m were recorded relating
to previous transactions.
As previously announced, EUR 25.9m is relating to an impairment and onerous contract
provision for the ELWA contract in UK Municipal, EUR 17.9m relating to the reduction
in discount rates used for long term provisions and a EUR 15.1m legal provision for
the recent Belgian state aid litigation. The exceptional finance costs include a
current year credit for ineffectiveness of interest rate derivatives.
At merger completion we announced total expected merger related cash costs of EUR 50m
for synergy delivery, EUR 20m for other integration costs and EUR 12m for rebranding
capital spend. The table below shows how this has been incurred since the merger date
and is in line with initial indications. As noted previously, branding spend has been
expensed rather than capitalised. A final EUR 4m of spend will be incurred in FY21 to
complete outstanding IT integration.
Merger FY17 FY18 FY19 FY20 Total Original Difference
related P&L
charges
EUR m EUR m EUR m EUR m EUR m EUR m EUR m
Integration 3.4 8.5 12.5 2.3 26.7 20.0 (6.7)
costs*
Synergy 5.3 13.4 22.1 13.8 54.6 50.0 (4.6)
delivery
Branding - - - - - 12.0 12.0
capex
Initial 8.7 21.9 34.6 16.1 81.3 82.0 0.7
merger
programme
Monostreams - 0.5 10.0 (0.5) 10.0
restructuri
ng
Non-cash - 2.6 12.2 0.7 15.5
costs
Total 8.7 25.0 56.8 16.3 106.8
*Including branding capex now expensed rather than capitalised
The discontinued operations charge of EUR 18.9m reflects the final loss on disposal
of the sale of the Municipal Canada business. In line with accounting requirements as
a result of uncertainty of receipt, the contingent proceeds from this disposal will
only be recognised if more certain.
EBIT from continuing operations, after taking account of all non-trading and
exceptional items, was a loss of EUR 28.1m (2019: EUR 56.6m loss).
Net finance costs
Net finance costs from continuing operations, excluding exceptional items, increased
by EUR 11.0m to EUR 34.4m (2019: EUR 23.4m). The largest driver was the adoption of
IFRS 16 from 1 April 2019 resulting in a EUR 5.8m increase in lease interest.
Interest payable on borrowings increased by EUR 2.2m due to higher levels of debt
compared to the prior period and a higher margin payable due to higher leverage in the
first part of the year. Other finance costs increased by EUR 1.1m principally due to
higher interest charges on invoice financing as referenced at the half year.
Share of results from associates and joint ventures
An increased profit of EUR 0.9m (2019: EUR 0.4m) due to one-off income which is not
expected to recur.
Loss before tax
Loss before tax from continuing operations on a statutory basis, including the impact
of non-trading and exceptional items, was EUR 59.4m (2019: EUR 89.0m).
Taxation
Total taxation for the year on continuing operations was a charge of EUR 1.1m (2019:
credit of EUR 12.4m). The effective tax rate on underlying profits from continuing
operations was 24.5% at EUR 13.3m, lower than last year's 25.0% and driven by
enactment of lower tax rates in Belgium. A tax credit of only EUR 12.2m is
attributable to the non-trading and exceptional items of EUR 113.5m given a
significant proportion of these are non-taxable.
As reported previously, both the Dutch and Belgian governments implemented a number of
corporate tax reforms in recent periods which have resulted in exceptional tax credits
from reductions in future tax rates. In the current year the Dutch Government has made
further revisions and reversed some of the planned tax rate falls which has resulted
in an exceptional tax charge of EUR 1.6m being recorded this year. The total
exceptional tax credit of EUR 2.4m also includes a credit for the release of
provisions in relation to pre-merger tax issues (EUR 2.5m) and an enacted lower tax
rate in the UK (EUR 1.5m).
Looking forward, we anticipate the underlying tax rate may fall slightly to around 24%
in the next few years as no further tax rate changes are anticipated.
The Group statutory loss after tax, including all discontinued and exceptional items,
was EUR 77.1m (2019: EUR 97.7m).
Earnings per share (EPS)
Underlying EPS from ongoing businesses, excluding non-trading and exceptional items,
was 3.9 cents per share, a decrease of 25% on a like for like basis. Basic EPS from
continuing operations was 7.7 cents loss per share compared to a loss of 9.0 cents per
share in the prior year.
Dividend
As announced previously, and in response to Covid-19, the Board has decided not to pay
a final dividend for the year ended 31 March 2020. The interim dividend of 0.45 pence
per share was paid on 10 January 2020.
CASH FLOW PERFORMANCE
A summary of the total cash flows is shown below:
Cash Flow FY20 FY20 FY19
IFRS16 basis IAS17 basis IAS17 basis
EUR m EUR m EUR m
EBITDA 202.8 170.0 181.3
Working capital 22.9 22.9 (22.2)
movement
Movement in provisions (4.5) (4.5) (9.8)
and other
Net replacement (64.2) (64.2) (88.1)
capital expenditure
Interest, loan fees (37.1) (31.2) (30.9)
and tax
Underlying free cash 119.9 93.0 30.3
flow
UK Municipal contracts (23.6) (25.2) (19.0)
Free cash flow 96.3 67.8 11.3
Growth capital (10.1) (10.1) (11.7)
expenditure
Synergy, integration & (24.3) (24.3) (38.7)
restructuring spend
Other (8.4) (9.6) (9.5)
Disposals net of 95.7 95.7 24.1
acquisitions
Dividends paid (8.6) (8.6) (27.4)
Net core cash flow 140.6 110.9 (51.9)
Net debt (6.4) (12.8) -
disposed/acquired
Replacement capital (61.8) - -
expenditure - new IFRS
16 leases
Total 72.4 98.1 (51.9)
Opening net debt (552.0) (552.0) (500.6)
excluding UK PPP net
debt
Loan fee amortisation 0.9 0.9 2.2
Transfer to disposal - - 4.2
group
IFRS 16 transition (177.3) - -
adjustment
Net debt movement 72.4 98.1 (51.9)
excluding UK PPP net
debt
Exchange (3.9) (4.2) (5.9)
Closing net debt (659.9) (457.2) (552.0)
excluding UK PPP net
debt
Free cash flow 132% 110% 35%
conversion
All numbers above include both continuing and discontinued operations.
Free cash flow conversion is underlying free cash flow as a percentage of underlying
EBIT.
Free cash flow conversion on an IAS 17 basis was strong at 110% compared to the 35% in
FY19. Working capital was an inflow of EUR 22.9m based on the timing of payables,
recovery on receivables delayed in the last quarter last year and increased efficiency
on the sale of receivables programme. Some of this benefit is expected to reverse in
the new financial year. Replacement capital spend, excluding new IFRS 16 leases, was
well controlled at EUR 64.2m (2019: EUR 88.1m) representing c.75% of depreciation.
Capital spend was restricted in the first half pending the completion of the disposals
of Canada and Reym which has resulted in a lower spend across the full year. In
addition, a number of leases previously considered operating leases before the
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introduction of IFRS 16 totalling EUR 61.8m have been entered into and these are now
recorded as right-of-use assets and are shown separately in the above cash flow. As
previously reported, we are investing in a rejuvenation of our truck fleet through
leases that spread the cash costs of the trucks over a six year period.
UK Municipal contracts reflect the cash spend on UK onerous contracts of EUR 23.6m
including a significant amount for the final months of the legacy Derby contract
before it was terminated, along with spend on the ELWA contract which is onerous as
from 1 January 2020. The cash outflow on all other contracts was as expected.
The growth capital spend includes the Ottawa expansion (now disposed of) and the
completion of the expansion of the Maasvlakte landfill site.
Synergy, integration and restructuring spend of EUR 24.3m included EUR 22.3m for
synergy delivery and merger related integration costs. In addition, EUR 2m of spend
has arisen for initial restructuring and fees relating to Renewi 2.0.
Other cash flows include the ATM spend on additional logistics and other associated
costs of EUR 4m, EUR 3.5m funding for the closed UK defined benefit pension scheme
and EUR 2.4m relating to the purchase of short term investments in the insurance
captive
The disposals and acquisitions inflow includes the net proceeds from the sale of our
Canadian and Reym businesses, along with EUR 4.3m spend on the acquisition of the
Rotie organic waste collection business and the 32% stake in RetourMatras BV, a
mattress recycler, alongside Ikea.
Net cash generated from operating activities increased from EUR 73.6m in the prior
period to EUR 157.7m in the current year. A reconciliation to the underlying cash
flow performance as referred to above is included in note 18 in the consolidated
financial statements.
RENEWI 2.0
As reported in the CEO's review, we have launched our Renewi 2.0 programme which is
intended to complete the creation of a modern waste-to-product company with digital
interfaces to customers and suppliers, supported by modern, lean and efficient core
processes. These include the introduction of a cloud-based source to pay system and
the creation of Global Process Owners for core processes to standardise and reduce
inefficiency.
