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Providing critical, sustainable
infrastructure and services
Over the last 100 years, we have been at the
forefront of the UK’s waste industry, collecting
15,000 tonnes of rubbish every day from 76,000
businesses and around 2.2 million households.
But our skills and capabilities stretch well
beyond the bins.
Today our operations span the entire breadth
of the waste management process including
collection, recycling, treatment, disposal and
energy generation.
We believe our 8,000+ team can lead the way in
achieving a sustainable future for the UK, helping
to change the way people think about waste.
Contents
Strategic Report
Performance Highlights
At a Glance
Our Stakeholders
COVID-19 Response
Chairman’s Statement
In Conversation with our CEO
Our Strategic Framework
KPIs
Financial Review
Operating Review
Sustainability
Non-Financial Information Statement
Health & Safety
Our People
Managing our Risks
Principal Risks
Viability Statement and Going Concern
1
2
4
6
8
10
12
14
18
21
25
27
28
29
32
34
39
In Conversation with our CEO 10-11
Read more about our new PET
facility in our Strategic Review
13
Corporate Governance
Corporate Governance Report
Chairman’s Introduction
Board of Directors
Group Executive Team
Nomination Committee Report
Audit Committee Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
40
41
42
44
54
57
62
84
87
Financial Statements
88
Independent Auditor’s Report
Consolidated Financial Statements
102
Notes to the Consolidated Financial Statements 106
154
Parent Company Financial Statements
Additional Information
Glossary
Corporate Information
161
163
Performance Highlights
Continued growth
Financial Highlights
Non-Financial Highlights
Statutory Revenue
(£m)
Net Revenue
(£m)
Underlying
Operating Profit (£m)
Lost Time Injury Rate
(%)
CO2e Emissions
(scope 1&2) (ktns)
£1,163.1m
£1,102.8m
£90.5m
0.23%
572ktns
1
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Underlying
Free Cash Flow (£m)
Leverage Ratio (x)
£53.6m
2.4x
Statutory Profit
after Tax (£m)
£45.6m
Employee
Engagement (%)
Total Renewable
Energy Generated (MW)
58%
423MW
.
6
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Dividend
per Share (pence)
Statutory Earnings
per Share (pence)
Underlying Earnings
per Share (pence)
2.47p
2
.
7
7
.
6
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2
1. For technical terms and abbreviations please refer to the
glossary on pages 161 to 162.
2. The impact of IFRS 16 on FY20 results has been to increase
Underlying EBITDA by £18.9m, Underlying Operating
Profit by £2.8m, reduce Profit after Tax by £1.1m and
Underlying EPS by 0.5p. Net Debt has increased by £141m.
The impact on leverage is 0.6x.
3. Lost time injury rate refers to the number of lost time
injuries relative to the number of employees calculated
over a specified time period.
4. Our total energy generated reduced as we diverted less
waste to landfill resulting in less landfill gas (which we
use to generate energy).
1
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020
At a Glance
Creating value for
our stakeholders
Biffa has an efficient and sustainable
business model. Our ability to capture
value from the waste we collect and
through recycling, energy recovery
or safe disposal, is both profitable
and environmentally sustainable.
A business model with
sustainability at its core
Collect
Our business is formed of two divisions: ‘Collections’ and ‘Resources
and Energy’ (R&E). Collections encompasses our Industrial and
Commercial (I&C), Specialist Services and Municipal businesses
and provides collection, disposal and other services for businesses
and households. R&E which includes Recycling, Organics, Inerts and
Landfill Gas, focuses on sorting, treating, processing and recycling
waste streams. See pages 21 to 24.
We collect general waste and recyclate materials
We have a strong track record of reinvesting in our business, people,
infrastructure and systems and processes, whilst providing positive
returns to our shareholders over the long-term.
We believe our strong heritage, brand and reputation give us a
competitive edge and makes it challenging for new and existing
players to compete with us. As with most businesses across both
the UK and the globe, COVID-19 is undoubtedly testing the resilience
of our business model. However, we believe we have responded well
to the challenges (as detailed on pages 6 to 7) and continue to be
well placed. This is undoubtedly due to our swift response and the
hard work our people put in every day.
We have a deep and unrivalled understanding of the UK waste
market, which comes with over a century of experience. Our
expertise is often sought not only from our customers, but
from the UK Government which values Biffa’s opinion at a local
and national level. This, along with our scalable infrastructure,
distinguishes us from our competitors and is why we believe we
have an exciting growth journey ahead.
2
Revenue sources
Revenue sources
Revenue sources
■ Service fees for collection and disposal of commercial waste
■ Gate fees for processing and treating waste
■ Sale of commodity products
■ Outsourced provision of household collection services
■ Sale of renewable energy
Costs
■ Gate fees payable to third-party operators
(if waste cannot be processed at a Biffa facility)
■ Vehicle, personnel and associated support services
■ Landfill tax
Costs
■ Processing and treatment costs
(including equipment and personnel costs)
■ Gate fee disposal costs for certain products
Biffa Annual Report and Accounts 2020 100+
years of heritage
Leader
in industry health & safety
performance
for I&C collections
No.1
8,000+
employees
vehicles
2,800
95%
UK postcode coverage
70 I&C depots
2 Polymers plastic recycling facilities
15 Soil treatment and composting facilities
38 I&C waste transfer stations
11 Hazardous waste facilities
9 Operating landfill sites
4 Materials recycling facilities
33 Landfill gas sites generating electricity
3 Anaerobic digestion plants
35 Municipal collections contracts
Process
Produce
We process and treat waste and recycling
at our facilities
We generate renewable energy and recycled materials
Where we cannot recycle material at our sites,
we send to Energy from Waste facilities or, as
a last resort, dispose of to landfill
Revenue sources
Revenue sources
Revenue sources
■ Service fees for collection and disposal of commercial waste
■ Gate fees for processing and treating waste
■ Sale of commodity products
■ Outsourced provision of household collection services
■ Sale of renewable energy
Costs
■ Gate fees payable to third-party operators
(if waste cannot be processed at a Biffa facility)
Costs
■ Processing and treatment costs
(including equipment and personnel costs)
■ Vehicle, personnel and associated support services
■ Landfill tax
■ Gate fee disposal costs for certain products
3
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Our Stakeholders
Engaging our
stakeholders
Positive relationships with our stakeholders,
who have an interest in our business and
may be impacted by the decisions we make,
are key to our long-term success.
We therefore engage with them to understand what matters
to them and take this into account when setting strategy and
also in our day-to-day business operations. Our key stakeholder
groups are identified below. We have set out on these pages
how the business engages with these stakeholders, the key
interests raised and the outcomes of that engagement.
Employees
Customers
Shareholders
Government and Regulators
Suppliers
Communities
How we engage
We regularly engage with our employees
face-to-face and through a number of
channels including our employee app,
employee roadshows, all employee calls,
newsletters and our intranet. We conduct
an annual employee engagement survey
and hold focus groups to share results and
gain feedback.
Key interests raised
■ Pay and benefits
■ Communication
How we engage
Ensuring that we work collaboratively
with our customers is of vital importance.
We communicate regularly via customer
meetings, newsletters, blogs and social
media updates.
How we engage
The Executive Directors and Investor
Relations team meet (in person or
via conference call) with existing and
potential investors. We also provide
webcasts, email blasts and events
throughout the year.
How we engage
How we engage
How we engage
We have regular contact with Government
We look to secure excellent value
We are proud to give something back
and regulatory stakeholders and participate
for money, whilst minimising risk in
to the communities in which we serve.
in various expert working groups,
our supply chain. Our Procurement
We attend parish council and local
Government consultations, waste sector
team hosts events and ensures a positive
liaison meetings, invite community
liaison groups and councillor training.
two way communication process with
members to visit our sites, provide regular
our suppliers.
community newsletters and participate in
volunteering and fundraising initiatives.
Key interests raised
■ Service delivery
Key interests raised
■ Financial results
Key interests raised
Key interests raised
Key interests raised
■ Environmental policy and compliance
■ Business model/strategic direction
■ Local site specific environmental and
■ Strategy and growth opportunities
■ Business model/strategic direction
■ Waste and resources policy
■ Sustainability strategy, including
■ Development opportunities
■ Support with sustainability ambitions
■ Capital allocation
■ Employee fundraising
■ Business performance and
customer information
■ H&S
■ Merger & Acquisition potential
■ Ability to self-serve online and more
■ Competition in the industry
digital products
■ Sustainability Strategy
■ Health and Safety (H&S) progress
■ Electric vehicles and alternative fuels
Outcomes of engagement
■ Introduced our employee
app ‘Biffa Beat’
■ Launched ‘Safer Together’
H&S campaign to build a
stronger safety culture
■ Smarter Ways of Working
programme to support flexible
working and work life balance
■ Improved benefits and
employee discounts
■ Introduced new comprehensive
online suite of training and
development materials
■ Partnered with the charity WasteAid
Outcomes of engagement
■ Customer events held to update
customers on business strategy
and opportunities
■ Launched Sustainability Strategy
“Resourceful, Responsible”
■ Developing an online training product
to support our customers in how to
segregate their waste
■ Trialling SMS text alert service with
national customers, letting them
know when their collection is due
■ Introduced new e-commerce enabled
waste collection service called Skoup
Outcomes of engagement
■ High number of meetings held
throughout the year
■ Held Capital Markets Day for key
stakeholders (including online
webcast) to outline growth strategy
and introduce members of Biffa’s
Executive team
■ Launch of Sustainability Strategy
“Resourceful, Responsible”
■ Developed investor section of the
website to include alert service
and regulation
use of electric vehicles
■ Sustainability issues, including
■ Stamping out modern slavery
climate change, circular economy
in the supply chain
and bioplastics
■ Landfill tax issues
■ Tackling modern day slavery and H&S
■ Support of Biffa’s charity
partner WasteAid
operational issues and complaints
■ Funding of local projects through Biffa
Award Landfill Communities Fund
■ Sustainability issues including
waste plastic management and
circular economy
■ Support of Biffa’s charity
partner WasteAid
Outcomes of engagement
Outcomes of engagement
■ Input to, and member of, industry
■ Suppliers provided electric and
Outcomes of engagement
■ Working relationships with
working groups
hybrid vehicles on trial and Biffa
local communities
■ Responses to statutory consultations
provided feedback to product
and calls for evidence
development teams
■ Liaison over new national policy
■ Launch of Sustainability Strategy
and regulation issues
“Resourceful, Responsible”
■ Direct contributions through
community volunteering,
sponsorship and fundraising
■ Local project funding through
■ Publication of Biffa “Reality Check”
■ WasteAid/Slave Free Alliance joint
Biffa Award scheme
report series on website
■ Launch of Sustainability Strategy
“Resourceful, Responsible”
supplier day. Commitment from
suppliers to join the alliance and
help support our charitable efforts
■ Biffa “Reality Check” series of reports
■ Launch of Sustainability Strategy
“Resourceful, Responsible”
Where to find more information
See our People section
on pages 29 to 31
Where to find more information
See our Operating Review
on pages 21 to 24
Where to find more information
See our Shareholder Engagement
on page 52
Where to find more information
Where to find more information
Where to find more information
See our website for further information:
See how the Board engages with
www.biffa.co.uk/publications
Stakeholders on pages 48 to 49
See our People section
on pages 29 to 31
4
Biffa Annual Report and Accounts 2020 Section 172 statement
During the year, the Directors have acted to promote the success of the Company
for the benefit of shareholders, whilst having regard to the following matters:
Where to find out more (page)
■ Likely long-term consequences
■ Interests of the Company’s employees
■ Business relationships with suppliers and customers
■ Impact on the community and environment
■ Reputation for high standards of business conduct
■ Acting fairly between shareholders
6 to 7, 10 to 11, 39
4 to 5, 7, 29 to 31, 48
4 to 5, 7, 21 to 24, 48
4 to 5, 7, 25 to 31, 48
6 to 7, 13, 49
7, 48, 52
Government and Regulators
Suppliers
Communities
Key interests raised
■ Pay and benefits
■ Communication
Key interests raised
■ Service delivery
Key interests raised
■ Financial results
Key interests raised
■ Environmental policy and compliance
Key interests raised
■ Business model/strategic direction
■ Strategy and growth opportunities
■ Business model/strategic direction
■ Waste and resources policy
■ Sustainability strategy, including
How we engage
We have regular contact with Government
and regulatory stakeholders and participate
in various expert working groups,
Government consultations, waste sector
liaison groups and councillor training.
How we engage
We look to secure excellent value
for money, whilst minimising risk in
our supply chain. Our Procurement
team hosts events and ensures a positive
two way communication process with
our suppliers.
and regulation
use of electric vehicles
■ Sustainability issues, including
■ Stamping out modern slavery
climate change, circular economy
and bioplastics
■ Landfill tax issues
■ Tackling modern day slavery and H&S
in the supply chain
■ Support of Biffa’s charity
partner WasteAid
Outcomes of engagement
■ Input to, and member of, industry
working groups
■ Responses to statutory consultations
and calls for evidence
Outcomes of engagement
■ Suppliers provided electric and
hybrid vehicles on trial and Biffa
provided feedback to product
development teams
■ Liaison over new national policy
■ Launch of Sustainability Strategy
and regulation issues
■ Publication of Biffa “Reality Check”
report series on website
■ Launch of Sustainability Strategy
“Resourceful, Responsible”
“Resourceful, Responsible”
■ WasteAid/Slave Free Alliance joint
supplier day. Commitment from
suppliers to join the alliance and
help support our charitable efforts
How we engage
We are proud to give something back
to the communities in which we serve.
We attend parish council and local
liaison meetings, invite community
members to visit our sites, provide regular
community newsletters and participate in
volunteering and fundraising initiatives.
Key interests raised
■ Local site specific environmental and
operational issues and complaints
■ Funding of local projects through Biffa
Award Landfill Communities Fund
■ Sustainability issues including
waste plastic management and
circular economy
■ Support of Biffa’s charity
partner WasteAid
Outcomes of engagement
■ Working relationships with
local communities
■ Direct contributions through
community volunteering,
sponsorship and fundraising
■ Local project funding through
Biffa Award scheme
■ Biffa “Reality Check” series of reports
■ Launch of Sustainability Strategy
“Resourceful, Responsible”
Where to find more information
See our People section
on pages 29 to 31
Where to find more information
See our Operating Review
on pages 21 to 24
Where to find more information
See our Shareholder Engagement
on page 52
Where to find more information
See our website for further information:
www.biffa.co.uk/publications
Where to find more information
See how the Board engages with
Stakeholders on pages 48 to 49
Where to find more information
See our People section
on pages 29 to 31
5
Employees
How we engage
Customers
How we engage
Shareholders
How we engage
We regularly engage with our employees
Ensuring that we work collaboratively
The Executive Directors and Investor
face-to-face and through a number of
with our customers is of vital importance.
Relations team meet (in person or
channels including our employee app,
We communicate regularly via customer
via conference call) with existing and
employee roadshows, all employee calls,
meetings, newsletters, blogs and social
potential investors. We also provide
newsletters and our intranet. We conduct
media updates.
an annual employee engagement survey
and hold focus groups to share results and
gain feedback.
webcasts, email blasts and events
throughout the year.
■ Development opportunities
■ Support with sustainability ambitions
■ Capital allocation
■ Employee fundraising
■ Business performance and
customer information
■ H&S
■ Merger & Acquisition potential
■ Ability to self-serve online and more
■ Competition in the industry
digital products
■ Sustainability Strategy
■ Health and Safety (H&S) progress
■ Electric vehicles and alternative fuels
Outcomes of engagement
■ Introduced our employee
app ‘Biffa Beat’
■ Launched ‘Safer Together’
H&S campaign to build a
stronger safety culture
■ Smarter Ways of Working
programme to support flexible
working and work life balance
■ Improved benefits and
employee discounts
■ Introduced new comprehensive
online suite of training and
development materials
■ Partnered with the charity WasteAid
Outcomes of engagement
■ Customer events held to update
customers on business strategy
and opportunities
■ Launched Sustainability Strategy
“Resourceful, Responsible”
Outcomes of engagement
■ High number of meetings held
throughout the year
■ Held Capital Markets Day for key
stakeholders (including online
webcast) to outline growth strategy
■ Developing an online training product
and introduce members of Biffa’s
to support our customers in how to
Executive team
segregate their waste
■ Launch of Sustainability Strategy
■ Trialling SMS text alert service with
“Resourceful, Responsible”
national customers, letting them
know when their collection is due
■ Introduced new e-commerce enabled
waste collection service called Skoup
■ Developed investor section of the
website to include alert service
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 COVID-19 Response
Decisive action in
challenging circumstances
The COVID-19 outbreak is one
of the biggest challenges Biffa
has faced in its long history.
Since the crisis began, we have taken decisive action,
focusing on the following three immediate priorities:
■ Protecting the health, safety and wellbeing of our
employees and the communities we serve.
■ Ensuring our business operations are able to continue
with minimal disruption and that customers continue
to receive the essential services that we provide.
■ Protecting the financial strength of the Group.
The response of the entire Biffa team in ensuring we have
been able to successfully balance these three challenging
priorities has been exceptional.
Volumes are beginning to recover and COVID-19-related
absence is reducing. See ‘Ensuring Continuity of Business
Operations’ for further information.
Protecting Health, Safety and Wellbeing
Biffa contributed to and supported the development of
national Health & Safety guidance. The UK Government and public
health authorities provided H&S-based instructions and guidance
and the Executive and Waste Industry Safety and Health (WISH)
body, of which Biffa is a leading member, have also established
sector-specific H&S guidance.
We provided a comprehensive suite of Biffa H&S protocols and
supporting guidance, such as social distancing, cleaning standards
and good hygiene to our management, office and front line teams.
We were, like most businesses, faced with the challenge of obtaining
supplies of cleaning products and hand sanitiser in the early days
of the crisis. We worked with our supply chain partners to ensure
we had reasonable timeframes for deliveries and prioritised depots
that were in short supply. We also educated our workforce on what
alternative options they could utilise, such as soap and bottled
water for handwashing when hand sanitisers were not available.
We put measures in place to safeguard our employees who met
the vulnerable and extremely vulnerable category criteria and
implemented pay enhancements for these people to enable
them to keep safe. We also developed an individual employee case
tracker to help monitor and advise individuals within these groups.
