Recommended
Recommended
More Related Content
Similar to CMD marketing slides
Similar to CMD marketing slides (20)
Recently uploaded
Recently uploaded (20)
CMD marketing slides
- 1. Capital Markets Day 17 September 2019 Leading in UK Sustainable Waste Management
- 3. Welcome 3
- 4. Agenda Subject Presenter Welcome and Strategic Overview Michael Topham Collections Growth Opportunity Jeff Anderson Coffee Break Leading in UK Plastic Recycling Mick Davis Developing Energy from Waste Infrastructure Mike Thair Coffee Break Funding our Sustainable Platform Richard Pike Panel Discussion Various Summary with Q&A Michael Topham
- 5. The Team 5 Michael Topham CEO Richard Pike CFO Jeff Anderson COO - Collections Mike Thair Director of Business Development & Treatment David Gooding IT Director Jane Pateman HR Director Roger Edwards Managing Director Municipal Mick Davis COO Resources & Energy
- 6. We are the leader in UK sustainable waste management 6 With a diverse range of capabilities, generating strong returns £1,031m Net Revenue £81.7m OperatingProfit 7,900 Employees 2,794 Vehicles > 190 Locations 10.8m Tonnes waste handled Collections I&C Revenue: £560.2m Municipal Revenue: £164.6m Specialist Services Revenue: £72.5m Resources & Energy Recycling Revenue: £79.2m Organics Revenue: £61.7m Inerts Net Revenue: £47.1m Landfill Gas Revenue: £45.5m All number are from FY19
- 7. With a Strong Track Record of Profitable Growth 7 Average net revenue growth 7.9% p.a. FY14-FY19 split between organic (40%) and acquisition (60%) Strong growth in tonnages Strong growth in margins and return on assets since 2014 705 771 830 927 1006 1031 1090 34 49 63 74 81 82 89 10 20 30 40 50 60 70 80 90 100 110 500 600 700 800 900 1000 1100 2014 2015 2016 2017 2018 2019 FY20 Analyst ConsensusNet Revenue Underlying EBIT
- 8. With a clear Vision to further strengthen and grow our business Market presence Services & infrastructure Systems & processes Three pillars… Vision Grow Develop Optimise 8 Clear market Leader in Collections Organic Growth above market >£100m invested in acquisitions Unparalleled scale driving sector leading margins Larger, diversified and de-risked Resources & Energy business Leading Polymer Processor, £120m - £150m revenues Growing earnings from Energy from Waste assets Unrivalled leadership in sustainability Underpinned by supportive government legislation
- 9. Currently focused on three specific opportunities 9 Leading in UK Plastic Recycling Operational and development track record Control of materials Trusted off take partnerships Developing Energy from Waste Infrastructure Proven market need Control of waste and consented sites Underpins I&C business Collections Growth Opportunity Scale and capabilities position us well for organic growth Proven track record of M&A Platform gives unique synergy opportunities
- 10. An Extremely Powerful Sustainability Story 10 Consolidation in Collections Recycling/ EfW Investments Strong ESG Performance • Drives more efficient logistics • Reduces carbon impact • Positions us well for fleet electrification • Moves waste up the hierarchy • Reduces carbon impact • Investing in UK green economy infrastructure • Substantial UK employer • Significant UK indirect tax payer 11% Reduction in distance between lifts in last four years 21% Reduction in Scope 1 emissions since FY16 *Taxespaid include: Landfill tax, VAT, PAYE, Employers NIC, IPT and SDLT £230m Paid in UK indirect taxes*
- 11. Introduce Biffa’s Executive and leadership teams Provide insights on our markets and changing regulatory industry dynamics Explore our three key areas of strategic growth and the advantaged positions in each; and Shine a light on our strong sustainability performance Objectives of the Day 11 Biffa: our markets, growth prospects and ESG performance
- 12. Thank you.