We believe that Renewi 2.0 will deliver cost benefits at an annualised run rate of
EUR 20m by March 2023. The cost of the programme is expected to be EUR 40m, split
between capital and an exceptional charge as follows:
Renewi 2.0: expected costs and FY21 FY22 FY23 FY24
benefits
EUR m EUR m EUR m EUR m
Net benefit 1 5 12 20
Exceptional costs (14) (10) (6) -
Capital spend (1) (4) (2) -
Net cash flow (14) (9) 4 20
In addition to the above cash spend certain non-cash impairments of cEUR 3m are
anticipated
INVESTMENT PROJECTS
Expenditure in 2020/21
The Group's long-term expectations for replacement capital expenditure remain around
80% of depreciation. This level may from time to time be supplemented with larger
scale replacement projects. As a result of the current pandemic total capital spend
for FY21 is now estimated to be c.EUR 75m, similar to the previous year and lower
than our previous expectations. This spend will include the new infrastructure for the
construction materials at ATM and a new de-packaging hall in Organics in Commercial
Netherlands.
Return on assets
The Group return on operating assets (excluding debt, tax and goodwill) from ongoing
businesses increased from 26.7% at 31 March 2019 to 27.5% at 31 March 2020 on an IAS
17 basis. IFRS 16 adoption has increased assets by cEUR 175m, with a significant
proportion reflecting very long-term leaseholds of Dutch waterside locations which
cannot be owned under Dutch law. Under IFRS 16 the Group return on operating assets as
at 31 March 2020 was 19.0%. The reported Group post-tax return on capital employed
from ongoing businesses was 6.6% (31 March 2019: 6.9%).
Treasury and cash management
Core net debt and gearing ratios
Core net debt excludes the net debt relating to the UK PFI/PPP contracts which is
non-recourse to the Group and is secured over the assets of the special purpose
vehicles (SPVs) and excludes IFRS 16 related leases. Core net debt at EUR 457.2m
(2019: EUR 552.0m) was better than management expectations with working capital and
capital expenditure well controlled and cash received from the disposals. Liquidity
was also very strong with cash balances of EUR 195m and total liquidity of EUR 252m.
Net debt to EBITDA was 2.98x, comfortably within our covenant limit of 3.5x. On 29 May
2020 we announced a new structure of higher covenant test levels to ensure solvency
through the Covid-19 crisis. These peak at 6.0x during 2020, falling steadily back to
3.5x in September 2021.
Debt structure and strategy
Borrowings, excluding PFI/PPP non-recourse borrowings, are mainly long-term as set out
in the table below.
Debt Structure Drawn Term
EUR m
EUR 100m Belgian Green retail bond 100.0 June 2022
EUR 75m Belgian Green retail bond 75.0 July 2024
EUR 495m Green RCF and term loan 437.1 May 2023/2024
Green EUPP 25.0 December 2023/2025
637.1
Historic IAS 17 finance leases and 19.3
other
Loan fees (4.7)
Cash and Money market funds (194.5)
Core net debt (as per covenant 457.2
definitions)
IFRS 16 finance leases 202.7
Net debt excluding UK PPP net debt 659.9
(note 11)
The facility has been hedged with five cross currency swaps totalling EUR 243.1m at
fixed Euro interest rates of between 1.27% and 1.41% which expire between July 2022
and December 2022.
A EUR 100m retail bond with a coupon of 4.23% was repaid in July 2019 and replaced by
a EUR 75m 5-year green retail bond with a coupon of 3.00%. The remaining EUR 100m
green retail bond has a coupon of 3.65%. All of our borrowings are now green financed.
As at 31 March 2020, 99% of our core net debt was fixed or hedged.
The Group operates a committed invoice discounting programme. The cash received for
invoices sold at 31 March 2020 was EUR 88.0m (March 2019: EUR 68.2m).
The introduction of IFRS 16 on 1 April 2019 brought EUR 177.3m of additional lease
liabilities onto the balance sheet with an associated increase in assets. Additional
leases have been entered into during the year and mostly relating to the truck
replacement programme. Covenants on our main bank facilities remain on a frozen GAAP
basis.
Debt borrowed in the special purpose vehicles (SPVs) created for the financing of UK
PFI/PPP programmes is separate from the Group core debt and is secured over the assets
of the SPVs with no recourse to the Group as a whole. Interest rates are fixed by
means of interest rate swaps at contract inception. At 31 March 2020 this debt
amounted to EUR 90.0m (31 March 2019: EUR 95.4m).
Treasury initiatives
During the year we issued a new EUR 75m bond at 3% to 2024 and repaid the previous
EUR 100m 4.23% bond at maturity. This completed our transition to become entirely
Green financed across all our main banking facilities. After the year end we adjusted
the banking covenants of our facilities to reflect the potential impact from Covid-19.
We entered into various cross currency swaps during the year consistent with our
hedging strategy to manage both interest cost and fix our exposure to interest rates
across a large proportion of the variable rate borrowings. We also extended the use of
invoice discounting programme as we integrated the IT systems supporting the
Commercial division. We established and utilised additional Green leasing facilities
to fund our ongoing investment in our Clean and Green Fleet increasing the proportion
of Euro VI trucks substantially, which are right of use assets under IFRS 16.
PROVISIONS AND CONTINGENT LIABILITIES
Around 85% of the Group's provisions are long-term in nature, with the onerous
contract provisions in the UK Municipal being utilised over 20 years and landfill
provisions for many decades longer. As referenced earlier the Group has completed its
detailed triennial review of long-term discount rates this year which has resulted in
a decrease of discount rates and an associated increase of EUR 18m in the carrying
value of provisions at 31 March 2020. The current provisions amount to EUR 38m,
including EUR 4m for exceptional restructuring, EUR 16m for Municipal onerous
contracts and EUR 5m for landfill related spend. Municipal cash outflows are expected
to reduce in subsequent years.
Details of contingent liabilities are set out in note 17 of the financial statements
and the Group does not expect any of these to crystallise in the coming year.
Retirement benefits
The Group operates a defined benefit pension scheme for certain UK employees which has
been closed to new entrants since September 2002 and was closed to future benefit
accrual on 30 November 2019. At 31 March 2020, the scheme had moved into an accounting
surplus of EUR 16.0m (31 March 2019: EUR 3.7m deficit). The move into surplus was a
result of a change in the scheme's investment strategy which led to a higher return on
assets along with a decrease in the discount rate assumption and lower inflation.
During the year pension increase exchange exercises were actioned which resulted in a
past service saving of EUR 1.4m. The latest actuarial valuation of the scheme was at
5 April 2018 and the future funding plan has been maintained at the current level of
EUR 3.5m per annum until February 2022.
There are also several defined benefit pension schemes for employees in the
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DJ Renewi plc: Final results -10-
Netherlands and Belgium which had a retirement benefit deficit of EUR 7.5m at 31
March 2020, a EUR 0.7m decrease from 31 March 2019.
Consolidated Income Statement
For the year ended 31 March 2020
2020 2019
Note Non-trading Non-trading
Underlying & Underlying &
exceptional exceptional
items items
EUR m Total EUR m Total
EUR m EUR m
EUR m EUR m
CONTINUING
OPERATIONS
Revenue 3,4 1,775.4 - 1,775.4 1,780.7 - 1,780.7
Cost of sales 5 (1,467.5) (72.2) (1,539. (1,470.4) (51.3) (1,521.