The business made a huge effort to enable and support home working,
by issuing over 230 new laptops and supporting an increase in remote
connections to the Biffa network from (on average) 100 to 1,300 a
day. Technical guidance was developed to help people during the
transition along with tips and advice on looking after their wellbeing
during these challenging times.
Ensuring Continuity of Business Operations
In our Collections division, the Industrial & Commercial
business has continued to serve customers, providing essential
services such as food manufacture and retail, distribution,
health and utilities. It is however, the most severely impacted
part of Biffa’s business, with almost all revenues from customers
COVID-19 Response timeline
March
4 March 2020 Pre-close Trading
Update and regular Leadership
Team calls begin
6 March Additional Safety, Health
and Quality cleaning and hygiene
protocols introduced
6 March Internal response team set
up to coordinate business response
16 March Trade unions briefed
on Biffa’s action plan
20 March Michael Topham, CEO
begins weekly coronavirus video
updates for employees
25 March Additional Trading Update
26 March Letter to every Biffa
employee outlining priorities
and the financial support available
31 March Business Continuity
Statement published on website
6
April
1 April ‘Hi-Vis Heroes’ campaign launched
to provide appreciation for our employees
Biffa Annual Report and Accounts 2020 affected by the lockdown ceasing for the time being, across sectors
including hospitality, leisure, transport and non-food retail. Overall,
revenues were initially down around 50% from their position prior
to COVID-19, however volumes are now beginning to recover with
revenues now c. 40% down.
The Municipal business has remained resilient, with revenues
remaining stable. The business has worked with clients to ensure
continuity of almost all services and the team is performing
admirably despite the inevitable increased employee absence
due to COVID-19. Increased absence levels with COVID-19 related
absence peaked at c.17%, now they are c.6%.
The impact across Resources & Energy is varied, with the most
notable impact being on Biffa’s landfill operations, which rely on
the construction industry for a large proportion of their business
and saw revenues reduce by around 50% from their position prior
to COVID-19. Volumes are now beginning to recover with revenues
now c. 40% down. The other areas of the business, whilst impacted,
are holding up well.
For further information see our Operating Review on pages 21 to 24.
Protecting Financial Strength
We took swift and decisive action to mitigate the impact
of the crisis on trading performance and to protect the Group’s
finances, including:
■ rightsizing I&C operations by re-routing trucks, taking c40%
of the front line fleet off the road;
■ all M&A activity was suspended;
■ all non-essential and uncommitted capital expenditure
was deferred;
■ 1,500 staff, predominantly in or supporting our I&C business,
were furloughed under the Government’s Coronavirus Job
Retention Scheme;
■ the Board, Executive and Leadership Teams have taken pay
cuts, whilst we continue with the Government’s Coronavirus
Job Retention Scheme;
■ all uncommitted pay increases were cancelled;
■ FY20 bonuses, for the most senior participants, are to be settled
in shares and FY21 bonus schemes have been suspended;
■ all areas of operating costs were reviewed and non-essential
costs curtailed;
■ the Group agreed deferrals in payments of indirect taxes with
HMRC; and
■ no final dividend has been recommended for FY20.
In addition, the Group’s banks have been very supportive. Covenant
amendments and an additional £60m (in principal) liquidity
headroom has been agreed.
Stakeholder Management
All of our stakeholders were affected in some way by the
COVID-19 crisis. Our swift action and clear engagement with
all stakeholders has enabled Biffa to endure these challenging
circumstances in the best way possible, whilst ensuring we have
continued to support these stakeholders and act fairly at all times:
Employees – our internal effort to protect our people was our top
priority. From adapting staff benefits where relevant, utilising the
Coronavirus Government Retention Scheme, creating an internal
response team, utilising our employee app to proactively engage
with our teams, offering wellbeing support and other engagement
methods including letters, appreciation videos and much more.
Customers – we actively worked with customers to minimise service
disruption and support them where possible. We have also enjoyed
good levels of new business wins.
Shareholders – we sought to engage proactively with shareholders,
participating in numerous calls with them as well as briefing broker
sales teams, and releasing three RNS announcements in relation
to the crisis. Our share price reaction has been consistent with our
sector and the FTSE 250 overall.
Suppliers – we are extremely grateful to the many long-standing
suppliers who have supported our operations through the crisis.
We worked proactively with key suppliers to agree rebates, payment
deferrals and discounts where appropriate.
Government and Regulators – we proactively engaged with the
Government and Regulators and other industry operators to pull
together as an industry, helping to develop industry guidelines and
best practice in response to the crisis.
Communities – our key workers are providing an essential service
to businesses and households. We were overwhelmed by the support
we received from our customers and members of the public (in the
form of hand-written notes, pictures and social media posts) who
have expressed their gratitude for our front line workers.
You can read more on:
Principal risks on pages 34 to 38
Viability statement and going concern on page 39
How the Board Engages with Stakeholders on page 47
COVID-19 Response timeline
2 April Biffa provides waste collection
services for the first temporary COVID-19
hospital, NHS Nightingale in London
(the first of three NHS hospitals we
are supporting)
15 April Biffa receives letter from MP
Rebecca Pow, the Parliamentary Under
Secretary of State for Defra, thanking
the industry for the vital services we
are delivering
6 April Remuneration measures
Trading Update
6 April Regular rhythm of all-employee
calls begin
6 April Furlough process introduced
22 April Issued wellbeing guidance to
managers and podcasts to employees
to offer additional support
May
4 May Bank covenant amendments agreed
6 May COVID-19 Financing and
Reporting Trading Update
June
5 June Full year results announced
7
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Chairman’s Statement
Maintaining a strong
business foundation
Business and Markets
We understand the increasing scrutiny placed on businesses and
households to manage their waste responsibly. That is why we are
committed to providing our customers with efficient, reliable and
sustainable waste management. Central to our business is the
collection of industrial, commercial, and domestic waste which
we process, prioritising its recycling and energy recovery, with
safe disposal to landfill as a last resort.
The markets in which we operate provide us with a number of
opportunities for organic and inorganic growth. Our business spans
each area of the waste hierarchy, which means we are well placed
to take advantage of these opportunities when they arise.
At the beginning of the last financial year we re-organised the Group
into two divisions – Collections and Resources & Energy. This has
created a more efficient, focused structure and positioned us for
growth in the areas where we have advantaged positions. We have
made good progress in both divisions, delivering our plan for the
year and performing in line with expectations, despite the initial
impact of COVID-19 in the last month of the year. You can read
more in our Operating Review on pages 21 to 24.
Strategy and Capital Allocation
Biffa has a clear strategy for growth based on three strategic pillars;
grow our market share; develop services and infrastructure; and
optimise systems and processes. These are underpinned by a focus
on three specific opportunities – growing our collections business;
expanding our plastics recycling business Biffa Polymers; and
investing in energy from waste (EfW). The strategy fully supports
Biffa’s purpose to ‘change the way people think about waste’ and
our vision to ‘lead the way in UK sustainable waste management’
and is underpinned by our Sustainability Strategy, ‘Resourceful,
Responsible’, which we were delighted to launch in March 2020.
One of the highlights of the year for me was attending the official
opening of the first phase of Biffa’s new 57kt PET recycling facility
in Seaham, County Durham, in January 2020. This is progressing
well, despite the COVID-19 outbreak and we still see significant
opportunity for further investment in our Polymers plastics
business over the next few years.
We have also continued to commit capital to bolt-on acquisitions
in the Collections business, which are central to Biffa’s combined
organic and inorganic growth strategy.
You can read more about our overall strategic focus on
pages 12 to 13.
Photo taken at home during lockdown
Ken Lever
Chairman
Last year, my Chairman’s Statement had the
strapline “Well positioned for the future”
and 2019/20 was another good year for Biffa,
building on the progress made since our IPO
in 2016 and establishing a clear path for
future growth against our vision, to ‘lead the
way in UK sustainable waste management’.
It was not until the final couple of weeks of the year that the
impacts of COVID-19 became truly apparent. Biffa’s management
reacted swiftly to the changing economic circumstances and the
significant reduction in demand that the business has experienced
since the year end, especially in the Industrial and Commercial
(I&C) Collections and landfill operations businesses.
Of paramount importance to the Board and the management
is protecting the health, safety and wellbeing of our employees
and the communities we service. I am proud to say that I, and
the rest of the Board, are confident that we have taken the right
steps to do this whilst ensuring the continuity of the critical
services that we provide.
At the end of the financial year, we had over £150m of available
liquidity. This strong liquidity position, combined with the decisive
action taken to control costs, leaves Biffa well placed to weather
these unprecedented trading conditions.
8
Biffa Annual Report and Accounts 2020 Shareholder Returns
We had planned to see an increase in the dividend for the year
ended 27 March 2020, but due to cash conservation measures
in response to COVID-19, the final dividend of 2019/20 has
been cancelled. The Board believes this to be prudent in the
circumstances and aspires to return to dividend payments
as soon as more normal trading conditions allow.
Health & Safety
The waste management industry carries inherent Health & Safety
(H&S) risks and we are committed to keeping our people, our
customers and the general public safe and well. Protecting the
health, safety and wellbeing of our people has been our top priority
throughout the COVID-19 pandemic. Biffa has always been an
industry leader, setting extremely high safety standards. The Board
was delighted to see the achievement of the planned year-on-year
reduction in the Lost Time Injury rate as well as the introduction
of a new H&S culture change programme, ‘Safer Together’.
Corporate Governance
We set out in some detail later in the Corporate Governance
Report (see pages 40 to 85), our approach to corporate governance
and compliance with the UK Corporate Governance Code. The
increasing cost associated with meeting such requirements must
be recognised. We seek to ensure an appropriate balance between
pragmatic compliance and the associated cost, whilst upholding
the highest governance standards in those areas that truly add
value to the business.
The Board
Last year we made a number of changes to the Board. This year
we have seen these changes successfully embedded and Board
members working and interacting well together and building
strong relationships. Inevitably the COVID-19 crisis has challenged
the Board and the Group Executive Team, but it is at times of crisis
that the high quality of our team and leadership is apparent.
Employees
Our people are the core of our organisation. It is the hard work they
put in every day which makes the difference. Identified by the
Government as ‘key workers’ our people have continued to work
throughout the COVID-19 crisis, highlighting their commitment,
dedication and loyalty. The Board thanks all our employees for this
and for the sacrifices they have made to ensure we have been able
to continue to operate and support our customers and communities
during this time.
It has been regrettable that as a result of the downturn in business,
some of our employees have been put into the Government Furlough
Scheme. Biffa has provided enhanced benefits, designed to ensure
that no employee suffers undue hardship whilst unable to work
due to COVID-19. Our executive and senior leadership teams have
also taken adjustments to their remuneration and I would like to
recognise the contribution they have made at this difficult time.
Employee engagement continues to be of key importance to the
organisation. I was delighted that David Martin, our Board member
who has responsibility for workforce engagement, attended two
employee roadshows, conducted a focus group with a cross section
of employees and attended the annual employee awards event,
along with several other activities enabling him access to a large
number of employees.
You can read more about this on pages 29 to 31.
Looking to the Future
We are mindful that the immediate future of Biffa is very much affected
by the current uncertainty in markets attributed to COVID-19.
However, Biffa is a strong company, built on solid foundations, with
a dedicated and committed management team and a clear strategy
for growth. The immediate focus of the Board is very much to protect
and preserve the fundamental value of the business so that we can
return to business as usual and deliver further progress against our
strategic growth plans, once we are through these difficult times.
Ken Lever
Chairman
4 June 2020
9
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 In Conversation with our CEO
Supporting customers
and communities
through the crisis
■ Our I&C business operates in a fragmented market where
scale delivers significant benefits. Our focus on growing, both
organically and through synergistic acquisitions, remains central
to Biffa’s strategy. In the year we delivered strong acquisition growth
of 8.3% of revenue, integrating the acquisitions completed in the
prior year and completing five further bolt-on acquisitions. We
also made good progress in evolving our offering to enable us
to drive further organic growth by developing enhanced digital
capabilities and launching new products to market.
■ Our Polymers business operates in an exciting sector, with
demand for the closed-loop, food-grade recycled plastic that
we manufacture growing rapidly. In the year we successfully
built and commissioned the first phase of our PET plastic bottle
recycling plant at Seaham in County Durham. The plant can
process the equivalent of 1.3bn plastic bottles each year, turning
them into food-grade recycled raw materials for reuse here in the
UK. We also announced a £7m investment in nearby Washington,
in a plant to process plastic pots, tubs and trays. The Polymers
business has again combined the delivery of a strong operational
performance with the development and execution of an exciting
growth strategy.
■ In EfW, the UK continues to have under-capacity to treat non-
recyclable waste for energy recovery. Biffa, as one of the UK’s
largest controllers of waste feedstock through its Collections
business, is well placed to unlock the development of this much-
needed infrastructure. I was delighted that we reached financial
close on our Newhurst project in Leicestershire (£45m for 50%
equity commitment). Plant construction is now under way and
scheduled to be completed in 2023. We continue to progress our
second opportunity, Protos in Cheshire, and are at an advanced
stage of this evaluation.
I am pleased with our strategic progress and remain confident
about the future growth opportunities ahead.
Biffa recently launched its Sustainability Strategy.
What are the key parts of the strategy and how does
it align with Biffa’s growth strategy?
Sustainability isn’t new to us – it has been core to our business and
investment plans ever since the business and the wider industry
began to move away from landfill disposal and into recycling and
renewable energy.
We launched ‘Resourceful, Responsible’, our 10-year Sustainability
Strategy, in March 2020. The strategy, which is aligned to the UN’s
Sustainable Development Goals, is centred around three key
pillars: building a circular economy; tackling climate change; and
caring for our people and supporting our communities. It includes
a commitment to unlock £1.25bn of investment in green economy
infrastructure, whilst reducing our CO2 emissions by a further 50%
in the coming decade. When combined with what we’ve achieved
in the last 15 years, that will amount to a reduction in our CO2
emissions by over 80%.
‘Resourceful, Responsible’ is inextricably linked to our strategic
framework and the investment in green economy infrastructure
includes the plans already outlined in our growth strategy,
including: plastics recycling– which reduces the carbon intensity
of packaging; Collections acquisitions– which reduce the carbon
intensity of business collections as well as improving local air
quality and reducing traffic congestion; and EfW– which helps
Photo taken at home during lockdown
Michael Topham
Chief Executive Officer
How would you summarise the year for Biffa?
Events since March have, for obvious reasons, completely
overshadowed what was otherwise a very successful year for
Biffa. We delivered a strong set of financial results, continued
to execute our exciting growth strategy, and committed to
an ambitious 10-year Sustainability Strategy, ‘Resourceful,
Responsible’ which will see the Group unlock £1.25bn of
investment in green economy infrastructure by 2030.
We continued to make good progress in our I&C business, through
a combination of organic growth, a number of acquisitions and a
standout performance in our Specialist Services business. The
Municipal business stabilised with some excellent new business
wins and contract extensions. In Resources & Energy, a strong
performance in our Biffa Polymers business offset some weakness
in the recycling facilities that arose from ongoing softness in
commodity prices. You can read more about this on pages 21 to 24.
We combined strong business performance and strategic delivery,
with committed leadership in helping to tackle broader issues
affecting our industry including rough sleeping, modern day
slavery, managing waste in the developing world, and diversity
and inclusion in the workplace. We also delivered our best ever
safety performance.
We were admitted to the FTSE 250 Index in March 2020 and I’m
proud of what we have achieved in the year, and even more so
by our response to the COVID-19 crisis.
What are Biffa’s strategic priorities and what progress
has been made in their delivery in the year?
In September 2019 we held a Capital Markets Day event, our first since
the IPO in 2016. The materials presented on the day are available in
the Investors section of our website. At the event, along with members
of the Group Executive Team, we explored the key themes of our
strategy, including the growth of our leading I&C Collections platform,
investing to grow our award-winning plastics recycling business
Biffa Polymers, and investing in EfW infrastructure.
During the year we made good progress in all three areas:
10
Biffa Annual Report and Accounts 2020 reduce the UK’s dependence on fossil fuels. In addition to those
existing plans we have outlined our ambition to invest in solar
energy across our legacy landfill land bank, and our commitment
to phase out the purchase of diesel refuse vehicles by 2030.
It’s a bold and ambitious plan, but it is grounded in known
technologies and solid investment opportunities that we are
well positioned to deliver.
Biffa has refreshed its vision and purpose.
What does this mean for the organisation?
I am fortunate to lead such a committed team of individuals,
who share a clear vision and purpose for our business.
Our vision is simple – to lead the way in UK sustainable waste
management. We wish to lead in business performance and
returns, innovation, reputation and in how we tackle broader
societal issues relevant to our industry. In the year we have
proved we are worthy of the mantle, through the delivery of
a strong business performance, the ongoing execution of our
ambitious strategic growth plans, the articulation of our 10-year
Sustainability Strategy, and the exceptional commitment and
resilience the team has exhibited through the COVID-19 crisis.
Our purpose is – to change the way people think about waste. This
embodies what drives us as an organisation. We understand that waste
matters to people in a way that it didn’t use to. We see the opportunities
that exist in our sector and believe that our role is to help people
understand them so that together we can make them happen.
I believe that together our vision and purpose are a great embodiment
of what life at Biffa is all about and they help to drive our teams to
do the best that they can do.
You’ve mentioned the COVID-19 epidemic.
What impact has it had on the business and
what are you doing to mitigate this?
The COVID-19 crisis is of course unprecedented, and it has had
a significant impact on our business. Since the emergence of the
crisis we have focused on three priorities: protecting the health,
safety and wellbeing of our people and the communities we serve;
ensuring our business operations are able to continue with minimal
disruption and that customers continue to receive the essential
services that we provide; and protecting the financial strength
of the Group.
We took swift action to protect our people, including a rapid shift to
home working where possible and the introduction of new protocols
to ensure that social distancing was observed where practical in our
frontline operations. At all times we have been closely involved in the
development of, and of course have strictly observed, industry and
Government advice and guidelines. In addition to ensuring we kept
our people as safe as possible, we offered enhanced financial benefits
for those unable to work due to COVID-19-related sickness or absence.