- 13. Jeff Anderson Chief Operating Officer Collections
- 15. Introduction
- 16. Collections Division Structure Industrial & Commercial (I&C) MunicipalSpecialist Services StatsOverviewPriorities Revenue £560.2m Tonnes 2.5m (collected) Revenue £164.6m Tonnes 1.5m (collected) Revenue £72.5m Waste collection and materials handling services to I&C customers. Household waste and recycling collections, street cleaning and other services. Specialist services to I&C customers including; • Hazardous waste collection & treatment • Integrated resource management • Producer responsibility compliance Continue to grow organically & via acquisitions Develop new routes to market including e-commerce capability Business stabilised, positioned to selectively grow portfolio Prepare for & benefit from Government resource and waste strategy Continue to drive organic growth in IRM complex customers Restructure Hazardous business to merge with IRM business Leverage I&C customer base 16 I&C Market
- 17. I&C Market
- 18. Market Share Market Sizing £m % Nationals (incl. Biffa I&C) 1,657 28% Large Regionals 2,398 41% Corporate Brokers 396 7% Others 1,441 24% Total 5,892 100% Biffa I&C and Specialist Services £632m 11% Biffa is the clear leader in a fragmented market Competitive Landscape Nationals Large Regionals (e.g.) Corporate Brokers Others Veolia Suez Viridor DS Smith FCC Tradebe Augean Bagnall & Morris Bywaters Cawleys Grundon Simply Waste Hills Enva First Waste Greenzone Mitie Waste Reconomy UKWSL ACM Cheaperwaste Local Authorities C&D operators Small regionals Small brokers 18 11% 17% 41% 7% 24% Biffa I&C Nationals Large Regionals Corporate Brokers Others Source: estimates based on Biffa Data ► Only one national competitor has market share greater than 5% in I&C core market ► Other nationals have not been acquisitive in the collection market ► Biffa is the natural consolidator
- 19. Critical service which businesses must have Mainly scheduled service based (as opposed to volume based) revenue Ever increasing complexity in terms of segregated services and customer sustainability requirements Evolving policy further underpins this A market in which the scale operator has a distinct advantage 19 Route density & lowest cost operator – scale 99% services are scheduled and non variable Disposal costs absorb 50% of collection revenues - leveraging scale unlocks disposal benefits Large operators have scale advantage – both nationally and locally - supporting further industry consolidation Landfill diversion, contamination levels & carbon emissions Smart logistics mapping allows constant re-configuration of routes Technology supports customer, driver & vehicle data – management information driving efficiency Carbon ‘waste miles’ becoming important Critical Non-Discretionary Service Increasingly requiring scale Increasing relevance of ESG performance
- 20. And are supported by the ongoing policy environment Improvement in recycling rates will lead to greater requirement for segregation in containers and collections Mandated separate food collections will drive density to I&C food fleet and re- inflate AD gate fees Extended Producer Responsibility will lead to a greater recovery of recycling/re- processing costs from manufacturers & retailers Deposit Return Schemes should lead to a reduction of plastic bottles in Dry Mixed Recycling (DMR) Extended Producer Responsibility 20
- 22. We provide a unique Integrated Waste Proposition End to end integrated solution important to all customer channels Group processing capability - importance of end destination reporting Carbon and sustainability metrics 22
- 23. And a clear track record of delivery Price Management 1 Low Operating Cost Improved Retention Acquisition Integrations Strong Management Team 5 2 3 4 Strong price management and maintenance across all channels especially in SME 21% growth since 2015 Operating costs haveremained flat for 6 years offsetting inflationary increases with efficiency gains Retention rates have consistently improved for 5 years – SME churn down to <10% for past 2 years Effective at acquisition integration – faster synergy delivery for ‘tuck- under’ deals Regional P&L ownership supported by strong people capability FY15 FY16 FY17 FY18 FY19 Unit Ops cost growth -6.1% -0.7% -1.0% 0.5% 1.9% FY15 FY16 FY17 FY18 FY19 Unit Earnings growth 3.2% 5.6% 3.7% 4.7% 4.1% FY15 FY16 FY17 FY18 FY19 SME Churn 13% 12% 12% 10% 9% FY15 FY16 FY17 FY18 FY19 Deals 8 8 5 7 6 Revenue £6m £30m £19m £51m £64m 23 • Unit earnings is collection revenue minus cost of disposal per m3 • SME churn – annualised impact, in year effect broadly 50% of annualised