7) 7)
Gross profit 307.9 (72.2) 235.7 310.3 (51.3) 259.0
(loss)
Administrative (220.3) (43.5) (263.8) (224.8) (90.8) (315.6)
expenses
Operating 3,5 87.6 (115.7) (28.1) 85.5 (142.1) (56.6)
profit (loss)
Finance income 6 9.7 2.2 11.9 12.4 - 12.4
Finance charges 6 (44.1) - (44.1) (35.8) (9.4) (45.2)
Share of 0.9 - 0.9 0.4 - 0.4
results from
associates and
joint ventures
Profit (loss) 54.1 (113.5) (59.4) 62.5 (151.5) (89.0)
before taxation
Taxation 5,7 (13.3) 12.2 (1.1) (15.6) 28.0 12.4
Profit (loss) 40.8 (101.3) (60.5) 46.9 (123.5) (76.6)
for the year
from continuing
operations
DISCONTINUED
OPERATIONS
Profit (loss) 13 2.3 (18.9) (16.6) 1.4 (22.5) (21.1)
for the year
from
discontinued
operations
Profit (loss) 43.1 (120.2) (77.1) 48.3 (146.0) (97.7)
for the year
Attributable
to:
Owners of the 43.0 (120.9) (77.9) 48.9 (141.7) (92.8)
parent
Non-controlling 0.1 0.7 0.8 (0.6) (4.3) (4.9)
interests
43.1 (120.2) (77.1) 48.3 (146.0) (97.7)
Basic earnings (loss) per share attributable to owners of the parent (cent
per share)
Continuing 8 5.1 (12.8) (7.7) 5.9 (14.9) (9.0)
operations
Discontinued 8 0.3 (2.4) (2.1) 0.2 (2.8) (2.6)
operations
5.4 (15.2) (9.8) 6.1 (17.7) (11.6)
Diluted earnings (loss) per share attributable to owners of the parent (cent
per share)
Continuing 8 5.1 (12.8) (7.7) 5.9 (14.9) (9.0)
operations
Discontinued 8 0.3 (2.4) (2.1) 0.2 (2.8) (2.6)
operations
5.4 (15.2) (9.8) 6.1 (17.7) (11.6)
Consolidated Statement of Comprehensive Income
For the year ended 31 March 2020
2020 2019
EUR m EUR m
Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translation of foreign 6.3 0.3
subsidiaries
Fair value movement on cash flow hedges (12.2) 2.1
Deferred tax on fair value movement on cash flow 0.3 (0.2)
hedges
Share of other comprehensive income of investments 0.2 0.2
accounted for using the equity method
(5.4) 2.4
Items that will not be reclassified to profit or
loss:
Actuarial gain on defined benefit pension schemes 15.2 10.8
Deferred tax on actuarial gain on defined benefit (2.8) (1.7)
pension schemes
12.4 9.1
Other comprehensive income for the year, net of 7.0 11.5
tax
Loss for the year (77.1) (97.7)
Total comprehensive loss for the year (70.1) (86.2)
Attributable to:
Owners of the parent (69.7) (81.1)
Non-controlling interests (0.4) (5.1)
Total comprehensive loss for the year (70.1) (86.2)
Total comprehensive loss attributable to owners of
the parent arising from:
Continuing operations (53.1) (60.1)
Discontinued operations (16.6) (21.0)
(69.7) (81.1)
Consolidated Balance Sheet
As at 31 March 2020
Note 31 March 31 March
2020 2019
EUR m EUR m
Assets
Non-current assets
Intangible assets 10 610.1 605.6
Property, plant and equipment 10 584.0 629.1
Right-of-use assets 10 206.9 -
Investments 15.6 15.9
Financial assets relating to PPP 141.8 149.8
contracts
Trade and other receivables 3.1 0.5
Derivative financial instruments 16 2.1 0.1
Defined benefit pension scheme 15 16.0 -
surplus
Deferred tax assets 37.2 38.6
1,616.8 1,439.6
Current assets
Inventories 20.7 26.0
Investments 8.1 5.9
Loans to associates and joint 0.9 0.9
ventures
Financial assets relating to PPP 6.0 6.0
contracts
Trade and other receivables 272.4 278.8
Derivative financial instruments 16 - 2.9
Current tax receivable 0.7 -
Cash and cash equivalents 194.5 50.4
503.3 370.9
Assets of disposal groups classified 13 - 162.4
as held for sale
503.3 533.3
Total assets 2,120.1 1,972.9
Liabilities
Non-current liabilities
Borrowings - PPP non-recourse net (87.2) (92.6)
debt
Borrowings - Other (816.1) (483.7)
Derivative financial instruments 16 (32.4) (28.4)
Other non-current liabilities (7.1) (6.5)
Deferred tax liabilities (46.9) (56.1)
Provisions 14 (252.4) (215.9)
Defined benefit pension schemes 15 (7.5) (11.9)
deficit
(1,249.6) (895.1)
Current liabilities
Borrowings - PPP non-recourse net (2.8) (2.8)
debt
Borrowings - Other (38.3) (118.7)
Derivative financial instruments 16 (5.6) (4.4)
Trade and other payables (534.3) (518.6)
Current tax payable (16.5) (17.9)
Provisions 14 (37.7) (55.4)
(635.2) (717.8)
Liabilities of disposal groups 13 - (40.5)
classified as held for sale
(635.2) (758.3)
Total liabilities (1,884.8) (1,653.4)
Net assets 235.3 319.5
Equity
Share capital 99.5 99.5
Share premium 473.6 473.6
Exchange reserve (11.6) (17.9)
Retained earnings (327.6) (236.7)
Equity attributable to owners of the 233.9 318.5
parent
Non-controlling interests 1.4 1.0
Total equity 235.3 319.5
Consolidated Statement of Changes in Equity
For the year ended 31 March 2020
Share Share Exchange Retained Non-controlling Total
reserve earnings interests
capital premium equity
EUR m EUR m EUR m
EUR m EUR m EUR m
Balance at 31 99.5 473.6 (17.9) (236.7) 1.0 319.5
March 2019
Change in - - - (7.5) - (7.5)
accounting
policy (note
19)
Restated total 99.5 473.6 (17.9) (244.2) 1.0 312.0
equity at 1
April 2019
(Loss) profit - - - (77.9) 0.8 (77.1)
for the year
Other
comprehensive
income (loss):
Exchange gain - - 6.3 - - 6.3
on translation
of foreign
subsidiaries
Fair value - - - (11.5) (0.7) (12.2)
movement on
cash flow
hedges
Actuarial gain - - - 15.2 - 15.2
on defined
benefit pension
schemes
Tax in respect - - - (2.0) (0.5) (2.5)
of other
comprehensive
income items
Share of other - - - 0.2 - 0.2
comprehensive
income of
investments
accounted for
using the
equity method
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Total - - 6.3 (76.0) (0.4) (70.1)
comprehensive
income (loss)
for the year
Share-based - - - 1.2 - 1.2
compensation
Non-controlling - - - - 0.8 0.8
interest
capital
injection
Dividends paid - - - (8.6) - (8.6)
Balance as at 99.5 473.6 (11.6) (327.6) 1.4 235.3
31 March 2020
Balance at 1 99.5 473.6 (18.2) (124.7) 6.1 436.3
April 2018
Loss for the - - - (92.8) (4.9) (97.7)
year
Other
comprehensive
income (loss):
Exchange gain - - 0.3 - - 0.3
on translation
of foreign
subsidiaries
Fair value - - - 2.3 (0.2) 2.1
movement on
cash flow
hedges
Actuarial gain - - - 10.8 - 10.8
on defined
benefit pension
schemes
Tax in respect - - - (1.9) - (1.9)
of other
comprehensive
income items
Share of other - - - 0.2 - 0.2
comprehensive
income of
investments
accounted for
using the
equity method
Total - - 0.3 (81.4) (5.1) (86.2)
comprehensive
income (loss)
for the year
Share-based - - - 0.8 - 0.8
compensation
Movement on tax - - - (0.6) - (0.6)
arising on
share-based
compensation
Own shares - - - (3.4) - (3.4)
purchased by
the Employee
Share Trust
Dividends paid - - - (27.4) - (27.4)
Balance as at 99.5 473.6 (17.9) (236.7) 1.0 319.5
31 March 2019
The exchange reserve comprises all foreign exchange differences arising since 1 April
2005 from the translation of the financial statements of non-Euro denominated
operations as well as from the translation of liabilities that hedge the Group's net
investment in foreign operations. The cumulative translation loss of EUR 1.9m in
relation to the Canadian operations has been recycled through the Income Statement in
the year ended March 2020 with further detail in note 13.