The impact has varied across the range of services we provide. Our
most severely impacted business is I&C, where we experienced a
significant reduction in demand for our services and a 50% revenue
decline during the lockdown period, versus pre-COVID levels.
Demand for our Municipal services was relatively unaffected
however, ensuring services could continue in the face of significant
workforce absence has been challenging. Our Resources & Energy
business has been most notably affected in our lnerts business,
with landfill revenues down c50%, versus pre-COVID levels, due to
reduced volumes particularly from the construction sector. Other
parts of the division have been less impacted.
Overall, Group revenues for the period of lockdown were down
30% versus pre-COVID levels. However, the Group saw an early
stabilisation of these trends and in recent weeks we have seen
increases in revenues, with revenue levels in both I&C and landfill
operations now down about 40% from pre-COVID levels.
To support short-term cash preservation we have taken a number of
proactive measures, deferring all discretionary capital and operating
expenditure and other strategic investments such as acquisitions,
settling the majority of earned bonuses from the 2019/20 year in
equity, pay reductions for the Board, Executive Team and other
leaders, the suspension of bonus schemes for the 2020/21 year
and cancelling our year-end dividend. We have benefited from
Government support through the deferral of indirect tax payments
and furloughed approximately 1,500 people. As outlined in our
Chief Financial Officer’s Review, we negotiated waivers of lending
covenants and secured agreement to £60m of additional headroom
financing lines from our existing lending banks, should they be
required. When combined, these measures have ensured that the
Group is positioned to withstand the impact of the crisis and will
help to ensure that we emerge strongly when the crisis passes.
I would like to offer my thanks and appreciation to all of Biffa’s
stakeholders, in particular our employees, for their exceptional
response to the COVID-19 crisis.
As a result of all the actions taken to control costs and enhance
liquidity, the Group remains EBITDA positive and is seeing only
modest monthly cash burn. As a result of mitigating actions, the
Group has taken, we are confident that we can manage through FY21
without seeing a marked increase in debt. Consequently, the Group
is in a position to weather the unprecedented operating backdrop
and trade through all modelled scenarios.
However, it is clear that COVID-19 is having a very significant impact
on some of the Group’s markets and the duration of the pandemic’s
impact and the ongoing effect it may have on the Group’s financial
performance remains uncertain.
As a result, our balance sheet and liquidity planning is based upon a
cautious base case scenario, which assumes lockdown restrictions
continue to be imposed for the duration of Q1 FY21 and are followed
by a subdued and incomplete recovery over the remainder of the
year. Under this scenario:
■ The I&C division is expected to recover slowly as customers begin
to renew activity, exiting the FY21 year with run rate revenues of
~80-90% of FY20, and remaining at these levels as we enter FY22.
■ The Resources & Energy division is expected to experience a
continued and more marked decline in Landfill Gas revenues during
FY22, based on known volume reductions and current electricity
prices. The Group expects its recycling business to continue to grow
across FY21 and FY22, with the new Seaham PET plant coming
on-line and Material Recycling Facility contract improvements.
The impact of reduced EBITDA would see leverage increase at the
end of FY21 to c.3x on the base case and 4x on worst case scenario
(both on a pre-IFRS 16 basis).
As a consequence of the covenant amendments agreed with lenders,
we have agreed a number of restrictions, relating to levels of capex,
M&A and shareholder distributions, which we expect to remain in
place for c.12-18 months. The Company is therefore continuing to
consider its funding options on an ongoing basis, including raising
equity capital, to allow it to continue with all the previously outlined
growth investment opportunities across I&C, closed loop plastic
recycling and Energy from Waste, without delay.
What are your core priorities over the next year?
Our immediate priorities remain those associated with navigating
the COVID-19 crisis. I am however hopeful and confident that as
the year continues, and given the extensive measures we have
taken, we will be able to refocus on delivering our strategic growth
plans, make further progress against our Sustainability Strategy
and ensure Biffa emerges as a stronger and better business.
COVID-19 will eventually pass and we will be able to restore
underlying profitability over time, but the climate emergency
is a continuing global challenge that will still be with us, and
we at Biffa understand the vital role we have to play in helping
the UK to address it.
Michael Topham
Chief Executive Officer
4 June 2020
11
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Our Strategic Framework
Driving progress
through strategy
Our purpose
To change the way people
think about waste
Our vision
To lead the way in UK sustainable
waste management
Read more on page 11
Read more on page 11
Our strategy for the future is built on three key pillars:
Grow our
market share
Biffa seeks to drive organic growth
across all of its businesses by gaining
new customers and by upselling
services to existing customers.
In its I&C business, Biffa has a clear
focus to grow by acquisition, as
a natural consolidator within
a fragmented market.
Develop
services and
infrastructure
Biffa looks to leverage the control
of waste feedstock from its collections
operations to invest in sustainable
waste processing infrastructure.
The expanded capacity and service
offerings that this brings will help
deliver the sustainability ambitions
of both Biffa and its customers whilst
providing the Group with long term
sources of earnings.
Optimise
systems and
processes
Biffa aims to maximise margins by
operating its business as efficiently
as possible. Optimising Biffa’s systems
and processes includes activities such
as integrating acquisitions on to Biffa
systems, delivering strong levels of
customer service to minimise customer
churn, leveraging e-commerce
opportunities and ensuring that
projects meet investment criteria and
help deliver our Sustainability Strategy.
Read more on page 13
Read more on page 13
Read more on page 13
Focused on three specific investment areas:
Collections
growth
Leading in UK
plastic recycling
■ Scale and capabilities position
■ Operational and development
us well for organic growth
track record
■ Proven track record of M&A
■ Control of materials
■ Platform gives unique
synergy opportunities
■ Trusted offtake partnerships
Developing
energy from waste
infrastructure
■ Proven market need
■ Control of waste and consented sites
■ Underpins I&C business
Underpinned by an extremely powerful sustainability story:
We are unlocking c.£1.25bn of investment in the green economy, supported by fundable and deliverable investment plans. See pages 25 to 26.
Building a circular
economy
■ Quadrupling our plastic
recycling capability
■ Investing in energy from waste
Tackling climate
change
■ Efficient low carbon collections
■ Transitioning to EV/alternative fuels
■ Solar development
Caring for our people,
supporting our
communities
■ Reduce Lost Time Injuries
■ Top quartile business for
employee engagement
■ Manage 30% of estate for biodiversity
12
Biffa Annual Report and Accounts 2020
Optimise
systems and
processes
Biffa aims to maximise margins by
operating its business as efficiently
as possible. Optimising Biffa’s systems
and processes includes activities such
as integrating acquisitions on to Biffa
systems, delivering strong levels of
customer service to minimise customer
churn, leveraging e-commerce
opportunities and ensuring that
projects meet investment criteria and
help deliver our Sustainability Strategy.
Read more on page 13
Our strategy for growth sets us on a clear path to lead the way
in UK sustainable waste management.
Grow our
market share
Develop
services and
infrastructure
Optimise
systems and
processes
What we achieved
A particular area of focus for the Group
is in plastics recycling, where we have
the operational track record, control of
feedstock materials and the deep trusted
partnerships with our customers that
position us for success in this critical
and growing sector. Similarly our focus
is in EfW, where our control of feedstock
and consented sites give us the potential
to unlock the development of this much
needed infrastructure.
In January 2020, we opened and
commissioned the first phase of our new
£27.5m PET plastics recycling facility in
Seaham, County Durham. In the next year,
Biffa intends to progress the second phase
of this facility in addition to building a £7m
facility in Washington, which will expand our
recycling capabilities for plastic pots, tubs
and trays. These combined investments
will increase Biffa’s total recycled plastic
processing capability to 140,000 tonnes
per annum.
We also made good headway in growing
our EfW assets, reaching financial close
for our facility in Newhurst, Leicestershire
in February 2020, a commitment by Biffa
ofc.£45m. The plant is now in construction
and is expected to be operational in 2023.
Our second project, the Protos EfW in Cheshire,
is at an advanced stage of evaluation.
In response to the COVID-19 crisis, we
deferred all non-essential and uncommitted
capital expenditure. We anticipate that
this will have only a modest impact on the
timing of our plastics expansion plans and
EfW programme.
Priorities
Our strategic priorities continue to remain
as outlined in our Capital Markets Day in
September 2019, the presentation for which
is included on our website. We intend to
proceed at pace with these plans once the
COVID-19 crisis passes.
What we achieved
Biffa has continued its strong track record of
delivering both organic and inorganic growth,
delivering good levels of new contract wins
in all areas of the business and by acquiring
and successfully integrating acquisitions in
our I&C business.
During the year, we achieved some flagship
Collections division customer wins including
Transport for London and Center Parcs in
our I&C business, Winchester and Cornwall
Council in our Municipal business, and North
London Waste Authority and Müller in our
Resources & Energy division.
We acquired the trade and assets of
five small businesses for a combined
consideration of £5.1m, which takes our
total number of successfully integrated
businesses up to 22 since 2016, with £102m
invested and £132.6m in revenue acquired.
We made good progress in integrating
acquired businesses from the prior year
with all integrations on track. In particular,
the integration of Weir Waste has seen
strong operational synergies by reducing
the size of the combined trade waste
fleet by 24% and in SWR, where we have
benefited significantly from additional
revenues into our collection network.
FY20 Acquisitions
June 2019 Thamesdown Recycling
July 2019 IWMS Waste Collection.com
September 2019 Ribbex
November 2019 Kier Somerset trade waste
Jan 2020 Winchester City Council
Trade Waste Business
Priorities
We have a strong track record in delivering
on our M&A programme. The market
remains fragmented and once we emerge
from the COVID-19 crisis we will be well
placed to continue with our strategy.
As at March 2020, we had several potential
acquisitions that were significantly
progressed, but those processes were put
on hold due to the impact of COVID-19.
We are confident that as the year progresses,
we will be able to further progress our
strategic growth plans in this area.
What we achieved
At the beginning of the financial year
we restructured our business into two
operating divisions – Collections and
Resources & Energy. The restructure has
delivered real benefits and synergies in
particular with closer working between the
I&C and Municipal businesses and between
our Landfill and Landfill Gas operations.
Increasing efficiency was a key
focus throughout the year which we
accomplished in many areas, including
our finance back office by deploying a
Robotic Process Automation (RPA) using
UI Path. The tool automates repetitive
tasks and increases the speed of
completing certain finance processes.
From a customer perspective, we experienced
low levels of churn, in our I&C business,
with key renewals including John Lewis
Partnership, Baxter Healthcare, Greene King
and Mitchells & Butlers. We also deployed
customer facing Power BI reporting across
64 corporate customers which enables
them to report on their overall spend,
volumes, carbon consumption and other
detailed activity. It is proving to be a real
differentiator for new business versus
competitors, adding to Biffa’s unique and
quality service offering.
We successfully integrated prior year
acquisitions, together with five additional
businesses bought in year, overseen by
our experienced management team. Our
excellent M&A track record and integration
capabilities have been key success factors
in ensuring we can quickly benefit from the
synergies that these acquisitions deliver.
We have also been progressing ‘Project
Fusion’, the Group’s system replacement
programme. More on this can be found
on page 20.
Priorities
Our investment focus remains on
improving efficiency of Collections,
processing and back office function
operations. We also seek to reduce
the level of manual intervention in
operational day-to-day tasks so that our
resource can provide more added value
elsewhere. We will implement RPA in
other areas of the business in the coming
year to drive increased efficiency and will
explore potential efficiency opportunities
using our internal BrightSparks innovation
process which generates new ideas.
Risks
See pages 32 to 38
Risks
See pages 32 to 38
Risks
See pages 32 to 38
13
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Key Performance Indicators
Measuring our progress
Financial
Underlying Organic
Net Revenue Growth (%)
Acquisition Net
Revenue Growth (%)
Underlying Operating
Profit Margin (%)
Return on Operating Assets
Return on Capital Employed
Underlying Earnings
Leverage Ratio
(%)
(%)
per Share (pence)
(x)
2020
2.5
2020
4.5
2020
2019
1.5
2018
2.1
2019
2018
2.9
4.4
2019
2018
7.8
7.5
7.5
Definition
Performance
The increase/(decrease) in
Net Revenue in the period
excluding Net Revenue from
acquisitions completed in
the period and Net Revenue
from acquisitions completed
in the prior period up to the
anniversary of the relevant
acquisition date, to the
extent such Net Revenue
falls in the current period.
Where comparative periods
differ in duration, the KPI is
adjusted on a pro-rata basis.
The Group had a strong
year of organic growth with
some flagship customer
wins. In our Collections
division these included
Transport for London and
Center Parcs in the I&C
business and Winchester
and Cornwall Council in
our Municipal business.
In our Resources & Energy
division, we had some
important contract renewals
that will underpin ongoing
organic growth including
Müller, Arla and North
London Waste Authority.
Acquisition Net Revenue
Growth in any period
represents the Net Revenue
Growth in the relevant
period from (i) acquisitions
completed in the relevant
period and (ii) any
acquisitions completed in
the 12 months prior to the
relevant period up to the
12-month anniversary of
the relevant acquisition
date (to the extent such Net
Revenue falls in the current
period). Acquisition Revenue
Growth is calculated on the
same basis, using revenue
in place of Net Revenue.
We acquired the trade
and assets of five small
businesses for a combined
consideration of £5.1m.
We also made good progress
in integrating acquired
businesses from the prior
year with all integrations
on track.
As at March 2020, we
had several potential
acquisitions that were
significantly progressed,
but those processes were
put on hold due to the
impact of COVID-19.
Profit before exceptional
items, amortisation of
acquisition intangibles,
impact of real discount
rate changes to landfill
provisions, finance costs
and taxation expressed
as a percentage of sales.
Underlying Operating
Profit divided by the average
Operating Profit excluding
exceptional items and the
Underlying Profit After Tax
divided by the number of
Net Debt: Underlying
EBITDA.
impact of real discount rate
shares in issue.
of opening and closing
tangible fixed assets plus
net working capital.
changes to landfill provisions
divided by the average
of opening and closing
shareholders’ equity plus
Net Debt (including lease
liabilities), pensions and
environmental provisions.
The Underlying Profit Margin
remained stable, despite
commodity price headwinds
and disposal cost pressure.
On a pre-IFRS 16 basis the
margin for the current year
was 7.5%.
Return on Operating
Assets decreased due to
the inclusion of £134.9m of
IFRS 16 Right of Use assets.
On a pre-IFRS 16 basis
ROOA improved to 26.4%.
Whilst operating profits have
Underlying Earnings per
increased year-on-year, due
Share rose by 12.1% to 23.1
to IFRS 16, Capital Employed
pence. This is driven by
has increased by £141m. On
higher underlying profits
a pre-IFRS 16 basis ROCE
improved to 10.3%.
and lower underlying
financing costs.
See page 122.
See page 122.
See page 102.
Target
CPI +1%
> 2.5%
Continuous improvement.
Grow to over 20% and
Grow to over 10% and
Consistent growth.
maintain above this level.
maintain above this level.
Remuneration Linkage
Associated with annual
bonus financial or
personal metrics.
Associated with annual
bonus financial or
personal metrics.
Associated with annual
bonus financial or
personal metrics.
bonus financial or
personal metrics.
bonus financial or
personal metrics.
Associated with annual
Associated with annual
LTIP – Earnings Per Share 50%.
Associated with annual
Leverage has increased in
the year due to the inclusion
of £141m of IFRS 16 finance
leases. On a pre-IFRS 16
basis leverage reduced
from 2.1x to 1.8x as a result
of strong underlying cash
flow generation and lower
M&A expenditure.
See note 27 on page 143.
<2.5x and to return to ≤2x over
medium term (pre-IFRS 16).
bonus financial or
personal metrics.
Link to Strategy
14
Biffa Annual Report and Accounts 2020 Key: Link to Strategy
Grow market
presence
Develop services
and infrastructure
Optimise systems
and processes
Financial
Underlying Organic
Net Revenue Growth (%)
Acquisition Net
Revenue Growth (%)
Underlying Operating
Profit Margin (%)
Return on Operating Assets
(%)
Return on Capital Employed
(%)
Underlying Earnings
per Share (pence)
Leverage Ratio
(x)
2020
2019
2018
19.4
25.5
27.2
2020
2019
2018
8.9
9.4
9.8
2020
2019
2018
23.1
2020
2.4
20.6
19.2
2019
2018
2.1
1.9
Underlying Operating
Profit divided by the average
of opening and closing
tangible fixed assets plus
net working capital.
Operating Profit excluding
exceptional items and the
impact of real discount rate
changes to landfill provisions
divided by the average
of opening and closing
shareholders’ equity plus
Net Debt (including lease
liabilities), pensions and
environmental provisions.
Underlying Profit After Tax
divided by the number of
shares in issue.
Net Debt: Underlying
EBITDA.
We acquired the trade
and assets of five small
The Underlying Profit Margin
remained stable, despite
businesses for a combined
commodity price headwinds
and disposal cost pressure.
On a pre-IFRS 16 basis the
margin for the current year
was 7.5%.
Return on Operating
Assets decreased due to
the inclusion of £134.9m of
IFRS 16 Right of Use assets.
On a pre-IFRS 16 basis
ROOA improved to 26.4%.
Whilst operating profits have
increased year-on-year, due
to IFRS 16, Capital Employed
has increased by £141m. On
a pre-IFRS 16 basis ROCE
improved to 10.3%.
Underlying Earnings per
Share rose by 12.1% to 23.1
pence. This is driven by
higher underlying profits
and lower underlying
financing costs.
See page 122.
See page 122.
See page 102.
Leverage has increased in
the year due to the inclusion
of £141m of IFRS 16 finance
leases. On a pre-IFRS 16
basis leverage reduced
from 2.1x to 1.8x as a result
of strong underlying cash
flow generation and lower
M&A expenditure.
See note 27 on page 143.
Target
CPI +1%
> 2.5%
Continuous improvement.
Grow to over 20% and
maintain above this level.
Grow to over 10% and
maintain above this level.
Consistent growth.
<2.5x and to return to ≤2x over
medium term (pre-IFRS 16).
Remuneration Linkage
Associated with annual
Associated with annual
Associated with annual
bonus financial or
personal metrics.
bonus financial or
personal metrics.
bonus financial or
personal metrics.
Associated with annual
bonus financial or
personal metrics.