- 24. With National Coverage Consistent, effective, reliable – Strong platform for growth 1308 Vehicles 37 Transfer Stations 66 Depots The largest commercial waste collection network in UK 95% UK postcode coverage Strong buying power – disposal costs Critical mass supports flexibility & strong route density 98% first time service success High customer retention rate 3400 FTE 24
- 25. And the greatest benefits of scale in a Fragmented Market Lowest cost to serve, efficient & with strong ESG credentials 25 700k containers collected each week 0.62 lifts per km up 11% since 2015 Stable Ops cost over 5 years Carbon mapping capability Vehicle capacity increased due to fleet double shifting – 24/7 operations Full waste stream coverage, close to customers and highly flexible Modern collection fleet, significant investment over 5 years Dedicated driver training resource Carbon mapping tool introduced – demonstrates value of being located close to the customer Well positioned to leverage electric vehicle technology
- 26. We have a winning formula for customers Self Delivery 95% postcode coverage Well invested fleet Full waste stream coverage Customer Service Levels 98% first time service Strong cash collection Account profitability 100% corporate customers are profitable SME higher margin Brand Increasing profile of ESG Pricing Critical mass and strong route density Innovation & MI Un-paralleled real- time customer MI Sustainability & Compliance Waste data, traceability & supplier governance Carbon mapping Corporate Customers 165 customers - c. £283m collection revenue; 62 customers with annual spend > £1m pa Strong cross sector mix – low exposure to single channel Retail Leisure FM Broker Utilities & Construction £78m £54m £61m £50m £40m 26 Current run rate revenues; including SWR revenues SME Customers 74,000 customers - c. £317m collection revenue with average spend > c. £4k pa Strong cross sector mix – low exposure to single channel
- 27. Our Management Information is industry leading E2E data supporting Customer Management Information 27
- 28. And we look to create strong sustainable partnerships Customer Advocacy 10 year + relationship 1400 UK wide outlets including bakeries One million collections each year across residual waste, food, recyclables and other 36,000 waste tonnes handled 99% first time service – 95% self delivered 96% diverted from landfill 28
- 29. Which is reflected in our win and churn rates Retention & new business win rates are strong National players & waste brokers compete for corporate customers Regional & SME customers targeted by multiple suppliers Impressive retention rates – strong link to acct management capability & service delivery Strong track record of organic revenue growth Price increase discipline ensures recovery of cost inflation SME price elasticity well managed & industry leading Added value services in corporate & IRM estates 45% 28% 95% 94% 91% 0 20 40 60 80 100 Corporate Regional Customers SME Win Ratio Retention Rate 3.5% 2.9% 5.9% 2.5% 3.2% 0 1 2 3 4 5 6 7 FY15 FY16 FY17 FY18 FY19 29 n/a
- 31. Integrated Resource Management Hazardous Waste Compliance Schemes StatsOverviewOpportunity Revenue £34m Revenue £24m Revenue £14m • Complex customers – manufacturing, retailers, food processors • On-site support – waste segregation • Commodity and rebate based • Generates important volumes for Biffa Group – £7m revenue internalised • Collection & disposal of packaged hazardous wastes • Industrial cleaning – facilities e.g. power stations • Liquid tanker operations • End of life treatment (aerosols, flu tubes & bulk liquids) • Biffpack • Packaging Waste Compliance Scheme • Sources Packaging Recovery Notes (PRNs) on behalf of customers • 500 Scheme members • Transform (WEEE) & Battery compliance Waste segregation at source increasingly important on large facilities • Resources & Waste strategy and end to end visibility of waste materials • Strong link to PRN requirements • Opportunity to penetrate I&C corporate customers • Packaged waste opportunity in regional and SME accounts • Retain current membership and profitability • Engage with govt as part of EPR consultation process – Resources & Waste strategy 2023 Specialist Services provides strengthened core offer & growth 31
- 32. Manufacturing Focused / Award Winning / Integrated Experts Bespoke Service Offering Tailored MI Reporting and dedicated on-site Management Strong presence in Food Manufacturing Sector Growth in Distribution Centres (JLP, BP etc) Specialist Waste Handling & Telemetry provider - Biffa Equip Building innovative waste food and co-product collection and processing into pet food – ‘closed loop solution’ Integrated Resource Management: services a Broad Customer Landscape 32