Consolidated Statement of Cash Flows
For the year ended 31 March 2020
2020 2019
EUR m EUR m
Loss before tax (59.4) (89.0)
Finance income (11.9) (12.4)
Finance charges 44.1 45.2
Share of results from associates and joint (0.9) (0.4)
ventures
Operating loss from continuing operations (28.1) (56.6)
Operating loss from discontinued operations (15.8) (21.0)
Amortisation and impairment of intangible 12.8 31.9
assets
Depreciation and impairment of property, plant 74.8 99.5
and equipment
Depreciation and impairment of right-of-use 42.8 -
assets
Exceptional loss on disposal of 56.2 42.0
subsidiaries/remeasurement of assets held for
sale
Gain on disposal of property, plant and (1.7) (2.3)
equipment
Exceptional loss allowance of loans to - 20.4
associates and joint ventures
Exceptional gain on disposal of joint venture (1.4) (11.1)
Outflows in respect of PPP arrangements under (0.2) (1.7)
the financial asset model
Capital received in respect of PPP financial 0.1 8.6
assets
Exceptional gain on disposal of subsidiaries - (0.3)
Exceptional charge on reassessment of discount 17.9 -
rates for long term provisions
Net decrease in provisions (2.8) (16.9)
Exceptional past service cost in relation to (1.4) (0.1)
defined benefit pension schemes
Payment related to committed funding of the (3.5) (3.4)
defined benefit pension scheme
Other non-cash items (0.1) (2.2)
Share-based compensation 1.2 0.8
Operating cash flows before movement in 150.8 87.6
working capital
Decrease in inventories 5.0 0.1
Increase in receivables (5.7) (5.3)
Increase in payables 17.7 4.4
Cash flows from operating activities 167.8 86.8
Income tax paid (10.1) (13.2)
Net cash inflow from operating activities 157.7 73.6
Investing activities
Purchases of intangible assets (6.7) (5.7)
Purchases of property, plant and equipment (77.8) (101.8)
Proceeds from disposals of property, plant and 11.1 8.1
equipment
Acquisition of subsidiary, net of cash (3.8) -
acquired
Acquisition of business assets (2.6) (0.1)
Proceeds from disposal of subsidiaries, net of 88.2 7.4
cash disposed of and disposal costs paid
Purchase of associates and joint ventures (1.7) (3.8)
Net receipt of deferred consideration 0.3 0.3
Purchase of other short-term investments (2.4) (5.9)
Proceeds from disposal of joint venture - 20.2
Dividends received from associates and joint 0.6 0.7
ventures
Net repayment of loans granted to associates - 1.6
and joint ventures
Outflows in respect of PPP arrangements under (1.7) (1.4)
the financial asset model
Capital received in respect of PPP financial 4.7 4.4
assets
Finance income 10.9 11.7
Net cash inflow (outflow) from investing 19.1 (64.3)
activities
Financing activities
Finance charges and loan fees paid (37.9) (29.4)
Investment in own shares by the Employee Share - (3.4)
Trust
Capital injection from non-controlling 0.8 -
interest
Dividends paid (8.6) (27.4)
Proceeds from retail bonds 75.0 -
Repayment of retail bonds (100.0) -
Proceeds from bank borrowings 78.3 40.3
Repayment of PPP net debt (2.9) (0.6)
Repayments of obligations under leases* (38.5) (11.8)
Net cash outflow from financing activities (33.8) (32.3)
Net increase (decrease) in cash and cash 143.0 (23.0)
equivalents
Effect of foreign exchange rate changes 1.1 0.4
Cash and cash equivalents at the beginning of 50.4 73.0
the year
Cash and cash equivalents at the end of the 194.5 50.4
year
*Repayments of obligations under leases of EUR 38.5m includes EUR 1.8m in relation
to assets of disposal groups classified as held for sale during the year which have
now been disposed of, EUR 0.5m in relation to discontinued operations which have now
been disposed of and EUR 36.2m as set out in note 11. Included in the EUR 38.5m is
EUR 29.7m in relation to additional leases arising upon the adoption of IFRS 16.
Notes to the Consolidated Financial Statements
1. General information
Renewi plc is a public limited company listed on the London Stock Exchange and from 30
January 2020 with a secondary listing on Euronext Amsterdam. Renewi plc is
incorporated and domiciled in Scotland under the Companies Act 2006, registered number
SC077438. The address of the registered office is 16 Charlotte Square, Edinburgh, EH2
4DF. The nature of the Group's operations and its principal activities are set out in
note 3.
2. Basis of preparation
The figures and financial information for the year ended 31 March 2020 are extracted
from but do not constitute the statutory financial statements for that year. The
figures and financial information are audited. The Consolidated Income Statement,
Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in
Equity and Consolidated Statement of Cash Flows for the year ended 31 March 2019 and
the Consolidated Balance Sheet as at 31 March 2019 have been derived from the full
Group accounts published in the Annual Report and Accounts 2019. These have been
delivered to the Registrar of Companies and on which the report of the independent
auditors was unqualified and did not contain a statement under section 498 of the
Companies Act 2006. The statutory accounts for the year ended 31 March 2020 will be
filed with the Registrar of Companies in due course.
The consolidated financial statements are prepared in accordance with International
Financial Reporting Standards (IFRS) and related interpretations issued by the IFRS
Interpretations Committee (IFRS IC) adopted by the European Union (EU) and therefore
comply with Article 4 of the EU IAS Regulation and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS. The Group has applied all
accounting standards and interpretations issued relevant to its operations and
effective for accounting periods beginning on 1 April 2019. The IFRS accounting
policies have been applied consistently to all periods presented and throughout the
Group for the purpose of the consolidated financial statements.
Going concern
As detailed in the CEO and CFO reviews, in relation to the Covid-19 pandemic our
business is an essential service, in the front line of maintaining vital services to
hospitals, businesses and communities and has been able to maintain all required
services and protect our employees in recent times. There has been an adverse impact
to volumes coming into our commercial divisions in particular in the last weeks of
March and during April and May. We have undertaken revised modelling for the new
financial year and beyond to reflect these changes and have taken cost and cash
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DJ Renewi plc: Final results -12-
actions to preserve liquidity even in an extended crisis. The Group has recently
announced that amendments to our banking covenants until September 2021 have been
secured as a result of the impact of Covid-19. Having assessed the revised forecasts
and the principal risks and other matters in connection with the viability statement,
the Directors consider it appropriate to adopt the going concern basis of accounting
in preparing these consolidated financial statements.
Covid-19
Management used judgement to determine the expected impact on financial instruments as
a result of the Covid-19 pandemic. Management have adjusted the future cash flows of
cash generating units when undertaking impairment reviews, specifically with regard to
a reduction in input volumes, reassessment of costs and a deferral of non-urgent
maintenance and capital expenditure. In addition the expected impact of Covid-19 has
been taken into account when assessing the recoverability of deferred tax assets.
Changes in accounting policies
The Group adopted IFRS 16 Leases from 1 April 2019 and has applied the modified
retrospective approach. The comparative information has not been restated however the
reclassifications and adjustments on the opening Balance Sheet on 1 April 2019 have
been recognised and disclosed. The accounting policies, judgements, impact and
practical expedients taken in relation to right-of-use assets and lease liabilities
are detailed in note 19.
The Group also adopted IFRIC 23 Uncertainty over income tax treatments, no changes
were needed to the Groups tax provisions as at the initial application date of 1 April
2019.
2. Basis of preparation - continued
The Group has elected to early adopt the Amendments to IFRS 9, IAS 39 and IFRS 7
Interest Rate Benchmark Reform (IBOR) issued in September 2019 and EU endorsed on 15
January 2020. In accordance with the transition provisions, the amendments have been
adopted retrospectively to hedging relationships that existed at the start of the
reporting period or were designated thereafter. The amendments provide temporary
relief from applying specific hedge accounting requirements to hedging relationships
directly affected by IBOR reform and set out triggers for when the relief will end
which include the uncertainty arising from interest rate benchmark reform no longer
being present. The reliefs mean that this reform should not generally cause the
termination of hedge accounting and the Group has no plans to discontinue hedge
accounting during the period solely due to this IBOR related uncertainty. However, any
hedge ineffectiveness will continue to be recorded in the Income Statement as a
non-trading item. The Group has limited exposure to changes in the GBP LIBOR benchmark
with a notional principal amount of EUR 243.1m of forward cross-currency interest
rate swaps and EUR 104.7m of interest rate swaps relating to PPP contracts. The
Group's transition programme anticipates that the areas of greatest change will be
amendments of the contractual terms of LIBOR referenced interest rate swaps and
cross-currency interest rate swaps and their related cashflows. In assessing whether
the hedge is expected to be highly effective on a forward-looking basis, the Group has
therefore assumed that these future cash payments are not altered by IBOR. The Group
has also determined that the hedged GBP LIBOR risk component is not separately
identifiable at hedge designation.
New standards and interpretations not yet adopted
Standards and interpretations issued by the International Accounting Standards Board
(IASB) are only applicable if endorsed by the European Union.
At the date of approval of these financial statements, there are no IFRSs or IFRS IC
interpretations not yet effective that would be expected to have a material impact on
the Group and there were no other new IFRSs or IFRS IC interpretations which were
early adopted by the Group.
Exchange Rates
The most significant currency for the Group is Sterling with the closing rate on 31
March 2020 of EUR 1:GBP0.884 (2019: EUR 1:GBP0.862) and an average rate for the year
ended 31 March 2020 of EUR 1:GBP0.872 (2019: EUR 1:GBP0.895).
Underlying business performance
The Group uses alternative performance measures as we believe these measures provide
additional useful information on the underlying trends, performance and position of
the Group. These underlying measures are used by the Group for internal performance
analysis and incentive compensation arrangements for employees. The term 'underlying'
refers to the relevant measure being reported for continuing operations excluding
non-trading and exceptional items. These include underlying earnings before interest
and tax (underlying EBIT), underlying profit before tax, underlying profit after tax,
underlying free cash flow, underlying earnings per share and EBITDA (earnings before
interest, tax, depreciation and amortisation). The terms 'EBIT', 'exceptional items'
and 'underlying' are not defined terms under IFRS and may therefore not be comparable
with similarly titled profit measures reported by other companies. These measures are
not intended to be a substitute for, or superior to, GAAP measurements of profit. A
full list of alternative performance measures and non-IFRS measures together with
reconciliations are set out in note 18.