Associated with annual
bonus financial or
personal metrics.
LTIP – Earnings Per Share 50%.
Associated with annual
bonus financial or
personal metrics.
15
The increase/(decrease) in
Net Revenue in the period
Acquisition Net Revenue
Growth in any period
excluding Net Revenue from
represents the Net Revenue
acquisitions completed in
Growth in the relevant
the period and Net Revenue
period from (i) acquisitions
from acquisitions completed
completed in the relevant
Profit before exceptional
items, amortisation of
acquisition intangibles,
impact of real discount
rate changes to landfill
provisions, finance costs
and taxation expressed
as a percentage of sales.
in the prior period up to the
anniversary of the relevant
acquisition date, to the
extent such Net Revenue
falls in the current period.
Where comparative periods
differ in duration, the KPI is
adjusted on a pro-rata basis.
The Group had a strong
year of organic growth with
some flagship customer
wins. In our Collections
division these included
Transport for London and
Center Parcs in the I&C
business and Winchester
and Cornwall Council in
our Municipal business.
In our Resources & Energy
division, we had some
important contract renewals
that will underpin ongoing
organic growth including
Müller, Arla and North
London Waste Authority.
period and (ii) any
acquisitions completed in
the 12 months prior to the
relevant period up to the
12-month anniversary of
the relevant acquisition
date (to the extent such Net
Revenue falls in the current
period). Acquisition Revenue
Growth is calculated on the
same basis, using revenue
in place of Net Revenue.
consideration of £5.1m.
We also made good progress
in integrating acquired
businesses from the prior
year with all integrations
on track.
As at March 2020, we
had several potential
acquisitions that were
significantly progressed,
but those processes were
put on hold due to the
impact of COVID-19.
Definition
Performance
Link to Strategy
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020
Key Performance Indicators continued
Financial
Non-Financial
Underlying Free Cash Flow
(£m)
Dividend per Share
(pence)
Tonnes of waste processed
(ktns)
Tonnes of waste collected
Lost Time Injury Rate
CO2e emissions reduction
Employee engagement (%)
(ktns)
(%)
(ktns)
2020
2019
2018
53.6
2020
2.47
47.7
44.4
2019
2018
7.20
6.70
2020
2019
2018
4,055
4,031
3,693
Definition
Performance
Net cash and cash
equivalents plus
dividends, acquisition
spend, restructuring, EVP
and exceptional spend
movement in financial
assets less net borrowings.
Underlying Free Cash Flow
increased by £5.9m in the
year, due to lower finance
costs and working capital
improvements.
Dividend declared divided
by the total number of
shares in issue.
Tonnages received in
the period subjected to
processing activities, such
as sorting, bailing, plastics
recycling etc. at
Biffa operated sites.
Total waste tonnages
LTIs are defined as workplace
Greenhouse gas (GHG)
The levels of employee
collected from customers
injuries which resulted in
emissions data is captured
engagement as measured
by Biffa operations. Excludes
the injured person taking
sub-contracted services and
time off work to recover
haulage/internal movements.
from their injuries.
through the Kincentric
Employee Engagement Index.
Due to the impact of
COVID-19, the Board is
not recommending a final
dividend for the FY20
year. As a result, the only
dividend for the period was
the interim dividend of
2.47 pence per share.
Tonnage processed
increased by 1% this year.
A decrease in transfer
station volumes was
offset by increased soil
treatment volumes.
Tonnes of waste collected
has increased by 1%, I&C
volumes remain static
with an increase in
Municipal tonnage.
which is then converted
to CO2 equivalents using
Government emission
conversion factors for
GHG reporting published
by the Department for
Business, Energy &
Industrial Strategy.
We reduced carbon
emissions by 23% in the
year. We achieved this
through a combination
of landfill gas reduction
(with a 31% decrease in
methane emissions) and
During the year we had our
best ever H&S performance,
significantly reducing the
number of LTIs across the
organisation by 42%. This
achievement was the result
of great efforts by all our
which resulted in a 50%
reduction in the number
of slips, trips and falls from
the previous year.
employees, supported by our
an improvement in how we
‘Watch your Step’ campaign,
capture gas for renewable
energy generation purposes.
The 2020 result from
a survey carried out in
February 2020 was an
employee engagement
score of 58%.
Target
Maximising conversion
of underlying PAT to cash
(currently 93%).
Growth over time.
Growth.
Growth.
5% reduction in LTI rate.
Year-on-year reduction in
overall carbon emissions.
A 2% increase to an employee
engagement score of 60%.
Remuneration Linkage
Annual bonus.
Associated with annual
bonus financial metrics.
Associated with annual bonus
financial or personal metrics.
Associated with annual bonus
Annual bonus personal
Associated with annual bonus
Annual bonus personal
financial or personal metrics.
metric (6%).
financial or personal metrics.
metric (6%).
Link to Strategy
See page 28 for
more information
See page 26 for
more information
See page 30 for
more information
16
Biffa Annual Report and Accounts 2020 Key: Link to Strategy
Grow market
presence
Develop services
and infrastructure
Optimise systems
and processes
Financial
Non-Financial
Underlying Free Cash Flow
Dividend per Share
Tonnes of waste processed
(£m)
(pence)
(ktns)
Tonnes of waste collected
(ktns)
Lost Time Injury Rate
(%)
CO2e emissions reduction
(ktns)
Employee engagement (%)
2020
2019
2018
4,052
2020
0.23
2020
183
2020
4,007
4,124
2019
2018
0.39
2019
27
0.27
2018
109
2019
2018
58
58
53
Definition
Performance
Net cash and cash
equivalents plus
dividends, acquisition
spend, restructuring, EVP
and exceptional spend
movement in financial
assets less net borrowings.
Underlying Free Cash Flow
increased by £5.9m in the
year, due to lower finance
costs and working capital
improvements.
Dividend declared divided
by the total number of
shares in issue.
Tonnages received in
the period subjected to
processing activities, such
as sorting, bailing, plastics
recycling etc. at
Biffa operated sites.
Total waste tonnages
collected from customers
by Biffa operations. Excludes
sub-contracted services and
haulage/internal movements.
LTIs are defined as workplace
injuries which resulted in
the injured person taking
time off work to recover
from their injuries.
Due to the impact of
COVID-19, the Board is
not recommending a final
dividend for the FY20
year. As a result, the only
the interim dividend of
2.47 pence per share.
dividend for the period was
treatment volumes.
Tonnage processed
increased by 1% this year.
A decrease in transfer
station volumes was
offset by increased soil
Tonnes of waste collected
has increased by 1%, I&C
volumes remain static
with an increase in
Municipal tonnage.
During the year we had our
best ever H&S performance,
significantly reducing the
number of LTIs across the
organisation by 42%. This
achievement was the result
of great efforts by all our
employees, supported by our
‘Watch your Step’ campaign,
which resulted in a 50%
reduction in the number
of slips, trips and falls from
the previous year.
The levels of employee
engagement as measured
through the Kincentric
Employee Engagement Index.
The 2020 result from
a survey carried out in
February 2020 was an
employee engagement
score of 58%.
Greenhouse gas (GHG)
emissions data is captured
which is then converted
to CO2 equivalents using
Government emission
conversion factors for
GHG reporting published
by the Department for
Business, Energy &
Industrial Strategy.
We reduced carbon
emissions by 23% in the
year. We achieved this
through a combination
of landfill gas reduction
(with a 31% decrease in
methane emissions) and
an improvement in how we
capture gas for renewable
energy generation purposes.
Target
Growth over time.
Growth.
Growth.
5% reduction in LTI rate.
Year-on-year reduction in
overall carbon emissions.
A 2% increase to an employee
engagement score of 60%.
Maximising conversion
of underlying PAT to cash
(currently 93%).
Remuneration Linkage
Annual bonus.
Associated with annual
bonus financial metrics.
Associated with annual bonus
financial or personal metrics.
Associated with annual bonus
financial or personal metrics.
Annual bonus personal
metric (6%).
Associated with annual bonus
financial or personal metrics.
Annual bonus personal
metric (6%).
Link to Strategy
See page 28 for
more information
See page 26 for
more information
See page 30 for
more information
17
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020
Financial Review
Positioned well ahead
of the downturn
A reconciliation from Underlying Profit After Tax to Statutory
Profit After Tax is set out below:
FY20
£m
IFRS 16
Adj
£m
Pre
IFRS 16
£m
FY19
£m
57.4
1.1
58.5
51.5
(1.1)
(16.9)
4.9
(4.8)
1.5
–
1.1
3.5
–
–
–
–
–
–
–
–
(1.1)
(2.8)
(16.9)
(16.5)
4.9
(1.6)
(4.8)
1.5
(2.1)
(10.2)
–
1.1
3.5
(3.1)
(6.2)
9.0
45.6
1.1
46.7
18.0
Underlying Profit
After Tax
Acquisition-
related costs
Amortisation
of acquisition
intangibles
Impact of changes
in real discount
rate on landfill
provisions
Strategy and
restructuring cost
Onerous contracts
Pensions GMP
equalisation
Finance charges
Taxation impact
on other items
Statutory Profit
After Tax
Photo taken at home during lockdown
Richard Pike
Chief Financial Officer
Group Performance
I am pleased to be able to present another strong set of financial
results. Compared with the prior year, Statutory Revenue was up 7%,
Statutory Operating Profit increased 63% and Statutory Profit before
Tax was up 163%, resulting in Earnings per Share (EPS) increasing
154%. Looking at underlying performance measures, Underlying
Operating Profit (pre-IFRS 16) was up 7.3% and Underlying EPS
increased 14.6%.
Other Items
To enable a better understanding of business performance, certain
items are excluded when calculating the Group’s underlying
measures of performance. These items are explained further in
Note 3 to the consolidated Financial Statements and include:
(i) exceptional items; and
(ii) Other non-underlying items that recur most years but
that the Group feels will aid the user by excluding from
underlying performance– amortisation of acquisition
intangibles and movement on landfill provisions as
a result of discount rate changes.
These Alternative Performance Measures (APMs) are also used
to enhance the comparability of information between reporting
periods and the Group’s divisions, by adjusting for non-recurring
or uncontrollable factors which affect IFRS measures, to aid the
user in understanding the underlying performance.
18
Biffa Annual Report and Accounts 2020 Finance Charges
Underlying financing costs fell significantly compared with the prior
year, as a result of renegotiated loan borrowing and bonding facilities
and the natural decline of the number of older, more expensive lease
liabilities. A breakdown in net finance charges is below:
Interest on net
borrowings
Interest on lease
liabilities
IFRS 16 leases
Bond premiums
Provision discount
unwind/other
Net underlying
finance charges
Discount unwind
on EVP instrument
and IPO costs
Unamortised
arrangement fees
on old facility
Net finance
charges
FY20
£m
IFRS 16
Adj’s
£m
Pre
IFRS 16
£m
9.0
4.2
4.2
1.6
(0.3)
–
–
(4.2)
–
–
9.0
4.2
–
1.6
(0.3)
18.7
(4.2)
14.5
FY19
£m
9.9
5.0
n/a
1.8
1.0
17.7
(1.1)
–
–
–
(1.1)
2.4
–
3.8
17.6
(4.2)
13.4
23.9
Taxation
The Group’s tax strategy is approved annually by the Board and is
available on the Group’s website. The Group remains committed
to fully discharging its responsibilities in respect of all relevant
tax legislation in a clear and transparent manner based on a
collaborative relationship with all tax agencies.
The statutory effective tax rate was 19.2%, slightly higher than
the prevailing rate due to certain charges being disallowed for UK
corporation tax. Payments in respect of corporation tax in the year
were (£0.2m) (prior year £0.2m). The Group’s deferred tax balance
of (£17.3m) includes balances totalling (£39.9m) in respect of
Accelerated Capital Allowances, previously written off goodwill and
losses which will continue to moderate tax payments in future years.
Earnings per Share
Underlying Earnings per Share rose by 12.1% to 23.1 pence from
20.6 pence in the prior year. In addition, Total Earnings per Share
increased to 18.3 pence, over 154% higher than the prior year
7.2 pence, as a result of improved trading performance and lower
exceptional, non-underlying items.
Retirement Benefits
The Group operates defined pension schemes for certain employees.
These are closed to new members and to future accrual (except for
a small number of members who have protected entitlements under
local Government contracts). At 27 March 2020, the net retirement
surplus was £124.7m (prior year £79.0m). The Biffa Pension Scheme
had an actuarial deficit of £29.2m at the time of the last valuation
in March 2018 (compared with £66.7m in March 2015), and an
inflation-linked annual payment of £4.3m has been agreed with
the Trustee of the scheme.
Capital Allocation
The Group seeks to balance the allocation of its discretionary capital
between shareholder returns, acquisitions and organic growth
opportunities.
Due to the impacts of COVID-19, and the prudent prioritisation of
cash conservation, the Board is not recommending a final dividend
for the FY20 year. As a result, the only dividend for the period was
the interim dividend of 2.47 pence per share.
Prior to putting all M&A activity into abeyance, due to the impending
impacts of COVID-19, the Group had continued to deliver against
its growth strategy by completing five small acquisitions for £5.1m
during the year. As the SWR business was acquired on 12 March
2019, the integration of this business, and the other six acquisitions
last year, has been a significant focus for the Group.
Cash Flow
Another year of focus on strong cash flow delivery in the year
enabled the Group to exit the year with a further strengthened
balance sheet and reduced leverage.
A summary of the Group’s cash flows is shown below:
FY20
£m
IFRS 16
Adj’s
£m
Pre
IFRS 16
£m
Underlying EBITDA
174.0
(18.9)
155.1
FY19
£m
150.7
Working capital
movement
Net capital
expenditure
Net interest paid
Lease principal
payments
Pension deficit
payments
Advance for
purchase of own
shares for share
awards
Tax paid re
acquisitions
Underlying Free
Cash Flow
Restructuring and
exceptional items
Acquisitions
Investment in
associates
Changes in
borrowings
Movement in
financial assets
Dividends
Net increase/
(decrease) in
cash and cash
equivalents
12.8
(55.8)
(16.9)
–
–
4.2
12.8
(3.2)
(55.8)
(12.7)
(45.2)
(16.0)
(50.2)
14.7
(35.5)
(33.0)
(4.1)
(6.0)
(0.2)
53.6
(14.2)
(5.1)
(5.0)
0.5
10.1
(18.3)
21.6
–
–
–
–
–
–
–
–
–
–
–
(4.1)
(4.0)
(6.0)
(1.4)
(0.2)
(0.2)
53.6
47.7
(14.2)
(5.1)
(4.5)
(41.5)
(5.0)
–
0.5
45.1
10.1
(4.4)
(18.3)
(17.0)
21.6
25.4
19
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Financial review continued
Underlying Free Cash Flow increased by £5.9m in the year, driven
by working capital inflow and reduced interest costs, which offset
increased capital expenditure and purchase of own shares for share
awards. Net cashflow (excluding movement in borrowings) is stronger
than last year as a result of lower M&A spend, offset by the Hazardous
waste landfill tax payment to HMRC (detailed further below) and the
initial equity investment in the Newhurst EfW facility.
Systems Replacement Programme
We have made some substantial changes to ‘Project Fusion’, the
Group’s systems replacement programme, during the year. We were
not satisfied with the progress to date and as a result, we paused
the programme in May 2019 in order to reassess the constituent
elements, ordering and project milestones. The increased costs
associated with this pause are included in Other Items: Strategy and
restructuring costs. We replaced the Systems Integration delivery
partner and recommenced the programme with a new partner in
November 2019. The programme has been paused again in April
2020 as a result of COVID-19.
Net Debt and Financing Facilities
In March 2019, the Group refinanced its bank borrowings with a new
unsecured revolving credit facility (RCF) of £350m. This facility
had an initial five-year term and was extended by a further year
to March 2025 during the period. The RCF provided the Group with
a lower than average cost of debt compared with the prior year, an
increased maturity profile and improved covenants. As previously
reported, after the year end, an agreement was reached with the
Group’s banks to revise covenants and increase liquidity headroom
for FY21 to provide appropriate flexibility to cope with the impacts
of COVID-19 in order to cater for all modelled scenarios:
■ An amended pre-IFRS 16 Net debt: EBITDA covenant for FY21 H1
of 5.5x (compared to the previous covenant of 3.5x) and an
interest cover covenant unchanged at 4x;
■ An agreement that in relation to FY21 H2, the Group will be
afforded a 30% covenant headroom over and above Biffa’s
forecast profit run rate as calculated in September 2020,
to cater for the current lack of visibility around the post
lockdown run rate of profitability; and
■ In addition, whilst the Group has sufficient liquidity to cover the
various modelled scenarios, its banks have agreed in principle,
to an additional £60m committed liquidity headroom facility,
should it be required.
Landfill Tax Matters
The Group is currently engaged in the following disputes with HMRC:
EVP: The Group is engaged in a dispute with HMRC concerning
historical landfill tax. Biffa was successful in its appeal at the Upper
Tax Tribunal hearing held in November 2019. HMRC has appealed
this decision to the Court of Appeal. This is covered in more detail
in note 34 of the accounts.
Hazardous Waste: As previously disclosed, HMRC assessed Biffa
for £8.5m of landfill tax relating to the period 2012 to 2016. Biffa
paid these monies to HMRC in December 2019 and is appealing the
assessment. The cash payment is within exceptional cash flows
and is held on the balance sheet within prepayments as we expect
to successfully defend this case.
Financial Reporting Council (FRC) Information Request
In February 2019, the Group received a request for information on
the reporting treatment of certain areas from the FRC, following a
review of the Group’s 2018 Annual Report and Accounts. The request
focused on four main areas– APMs, landfill restoration and aftercare
provisions, pension schemes, and service concession arrangements.
The Group responded fully and on a timely basis to the FRC, enabling
it to close its enquiry in early May 2019. As a result of the enquiry, the
Group made a number of small disclosure changes in the prior year
Financial Statements, which have also been incorporated this year.
IFRS 16
The Group has adopted IFRS 16 with effect from the start of this year.
It has not restated the prior year Financial Statements. Adoption
of IFRS 16 has no effect on how the business is run, nor on the cash
flows for the Group.