- 33. Nationwide fleet / UK Treatment Facilities / UK Transfer Station Network Hazardous Waste complements the overall offering National collection capability supported by Haz Waste transfer station network National Tanker Fleet to deal with all types of liquid waste Treatment capability in aqueous liquids, aerosols and fluorescent tubes Secure Waste Destruction facility Opportunities ► Most I&C customers will require a hazardous waste service ► Corporate, SWR and IRM customers will generate significant additional spend ► Infrastructure and disposal capability requires future investment ► Well positioned to build out capability & infrastructure through acquisition 33
- 35. Increasing digital capability 35 Multiple digital communications and real time update development opportunities Interface with customers through technology: Real time eta Track my service Dynamic alerts and reminders Personalised messages Driver interaction IOT integration - Order services via voice activated search devices Auto renewal / re-order Reactive SEO / digital marketing Launch of e-commerce solutions
- 36. Driving more volume into the network 36 Corporate SME Household (B2C) Scheduled Exchange Reactive Service Self-delivered Brokered Part-brokered Self-delivered Self-delivered Phone / account manager Complex site clearance Self-delivered Online Telesales Field sales Online-Broker Telesales Self-delivered Online Telesales Regional acquisition brands Self-delivered Self-delivered Online only Waste clearance Click and pay Self-delivered (Municipal Division) .co.uk .co.uk Self-delivered Online only Waste clearance Click and pay Self-delivered Online only Waste clearance Click and pay Green waste Self-delivered Online only Channel Strategy
- 37. Digital Offering – Online Transactional Service Initial phase of Biffa e-commerce and sub-brand strategy Ad hoc waste collection service for the B2B and B2C market Fast response van or skip service Fully on-line transaction – ‘click & pay’ Nationwide coverage – linked to I&C depot & disposal network Target launch: October 2019 ‘The Simple way to get rid of stuff’ ‘Skip it, van it, bag it’ 37
- 39. Deals Revenue Acquired Invested FY14 2 £52m £32m FY15 8 £6m £1m FY16 8 £30m £10m FY17 5 £19m £13m FY18 7 £51m £47m FY19 6 £64m £48m FY20 2 £5m £3m Total 38 £227m £154m We have a clear track record of successful integration 39 ► Removal of duplicate routes ► Removal of duplicate locations ► Transfer Station infrastructure ► Internalising sub-contracted work ► Scale benefits for disposal costs ► Procurement efficiencies ► Back-office and management Source of Synergies ► Well networked management team – able to source off-market deals ► Well respected by advisory community for execution track record ► Experienced M&A team ► Integration capability - able to integrate multiple deals each year Critical Success FactorsTrack Record (Biffa Collections) *Excludes Municipal revenues ex Cory acquisition 2017
- 40. UK network benefits from infill targets in all geographies 40 Primary Targets Looking Forward I&C Compaction / Exchange High synergy value Route density – Ops cost m3 Speed of integration Strengthens local market position Transfer Station & Recycling infrastructure Liberates ‘stranded’ tonnage for Biffa EfW Internalises recycling margin Disposal cost protection Waste Brokerage Strong route density gains Low synergy but internalises margin Creates new routes to mark Hazardous Waste & Source Segregated (e.g.food) Strong cross – sell opportunity Route density & infrastructure build Potential for positive legislative impact Distribution of acquisitions since 2015
- 41. Case Study Strong regional competitor - £4.0m revenues Strong local brand Well invested TS & Recycling Facility Price discounter Distracted management – business in decline No. 4 player in regional market (Biffa No. 1) Infill volume - route density Internalised waste transfer capability Recycling Internalisation of sub- contracted volumes, previously sub-optimal Strong overhead & operational synergies Pre-Acq Post Acq Vehicles 15 10 Ops FTE 20 9 Back Office 6 1 Locations 2 1 Synergy savings £0.8m Post synergy EBITDA multiple 3.5x Time to fully integrate 6 months Target Company Profile Investment Rationale Post Integration Output 41
- 42. Summary
- 43. Summary Unparalleled National Footprint Route density across 95% UK postcodes Close to customers – Flexible 98% first time service Market Consolidation Average 7 acquisitions pa over last 5 years Two further infill acquisitions in progress Future targets expanded to include collections, brokers and Hazardous waste Sector-leading Organic Growth Industry leading data & MI Growth through new channels E-commerce capability Strong Management Team Strength in depth management team – low attrition rate Industry leading Corporate accounts team Regional control – de-centralised 43
- 44. Thank you.