Non-trading and exceptional items
Items classified as non-trading and exceptional are disclosed separately due to their
size or incidence to enable a better understanding of performance. These include, but
are not limited to, significant impairments, significant restructuring of the
activities of an entity including employee associated severance costs, acquisition and
disposal related transaction costs, integration costs, synergy delivery costs,
significant fires, onerous contracts arising from restructuring activities or if
significant in size, profit or loss on disposal of properties or subsidiaries as these
are irregular, the change in fair value of non-hedged derivatives, ineffectiveness of
derivative financial instruments, the impact of changing the discount rate on
provisions and amortisation of acquisition intangibles. The Group incurs costs each
year in maintaining intangible assets which include acquired customer relationships,
permits and licences and excludes amortisation of these assets from underlying EBIT to
avoid double counting such costs within underlying results. A full listing of those
items presented as non-trading and exceptional is shown in note 5.
3. Segmental reporting
The Group's chief operating decision maker is considered to be the Board of Directors.
The Group's reportable segments are determined with reference to the information
provided to the Board of Directors in order for it to allocate the Group's resources
and to monitor the performance of the Group and are set out below:
Commercial Waste Collection and treatment of commercial
waste in the Netherlands and Belgium.
Hazardous Waste Treatment of hazardous waste in the
Netherlands and industrial cleaning until
31 October 2019.
Monostreams Production of materials from waste
streams in specific end markets such as
glass, electrical and electronic
equipment, organics and minerals in the
Netherlands, Belgium, France, Hungary and
Portugal.
Municipal Operation of waste management facilities
under long-term municipal contracts in
the UK.
Group central services Head office corporate function.
The Commercial Waste reportable segment includes the Netherlands Commercial Waste and
Belgium Commercial Waste operating segments which have been aggregated and reported as
one reportable segment as they operate in similar markets in relation to the nature of
the products, services, processes and type of customer.
The profit measure the Board of Directors uses to evaluate performance is underlying
EBIT. The Group accounts for inter-segment trading on an arm's length basis.
Revenue 2020 2019
EUR m EUR m
Netherlands Commercial Waste 786.0 764.7
Belgium Commercial Waste 439.1 430.8
Intra-segment (1.5) (1.1)
Commercial Waste 1,223.6 1,194.4
Hazardous Waste 173.0 211.3
Monostreams 213.6 213.3
Municipal 197.2 195.2
Inter-segment revenue (32.0) (33.5)
Total revenue from continuing operations 1,775.4 1,780.7
Results 2020 2019
EUR m EUR m
Netherlands Commercial Waste 56.0 53.2
Belgium Commercial Waste 33.9 33.3
Commercial Waste 89.9 86.5
Hazardous Waste 12.0 7.0
Monostreams 14.5 12.9
Municipal (2.8) 0.8
Group central services (26.0) (21.7)
Total underlying EBIT 87.6 85.5
Non-trading and exceptional items (note 5) (115.7) (142.1)
Total operating loss from continuing operations (28.1) (56.6)
Finance income 9.7 12.4
Finance charges (44.1) (35.8)
Finance income - non trading and exceptional 2.2 -
items
Finance charges - non trading and exceptional - (9.4)
items
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DJ Renewi plc: Final results -13-
Share of results from associates and joint 0.9 0.4
ventures
Loss before taxation and discontinued (59.4) (89.0)
operations
4. Revenue
The following tables show the Group's continuing revenue by type of service delivered
and by primary geographic markets:
Commercial Hazardous Monostreams Municipal Inter-segment Total
Waste Waste
Revenue EUR m EUR m EUR m EUR m EUR m EUR m
by type
of
service
2020
Inbound 1,037.2 94.6 79.0 185.9 (27.8) 1,368.
9
Outbound 116.8 5.4 131.8 4.8 (2.4) 256.4
On-Site 39.2 72.9 - - (0.2) 111.9
Other 30.4 0.1 2.8 6.5 (1.6) 38.2
Total 1,223.6 173.0 213.6 197.2 (32.0) 1,775.
revenue 4
2019
Inbound 969.2 91.5 71.7 167.3 (23.5) 1,276.
2
Outbound 151.5 4.1 138.9 5.9 (2.2) 298.2
On-Site 44.2 115.7 - - (6.3) 153.6
Other 29.5 - 2.7 22.0 (1.5) 52.7
Total 1,194.4 211.3 213.3 195.2 (33.5) 1,780.
revenue 7
Commercial Hazardous Monostreams Municipal Inter-segment Total
Waste Waste
Revenue by EUR m EUR m EUR m EUR m EUR m EUR m
geographic
market
2020
Netherlands 785.1 173.0 116.0 - (30.2) 1,043.
9
Belgium 438.5 - 64.7 - (1.8) 501.4
UK - - - 197.2 - 197.2
France - - 22.7 - - 22.7
Other - - 10.2 - - 10.2
Total 1,223.6 173.0 213.6 197.2 (32.0) 1,775.
revenue 4
2019
Netherlands 764.0 211.3 113.9 - (31.2) 1,058.
0
Belgium 430.4 - 62.6 - (2.3) 490.7
UK - - - 195.2 - 195.2
France - - 24.2 - - 24.2
Other - - 12.6 - - 12.6
Total 1,194.4 211.3 213.3 195.2 (33.5) 1,780.
revenue 7
Revenue recognised at a point in time amounted to EUR 1,611.8m (2019: EUR 1,576.8m)
with the remainder recognised over time. The majority of the Commercial, Municipal and
Monostreams revenue is recognised at a point in time, whereas for Hazardous Waste the
majority is recognised over time.
5. Non-trading and exceptional items
To improve the understanding of the Group's financial performance, items which are not
considered to reflect the underlying performance are presented in non-trading and
exceptional items.
2020 2019
EUR m EUR m
Merger related costs:
Synergy delivery costs - cash 13.3 32.1
Synergy delivery costs - non-cash 0.7 12.1
Integration costs - cash 2.3 12.5
Integration costs - non-cash - 0.1
16.3 56.8
Portfolio management activity:
Loss on disposal of subsidiaries/prior year 37.3 19.5
remeasurement of assets held for sale
Acquisition of 100% of shares in a joint venture (1.4) -
Prior year disposals (2.2) (11.0)
2017 merger related (3.9) 0.2
29.8 8.7
UK Municipal contract issues 25.9 64.3
Other changes in long-term provisions 33.0 -
Other items:
ATM soil issues 3.1 6.5
Restructuring charges 2.7 -
Income relating to fires (0.1) (0.5)
IAS 19 Employee benefits pensions net credit (1.4) (0.1)
4.3 5.9
Exceptional finance charges - Derby contract - 5.0
issues
Ineffectiveness on cash flow hedges (2.2) 4.3
Change in fair value of derivatives at fair - 0.1
value through profit or loss
Amortisation of acquisition intangibles 6.4 6.4
Non-trading and exceptional items in loss before 113.5 151.5
tax (continuing operations)
Tax on non-trading and exceptional items (9.8) (12.4)
Exceptional tax credit (2.4) (15.6)
Non-trading and exceptional items in loss after 101.3 123.5
tax (continuing operations)
Discontinued operations 18.9 22.5
Total non-trading and exceptional items in loss 120.2 146.0
after tax
The above non-trading and exceptional items include the following:
Merger related costs
Due to the significance of the merger of Shanks Group and Van Gansewinkel Groep (VGG)
in 2017 and the associated synergy delivery projects, these costs are considered to be
exceptional. Synergy delivery costs of EUR 14.0m (2019: EUR 44.2m) and integration
costs of EUR 2.3m (2019: EUR 12.6m) were incurred as the Group executes merger plans
for generating value. Synergy delivery costs include non-cash impairments of EUR 0.7m
relating to the simplification of the range of products at Coolrec and the prior year
cost of EUR 12.1m principally related to the restructuring of the Monostreams glass
operations in the Netherlands. The total cost of EUR 16.3m (2019: EUR 56.8m) was
split EUR 4.0m (2019: EUR 29.5m) in cost of sales and EUR 12.3m (2019: EUR 27.3m)
in administrative expenses.
Portfolio management activity
The Municipal Canada sale completed in September 2019 and is shown as a discontinued
operation. The sale of the Hazardous Waste Reym industrial cleaning business completed
in October 2019 with a loss on disposal of EUR 37.3m (2019: EUR 19.5m loss on
remeasurement) and further details are set out in note 12.
In November 2019 the Group acquired the 50% holding in AP4 Terra B.V. from the joint
venture partner and this resulted in a profit of EUR 1.4m and further details are set
out in note 12.
5. Non-trading and exceptional items - continued
The credit for prior year disposals of EUR 2.2m relates to the release of a warranty
provision for a UK disposal as it is now no longer required. The prior year credit of
EUR 11.0m includes the profit on the sale of the Group's share in the UK joint
venture, Energen Biogas and the profit on sale of transferring 50% of a Hazardous
Waste ATM subsidiary to a joint venture net of initial fees relating to the disposal
process for the Canada and Reym businesses.