The Balance Sheet impact of IFRS 16 is:
(£m)
Property, plant
and equipment
FY20
£m
IFRS 16
adj’s
£m
Pre
IFRS 16
£m
FY19
£m
527.7
(139.4)
388.3
365.4
Lease Liability
(258.0)
141.0
(117.0)
(122.6)
Other
Net Assets
141.3
411.0
(0.5)
1.1
140.8
412.1
117.3
360.1
Reported Net Debt at year-end breaks down as:
The impact to the trading statement of IFRS 16 is:
Reported Net Debt
(£m)
Cash
Loans
FY20
£m
87.8
(249.0)
IFRS 16
adj’s
£m
–
–
Pre
IFRS 16
£m
87.8
FY19
£m
66.2
(249.0)
(248.0)
Lease liabilities
(258.0)
141.0
(117.0)
(122.6)
EVP preference
instrument
(6.3)
–
(6.3)
(6.3)
Total
(425.5)
141.0
(284.5)
(310.7)
Reported Net Debt excludes £41.3m (prior year £42.3m) of EVP
preference instrument liability in respect of the EVP Dispute
(see Note 33). £6.3m of these costs is included in Reported Net
Debt as it will be payable irrespective of the outcome of the
dispute and is therefore considered core debt.
(£m)
Underlying EBITDA
Depreciation
Underlying
Operating Profit
Underlying Profit
before tax
Underlying profit
after tax
Richard Pike
Chief Financial Officer
4 June 2020
FY20
£m
174.0
(83.5)
IFRS 16
adj’s
£m
Pre
IFRS 16
£m
(18.9)
155.1
FY19
£m
150.7
16.1
(67.4)
(69.0)
90.5
(2.8)
87.7
81.7
71.7
57.4
1.4
1.1
73.1
64.0
58.5
51.5
20
Biffa Annual Report and Accounts 2020 Operating Review
Collections Division
Photo taken at home during lockdown
Jeff Anderson
Chief Operating Officer, Collections Division
The Collections division comprises the Industrial & Commercial
(I&C), Municipal and Specialist Services businesses. Collection
services are provided for local authority and commercial customers,
together with commodity recycling and a wide range of additional
services including hazardous waste collection.
Industrial & Commercial
The I&C business provides waste
collection and materials handling
services for commercial customers.
Performance Summary
The I&C business performed extremely well in the year, with revenue
growing by 7.8% to £603.7m. Organic growth of 1% was supplemented
by 8.3% from acquisitions.
In the year, we benefited significantly from SWR revenues (which
we acquired in March 2019). We successfully integrated seven
acquisitions from FY19 into our business and made a further five small
acquisitions during the current year. Integration of these acquisitions
is progressing well and we had a strong pipeline of future opportunities
in March 2020, prior to putting all acquisitions on hold.
We were pleased to achieve a further year of excellent customer
retention (overall churn of 5.2%), as well as a number of flagship
customer wins including: Transport for London, Center Parcs, SSE,
Malmaison, Barratt Homes and Skanska.
In our Small to Medium Enterprise (SME) market we had a record
year. The growth was largely driven by strong performance from our
telesales team and good progress in our lead generation capability.
Market Conditions
Overall Biffa remains a leader in a fragmented Collections market,
benefiting from our scale, route densities and lower operating
costs. We are seeing increasing requirements from customers
to help manage their sustainability performance, specifically
around landfill diversion and carbon emissions. Our smarter
logistics mapping allows for constant reconfiguration of routes
to help reduce carbon ‘waste miles’ and our integrated position
means our customers have full visibility of the waste supply chain.
Volatility in the global commodity markets depressed the value
received for recycled materials in the year. In addition, we also saw
the introduction of import tariffs on refuse derived fuel in both the
Netherlands and Sweden. Market pricing responded accordingly,
and these costs were successfully mitigated, demonstrating the
resilience of the business model.
As discussed at our Capital Markets Day, the I&C business intends to
reduce volume into some European export refuse derived fuel (RDF)
markets over time, and expects more UK incinerator volume, including
EfW developments planned by Biffa, to increasingly become available.
Strategy and Outlook
The I&C business has been significantly impacted by the COVID-19
crisis as many customers, particularly those in hospitality, leisure
and non-food retail, ceased or reduced trading, with revenues falling
by approximately 50% in the weeks since the financial year end.
By taking rapid action to reduce costs, we have been able to ensure
that service levels continue to be maintained at their normal very
high standards, with over 97% of services successfully provided first
time. In addition, despite these challenges, new business wins have
continued at high levels, as some smaller operators have struggled
to ensure continuity of service.
We have a clear strategy to grow the Collections business through
organic growth and the development of additional services,
supported by complementary acquisitions.
We are developing a number of new routes to market, innovating
and broadening our digital capabilities. We are strengthening our
e-commerce capability, by adding additional customer features on
our self-serve web portals and introducing more digital products
to market. During the year, a new reactive waste collection service
‘Skoup’ was introduced which enables residential and commercial
customers in the UK to order a skip, van collection or bag service
online. You can find out more about Skoup here: www.skoup.co.uk
21
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Operating Review continued
Collections Division continued
Specialist Services
The Specialist Services business provides
specialist, tailored and niche services to
customers who have more complex waste
requirements. It was formed through the
amalgamation of Integrated Resource
Management (IRM) and our Hazardous Waste
operation, together with Biffpack, our plastic
packaging compliance service business.
Performance Summary
Specialist Services delivered a strong performance through
operational synergies, customer retention and some encouraging
new business wins. Revenue grew by 23.9% to £89.8m. In IRM
we continued to secure more complex customers including
manufacturers such as Britvic and food processors such as Avara
Foods. We improved underlying performance in Hazardous Waste by
leveraging Biffa’s I&C customer base to provide additional collection
and treatment services to customers and this was further supported
by some encouraging new contract wins, including Royal Mint.
Through Biffpack we have a role to play in helping businesses
to meet their legal compliance with packaging regulations.
We offered free compliance workshops in the year on topics
including WEEE and batteries, to help customers understand
the regulatory requirements.
Market Conditions
The market for Specialist Services is growing and Biffa’s unique
position in having a fully integrated waste management platform
means we can take advantage of cross-selling services from our
I&C customer base.
Going forward we will continue to engage with the UK Government,
to ensure our opinions on packaging compliance reforms are
considered during the development of new waste policy and
regulatory measures, including the Resources and Waste Strategy
in England.
Strategy and Outlook
Specialist Services is holding up well in the current circumstances,
with IRM continuing to provide an extremely valuable service to
the food manufacturing sector in particular, with Hazardous Waste
collections and end of life processing continuing, albeit around 20%
down on pre-COVID-19 crisis levels.
Going forward, the business has a good opportunity for growth,
particularly in the Hazardous Waste arena. This will be reflected in
our acquisition pipeline, once we emerge from the COVID-19 crisis.
22
Municipal
The Municipal business provides household
waste and recycling collections, street
cleaning and other services for households,
on behalf of local authorities.
Performance Summary
We have made significant progress in stabilising the business,
winning new contract tenders, building our strong order book and
achieving good operational delivery. Revenue grew by 7.7% to £177.3m.
We successfully mobilised our East Sussex and Waverley contracts,
delivering good levels of customer service and ensuring strict
Health & Safety protocols are in place. In addition, key contract
wins in the year include the waste and cleansing contracts for
Cornwall, Tandridge and Winchester Councils, which have added
over £300m to the order book.
Market Conditions
Our Municipal business is number two in the UK domestic market,
with 35 municipal contracts and is regarded by local authorities
as a key partner, delivering a high-quality service. The market
remains competitive; however, we are seeing a shift in approach
and some parties are now exiting the market, resulting in increased
stabilisation. This in turn is leading to more maturity in the sales
and procurement processes and a more equitable risk balance
between the public and the private sector.
The business is well placed to benefit from the Government’s
Resources and Waste Strategy (RWS) in the next few years as
demand for recycling services from local authorities increases.
We are also seeing more willingness from local authorities to
increase their budgets for waste contracts as they appreciate that
a sustainable quality service is more beneficial over the long term.
Labour supply, including driver availability continues to be a key
risk, but we are confident that we have the best team in place to
manage our business needs.
Strategy and Outlook
The Municipal business has remained resilient in the current
market conditions, with revenues remaining stable. The business
has worked with clients to ensure continuity of almost all services
and the team is performing admirably despite the inevitable
increased employee absence due to COVID-19.
Going forward, the business will continue to focus on delivering an
efficient, high-quality service, keeping costs firmly under control
and delivering efficiencies through the increased use of technology.
We will continue to build our complementary and adjacent Non-
Local Government revenue streams whilst delivering high quality,
commercially robust and risk appropriate tenders for new business
in our core market.
We have enhanced our technology capabilities by investing in
the remote monitoring of vehicles to improve safety performance
and customer service.
In line with our sustainability ambitions, we are supporting
Manchester City Council with the implementation of electric
refuse collection vehicles. We are committed to being at the
forefront of this innovation and embracing this technology
forms a key part of Biffa’s Sustainability Strategy and our
target to reduce carbon emissions by 50% by 2030. You can
read more on this here: www.biffa.co.uk/sustainability
Biffa Annual Report and Accounts 2020 Operating Review continued
Resources & Energy Division
Photo taken at home during lockdown
Mick Davis
Chief Operating Officer, Resources & Energy Division
The R&E business, which includes Recycling,
Organics, Inerts and Landfill Gas, focuses
on the treatment, recycling, energy recovery
and ultimate disposal of waste. Net revenue
in the year was £232.1m.
Performance Summary
Recycling
Our recycling facilities comprise our Polymers plastics business
and our materials recycling facilities (MRFs).
In our Polymers business we have seen increasing demand for
recycled plastics result in revenues increasing by 0.4% to £79.5m
and (as described on page 24) we have invested £15m in the
first phase of a new 57kt PET facility in Seaham during the year
to satisfy the growing demand in this space.
We faced variable commodity prices in the year, which reinforced
the need for us to change our business model to improve gate fees
and lower commodity exposure. We have repurposed some of
these facilities from dry mixed recyclables to focus purely on
plastics so we can increase capacity and produce feedstock for
our Polymers business.
Organics
Revenue decreased by 7.8% to £56.9m due to a mixture of service
contract changes in West Sussex, where material is now sent to
EfW rather than landfill and the impact of planned maintenance
downtime in Poplars, reducing energy generation. Our Leicester
site has had a solid year with improving underlying performance.
Inerts
Landfill has had a strong year, improving tonnage from 2.8 to 2.9MT,
offsetting a modest reduction in average gate fees due to changes
in geographic and waste type mix. These volumes have been
underpinned by our rail hub operations in Leeds and Manchester.
Soil and aggregate treatment operations have also had a solid year.
As a result, net revenue in the business grew by 11.2% to £52.4m.
Landfill gas
Ongoing landfill gas yield declines were lower than recent years due
to strong operational performance. Higher average forward-selling
prices achieved (£49.23 per MWh in FY20 versus £46.00 in FY19)
have been offset by a lower ROC upside.
23
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Operating Review continued
Resources & Energy Division continued
Strategy and Outlook
The impact of COVID-19 across R&E is varied, with the most
notable impact being on Biffa’s landfill operations, which rely on
the construction industry for a large proportion of their business
and have seen revenues reduce by around 50% from their position
prior to COVID-19. The other areas of the business, whilst impacted,
are holding up well.
Going forward we will continue to focus on expanding our capacity
for closed-loop recycling, which is the highest-grade (food grade
material) and therefore has the highest value.
In January 2020, we opened the first phase of our £27.5m rPET plastics
recycling site in Seaham, County Durham. The plant, which can
recycle the equivalent of 1.3bn plastic bottles per annum, was built
on budget and on schedule and was fully operational at the start
of the new financial year. We also announced a new £7m facility
in Washington, Tyne & Wear, which will expand our recycling
capabilities for plastic pots, tubs and trays. These combined
investments will increase Biffa’s total recycled plastic processing
capability to 140,000 tonnes per annum.
EfW forms a key part of our strategy. The Newhurst EfW development
reached financial close on 11 February 2020 and will commence
operations during 2023. As previously disclosed, Biffa’s financial
commitment to this development will be c£45m over the next
three years. We continue to progress our second opportunity,
Protos in Cheshire, and are at an advanced stage of this evaluation.
We announced in our Sustainability Strategy that we will look
to invest in solar energy generation on closed or restored landfill
sites. Our low cost access to the grid and large land holdings make
this an interesting future investment opportunity.
We will continue to expand our rail hub network to support our
landfill operations, together with optimising gas, electrical and
material yields whilst maintaining operational efficiency across
all our sites.
Market Conditions
We continue to experience strong demand for plastics recycling
material as a result of ongoing consumer and brand preference
coupled with emerging Government policy.
In the budget it was announced that a plastics tax of £200/t would
be introduced from 2022. The additional measures announced in
the Government’s RWS are subject to ongoing consultation, but are
generally expected to have a positive market impact on recycling
levels, which will provide the right conditions for companies, such
as Biffa, to invest in waste infrastructure.
The landfill market continues to see the closure of sites as void
space is filled with no near term sites replacing them. This is
resulting in fewer landfill sites within the UK and waste being
transported further. Biffa has responded by expanding its current
rail hub programme, which can transport inert waste cost effectively
to alternative sites with capacity.
Whilst the market prices for energy have weakened, Biffa has
forward sold c90% of its FY21 output.
The growth of separate food waste collections has been limited
during the last year and there continues to be an excess of anaerobic
digestion processing capacity, placing pressure on gate fees. However,
through our scale, operational expertise and collection network, we
remain well positioned to benefit from a rebalancing in this market as
the RWS measures around food segregation are introduced over time.
24
Biffa Annual Report and Accounts 2020 Sustainability
Our ambitious
approach to
sustainability
In March 2020 we launched our Sustainability
Strategy: Resourceful, Responsible.
The strategy builds on our long track record of making a positive
contribution to the environment and communities we operate in,
outlining Biffa’s ambition to drive the sustainability agenda within
the UK waste management industry for the next 10 years. It is
underpinned by an ambitious but deliverable plan, which is aligned
to our strategic framework and fully supported by our previously
outlined investment plans.
In the strategy, we pledged to continue building on the significant
progress that we have made in recent years to decarbonise our
services, which has already seen CO2 emissions reduce by 65% since
2002. In the year we reduced our emissions by over 23%; however
we have big ambitions and are targeting a further 50% reduction in
emissions by 2030. This will be achieved through increased recycling,
diversion from landfill and by improving collection route densities.
Our Sustainability Strategy has been informed by recognised best
practice, new and emerging UK and EU waste and circular economy
policies, and the United Nations Sustainable Development Goals.
Sustainable Development Goals (SDGs)
Under each strategy pillar we have mapped the SDGs to demonstrate
how we are making a contribution.
You can read more about this in the Sustainability Strategy, which
is available at: www.biffa.co.uk/sustainability
t n e r s h i ps
P a r
f o r t h e g o a ls
No poverty
d
s
n
n
e a
c ti c
s tit u ti o
P e a c e, j u
stro n g i n
Life on land
Zero h
u
n
ger
G
a
o
n
o
d
d
w
h
e
a
e
l
l
-
b
l
t
h
ater
w w
lo
e
e b
f
i
L
n
o
i
t
c
a
e
t
a
m
i
l
C
n
o
i
t
p
n
m
o
i
t
u
c
s
u
n
d
o
i
c
o
r
e
p
l
b
d
i
s
n
n
a
o
p
s
e
R
s
e
iti
s
e
iti
n
u
le c
m
b
a
m
o
d c
stain
n
a
u
S
1 7
1
2
3
1 6
15
4
1
3
1
2
1
1
1
10
9
8
4
5
6
7
clean energy
Affordable and
Reduced inequalities
and infrastructure
Industry, innovation
e
D
c
e
o
c
n
e
n
omi
c g
rowth
t wo
rk and
Strategic Pillars
Strategic Ambitions
Targets to 2030
Alignment to the SDGs
Building a circular
economy
Unlock £1.25bn of investment
in green economy infrastructure
by 2030
Tackling climate
change
Having reduced emissions by
65% since 2002, we will deliver
a further 50% reduction by 2030
Caring for our people,
supporting our
communities
To be recognised as a top ranked
employer and to continue to
be a good corporate citizen,
supporting good causes to
make a real difference
■ Expanding our low-carbon
collection business
■ Quadrupling our
plastic recycling
■ Investing in low carbon,
Energy from Waste
■ 50% reduction in
carbon emissions
■ Cease buying fossil-fuelled
collection vehicles
■ Increase collection route
efficiency by 20%
■ To continuously be a
top quartile business for
Employee Engagement
■ 50% reduction in our
Lost Time Injury rate
■ Manage 30% of our estate
for biodiversity
e
i
n
g
Q
u
a
l
i
t
y
e
d
u
c
a
t
i
o
n
G
e
n
d
e
r
e
q
u
a
l
i
t
y
a
n
Cle
d sa
a
nitation
n water
25
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020
Sustainability continued
Environmental Performance
Biffa has a team of environmental regulation and policy specialists,
who engage with the UK Government, regulators and policy makers
to help shape the national regulatory and policy framework in
relation to environmental matters.
We also provide our expertise in our Reality Check papers, published
on our website, which cover important topics such as recycling,
plastics and waste treatment.
To read these papers visit:
www.biffa.co.uk/media-centre/publications
Below is our streamlined energy and carbon reporting data for year
ended 27 March 2020. Further environmental data can be found at:
www.biffa.co.uk/sustainability/environmental-performance
Global GHG Emissions and Energy Use Data for period 1 April 2019 to 27 March 2020
Emissions from activities for which the company own or control
including combustion of fuel & operation of facilities (Scope 1) /tCO₂e (ktns)
Emissions from purchase of electricity, heat, steam and cooling
purchased for own use (Scope 2) /tCO₂e (ktns)
Total gross scope 1 & 2 emissions/tCO₂e (ktns)
Intensity ratio: tCO₂e (gross scope 1 & 2 emissions per employee)
* Scope 1 emissions for 2018/19 have been restated as improved diesel data has now become available.