- 45. Mick Davis Chief Operating Officer Resources & Energy
- 46. Introduction to the Resources & Energy Division
- 47. Biffa’s Resources & Energy portfolio 47 InertsRecycling EfW developmentLandfill Gas Key Stats Treatment & disposal of contaminated inerts Produces sands and aggregates Provides landfill disposal for untreatable residues Sorting and trading of dry recyclable commodities Advanced closed loop food grade plastic recycling Treatment of organic waste to produce compost and renewable energy Includes long term MBT contracts at Leicester and West Sussex Energy generation from landfill gas extraction Net Revenue: £61.7M Tonnages: 0.5M Sites: 5 Treatment of general waste for energy recovery Net Revenue: £79.2M Tonnages: 0.5M Sites: 8 Net Revenue: £45.5M GWh: 350 Sites: 36 Net Revenue: £47.1M Tonnages: 3.6M Sites: 23 Organics Overview *Gross Revenue: £120M Tonnages: 750ktpa Sites: 2 Quoted figures refer to the 52 week period ended 29 March 2019 *Gross Project Revenue. Biffa’s share to be incorporated as part of share of net income from JV
- 48. A reminder of Biffa’s Integrated proposition Key to success is security of feed-stock quality and quantity We have scale and are integrated 48 PRODUCTION MANUFACTURING / RAW MATERIALS BIFFA POLYMERS EFW UK
- 49. Plastics Recycling Polymers Resources & Energy: Polymers – Leading in UK plastic recycling
- 50. 50 Blue Planet Consumer awareness – demand for recycled content Brand Value – Sustainability non-negotiable Legislation HMRC – plastic tax Recyclability – Extended Producer Responsibility Public opinion and government policy are aligned (1) Quant survey 2018, UK, CHI,INDO, FR, GER, SP, MEX 78% of consumers prefer more sustainable plastic packaging rather than choosing to abandon plastic completely1
- 51. Where the different policies for plastics sit in the waste hierarchy Stages Most Preferred Least Preferred Prevention Re-use Recycling Other recovery Disposal 51 Ban on single use plastics Bags for life Closed loop mechanical recycling Open loop mechanical recycling Chemical recycling Biodegradable plastics Policy examples
- 52. 52 5 Process lines 63,000 Tonnes input pa 92 Customers 143 Full time employees Current Operations based in Redcar Operating from one of the most technically advanced plastic reprocessing facilities in the world, delivering solutions by converting waste plastics into high value raw materials. Biffa Polymers Redcar
- 53. 53 A Great Track Record to Build on Completed In build 2000 ‘02 ‘04 ‘06 ’08 ‘10 ‘12 ‘14 ’16 ‘20 Pre-consumer PP processing World’s first food grade HDPE (milk bottle) plant Post-consumer mixed plastics processing 2nd HDPE line ’21 Extend mixed plastics capacity PET Investments ‘18 FY00 FY08 FY16 FY19 Tonnage 6,000 24,000 52,000 63,000 Revenue £2m £10m £20m £40m
- 54. Collaboration along the entire supply chain from dairies to supermarkets In 2008 set a target to achieve 30% recycled content by 2015 Biffa developed the world’s first food-grade standard recycling HDPE plant Won the Queen’s Award for Enterprise Innovation in 2009 Industry standardised labels , glues and pigments to boost recycling The result is Biffa’s recycled plastic is used in 85% of plastic milk bottles 54 We pioneered a Sustainable Industry-wide Model
- 55. Delivering a True Closed-Loop Recycling Model 55 Collection SortingMixed Recycling Hot Wash Bales Washed flake Colour sort & decontamination PelletsBlow Moulding Supermarket Dairy
- 56. Long-standing Customer Relationships 56 57,000 Tonnes input pa 38,000 Tonnes output pa
- 58. Resources & Waste Strategy Dec 2018 : To achieve at least 65% recycling of municipal waste by 2035 To work towards all plastics placed on the market being recyclable, reusable or compostable by 2025 and To eliminate avoidable plastic waste over the lifetime of the 25 year plan 58 Launched by WRAP in 2018 Members represent 80% of plastics packaging sold in UK supermarkets The targets for 2025 are : UK Government Policy is aligning with Europe and Public Sentiment
- 59. 59 … and this is Feeding a Huge Uplift in Demand Growth Drivers for UK processing capacity Extended producer responsibility boosting demand Plastic tax Deposit Return Schemes increasing supply Sustainability becoming a key measure of business performance Increasing capture rates expected to meet Government and Plastic Pact targets (66% and 70% by 2025) Potential South East Asia ban on importing plastics Potential UK ban on export of plastics UK processing market could grow 3 - 5x by 2025 - 2017 based on National Packaging Waste data and Biffa recycled tonnage. - 2021 & 2025 indicative projections based on: exports declining to nil and 70% plastics recycling target achieved by 2025; total plastics volume remains constant.