The 2017 merger related credit of EUR 3.9m (2019: EUR 0.2m charge) includes a final
warranty settlement relating to the 2017 merger of VGG, a release of provisions in
relation to pre-merger legal matters net of further legal and other advisory
transaction costs incurred. These are considered exceptional as part of the overall
total transaction costs.
The total cost of EUR 29.8m (2019: EUR 8.7m) was all recorded in administrative
expenses.
UK Municipal contract issues
The UK Municipal contract issues of EUR 25.9m (2019: EUR 64.3m) relate to the ELWA
contract which has become onerous from 1 January 2020 as a result of a new Dutch tax
on the import of burnable waste which has and will continue to increase off-take costs
until new outlets can be found together with an expected impact of Brexit which will
increase haulage and tariff costs. This charge is split between an onerous contract
provision of EUR 15.5m and impairment of EUR 10.4m of right-of-use assets. In the
prior year EUR 59.3m was reflected in relation to the UK Municipal Derby contract
including a provision against the original subordinated debt investment of EUR 20.4m
along with impairment of goodwill and other intangible assets of EUR 14.9m, onerous
contract provision of EUR 7.6m to cover ongoing losses and termination costs, a loss
allowance against EUR 11.6m of unpaid delay damages and acceleration of a prepayment
of EUR 4.8m. The contract was subsequently terminated in August 2019. In addition the
prior year charge included a EUR 1.8m onerous contract provision increase and
EUR 4.1m of impairments of contract right intangibles and plant and equipment
relating to the ELWA contract net of a release of a provision of EUR 0.9m for the
Elstow contract. The charge of EUR 25.9m (2019: EUR 64.3m) was split EUR 25.9m
(2019: EUR 9.4m) in cost of sales and EUR nil (2019: EUR 54.9m) in administrative
expenses.
Other changes in long-term provisions
Other changes in long-term provisions includes an increase in provisions of EUR 17.9m
due to the reduction in discount rates, principally landfill related and onerous
contracts, as a result of the fall in Government bond yields. As announced in March
2020, on 6 February the European Commission announced its decision to initiate a
formal investigation in which it alleges that the Walloon Region of Belgium provided
state aid to the Group in relation to the Cetem Landfill. An adverse judgement would
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require the Walloon Region to seek repayment from the Group. While we are vigorously
defending the case, we have considered it appropriate at this stage to recognise a
provision of EUR 15.1m which has been based on the most likely outcome from our legal
advisers. The charge of EUR 33.0m is all recorded in cost of sales.
Other items
The charge for ATM soil issues of EUR 3.1m (2019: EUR 6.5m) relates to the soil
offset market issue and includes additional costs of logistics, off-site storage,
testing and legal advice. These issues are now resolved and no further exceptional
charges are expected.
Other restructuring of EUR 2.7m (2019: EUR nil) includes advisor fees relating to
Renewi 2.0, a project to enhance margins and efficiencies through digitisation and
optimising internal processes.
The net credit in income relating to fires of EUR 0.1m (2019: EUR 0.5m) was the
result of final insurance settlements relating to significant fires in the Commercial
division in prior years.
The IAS 19 Employee benefits net credit of EUR 1.4m (2019: EUR 0.1m) relates to a
past service credit for the UK defined benefit pension scheme which was closed to
future benefit accrual during the year together with a reduction in liabilities as a
result of pension increase exchange exercises. The prior year credit included a past
service charge of EUR 2.0m for the UK defined benefit pension scheme as a result of
the impact of the 2018 Court ruling for guaranteed minimum pension equalisation along
with a curtailment gain of EUR 2.1m which arose as the principal Dutch legacy VGG
defined benefit pension scheme was closed.
The total charge of EUR 4.3m (2019: EUR 5.9m) was split EUR 2.9m (2019: EUR 6.0m)
in cost of sales and EUR 1.4m (2019: EUR 0.1m credit) in administrative expenses.
Items recorded in finance charges and finance income
The exceptional finance charges in the prior year include a EUR 5.0m loss allowance
against the interest receivable on the subordinated debt in relation to the Derby UK
Municipal contract as described above. The EUR 2.2m credit (2019: EUR 4.3m charge)
for ineffectiveness on cash flow hedges is principally in relation to the Cumbria PPP
project interest rate swaps as a result of a revised repayment programme for the PPP
non-recourse debt.
Amortisation of acquisition intangibles
Amortisation of intangible assets acquired in business combinations of EUR 6.4m
(2019: EUR 6.4m) is all recorded in cost of sales.
5. Non-trading and exceptional items - continued
Exceptional tax credit
The exceptional tax credit of EUR 2.4m (2019: EUR 15.6m) relates to a release of
provisions in relation to pre-merger tax issues in Belgium and the Netherlands and
changes in tax rates in the UK and the Netherlands. The prior year credit related to
the change in tax rates in Belgium and the Netherlands and the recognition of tax
losses in the Netherlands and further details are given in note 7.
Discontinued operations
The sale of the Canadian disposal group was completed on 30 September 2019 which
resulted in a loss on disposal of EUR 18.9m (2019: EUR 22.5m loss on remeasurement)
and further details are set out in note 13. As a result of uncertainty of receipt, the
contingent proceeds from this disposal will only be recognised once more certain.
6. Net finance charges
2020 2019
EUR m EUR m
Finance charges
Interest payable on borrowings 18.5 16.3
Interest payable on PPP non-recourse 7.8 7.8
net debt
Lease interest* 6.4 0.8
Unwinding of discount on provisions 7.7 8.4
(note 14)
Interest charge on the retirement 0.2 0.6
benefit schemes
Amortisation of loan fees 1.3 0.8
Other finance costs 2.2 1.1
Total finance charges before 44.1 35.8
non-trading and exceptional items
Finance income
Interest receivable on financial (9.5) (9.5)
assets relating to PPP contracts
Unwinding of discount on deferred (0.2) (0.2)
consideration receivable
Interest receivable on other loans - (2.7)
and receivables
Total finance income before non-trading and (9.7) (12.4)
exceptional items
Non-trading and
exceptional items
Change in fair - 0.1
value of
derivatives at
fair value through
profit or loss
Ineffectiveness on (2.2) 4.3
cash flow hedges
Exceptional - 5.0
finance charges
Non-trading and (2.2) 9.4
exceptional items
Net finance 32.2 32.8
charges
*The lease interest comparatives have been restated to reclassify the prior year
charge for IAS 17 finance leases from interest payable on borrowings. Lease interest
for the year ended March 2020 includes EUR 5.8m interest in relation to the increase
in lease liabilities as a result of IFRS 16 with further details in note 19.
7. Taxation
The tax charge (credit) based on the loss for the year from continuing operations is
made up as follows:
2020 2019
EUR m EUR m
Current tax
UK corporation tax
- Current year 1.5 1.5
Overseas tax
- Current year 11.4 10.1
- Adjustment in respect of the prior year (1.0) (0.4)
- Exceptional tax credit (2.5) -
Total current tax charge 9.4 11.2
Deferred tax
- Origination and reversal of temporary (8.3) (23.8)
differences in the current year
- Adjustment in respect of the prior year - 0.2
Total deferred tax credit (8.3) (23.6)
Total tax charge (credit) for the year 1.1 (12.4)
7. Taxation - continued
The standard Netherlands corporate income tax rate was 25% (2019: 25%). Under the
corporate tax reform enacted by the Dutch government on 18 December 2018, it was
stated that the rate would reduce to 22.55% for the period ending 31 March 2021 and
20.50% for the period ending 31 March 2022 and subsequent periods. However, in
September 2019 the Dutch government announced amendments to the rates so that the rate
will remain at 25% for the period ending 31 March 2021 and 21.7% for the period ending
31 March 2022 and subsequent periods. These amendments were enacted by the Dutch
government on 17 December 2019. As a result, Netherlands deferred tax has been
calculated at the substantively enacted rates depending on when the timing differences
are expected to reverse. This resulted in an exceptional tax charge of EUR 1.6m in
the current year and a credit of EUR 6.3m in the prior year.
The rate of UK corporation tax rate changed from 20% to 19% on 1 April 2017 and
legislation was included in Finance Act 2016 to reduce the rate to 17% on 1 April
2020. However, it was announced in the Chancellor's Budget of 11 March 2020 that the
rate will remain at 19% and this was substantively enacted on 17 March 2020. As a
result, the UK deferred tax for the year has been calculated based on the
substantively enacted rate of 19%. This has resulted in an exceptional tax credit of
EUR 1.5m in the current year.
The other exceptional tax credit of EUR 2.5m relates to a release of provisions in
relation to pre-merger tax issues in Belgium and the Netherlands.