Energy consumption used to calculate the above emissions
Climate change/GHG emissions table (Total kWh):
Methane emissions (utilised)
Diesel fuel used
Red diesel used
Unleaded petrol used
Kerosene used
LPG
Natural gas
Purchased electricity
Self-supplied electricity
Total kWh
Current reporting year
2019/20
Comparison reporting year
2018/19
543
29
572
71
716*
31
747
95
Current reporting year
2019/20
Comparison reporting
year 2018/19
434,148
447,463
449,367,933
474,364,639
80,800,198
89,689,097
846,055
106,848
8,164
7,700,877
76,585,813
37,460,319
1,251,655
96,240
15,782
6,952,145
73,334,935
36,692,163
653,310,355
682,844,119
To calculate the above consumption figures, we used methodology based on Energy Savings Opportunity Scheme (ESOS) and CRC Energy
Efficiency Scheme compliance.
Following our ESOS audit, completed in November 2019, a number of Biffa’s sites undertook energy saving projects. These included installing
LED lighting at 45 of our sites and PIR motion sensors at 11 of our sites, both aimed at reducing electricity consumption.
Overall, we reduced carbon emissions by 23% in the year. We achieved this through a combination of landfill gas reduction and an improvement
in how we capture gas for renewable energy generation purposes.
Energy Generation
Generation (GWh)
Carbon benefit (kt CO2e)
26
2020
423
108
2019
441
125
Biffa Annual Report and Accounts 2020 Non-Financial Information Statement
Our Annual Report and Accounts details our approach to environmental, social and employee related matters. The table below outlines
where in the report you can find this information and where additional information can be found on our website.
Main policies and standards which govern our approach
Where to find further information
■ Anti-fraud, bribery and corruption policy
and procedures
■ Whistleblowing policy and procedures
Our People (pages 29 to 31)
Audit Committee Report (page 57)
Anti-fraud, bribery
and corruption
Business model,
principal risks and
non-financial KPIs
Employees
■ Business model
■ Principal risks
■ Non-financial KPIs
■ Employee handbook
■ Corporate responsibility statement
■ Sustainability strategy
■ Diversity policy
■ Health, safety and wellbeing policy
■ Whistleblowing policy and procedures
Environmental matters
■ Corporate responsibility statement
■ Sustainability strategy
Human rights
■ Employee handbook
■ Corporate responsibility statement
■ Modern slavery and human trafficking policy
■ Supplier Code of Conduct
Social matters
■ Corporate responsibility statement
■ Sustainability strategy
Group at a glance (pages 2 to 3)
Principal risks (pages 34 to 38)
Key performance indicators
(pages 14 to 17)
Our People (pages 29 and 31)
www.biffa.co.uk/sustainability/
corporate-social-responsibility
www.biffa.co.uk/sustainability
See page 26
www.biffa.co.uk/sustainability/
corporate-social-responsibility
Our People (pages 29 to 31)
www.biffa.co.uk/sustainability/
corporate-social-responsibility
www.biffa.co.uk/about-us/suppliers
Our People (pages 29 to 31)
www.biffa.co.uk/sustainability/
corporate-social-responsibility
www.biffa.co.uk/sustainability
27
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Health and Safety
Keeping our people
safe and well
Despite our recent positive performance, there is still much to do.
Our long-term commitment is to create a zero harm environment,
with no injuries or work related ill health across our team. We are
aiming for a further 50% reduction in our LTI rate by 2030.
To support us on this journey, we implemented or continued the
following initiatives in the year:
Safer Together
‘Safer Together’, which launched in February 2020, is our new H&S
programme centred on collective responsibility by working together
to ensure the safety of our people and those we work with, including
contractors, customers and members of the public.
The foundation of the programme is the Safer Together Pact:
Keeping our people safe and well is our
absolute priority. This extends to the
safety of our contractors, customers
and members of the public. The Board
has overall responsibility for Health &
Safety, including setting policy and
reviewing performance.
Health and Safety Policy
Our H&S policy outlines our approach to health, safety and wellbeing
across the Group. In order to support the implementation of the
policy, we have a set of management standards which apply to all of
Biffa’s operations. In the year, we undertook a project to consolidate
these into 20 Group standards which cover key areas of H&S, such
as waste handling processing and traffic management. Training is
provided to employees, including contractors, to ensure compliance.
Performance
During the year we had our best ever H&S performance, significantly
reducing the number of LTIs across the organisation by 42% (39 in
2019/20 compared with 67 in 2018/19). This achievement was the
result of great efforts by all our employees, supported by our ‘Watch
your Step’ campaign, which resulted in a 50% reduction in the
number of slips, trips and falls from the previous year.
Lost Time Injury and RIDDOR Rate
2019/20
2019/20
2018/19
2018/19
2017/18
2017/18
2016/17
2016/17
2015/16
2015/16
0.23
0.20
0.19
0.18
0.21
0.32
0.27
0.31
Lost Time Injury Rate
RIDDOR Rate
0.39
All our senior leaders attended a two hour Safer Together leadership
training experience so they can continue to lead by example. This
will be supported by training for managers, supervisors, drivers and
front line operatives throughout the year ahead.
0.38
People in Bins
Biffa is working collaboratively with the waste industry, homelessness
charities and members of the public to address the growing issue
of people sleeping in bins, which poses significant H&S risk. By
raising awareness of what preventative measures need to be taken,
by both drivers and members of the public, we hope to prevent these
incidents from occurring. This includes, training our own drivers on the
importance of checking bins before they are collected and reporting
such encounters to Street Link, a national rough sleeping reporting
service. You can read more about our research and action plan on
our website here: www.biffa.co.uk/media-centre/publications
Driving Recklessly on Pavements (DRoPs)
Our employees continue to face the threat of reckless and aggressive
drivers who do not have the courtesy or patience to allow them to
perform their duties. Biffa is committed to raising awareness of the
social unacceptability of DRoPs to help protect the safety of our
crews and the public.
28
Biffa Annual Report and Accounts 2020 Our People
Engaging
our people
Our services are delivered by a team of
over 8,000 colleagues across Biffa. We
work hard to create a culture and an
environment that allows everyone to work
effectively and safely and to contribute to
the growth of the organisation. Our People
Strategy guides our priorities with a focus
on; Attraction, Leadership, Engagement,
Development and Performance.
Our policies ensure that our positions on key topics are clearly
defined and communicated to our employees and that we all
take consistent and appropriate action.
Our Values
Our values (Be safe, Be innovative, Be customer focused, Be a team
player and Be accountable) help guide our people in their daily
activities and support our behavioural framework. They describe
the behaviours we encourage all employees to adopt to best serve
the interests of our customers, employees and the business overall.
We have been finalising a new set of values over recent months to
reflect our evolving position as key workers and to better capture
the sentiment of how we act. Once approved, they will be embedded
internally over the coming months.
Health and Wellbeing
We care about the health and wellbeing of our employees. Our
“& Me” programme focuses on aspects of health and wellbeing
that are particularly relevant to Biffa. The programme delivers
regular campaigns, training and offers a dedicated website with
advice and guidance on how to improve wellbeing. We also have
our Smarter Ways of Working programme which supports flexible
working and work-life balance and provides a confidential Employee
Assistance Programme with a 24-hour helpline.
Board Engagement Activities
Photo taken at home during lockdown
David Martin, our Senior Independent Director, has Board
responsibility for workforce engagement. David has attended,
and been privy to, a number of employee-related activities
over the course of the year, which have provided opportunities
to interact directly with representative groups of employees
in a variety of forums.
This included attending events such as employee roadshows,
manager conferences, employee focus groups and the annual
Diamond Award ceremony.
In addition, David attended, with the Group Executive
Team, a presentation on the results of the annual employee
engagement survey and employee action plan reviews with
the CEO, Group HR Director and the lead employee engagement
champions, where he had the opportunity to consider and raise
questions about the annual employee engagement survey and
subsequent action planning activities.
David has provided feedback to the Board on engagement
activities and provided a full report at the April 2020 meeting
when the engagement plan for 2020/21 was also agreed.
Site visits for future Board meetings will be structured to
accommodate general discussion with employee groups.
“Having completed a full year undertaking the
responsibilities of the Non-Executive Director
for Workforce Engagement, I am content that the
Terms of Reference and Engagement Framework is
proving fit for purpose, and providing me with ample
opportunity to sample reactions and viewpoints of
the workforce at large.”
“At all the meetings I attended I noted high levels
of motivation, engagement and pride at being part
of a successful business and significant buy-in
to ‘changing the way people think about waste’ a
purpose which has landed strongly across a range
of employees and managers.”
“I was very impressed at the constructive input from
all participants, which gave me confidence to advise
the Board that so far I have seen practical evidence
of our values being openly expressed and validated
by a good cross-section of employees.”
David Martin
Non-Executive Director for Workforce Engagement
Details of how the Board has considered employee
interests during the year in its decision making are
set out on pages 48 to 49
29
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020
Our People continued
Engaging our Employees
Creating high levels of employee engagement is one of our top
priorities and is central to our People Strategy; we strive to make
Biffa a consistently great place to work. Since 2011, the percentage
of engaged employees at Biffa has doubled and in the past year
our overall level of engagement has remained stable at 58%,
following a 5% point increase last year. Although levels have
remained stable this year, we are still ahead of our strategic
target and ahead of the UK average. We engage with our employees
throughout the year through multiple communication channels
including: face-to-face roadshows, conference calls, recorded
vlogs and our employee app, Biffa Beat.
In addition, we recognise our employees and teams who have gone
the ‘extra mile’ through our annual Diamond Award ceremony.
Learning and Development
We continue to invest in the personal development of our colleagues.
Our Learning and Development Team provides a broad selection
of programmes ranging from compliance and technical training to
management and leadership development. We have also invested
in a comprehensive portfolio of e-learning modules, allowing all our
employees access to relevant and timely learning content.
One key area of focus for 2020 is our Advanced Leadership
Programme. This new senior leader development programme
will accelerate the development of some of our brightest talent
across the organisation.
We continue to offer a portfolio of apprenticeship programmes
which range from engineering apprenticeships through to master’s
in business administration.
Anti-fraud, Bribery and Corruption
Our anti-fraud, bribery and corruption policy and procedure sets
out the standards that are expected of employees and the systems
and procedures which Biffa employs to minimise the opportunity
for fraudulent or corrupt behaviour taking place and how it will
deal with any instances of such behaviour. It applies to all our
employees and appropriate parts of the policy are also applied to
representatives, joint venture partners and outsourcing partners.
It includes guidance to employees on the giving, receiving and
recording of business gifts and hospitality. There is an e-learning
module on this topic for all Biffa leaders and managers to ensure
they understand and adhere to this. Any breaches of policy are
investigated by the Head of Risk and Internal Audit and are reported
to the Audit Committee (see details on whistleblowing).
Promoting Diversity and Inclusion (D&I)
We are committed to promoting D&I across all areas, including
gender and ethnicity. The industry in which we operate has
traditionally employed more men than women. Across the Group,
the workforce comprises 12% female and 88% male employees. There
is therefore lots more to do in this area and it remains a key focus.
The Company entered the FTSE 250 in March 2020 and we will
submit the gender data on our Group Executive Team and their
direct reports to the Hampton-Alexander Review in November
2020. The table below shows our employment by gender in each
of the relevant categories.
We believe that diversity enhances our effectiveness and we will
continue to address our gender imbalance when making future
Board and senior leader appointments and will strive to develop
a diverse pipeline of executive talent.
Although women account for only 12% of the overall workforce,
they are better represented within professional and managerial
roles which means on average they receive high levels of pay
in our business. This results in a negative gender pay gap.
More information can be found in our Gender Pay Gap report:
www.biffa.co.uk/sustainability/corporate-social-responsibility
We are working to create a consistently inclusive environment
where differences are valued and all colleagues can thrive.
We delivered D&I training to our senior leaders during 2019,
introduced an e-learning module on diversity for all managers
and plan to deliver D&I training to front line employees during 2020.
Our diversity policy also covers specific arrangements for people
with disabilities including:
■ giving full and fair consideration to applications from disabled
persons, having regards for their skills and abilities;
■ continuing the employment of and arranging appropriate training
for those who have become disabled while at Biffa; and
■ career development and promotion of disabled employees.
More information (including targets for the next 10 years)
can be found in our Sustainability Strategy: www.biffa.co.uk/
sustainability
Our Gender Statistics:
Category
Board
Group Executive Team
Direct Reports to Group Executive Team
All Employees
Male
%
85.7%
85.7%
73.7%
87.4%
Female
Non-Disclosed
No’s
%
No’s
1
1
10
1,028
14.3%
14.3%
26.3%
12.6%
0
0
0
0
%
0.0%
0.0%
0.0%
0.0%
Total
%
100.0%
100.0%
No’s
7
7
38
100.0%
8,188
100.0%
No’s
6
6
28
7,160
Board = Chairman, Non-Executive Director’s and Executive Director’s
Group Executive Team = Executive Directors’ and E Grades
Direct Reports to Group Executive Team = Direct Reports to E Grades (except PA’s)
All Employees = All Employees
30
Biffa Annual Report and Accounts 2020
Ethics and Human Rights
We conduct our business with honesty, integrity, fairness and
respect and encourage all our employees to embrace these
principles. Our employee handbook sets out our expectations
and we also have specific policies including whistleblowing,
anti-fraud, bribery and corruption, disciplinary and grievance
matters, diversity and inclusion and preventing modern slavery.
Preventing Modern Slavery
Modern slavery is a growing world-wide issue exacerbated by the rapid
rise in global migration. We operate at over 200 sites across the UK
and employ more than 8,000 people, as well as many agency staff. We
also have relationships with many external suppliers to source labour
and materials for our business. It is therefore imperative to maintain a
robust and effective approach towards slavery and human trafficking
in order to protect our people and supply chain. We procure goods
and services under the Code of Ethics of the Chartered Institute of
Procurement & Supply and complete due diligence checks on new
and existing suppliers. There is an e-learning module on modern
slavery for all leaders and managers to build their knowledge and
understand their responsibilities.
More information can be found in our Modern Slavery
Statement: www.biffa.co.uk/media-centre/publications
Whistleblowing
The Group has a long established whistleblowing policy and
procedure by which all employees may, in confidence, report any
concerns where the interests of the Company or others are at risk.
Employees are encouraged in the first instance to talk to their
manager, a higher level of management or a member of the HR
team. However, in circumstances where this is not possible, or is
inappropriate, the Group has provided an independent, external
whistleblowing hotline, via Safecall, for the reporting of such
matters on a named or anonymous basis.
All reports are entered in the Group Whistleblowing Register and
are treated in the strictest confidence. The output of an investigation
is typically reviewed by a review body, which confirms the outcome
and any action to be taken, comprising the Group HR Director,
General Counsel & Company Secretary and other senior leaders as
appropriate, dependent on the nature of the complaint. The policy
is reviewed annually to ensure it is fit for purpose and continues
to reflect best practice. There were 39 whistleblowing reports in
the year ended 27 March 2020, nearly 60% of them being in the
categories of inappropriate behaviour or dishonesty.
In five of these cases process/system changes were recommended
to be enacted. In the other 19 cases the investigation completed,
but did not result in sufficient evidence to warrant disciplinary
action or a change to existing processes or systems.
Giving Back to our Communities
We encourage all colleagues to ‘give something back’ and are
proud to partner the charity WasteAid, as well as supporting
local communities through employee volunteering, local
fundraising activities and biodiversity initiatives.
We support our employees in their volunteering activities
within their local communities. We believe that, in addition to
giving something back to society, volunteering results in better
teamwork, motivation, engagement and personal fulfilment for
employees. During the year, more than 56 employees took
part in volunteering activities.
We also have the Biffa Award which diverts a proportion of landfill
tax to help support community projects near landfill sites. During
the year, 44 projects received funding of more than £3m to support
the improvement of land for biodiversity, the improvement of
community buildings, such as village halls and the installation of
recreational facilities such as play equipment. We are committed
to providing an additional £25m to local communities by 2030.
You can read more about our people and communities
in our Sustainability Strategy here: www.biffa.co.uk/
sustainability/downloads
31
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Managing our Risks
Managing risks
through unprecedented
circumstances
The Board has overall responsibility for risk
management at Biffa. In support of this, risk
management is firmly embedded within our
everyday business activities and our culture.
Clearly the evolving COVID-19 crisis has had a significant impact
on the Group. Whilst Biffa has continued its operations throughout
the unprecedented circumstances, there has been increased risk to
the I&C and landfill businesses in particular. Further detail on risk
management throughout the COVID-19 crisis is provided in Principal
Risks and Uncertainties on pages 34-38.
Risk Governance
The Board recognises its responsibility to ensure that the Group’s
internal control systems and risk management framework are
effective. The Audit Committee has specific delegated authority
to review the effectiveness of the risk management and internal
control processes during the year.
Day-to-day risk management and control is the responsibility of
the Group Executive Team, with Board oversight, and is designed
to ensure that management provides leadership and direction to
employees so that our overall risk-taking activity is kept within our
risk appetite.
Biffa operates the ‘Three Lines of Defence’ model to manage the
ongoing effectiveness of risk and control, to define the relationship
between the various management and oversight functions, and to
demonstrate how responsibilities are allocated. The Internal Audit
team assesses our risks and controls independently and objectively.
Risk Appetite
The Board sets our overarching risk appetite and ensures that we
manage risk appropriately across the Group. H&S, regulatory and
environmental risks are our top priority. Biffa dedicates significant
resources and focus to managing and monitoring these risks on a
daily basis, with other key risks considered and reviewed alongside
this. In each case, controls and mitigating actions aligned to the risk
appetite are put in place.
Risk Assessment
A risk assessment matrix is used to ensure that risks are assessed
consistently. This matrix considers the likelihood of the risk
materialising and its potential impact. We assess both the inherent
risk, before any mitigating actions, and the residual risk, after
considering mitigating actions and controls. We also identify any
additional activities that could be undertaken to further mitigate
the risk.
Emerging Risks
In addition to known risks, we identify and analyse emerging risks
and the need for mitigation as part of our existing risk management
processes. These risks are reviewed by both the Group Executive
Team and the Audit Committee, and include risks relating to climate
change, such as flood risk arising from high rainfall, and pandemic
and infectious diseases.
32
Biffa Annual Report and Accounts 2020 Risk Management Processes
The Group’s risk management processes are centrally coordinated
with an established network of ‘Risk Champions’ in place to
facilitate updates to risks during the year. The Risk Champions
are members of the senior management team and take a lead role
in engaging local management to identify, agree and update risk
information on a regular basis.