- 60. New PET Bottle Recycling Facility in Seaham 60 £27.5m Investment 57,000 Tonnes input pa 1.3bn Bottles recycled pa 96 Full time employees Biffa Polymers Seaham When completed Seaham will be the most modern and technically advanced PET facility in the world, converting waste plastic bottles into high purity food contact material. £40m Annual Revenues
- 61. Critical Success Factors 61 Biffa is uniquely positioned to succeed Long established team Pioneered food safety protocols in Europe Self-delivered HDPE expansion in 2017 Flexible design to meet all end customers’ requirements Biffa collections: 2,800 trucks MRF network provides high quality sorted materials Modifying MRFs to expand plastic sorting capacity Long-standing relationships through HDPE business Supply to blow moulders or brands directly De-risked commercial model and long- term commitments under negotiation Development & Operational Excellence Control of Feedstock Trusted Offtake Partnerships
- 62. Indicative Expansion Strategy and Impact 62 PP post-industrial 20,000 PP post-consumer 7,000 HDPE post-consumer 28,000 PP wash plant expansion 8,000 63,000 Operational now: Tonnes pa PET (from FY21) 57,000 120,000 Committed and in-build (£27.5m): Expand PP post-consumer 15,000 Expand HDPE 14,000 Expand PET 57,000 206,000 Future potential projects (£30-50m): Medium term targets: Revenue between £120M - £150M Operating Profit £10M - £15M
- 63. Conclusion
- 64. Concluding Remarks #1 in food grade recycled plastic Integrated supply chain Market leader today Government policy alignment and taxes Brand producers response Closed loop - highest level of recycling Unprecedented demand Same team Same technology Same customers Demonstrated track record Control of feedstock Protected margins Strength of team De-risked business model
- 66. Mike Thair Director of Business Development & Treatment
- 67. Market Overview
- 68. 68 The Waste Hierarchy supports the drive away from landfill towards more beneficial recycling and recovery options Since 2000 the UK’s environmental policies have focused on driving waste away from landfill towards more environmentally friendly recycling and recovery options Once recycling has been maximised the next stage is to recover value from the remaining residual waste Recovery is generally in the form of energy generation - realising the latent energy value in the materials we throw away to generate de-centralised renewable energy For material that cannot be recycled or recovered Landfill remains the final disposal option Market evolution supported by fiscal policy has resulted in an economic structure that supports environmental policy with disposal representing the highest cost option of managing waste. Waste Hierarchyand Typical Cost Waste Hierarchy & Economics – Driving recycling & diverting waste from landfill Landfill - £110 Prevention Re-use Recycling +/- £0 Other Recovery £80-£100 Disposal >£100
- 69. UK Waste Management – Progress 69 The UK has made substantial progress in recycling, increasing from ~10% in 2000 to 46% in 2017. Growth has now slowed and further stimulus is required to drive future increases 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 England - Household Waste Management Recycling Recovery - EfW Landfill Recycling Driven by environmental and fiscal policies the UK has seen significant growth over the last 20 years Recovery – Energy from Waste EfW development was historically underpinned by Local Authorities and PFI contracts . Current and future development requires I&C waste and private finance Landfill Landfill tax has supported investment in Recycling & Recovery, reducing the UK’s reliance on landfill disposal Source: DEFRA
- 70. Managing the UK’s residual waste 70 - 5.00 10.00 15.00 20.00 25.00 30.00 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Managing the UK’s Residual Waste (M tpa) RDF Export Domestic EfW Capacity Residual Waste New infrastructure to treat residual waste continues to be developed but there will continue to be a gap in capacity. The amount of residual waste that requires managing depends on the future levels of recycling Current projections include assumed increases in recycling performance Domestic UK Energy from Waste (EfW) capacity treats >12M tpa (2018) The UK currently exports approximately 3M tpa of residual waste to mainland Europe as Refuse Derived Fuel (RDF) – assumed to remain constant but may decrease over time Despite further growth in recycling and the development of additional EfW capacity, the UK will have a persistent shortfall (c.6Mtpa) in treatment capacity Source: Management Analysis