In the prior year in view of the performance of the integrated Netherlands Commercial
business and the Group's forecasts for future profitability of the Netherlands
business, an exceptional tax credit of EUR 10.5m was recognised in relation to the
utilisation of tax losses of the legacy Van Gansewinkel Netherlands businesses
included in the Dutch fiscal unity that can reasonably be expected in the coming
years. In addition, there was an exceptional tax charge of EUR 1.2m for the
impairment of the deferred tax asset brought forward in respect of Maltha Netherlands
fiscal unity losses.
8. Earnings per share
Continuing 2020 2019
operations
Basic Dilutions Diluted Basic Dilutions Diluted
Weighted 794.9 0.9 795.8 796.7 0.1 796.8
average number
of shares
(million)
Loss after tax (60.5) - (60.5) (76.6) - (76.6)
(EUR m)
Non-controlling (0.8) - (0.8) 4.9 - 4.9
interests
(EUR m)
Loss after tax (61.3) - (61.3) (71.7) - (71.7)
attributable to
ordinary
shareholders
(EUR m)
Basic loss per (7.7) - (7.7) (9.0) - (9.0)
share (cents)
The reconciliation between underlying earnings per share and basic loss per share is
as follows:
2020 2019
Cents EUR m Cents EUR m
Underlying earnings per 5.1 40.7 5.9 47.5
share/Underlying profit
after tax attributable to
ordinary shareholders
Adjustments:
Non-trading and exceptional (14.3) (114.2) (18.5) (147.2)
items
Tax on non-trading and 1.2 9.8 1.6 12.4
exceptional items
Exceptional tax 0.3 2.4 2.0 15.6
Basic loss per share/Loss (7.7) (61.3) (9.0) (71.7)
after tax attributable to
ordinary shareholders
Diluted underlying earnings 5.1 40.7 5.9 47.5
per share/Underlying profit
after tax attributable to
ordinary shareholders
Basic loss per share/Loss (7.7) (61.3) (9.0) (71.7)
after tax attributable to
ordinary shareholders
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DJ Renewi plc: Final results -15-
Discontinued operations 2020 2019
Cents EUR m Cents EUR m
Underlying earnings per 0.3 2.3 0.2 1.4
share/Underlying profit
after tax attributable to
ordinary shareholders
Basic loss per share/Loss (2.1) (16.6) (2.6) (21.1)
after tax attributable to
ordinary shareholders
8. Earnings per share - continued
The weighted average number of shares excludes ordinary shares held by the Employee
Share Trust. The Directors believe that adjusting earnings per share for the effect of
the non-trading and exceptional items, amortisation of acquisition intangibles and the
change in fair value of derivatives enables comparison with historical data calculated
on the same basis. Non-trading and exceptional items are those items that need to be
disclosed separately on the face of the Income Statement, because of their size or
incidence, to enable a better understanding of performance.
9. Dividends
2020 2019
EUR m EUR m
Amounts recognised as distributions to equity
holders in the year:
Final dividend paid for the year ended 31 March 4.4 18.9
2019 of 0.5 pence per share (2018: 2.1 pence)
Interim dividend paid for the year ended 31 4.2 8.5
March 2020 of 0.45 pence per share (2019: 0.95
pence)
8.6 27.4
Total dividend per share (pence) 0.45p 1.45p
The Directors have not recommended a final dividend for the year ended March 2020
(2019: 0.5p per share) therefore the aggregate amount of the proposed dividend is
EUR nil (2019: expected to be EUR 4.6m), the actual amount paid for the year ended
March 2019 final dividend was EUR 4.4m due to exchange translation as the dividends
were paid in Sterling.
10. Goodwill, intangible assets, property, plant and equipment and right-of-use assets
Goodwill Intangible Property Right-of-use Total
, plant
EUR m assets assets* EUR m
and
equipmen
t
EUR m EUR m
EUR m
Net book 619.3 80.0 710.8 - 1,410.1
value at 1
April 2018
Additions - 4.9 103.6 - 108.5
Acquisition - 0.1 - - 0.1
through
business
combinations
Disposals (5.1) (0.2) (13.5) - (18.8)
Transfer to (57.3) (4.9) (73.9) - (136.1)
disposal
groups
classified as
held for sale
Amortisation - (13.3) (89.7) - (103.0)
and
depreciation
charge
Impairment (4.3) (14.3) (10.3) - (28.9)
Reversal of - - 0.5 - 0.5
prior year
impairment
charge
Exchange 0.1 0.6 1.6 - 2.3
Net book 552.7 52.9 629.1 - 1,234.7
value at 31
March 2019
Adjustment - - (35.5) 35.5 -
for change in
accounting
policy*
Right-of-use - - - 139.8 139.8
assets on
transition*
Net book 552.7 52.9 593.6 175.3 1,374.5
value at 1
April 2019 -
restated
Additions - 8.5 65.6 61.8 135.9
Acquisition 8.4 0.7 8.9 13.5 31.5
through
business
combinations
Disposals - - (9.3) (0.9) (10.2)
Amortisation - (12.8) (73.1) (32.4) (118.3)
and
depreciation
charge
Impairment - - (1.7) (10.4) (12.1)
Exchange - (0.3) - - (0.3)
Net book 561.1 49.0 584.0 206.9 1,401.0
value at 31
March 2020
*The accounting policy change relates to the adoption of IFRS 16 Leases from 1 April
2019 resulting in finance lease assets with a net book value of EUR 35.5 previously
classified as property, plant and equipment being transferred to right-of-use assets.
In addition on transition EUR 139.8m of right-of-use assets were recognised, see note
19 for further details.
At 31 March 2020, the Group had property, plant and equipment capital commitments of
EUR 12.0m (2019: EUR 15.7m), right-of-use asset commitments of EUR 12.3m and
intangible assets of EUR 3.5m (2019: EUR 0.1m).
11. Borrowings
Borrowings are analysed as follows:
2020 2019
EUR m EUR m
Non-current borrowings
Retail bonds 174.3 99.6
European private placements 24.6 24.5
Term loans 81.5 132.4
Revolving credit facility 352.0 212.2
Lease liabilities* 181.2 15.0
Other loans 2.5 -
Borrowings - Other 816.1 483.7
Borrowings - PPP non-recourse net debt 87.2 92.6
903.3 576.3
Current borrowings
Retail bonds - 100.0
Bank overdrafts 0.7 5.4
Lease liabilities* 36.4 8.3
Other loans 1.2 5.0
Borrowings - Other 38.3 118.7
Borrowings - PPP non-recourse net debt 2.8 2.8
41.1 121.5
*The Group adopted IFRS 16 Leases from 1 April 2019 which resulted in an increase in
lease liabilities with details set out in note 19. The impact on the 31 March 2020
borrowings is an addition of EUR 202.7m.
Movement in net debt
At 1 Adjustment Cash Acquired/ Exchange At 31
April for change flows movement March
2019 in s 2020
accounting
policy Other Disposed
EUR m non-ca of
EUR m sh EUR m EUR m
change
EUR m s
EUR m
EUR m
Cash and 50.4 - 156.0 - (13.0) 1.1 194.5
cash
equivale
nts*
Bank (355.0) - (78.3) 0.7 - (5.3) (437.9)
loans
and
overdraf
ts
European (24.5) - - (0.1) - - (24.6)
private
placemen
ts
Retail (199.6) - 25.0 0.3 - - (174.3)
bonds
Lease (23.3) (155.4) 36.2 (61.8) (13.7) 0.4 (217.6)
liabilit
ies
(552.0) (155.4) 138.9 (60.9) (26.7) (3.8) (659.9)
PPP (95.4) - 2.9 - - 2.5 (90.0)
non-reco
urse net
debt
Total (647.4) (155.4) 141.8 (60.9) (26.7) (1.3) (749.9)
net debt
*Cash and cash equivalents includes EUR 100.0m (2019: EUR nil) of Money market
funds.
Analysis of movement in total net debt
2020 2019
EUR m EUR m
Net increase (decrease) in cash and cash 156.0 (23.0)
equivalents excluding cash relating to
acquisitions and disposals
Cash sold as part of business disposals, net of (13.0) -
cash acquired as part of acquisitions
Net increase (decrease) in cash and cash 143.0 (23.0)
equivalents
Net increase in borrowings and finance leases (14.2) (27.9)
Lease liabilities acquired as part of (13.7) -
acquisitions
Capitalisation of loan fees 2.2 3.0
Total cash flows in net debt 117.3 (47.9)
Adjustment for change in accounting policy (note (155.4) -
19)
Leases entered into during the year (61.8) (0.4)
Amortisation of loan fees (1.3) (0.8)
Transferred to disposal groups classified as - 4.2
held for sale
Exchange loss (1.3) (7.3)
Movement in net debt (102.5) (52.2)
Total net debt at beginning of year (647.4) (595.2)
Total net debt at end of year (749.9) (647.4)
11. Borrowings - continued
At 31 March 2020, the Group had a Euro denominated multicurrency green finance
facility of EUR 520m (2019: EUR 575m) including a EUR 82.5m (2019: EUR 137.5m)
term loan, EUR 25.0m, (2019: EUR 25.0m) European Private Placement (EUPP) and a
EUR 412.5m (2019: EUR 412.5m) revolving credit facility (RCF). Of the term loan and
RCF 50% (EUR 247.5m) matures on 18 May 2023 subject to a further two-year extension
option and 50% (EUR 247.5m) matures on 18 May 2024 subject to a further one-year
extension option in both cases to 18 May 2025. The EUPP has a maturity of December
2023 for EUR 15m and December 2025 for EUR 10m. At 31 March 2020 the term loan was
fully drawn and EUR 355.7m (2019: EUR 212.2m) of the RCF was drawn for borrowings in
Euros and Sterling. The remaining EUR 56.8m (2019: EUR 202.4m) was available for
drawing under the RCF of which EUR 51.7m (2019: EUR 52.6m) was allocated for
ancillary overdraft and guarantee facilities. The covenants within the facility have
recently been amended.