The Group Executive Team receives regular reports on the principal
and emerging risks and ownership of each of these risks is assigned
to individual members of the Team.
The Audit Committee undertakes regular reviews of the principal
and emerging risks, as identified and assessed by management
through the above process. The Audit Committee also reviews
summaries of the work undertaken by the Internal Audit team,
which operates a risk-based annual plan of assurance reviews.
Our risk management systems are intended to mitigate and reduce
risk to the lowest extent possible, however we cannot eliminate
all risks to the Group. The risk management processes can only
provide reasonable and not absolute assurance against material
misstatement or loss.
Risk Management Framework
Board
Audit Committee
Group Executive Team
1st line of defence
2nd line of defence
Owns and manages risks
and implements/operates
business controls
Oversight of risks and
control compliance
3rd line of defence
Independent
assurance
Who is responsible:
■ Operational management/staff
Who is responsible:
■ Compliance/oversight functions
Who is responsible:
■ Internal Audit
Activity/controls:
■ Policies and procedures
■ Internal controls
■ Planning, budgeting,
forecasting processes
Activity/controls:
■ Health, Safety & Quality Team
with audit programme in place
Activity/controls:
■ Approved Internal Audit plan
■ Internal Audit reporting line
■ Environmental/regulatory compliance
to Audit Committee
■ Risk management
■ Delegated authorities
■ Controls compliance monitoring
■ Business workflows/IT
system controls
■ Personal objectives
and incentives
■ Management/Board reporting
and review of KPIs and financial
performance
■ Corporate policies and central
function oversight
■ Regular Internal Audit updates
to Audit Committee
33
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Principal Risks and Uncertainties
Risk title/description
Risk movement
and Impact
Mitigating actions
Changes in year
Strategic
objective
Optimise
Published reports (Reality
Check series) on Recycling
Collections Guide and on
Managing Waste Plastics.
10-year Sustainability Strategy
‘Resourceful, Responsible’
developed and launched in
March 2O2O, which helps link
the commercial strategy with
sustainability/ESG strategy and
targets. These are in line with
UK Government environmental
policy and objectives, as well as
the United Nations Sustainable
Development Goals.
New H&S Programme – Safer
Together launched.
Existing H&S standards updated
and incorporated into a new Group
Integrated Management System.
Optimise
New driver training programme
– Streetwise developed which
focuses on defensive driving
behaviours.
Wellbeing programme delivered
supporting key topics such as
mental health.
During the year we have
continued our M&A strategy to
support growth and completed
five small acquisitions.
We have also worked to integrate
the previous year’s acquisitions
including the internalisation
of SWR customer collections
previously outsourced. This
activity will complete next year.
Post COVID-19 we anticipate
returning to a strong pipeline
of opportunities.
Grow
Develop
Changes in Government
policy and legal and
regulatory compliance
The Group operates in a
highly regulated industry and
any changes to Government
policy, standards or regulatory
compliance requirements
could have an adverse impact
on the Group’s operations
and results.
■ Operational
■ Financial
■ Reputational
■ Regulatory
Health & Safety (H&S)
Biffa’s operations present
inherent H&S risks to our
employees, our customers
and the wider public.
Violations of H&S laws/
regulations could have a
material adverse effect on
Biffa’s business and reputation.
■ Reputational
■ Regulatory
■ Financial
■ Financial
Mergers & Acquisitions
(M&A) strategy and
delivery
Biffa faces risks arising from
its acquisition strategy, such
as increased competition for
acquisition targets or a lack of
suitable targets. Additionally,
acquisition integration
risks and issues could arise,
impacting the delivery of
expected benefits, either
within expected timeframes
or to the extent anticipated.
Experienced and qualified environmental
support experts working across all
operating divisions.
Representation on the Environmental
Services Association and other external
bodies; liaison with policy makers and
Regulators at national and local levels;
responses to Government/regulatory
consultations and sustainability reporting.
Environmental compliance strategy in place
including annually reviewed targets and
actions at local, divisional and Group levels.
Established compliance processes in place
to manage other regulatory compliance risks,
such as anti-bribery and corruption, GDPR,
modern slavery, competition and vehicle
operating licences.
Founding member of the Slave Free Alliance
and has implemented several initiatives,
including a manager’s guide to modern
slavery, to raise awareness across the business.
Training for senior leaders on modern
slavery, anti-bribery and corruption, GDPR
and competition.
Group H&S function reports to the CEO.
Active and regular engagement by senior
management including weekly reporting
and calls with the Group Executive Team.
Inclusion of H&S targets and objectives within
Group Balanced Business Plans (BBP) with one
of the five pillars being ‘Safe and Sustainable’.
Embedded policies, standards and procedures
in place across Biffa for the systematic control
of significant H&S risks.
Primary Authority relationship with Hampshire
Fire and Rescue Service enables access to
advice and counsel on fire risk issues.
Management system transitioned to ISO 14001
and ISO 9001:2015.
Group delegated authorities for the review/
approval of all transactions by senior
management, Investment Committee
and the Board.
Dedicated corporate finance expertise in
place together with experienced Biffa subject
matter experts as senior stakeholders for the
acquisition process.
Board and executive level review and update
included in monthly Board report summarising
pipeline of identified potential targets.
Due diligence undertaken for all M&A
transactions, including use of external
advisers depending on target value and
complexity. A standardised approach using
an established valuation model is in place
with all transactions reviewed/approved
by the Investment Committee and (where
appropriate) the Board.
Project team kept in place until integration
phase completed. Post-acquisition reviews to
track benefit delivery with financial benefits
embedded within financial planning processes
(e.g. forecasts and budgets).
34
Biffa Annual Report and Accounts 2020
Key: Risk movement in year
No change
Reduced
Increased
New
Risk title/description
Risk movement
and Impact
Mitigating actions
Changes in year
Continued focus on the sales
governance process including:
■ The development of the
contract risk framework to
formalise the governance
approach to key commercial/
legal risks, which has been
approved by the Board.
■ Improved capacity and
capability across our project
management and mobilisation
team facilitating a culture of
continuous improvement.
■ Restructure of the commercial/
sales function, integrating
leadership under the new
Municipal Commercial
Director, but also adding
additional support in both
the commercial and business
development teams.
See pages 6 to 7 for more
information.
Long-term contracts
and tendering
The Group is exposed to risks
inherent in long-term fixed-
price contracts, in particular
in its Municipal division and
related operations. Risks
include inaccurate long-term
cost estimates due to changes
in the external operating
environment and market
dynamics that lead to material
deviations from initial
underlying assumptions.
COVID-19
A signification reduction in
demand for I&C Collection
services, as many customers
are forced to cease or
drastically reduce trading,
may have an adverse
impact on Biffa’s operating
performance, revenues
and results of operations.
In addition, the Group
expects reductions in
volumes into some processing
facilities in the R&E division
and impacts to all business
operations from workforce
illness or enforced absence.
■ Financial
■ Reputational
Group delegated authorities for the review/
approval of bids by senior management,
the Investment Committee and the Board
(depending on bid size).
Material bids are compiled by dedicated
development teams with significant expertise
and experience. They are supported by subject
matter experts as appropriate.
Protection from change of law or force majeure
for unforeseen circumstances is designed
into contracts.
A contract risk framework is in place to identify
key commercial/legal risks and confirm
through the governance process that these
have been considered and mitigated.
■ Financial
■ Operational
■ Reputational
The Group has introduced measures to reduce
costs, including furloughing over 1,500
employees; pay reductions being taking by
the Board, the Group Leadership Team and the
broader leadership group; and suspension of
bonuses and pay increases.
All M&A has been suspended and non-essential
capital expenditure that has not already been
committed for FY21 has been put on hold.
In addition, payment deferrals have been
negotiated where appropriate and meaningful
in areas such as indirect taxes, pensions, lease
liabilities and material supplies.
Covenant amendments and additional
liquidity headroom have been agreed
with the Group’s banks.
An internal response team has been set up to
ensure we support the health and wellbeing of
our colleagues, manage business continuity,
provide clear and timely communications and
minimise service disruption.
All staff who are able to have been advised to
work from home and social distancing applied
across our workplaces.
Internal communications and engagement
have been key with CEO vlogs, internal
appreciation campaigns and our employee
App, Biffa Beat all contributing.
Strategic
objective
Grow
Grow
Optimise
35
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020
Principal risks and uncertainties continued
Risk title/description
Risk movement
and Impact
Mitigating actions
Changes in year
Strategic
objective
Optimise
Crisis management and emergency response
plans in place for key sites and operations.
■ Financial
■ Reputational
■ Operational
Server infrastructure supporting key IT
services hosted in Microsoft Azure Cloud
providing resilience, failover and backup
services.
ISO 27001 certification (Information Security)
in place.
Externally hosted business continuity
recovery sites in place for key administrative
and support functions with a tri-annual testing
programme in place.
Intrusion detection in place and a cloud-
based ‘always on’ security service provided by
Microsoft protecting against key cyber threats.
Cyber security education initiatives taken place.
Continued testing and
improvement of Biffa Business
Continuity arrangements
throughout the year.
Business continuity capability
demonstrated during COVID-19
crisis whereby the majority of
contact centre and head office
functions enabled to work from.
Whilst we continue to monitor
this risk, we are confident that
our existing mitigations will
enable the Group to minimise
the impact of any weakening in
economic conditions.
Grow
Optimise
■ Financial
Biffa has revenues and costs that are either
directly or indirectly impacted by the value
of Sterling relative to key currencies such as
the US Dollar or the Euro. This provides some
degree of offset and natural hedge.
We enter into forward contracts for the sale of
electricity and to mitigate short-term currency
exposures, improving earnings visibility in the
short term.
Biffa provides services across the breadth of
the UK economy and to customers in the public
and private sectors. The breadth of customers
offers a degree of protection against economic
pressures that may affect specific areas of the
economy.
The Group has assessed the potential impact
of certain Brexit scenarios on its activities and
the Board is satisfied that there is unlikely to
be a net material impact on the Group.
■ Operational
■ Financial
Reward framework for employees and
managers competitively aligned to the market,
including Performance Share Plan for senior
personnel and Sharesave scheme available to
all employees.
Talent and management development
programmes deployed at senior levels and
progressively to other levels going forward.
Ongoing review of the recruitment and
retention of drivers.
Established apprenticeship programme.
COVID-19 response team set up
to ensure we support the health
and wellbeing of our colleagues,
manage business continuity,
provide clear and timely
communications and minimise
service disruption.
Introduced an Advanced
Leadership Programme.
Grow
Develop
Optimise
Business continuity,
cyber security and
IT resilience
A significant disruption to
Biffa’s infrastructure, including
IT systems, could potentially
have an impact on the activity
of the Group’s customers, such
as increased billing times,
interruptions to collection
operations and processing
logistics, and additional costs.
Additionally, the theft, loss,
destruction, misappropriation
or release of sensitive and/or
confidential information
could result in business
disruption, negative
publicity or brand damage.
Economic environment/
Brexit
Economic conditions in the
UK may have an adverse
impact on Biffa’s operating
performance, revenues and
results of operations. The
Group is exposed to political,
social and macroeconomic
risks relating to the UK’s exit
from the EU.
Any economic weakness
that leads to reduced
volumes of waste and
recyclate will adversely
impact the Group’s business.
Furthermore, a deterioration
in macroeconomic conditions
may also result in increased
competitive pricing pressure
and increased customer
turnover.
People – attraction,
succession, retention
The loss of the services of a
number of Executive Directors,
senior management or key
employees, or if the Group
encountered labour shortages
or was unable to attract people
for core business roles, could
have a material adverse effect
on Biffa’s business results,
operations, financial condition
and prospects.
36
Biffa Annual Report and Accounts 2020
Key: Risk movement in year
No change
Reduced
Increased
New
Risk title/description
Risk movement
and Impact
Mitigating actions
Changes in year
Strategic project
implementation
Failure to deliver strategic
projects, such as Energy from
Waste (EfW) and Project
Fusion. EfW increases Biffa’s
residual waste treatment
capabilities providing a secure
and cost-effective disposal
solution for the I&C business.
Fusion is focused on our
products and services, how
they are sold and delivered,
the technology used and
the online services offered
to customers. As with any
such projects, there are
risks that the project fails
to deliver the anticipated
improvements and/or
benefits for the budgeted
investment, adversely
impacting reputation and
operating results.
Finance availability/
investment
If the Group were to fail
to comply with any of the
financial or non-financial
covenants in its credit
facilities (due, for example,
to deterioration in financial
performance), it could
result in an event of default
and the acceleration of the
Group’s obligations to repay
those borrowings, increased
borrowing costs or cancellation
of certain credit facilities.
■ Operational
■ Financial
Board and Group Executive Team engagement
and leadership.
Selected software is a proven ‘off the shelf’ product.
Independent programme assurance.
Change network in place to ensure line
management ownership of Fusion.
Proven EfW technology, substantial UK
and worldwide reference plants with > 30
operational in the UK treating in excess of 10m
tonnes per annum.
EfW joint venture providing complementary
skill sets and experience to minimise risk.
Limited recourse project structure.
Fusion transformation project has
made sound progress throughout
the year but has been slowed
down during COVID-19 crisis.
The project will resume following
the resolution of the crisis.
Newhurst EfW has achieved
financial close, securing a
fixed programme and fixed
price contract.
Covenant amendments and
additional liquidity headroom
have been agreed with the
Group’s banks in response
to the COVID-19 crisis.
■ Financial
Significant and flexible bank funding facility
with substantial headroom to enable the
Group to progress strategic priorities and
accommodate any downside performance risk.
£350m unsecured revolving credit facility,
expiring in March 2025 but with an option to
extend for a further year. As at the end of the
year, £98m of the facility was undrawn.
In addition to the bank funding facility, the
Group has over £150m of lease liabilities,
with undrawn funding of over £70m at the
end of the year.
Ongoing monitoring of financial and
non-financial covenants with summary
updates to the Board.
Strategic
objective
Develop
Optimise
Grow
Develop
Optimise
37
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020
Principal risks and uncertainties continued
Risk title/description
Risk movement
and Impact
Mitigating actions
Changes in year
■ Financial
■ Operational
Ongoing monitoring and improvements to
product quality within recycling processes.
Off-taker strategy review to limit dependency,
where able, on the Chinese market.
Commodity price risk sharing within
long-term commercial contracts.
Working with key customers (e.g. Local
Government) to agree gate fees to reflect
any increased costs and also dual
collection methods.
Power price hedging policy in place, which
is regularly reviewed.
Route to market Power Purchase Agreement
with top tier off-taker gives off-take certainty
and credit worthiness.
Investment in sorting technology
and process improvements
to ensure we can continue to
supply overseas markets. Supply
agreements now in place with
domestic processors to enable
a proportion of the material to
remain in the UK.
Biffa’s investment in plastic
recycling has significantly
reduced reliance on exports,
with the majority of recovered
plastics being processed to end
destination internally.
Continued focus on minimising
exposure to recycle commodity
price fluctuations by risk
sharing with our local authority
customers. In FY 2019/20, we
mitigated 58% of commodity
price risk through this approach.
Internal business innovation group focuses
on market developments and to act as an
incubator for ideas and new business models.
■ Financial
■ Operational
Continual competitor analysis to consider
threats and changes to the landscape.
Several innovative concepts
have been developed as potential
projects and evaluated by the
executive team.
Annual strategy review to ensure that
Biffa business model remains current
and competitive.
Customer surveys to ensure that the Biffa
offer remains relevant and compelling.
Ongoing investment in and improvement
of the customer experience through
digitisation, improved processes and
management information.
Commodities market
and pricing volatility
Biffa produces significant
volumes of recycled
commodities for re-sale.
Commodities produced
include various paper grades,
card, plastics, and ferrous
and non-ferrous metals.
In addition, Biffa generates
power from renewable sources
and changes to electricity
export prices impact revenues
and profits achieved.
Markets for these recyclate
products have individual
supply and demand dynamics
impacting both price and
availability of off-take.
Following China’s decision
to ban mixed paper imports
in 2018, other Far East
markets have tightened
quality standards, and in
some instances also banned
imports. This has put further
downward pressure on prices
with an oversupply of material
in the market and made it
more challenging to place
lower quality material.
Strategic/competitive
threat to business model
Market disruption from
the application of new
technology and the advent
of new business models could
change the waste supply
chain and adversely impact
Biffa’s established operating
asset base of a traditional
collection network and
processing facilities.
38
Strategic
objective
Develop
Optimise
Grow
Develop
Optimise
Biffa Annual Report and Accounts 2020
Viability Statement and Going Concern
The COVID-19 pandemic is unprecedented and has led to a sudden and significant
decline in waste volumes, due to lockdown measures. When these measures are
lifted, a marked but gradual recovery in volumes is anticipated, albeit with depressed
run rate levels, as a result of an expectation that a proportion of small customers
will not survive the pandemic.
Whilst the Group is subject to a number of principal risks, as disclosed in the Strategic
Report, these are considered to be well managed by the Board and the Group is fairly
defensive in nature. However, the economic downturn impacts of COVID-19 have
proved to be an entirely different proposition and the impacts of this are the main
factors taken into consideration for the viability assessment.
In accordance with provision 31 of the UK Corporate Governance Code 2018, the
Board has assessed the viability of the Group over a longer period than twelve
months and has adopted a period of three years for the assessment. In determining
the appropriate period over which to assess viability, the Board has considered
budgeting, forecasting and strategic planning cycles, the timeframe within which
the Group assess risks and the maturation of the Group’s credit facilities.
Three years is considered an appropriate time period given the short-term impact of
the COVID-19 lockdown measures to the waste industry and is a reasonable period
for a shareholder to expect a waste business to be assessed over. Beyond the three
year period, the Group has considered and is satisfied the longer term pre-COVID-19
strategy is still relevant and appropriate, this includes further recycling capacity,
acquisition growth and investment in EfW plants.
Ongoing weekly and, more recently as things have started to stabilise, bi-weekly
re-forecasting under different scenarios, have been undertaken since the COVID-19
pandemic started to impact the business at the end of March. Within these forecasts
the Directors carried out a robust assessment of the Principal Risks facing the Group,
including the impact of the COVID-19 pandemic on the various sectors the business
operates in and the waste streams arising in all the Group’s operating areas. To assess
viability, multiple, material risks are selected by the Board and are assumed to
crystallise in parallel during the assessment period, putting financial and operational
performance of the business under plausible, but unlikely, stresses outlined below.