- 71. Developing EfW Capacity in the UK – Critical Success Factors 71 There are more than 40 operational plants in the UK processing >12mtpa. However, more than 20 further mid sized EfW plants are required to manage the UK’s residual waste – this represents an investment of more than £6bn. Critical to unlocking a development project are: Control of Site: Proximity to waste arisings Planning Permission Environmental Permit Control of Waste: Agregated volumes to support investment Stong balance sheet to support contractual commitment SupplyChain: Proven technology with supporting performance guarantees Robust operator to maximise performance with proven technical capacbility
- 72. The Opportunity
- 73. Two opportunities have been developed to invest in EfW infrastructure Located just off the M1 at junction 23 in Leicestershire Annual capacity – 350ktpa of residual household and I&C waste Biffa contracting to supply – 70% (245ktpa) Construction Cost £285-£295m* ProtosNewhurst Development Opportunity – 750,000 tonnes per annum of robust, proven and reliable capacity 73 Located at Ince Marshes near Ellesmere Port in Cheshire Annual capacity – 400ktpa of residual household and I&C waste Biffa contracting to supply – 61% (245ktpa) Construction Cost £325-£335m* * Excluding finance costs
- 74. Located in Shepshed (Leicestershire), Newhurst is immediately accessed from junction 23 of the M1 The site is owned by the Garendon Estate and was historically leased by Hanson for the extraction of mineral Planning Permission & Environmental Permit granted Newhurst – A former quarry located immediately off the M1 in Leicestershire 74 Newhurst Key Metrics Construction Cost £285-£295m Leverage 70-75% Biffa Equity (50%) £40-£45m Biffa Group level IRR (post-tax) Mid-High Teens
- 75. Located in Ince near Ellesmere Port (Cheshire) the site is well located to serve Liverpool and Manchester with access from the M56 The Site (including the wider Protos estate) is owned by Peel. Planning Permission and Environmental Permit granted Protos – A green field site located near Ellesmere Port in Cheshire 75 Key Metrics Construction Cost £325-£335m Leverage 60-70% Biffa Equity @ 25% £30-£35m Biffa Group level IRR (post-tax) Mid-High Teens
- 76. Partnership – Biffa has selected strong partners for the delivery Newhurst and Protos 76 EPC (Engineering, Procurement & Construction) Turnkey Contract for the design, construction, commissioning and testing of the facility O&M (Operations and Maintenance) Provided by Covanta for a minimum term of 20 years FSA (Fuel Supply Agreement) Provided by Biffa for a minimum term of 20 years Sponsors Biffa will control 50% of the Newhurst Project alongside Covanta and GIG Protos – Biffa will control 25% - preferred investor identified to match Biffa’s 25% Non-Recourse Project Finance Borrowed by ProjectCo for the sole purpose of funding construction ProjectCo EPC O&M FSA Covanta Green 50% 50%50% 50% Sponsors: Non-Recourse Project Finance
- 77. EPC – Proven contracting structure for EfW and Project Finance 77 EPC (Engineering, Procurement & Construction) Turnkey Contract for the design, construction, commissioning and testing of the facility Fixed price, fixed programme contract with full responsibility for the performance of the plant through testing including ongoing availability tests ProjectCo EPC O&M FSA Risk Mitigation Allocation Capital Cost Increase Fixed price at financial close FX Hedged Variations by approval – cost benefit analysis EPC Delay Fixed programme to completion LDs payable for delay EPC Performance Guaranteed performance including availability, throughput and electricity generation backed by performance bond and LDs EPC
- 78. Operation & Maintenance – Provided by a leading global EfW Operator 78 ProjectCo EPC O&M FSA O&M (Operations and Maintenance) Provided by Covanta for a minimum term of 20 years Covanta operate 44 EfW facilities and process over 20m tpa Covanta employs over 4,000 people Market Cap $2.3bn Full responsibility to operate and maintain the plant to agreed standards Risk Mitigation Allocation Cost Increase Variable (volume) and fixed price cost payment mechanism O&M Health, Safety & Environment Contract obligation to comply with all legislation including environmental consents O&M Performance Guaranteed performance including availability, throughput and electricity generation O&M
- 79. Fuel Supply 79 ProjectCo EPC O&M FSA FSA (Fuel Supply Agreement) Provided by Biffa for a minimum term of 20 years 245,000 tonnes per annum per project Competitive rate to ensure ‘better than market’ disposal solution ‘Put or Pay’ provisions for failure to supply Volumes supplied from Biffa’s regional collection depots and transfer stations Spare capacity available to tender forthcoming Local Authority Contracts and maximise revenue through spot market rates