At 31 March 2020, the Group had two issues of green retail bonds. The green retail
bonds maturing June 2022 of EUR 100m (2019: EUR 100m) have an annual gross coupon of
3.65% and the green retail bonds of EUR 75m issued on 19 July 2019 maturing July 2024
have an annual gross coupon of 3.00%. The retail bonds of EUR 100m with a coupon of
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June 04, 2020 02:00 ET (06:00 GMT)
4.23% and a maturity date of July 2019 were fully repaid during the year.
12. Acquisitions and disposals
Acquisitions
In May 2019 the Monostreams division acquired the net assets and operations of Rotie
Organics, a business that collects, sources, de-packages and pre-treats out of date
food waste. The acquisition enhanced the Group's leading position in the Dutch
organics market, strengthening the existing capability to convert out of date food
into valuable products and energy. The consideration paid was EUR 2.6m with the
provisional fair value of the net assets acquired of EUR 1.9m of plant and equipment
and EUR 0.7m acquisition intangible in relation to the customer relationships
acquired. The acquired business contributed EUR 5.6m of revenue and EUR 0.1m of
operating profit since acquisition. If the acquisition had taken place on 1 April 2019
the full year revenue would have been EUR 6.1m and the full year operating profit
would have been EUR 0.1m.
In November 2019 ATM B.V. in the Hazardous Waste division acquired 100% of the share
capital of AP4 Terra B.V. Prior to this date 50% of the entity was owned as a Joint
Venture with an equity value of EUR 2.6m and a fair value of EUR 4.0m. A gain of
EUR 1.4m was recognised in non-trading and exceptional administrative expenses as a
result of remeasuring the equity interest to fair value at the acquisition date. The
business comprises a waterside quay and warehousing under a long-term lease from the
Dutch authorities. The consideration paid in cash was EUR 4.0m net of EUR 0.2m cash
held in the entity acquired resulting in a net cash outflow of EUR 3.8m. The
provisional fair value of the total identifiable net liabilities acquired was
EUR 3.4m being EUR 8.0m of property plant and equipment, EUR 13.5m of right-of use
assets, EUR 0.3m trade and other receivables, EUR 0.6m tax receivable, EUR 0.2m
cash net of EUR 12.3m trade and other payables and EUR 13.7m of lease liabilities.
The resulting goodwill of EUR 8.4m represents the strategic expansion that is already
in progress. The acquired business contributed EUR 0.6m of revenue and EUR 0.7m of
operating loss since acquisition. If the acquisition had taken place on 1 April 2019
the full year revenue would have been EUR 1.2m and the full year operating loss would
have been EUR 2.0m.
Canada disposal
On 30 September 2019 the Group completed the sale of Municipal Canada which was
disclosed as held for sale at 31 March 2019 with an impairment charge of EUR 22.5m
reflected at that time. The loss on disposal of Canada (net of disposal costs)
recorded in the year ended 31 March 2020 totalled EUR 18.9m. Under the Sale and
Purchase agreement there is a potential receipt of contingent consideration however
there is insufficient certainly to recognise a receivable at this time. Upon disposal
the cumulative currency translation reserve of EUR 1.9m has been recycled through the
Income Statement in accordance with IAS 21 The effects of changes in foreign exchanges
rates, see note 13 for further details.
12. Acquisitions and disposals - continued
Reym disposal
On 31 October 2019 the Group completed the sale of the Hazardous Waste Reym industrial
cleaning business which was disclosed as held for sale at 31 March 2019 with an
impairment charge of EUR 19.5m reflected at that time. The final current year loss on
disposal of Reym (net of disposal costs) totalled EUR 37.3m, which includes the
EUR 34.3m remeasurement recorded at 30 September 2019.
2020
EUR m
Loss on disposal
Net cash consideration 37.0
Net assets disposed of (34.0)
Disposal costs and others (6.0)
Loss on disposal (3.0)
Remeasurement at 30 September 2019 (34.3)
Non-trading loss (note 5) (37.3)
Cash flow
Cash consideration 50.1
Cash and cash equivalents disposed of (13.1)
Net cash consideration 37.0
Disposal costs paid (3.0)
Cash inflow per cash flow statement 34.0
13. Assets classified as held for sale and discontinued operations
Assets classified as held for sale - Canada and Reym disposals
On 8 November 2018 the Group announced its intention to exit Municipal Canada and the
Hazardous Waste Reym industrial cleaning business therefore the assets and liabilities
were presented as held for sale at 31 March 2019 as the criteria set out in IFRS 5
Non-current assets held for sale and discontinued operations had been met. Both
disposals completed during the year therefore the carrying value is EUR nil at 31
March 2020.
The carrying value of assets classified as held for sale and the related liabilities
under IFRS 5 were as follows:
2020 2019
EUR m EUR m
Goodwill - 23.8
Other intangible assets - 3.3
Property, plant and equipment - 67.0
Financial assets relating to PPP contracts - 44.0
Trade and other receivables - 23.6
Inventories - 0.7
Total assets held for sale - 162.4
Trade and other payables - (30.6)
Provisions - (0.8)
Finance leases - (4.2)
Tax - (4.9)
Total liabilities relating to assets held for sale - (40.5)
Net assets held for sale - 121.9
13. Assets held for sale and discontinued operations - continued
Discontinued operations - Canada disposal
The Municipal Canada disposal met the definition of a discontinued operation as stated
in IFRS 5 Non-current assets held for sale and discontinued operations, therefore the
net results are presented as discontinued operations in the Income Statement.
Income Statement in relation to the discontinued operations:
2020 2019
EUR m EUR m
Revenue 10.8 18.3
Cost of sales (6.8) (16.0)
Gross profit 4.0 2.3
Administrative expenses (0.9) (0.8)
Operating profit before non-trading and 3.1 1.5
exceptional items
Non-trading and exceptional items (18.9) (22.5)
Operating loss (15.8) (21.0)
Finance income 0.6 1.3
Finance charges (0.5) (1.5)
Loss before tax on discontinued operations (15.7) (21.2)
Taxation (0.9) 0.1
Loss after tax on discontinued operations (16.6) (21.1)
The assets and liabilities disposed were:
Carrying value Change in Carrying value
under IFRS 5 value to date of assets and
recorded in of disposal liabilities
asset held for on 30 disposed of at
sale at 31 September 30 September
March 2019 2019 2019
EUR m EUR m EUR m
Financial asset 44.0 1.2 45.2
relating to a PPP
contract
Property, plant and 21.7 4.5 26.2
equipment
Right-of-use assets - 4.7 4.7
Trade and other 1.7 1.7 3.4
receivables
Inventories 0.1 0.2 0.3
Trade and other (3.8) (0.4) (4.2)
payables
Tax (1.0) (1.0) (2.0)
Lease liabilities - (4.5) (4.5)
Net assets disposed 62.7 6.4 69.1
of (excluding cash)
Loss on disposal
Net cash 56.8
consideration
Net assets disposed (69.1)
of
Loss on disposal (12.3)
before disposal
costs
Cumulative currency (1.9)
translation loss
Disposal costs and (4.7)
others
Discontinued (18.9)
non-trading loss
Cash flow
Cash consideration 56.9
Cash and cash (0.1)
equivalents
disposed of
Net cash 56.8
consideration
Disposal costs paid (2.6)
Cash inflow per 54.2
cash flow statement
Cash flow information in relation to the discontinued operations:
2020 2019
EUR m EUR m
Net cash inflow from operating activities 38.6 10.5
Net cash outflow from investing activities (5.5) (1.5)
Net cash outflow from financing activities (36.3) (8.1)
Net movement in cash (3.2) 0.9
14. Provisions
Site Onerous Legal Restructuring Other Total
restor contrac and
ation ts warran
and ty
afterc EUR m EUR m EUR m
are
EUR m
EUR m
EUR m
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