- 80. Financial Summary – Project Level 80 Project Co. Worked Example P&L (£m) FY25 FY29 Total Revenues 58 66 O&M (19) (21) SPV Costs (5) (5) Gross profit 34 40 Lifecycle (2) (3) Depreciation (11) (11) Net interest expense (10) (9) Profit before Tax 11 18 Tax (3) (3) Net Income 8 14 O&M Contract represents 81% of annual operational costs Both O&M and Lifecycle costs fixed * Excluding finance costs Construction Cost - Worked Example Uses % Civils 29% Process Equipment 23% Mechanical & Electrical 13% Spares 1% General Project Costs 15% Grid Connection 2% ProjectCo Costs 8% Lease Premium 4% Construction / Project Management 3% Fixed O&M Costs 2% Mobile Equipment, IT, Outfitting 1% Total* 100% EPC Package – fixed price & fixed programme EPC Cost equates to 81% of the total Biffa will include its percentage share of profit after tax in its results Gate fees represent 2/3 of revenue Contracted and inflation linked Interest rates hedged at financial close
- 81. Biffa I&C Volumes – Strategy and delivery 81 Biffa has actively secured disposal capacity in domestic EfW over recent years. The combination of existing contracts and future developments delivers long term security combined with future flexibility Biffa expects to continue to control more than 1.7mtpa of suitable material for treatment in EfW – signed and future disposal contracts account for 60% of Biffa’s suitable tonnage Based on the signed and future Fuel Supply contracts, Biffa will be the UKs largest supplier of fuel to EfW On completion of disposal contracts currently in negotiation (including Newhurst and Protos) Biffa will have secured 60% of its I&C tonnages to long-term EfW supply contracts This commitment underpins the I&C operation on a national level and represents a suitable blend of committed tonnage and future flexibility 23% 14% 14%9% 40% Biffa Volume Contracted Volume Newhurst Protos Future EfW Uncontracted
- 82. Conclusion
- 83. Attractive projects delivering strategic needs 83 There is a clear need for more infrastructure in the UK to meet current and future needs The Newhurst and Protos EfW projects offer attractive investment opportunities delivering a Biffa Post Tax IRR of mid-high teens for a £70-£80m investment Access to EfW underpins our I&C business and supports continued growth Both facilities expected to be operational in 2023 Future opportunities to refinance / recycle capital for further investment
- 84. Thank you.
- 85. Richard Pike CFO
- 86. Building on a proven track record of delivery 86 Strong year on year improvement Resilient underlying business performance weathering commodity / Municipal headwinds / natural decline in Landfill Gas yields Robust underlying cashflow generation pre discretionary growth spend £103m of acquisitions funded from underlying free cash flow over last three years 705 771 830 927 1006 1031 1090 34 49 63 74 81 82 89 10 20 30 40 50 60 70 80 90 100 110 500 600 700 800 900 1000 1100 2014 2015 2016 2017 2018 2019 FY20 Analyst ConsensusNet Revenue Underlying EBIT FY20 Company compiled consensus includes £2m impact of IFRS16
- 87. We have the balance sheet to fund our growth plans 87 Strong, stable and growing Underlying Free Cash Flow Gearing will rise over next 2 years but remain <2.5x*. Medium term target c2x* Dividend growth through improving profitability Collections acquisitions Energy from Waste Plastic recycling solutions Investment Priorities * pre IFRS 16 measures as per banking covenants
- 88. And our ongoing delivery will drive significant shareholder value 88 Investment assumptions (FY20- 23): • c£100m aggregate acquisition spend* with high teen % IRRs • £70-80m equity contributions to EfW (3 year build and commission) which will yield mid-high teen % IRRs • £60-£80m expenditure on Plastics recycling capex with low 20’s % IRRs * in line with FY17-19 Targets: Underlying operating profit growth of around 50% compared to FY19 Underlying EPS growth of over 50%; and Progressive dividend
- 89. Thank you.
- 90. Panel Discussion
- 92. In Summary… Market presence Services & infrastructure Systems & processes Three pillars… Vision Grow Develop Optimise 92 Clear market Leader in Collections Organic Growth above market >£100m invested in acquisitions Unparalleled scale driving sector leading margins Larger, diversified and de-risked Resources & Energy business Leading Polymer Processor, £120m - £150m revenues Growing earnings from Energy from Waste assets Unrivalled leadership in sustainability Underpinned by supportive government legislation
- 93. Q&A
- 94. Thank you.