These forecasts assume a 13 week lockdown period from the balance sheet date and
a subsequent phased recovery. The financial impact has been modelled on a sub-
divisional level and includes the impact on revenue and operating costs. In modelling
the scenarios, recovery assumptions have been applied on the various sectors the
Group services. Impact to expected credit losses has been considered and reflected
in the modelling. The assumptions have been stress tested with variant recovery time
periods to determine whether current headroom would suffice and whether revised
bank covenants would be breached.
The Group has also implemented various mitigating actions to combat the near-
term reduction in demand for the Group’s services. These include the reduction of
expenditure on M&A, non-committed development and non-essential maintenance
capital expenditure, remuneration, other operating costs and not declaring a final
dividend for the year.
The Group’s profitability, liquidity and financial headroom have all been assessed
and incorporated within the above mentioned scenario analysis.
Based on the results of this analysis and after careful consideration of the uncertainty
and dynamic nature of COVID-19, including reviewing the fast changing external
factors and their cumulative impact in the short, medium and long term, and other
considerations including the Group’s business model and ability to model a range
of severe, but plausible, reasonable worst-case scenarios, the Directors confirm
that they have a reasonable expectation that the Group will be able to withstand
the impact of each of these scenarios, in isolation and in a number of plausible
combinations, should they occur in the course of the three-year assessment period.
In each event the Group would continue in operation and meet its liabilities as they
fall due. Therefore, the Board concluded that it remains appropriate to consider a
three year time frame over which we should assess the long-term viability of the
Group over the period to 31 March 2023.
39
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Corporate Governance Report
Summary of the Corporate
Governance Report
Our Corporate Governance Report, on
pages 40-85 explains how the Company
has applied the principles and complied
with the provisions of the UK Corporate
Governance Code 2018 (the Code), other
than as referred to below.
Compliance Statement
The Board has applied the principles and
complied with the provisions of the Code
throughout FY20, with the exception of
provision 21, which requires an external
evaluation of the Board every three years
and provision 38, concerning pension
contribution rates for Executive Directors.
Further information regarding the Board
evaluation can be found on page 55 and
regarding pension contribution rates can
be found in the Directors’ Remuneration
Report on page 66.
The Code is available on the website
of the Financial Reporting Council at
www.frc.org.uk
Board Leadership and Company Purpose
Board of Directors
Board Engagement with Stakeholders
Activities of the Board
42-43
48-49
51
Division of Responsibilities
Governance Framework
Roles and Responsibilities
Composition, Succession and Evaluation
Board Evaluation Process
Nomination Committee Report
Board Skills and Attributes
Audit, Risk and Internal Control
Audit Committee Report
Risk and Internal Control
Remuneration
Directors’ Remuneration Report
Directors’ Remuneration Policy
Directors’ Annual Report on Remuneration
45
46
53
54-56
55
57-61
60
62-83
66-73
74-83
4040
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Chairman’s Introduction
Leading with Purpose
Ken Lever
Chairman
Dear Shareholder,
On behalf of the Board, I am pleased to introduce the Group’s
Corporate Governance Report for this year. As previously stated,
the Company has had another successful year, delivering on its
strategy, with good financial results and the publication of its
first Sustainability Strategy.
In the final weeks of the year, the Board’s focus moved to the
Company’s response to the impact of COVID-19, providing oversight
and approving a number of updates to the market and various
measures for near-term cash preservation. The Board held weekly
calls at which it received updates on the status of the response
planning and the impact to our employees, other stakeholders and the
business. Further details on Biffa’s response are set out on pages 6-7.
Changes to the Board During the Year
There have been no changes to the Board during the year, following
last years movements. I am pleased to report that the changes have
been successfully embedded, with Board members working and
interacting well together, this was confirmed by the results of our
2020 Board evaluation (see page 53 for more details).
Governance
This year we are reporting under the 2018 UK Corporate Governance
Code for the first time. The updated principles in the Code emphasise
the value of good corporate governance to long-term sustainable
success. The Board took the opportunity to undertake a comprehensive
review and refresh of its policies and processes, following the publication
of the Code, with these being embedded during the year. The Corporate
Governance Report on pages 40-85 sets out how we comply with, and
have applied, the Code during the year.
Section 172 and Stakeholder Engagement
Set out on page 5 is the Board’s first section 172 statement. In order
to comply with section 172, the Board is required to consider a
number of matters in its decision making including the interests of
its stakeholders. Further details on this are set out on pages 48-49.
The Board fulfilling its s172 duties has been clearly demonstrated in
its response to the COVID-19 crisis, in particular, how it has engaged
with a number of different stakeholder groups during this time. All
of our stakeholders have been affected in some way and the Board
has supported the business to act fairly at all times, ensuring the
continuation of our essential services, whilst approving measures
to protect and preserve the fundamental value of the business to
ensure its long-term health. Further information on how the Board
has considered our stakeholders during this time can be found on
pages 6-7.
Shareholder Consultations
During the year, the Remuneration Committee consulted with our
major shareholders in relation to the new Directors’ Remuneration
Policy which will go before shareholders for approval at the AGM in
July this year. A number of changes were made to the Policy following
feedback from shareholders and the proxy agencies (see page 68 for
details). David Martin, our Senior Independent Director, also consulted
with investors following the votes against the resolution for my
re-appointment at the last AGM (see page 53 for details).
Purpose, Values and Culture
In last year’s Annual Report we introduced our new purpose – to
change the way people think about waste – for the first time. During
the year, the Board has monitored how the purpose, values, and
strategy align to the Company’s culture (see page 47 for details).
Environmental, Social and Governance (ESG)
In recent years we have seen an increased focus from shareholders on
ESG. In response to this, we published our first long-term Sustainability
Strategy ‘Resourceful, Responsible’ in March 2020. The strategy,
which builds on the Group’s long track record of making a positive
contribution to the environment and communities it operates in,
outlines the Company’s ambition to drive the sustainability agenda
within the UK waste management space for the next 10 years. It is
underpinned by an ambitious but deliverable plan, which is aligned
to the Company’s strategic framework and fully supported by the
Group’s previously outlined investment plans. Our Sustainability
Strategy can be found our website www.biffa.co.uk/sustainability.
Looking Forward
During the coming year, the Board will continue to focus on
the Group’s recovery from the COVID-19 crisis and the strategic
opportunities that will present.
Ken Lever
Chairman
4 June 2020
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The right balance of knowledge and skills
Ken Lever
Non-Executive Chairman
Date of Appointment
28 September 2016
Committee Memberships
N
Nationality
British
David Martin
Senior Independent Director
Date of Appointment
28 September 2016
Committee Memberships
A N R
Nationality
British
Relevant Skills and Experience
Ken is a Fellow of the Institute of Chartered Accountants and a
former partner at Arthur Andersen. He has a wealth of corporate
finance experience, having previously held board executive director
positions with Numonyx BV, Tomkins plc, Albright and Wilson plc
and Alfred McAlpine plc. Ken joined Xchanging plc as its chief
financial officer, and was subsequently appointed and served as
its chief executive officer from 2011 to 2015. He was previously a
non-executive director of Catesby Property Group plc, iSoft plc and
Vega Systems plc, and served for six years on the UK Accounting
Standards Board between 2006 and 2012.
Relevant Skills and Experience
David is a chartered management accountant and has significant
experience of both domestic and global transport businesses.
He was involved in the acquisition of National Express and the
successive management buy-out, leading to the creation of British
Bus Group Limited. David was subsequently appointed chief executive
of Arriva plc, a position he held from 2006 to December 2015. He was
previously a non-executive director of Ladbrokes plc and Arriva plc.
External Appointments
Ken is chairman of RPS Group plc and a non-executive director
of Vertu Motors plc, Blue Prism plc and Gresham House Strategic plc.
External Appointments
David is chairman of FirstGroup plc.
Michael Topham
Chief Executive Officer
Date of Appointment
29 September 2018
Committee Memberships
None
Nationality
British
Richard Pike
Chief Financial Officer
Date of Appointment
29 September 2018
Committee Memberships
None
Nationality
British
Relevant Skills and Experience
Michael was appointed Chief Executive Officer on 29 September
2018, having previously held the role of Chief Financial Officer
from 2013. Michael trained as a Chartered Accountant with PwC
in London, and held positions in both the audit and transaction
services practices. Prior to joining Biffa, he was finance director
at Greenstar UK Holdings Limited from 2005 to 2010.
External Appointments
Michael is a director of the Environmental Services Association Limited.
Relevant Skills and Experience
Richard was appointed Chief Financial Officer on 29 September 2018.
Having trained as a Chartered Accountant with Price Waterhouse,
he went on to hold a variety of financial and management positions
at Pilkington plc, Scapa Group plc and Manchester Airports Group.
Latterly, Richard was the chief financial officer of AB Sugar,
managing director of British Sugar and group chief financial
officer of Boparan Holdings Limited.
Board and Committee Attendance Table 2019/20
Board meetings
attended/held
Nomination Committee
meetings attended/held
Audit Committee
meetings attended/held
Remuneration Committee
meetings attended/held
8/8
8/8
8/8
8/8
8/8
8/8
8/8
3/3
3/3
3/3
3/3
3/3
3/3*
3/3*
4/4
4/4*
4/4
4/4*
4/4
4/4*
4/4*
7/7
6/7*
7/7
5/7*
7/7
6/7*
6/7*
Director
Michael Averill
Gab Barbaro
Carol Chesney
Ken Lever
David Martin
Richard Pike
Michael Topham
* Attended the meeting as an invitee
4242
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Committee Membership
A Audit Committee
N Nomination Committee
R Remuneration Committee
Committee Chairman
Michael Averill
Non-Executive Director
Date of Appointment
28 September 2016
Committee Memberships
A N R
Nationality
British
Gab Barbaro
Non-Executive Director
Date of Appointment
1 January 2019
Committee Memberships
N
Nationality
Italian/Australian
Relevant Skills and Experience
Michael has extensive knowledge of the waste management industry.
He is a Fellow of the Chartered Institute of Waste Management and a
former chairman of the Environmental Services Association. Michael
held a number of senior management roles in the industry before
being appointed group chief executive of Shanks Group plc from 1994
to 2007 where he oversaw the growth of the group. Michael joined the
former Board of Biffa Group in February 2013. He was previously a
non-executive director of TDG plc, Care UK plc and Van Gansewinkel
Group in the Netherlands.
Relevant Skills and Experience
Gab is currently the managing director of UK business at Centrica plc
(a division trading as British Gas Business), a position he has held
since 2015 following his promotion from his role as managing
director of British Gas Business Services.
Prior to this, Gab held a series of senior management roles in
strategy including head of group strategy at Centrica plc and
chief risk officer at Snowy Hydro in Australia, as well as strategy
consulting roles in consultancy firms Boston Consulting Group
and Accenture.
External Appointments
Michael is a non-executive director of the Saudi Investment
Recycling Company in Riyadh, Saudi Arabia.
Carol Chesney
Non-Executive Director
Date of Appointment
12 July 2018
Committee Memberships
A N R
Nationality
American/British
Sarah Parsons
General Counsel and
Company Secretary
Date of Appointment
June 2019
Relevant Skills and Experience
Carol is a Fellow of the Institute of Chartered Accountants in
England and Wales, and qualified with Arthur Andersen in the UK.
Carol was the company secretary of Halma plc, the FTSE 100 health,
safety and environmental technology group, where she oversaw
governance, pensions, group insurance and ethics compliance
from 2008 until September 2018. Prior to this role, Carol was
Halma’s group financial controller with oversight of all day-to-day
financial planning and reporting matters.
Sarah joined Biffa in June 2019 as General Counsel and was
appointed Company Secretary on 11 July 2019. She is responsible
for managing legal risk and in supporting the Chairman and the
Board in maintaining high standards of corporate governance.
She joined Biffa from Rotork plc, where she was Senior Legal
Counsel and Company Secretary. Prior to that, Sarah spent a
number of years in Australia as a senior in-house counsel at ANZ
Bank. She began her career in London at Bryan Cave Leighton
Paisner where she spent more than a decade as a corporate M&A
lawyer. Sarah is qualified as a solicitor in England and Australia.
External Appointments
Carol is a non-executive director of Renishaw plc, Hunting plc
and IQE plc.
The Board have provided their own photos for their biographies,
which were taken during Covid-19 lockdown.
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Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Group Executive Team
Michael Topham
Chief Executive Officer
Michael’s full biography
appears on page 42.
David Gooding
Chief Information Officer
Date of Appointment:
July 2011
Richard Pike
Chief Financial Officer
Richard’s full biography
appears on page 42.
David was appointed Chief Information Officer in April 2020,
having previously held the role of Group IT Director from July 2011.
Davis has worked in the waste industry for 15 years. In his role
David is responsible for IT services, IT strategy, the development of
management information, project governance, and leading Project
Fusion, the current initiative to improve the Group’s systems and
processes, and Group innovation.
Jeff Anderson
Chief Operating Officer,
Collections
Date of Appointment:
September 2011
Jane Pateman
Group HR Director
Date of Appointment:
December 2010
Jane joined Biffa in December 2010. Prior to this, she held a number
of senior HR director positions in FTSE listed businesses, with
significant experience in managing change. Jane is accountable
for the people strategy and her responsibilities include employee
relations, internal communications, learning and development,
payroll, engagement and reward and benefits. Jane is also a non-
executive director of Knights plc.
Mick Davis
Chief Operating Officer,
Resources & Energy
Date of Appointment:
September 2010
Mick was appointed Chief Operating Officer, Resources & Energy with
effect from April 2019, having previously held the role of Managing
Director of the RR&T Division from September 2010. He is responsible
for the day-to-day management of the Resources & Energy Division
and the development of new facilities, including the EfW plants. In
addition, he has oversight of the Group’s Environmental strategy as
well as being a trustee of the charity Biffa Award.
4444
Jeff was appointed Chief Operating Officer, Collections with effect
from October 2018, having previously held the role of Managing
Director, I&C Division from September 2011. He is responsible for
the overall leadership of our Collections operations, including our
hazardous waste business. His previous career was spent within B2B
supply chain and logistics companies, and he has held executive
board director positions at Wincanton plc and Securicor plc. Jeff has
significant experience in managing change, turnaround management
and operational excellence in large-scale operational businesses.
Roger Edwards
Managing Director, Municipal
Division
Date of Appointment:
October 2010
Roger joined Biffa in June 2010 following the acquisition of Greenstar
UK Holdings Limited. Prior to this, he had previously been managing
director at Verdant Municipal Limited and held board positions
in other waste businesses. Roger is responsible for the Municipal
business providing waste collection and street cleansing services
to over 2m households and leading a team of 3,400 employees.
The Group Executive Team have provided their own photos for their
biographies, which were taken during the Covid-19 lockdown.
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Division of Responsibilities
Our Governance Framework
The Board has a clear corporate governance framework comprising Board reserved matters, various Committees with their Terms
of Reference and the Group delegated authorities matrix ensuring decision making at appropriate levels within the Group.
Board of Directors
The role of the Board is to promote the long-term success of the Company, generating value for shareholders and
contributing to wider society by providing effective leadership and direction to the business as a whole. It sets the Group’s
strategy, having regard to stakeholders, while maintaining a balanced approach to risk within a framework of effective
controls. It has also established the Company’s purpose and values and monitors culture to ensure alignment. Its sets the
tone and approach to corporate governance and is responsible for the overall financial performance of the Group.
Board Committees
The principal Board Committees are the Audit, Remuneration and Nomination Committees. In addition, there
is also the EVP Committee and the Disclosure Committee. Each Committee has its own Terms of Reference,
approved by the Board, which are reviewed annually, and are available to view at www.biffa.co.uk.
Audit Committee
Reviews the integrity, adequacy
and effectiveness of Biffa’s
system of internal control and risk
management, and the integrity
of Biffa’s financial reporting,
whistleblowing and anti-bribery
and corruption obligations.
Nomination Committee
Evaluates and makes
recommendations regarding
Board and Committee
composition, succession
planning and Directors’
potential conflicts of interest.
Remuneration Committee
Sets, reviews and recommends
Biffa’s overall Remuneration
Policy and strategy and monitors
their implementation.
Audit Committee
Report p57-61
Nomination Committee
Remuneration Committee
Report p54-56
Report p62-83
EVP Committee
Provides an independent review of the EVP dispute
proceedings, (see note 33 on page 173 of the Financial
Statements,). The members are Gab Barbaro, Carol
Chesney, Ken Lever and David Martin, all Board
members, who have no financial interest in the
result of the dispute.
Disclosure Committee
Is responsible for the identification and disclosure of
inside information and comprises the Chief Executive
Officer, Chief Financial Officer, General Counsel and
Company Secretary and the Director of Group Finance.
Chief Executive Officer
Group Executive Team
The Group Executive Team is responsible for the day-to-day running of the business. It meets monthly and receives regular
reports on financial and business matters, health and safety, divisional updates, and has scheduled periodic reviews
on sustainability and environment, procurement, internal audit and risk, human resources, IT, and legal, property and
insurance. Relevant matters are reported to the Board by the Chief Executive Officer or the Chief Financial Officer.
Biographical details of the Group Executive Team are on the opposite page
Investment Committee
An Executive Management Committee comprising the Chief Executive Officer, the Chief Financial Officer and the General
Counsel and Company Secretary. It reviews and approves significant capital expenditure, potential acquisitions and
disposals, major contracts, tenders and property transactions within specified authority limits delegated by the Board.
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Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020
Division of Responsibilities continued
Roles and Responsibilities
The Board members have separate clearly defined roles and
responsibilities, as set out in the table below.
As set out in their biographies on pages 42-43, each member
of the Board has a range of skills and experience that is relevant
to the successful operation of the Group.
Independence of the Non-Executive Directors
The Nomination Committee reviews the independence of the Non-
Executive Directors annually and has confirmed to the Board that
it considers each of the Non-Executive Directors, being Ken Lever,
Michael Averill, Gab Barbaro, Carol Chesney and David Martin,
to be independent in accordance with the Code.
Additional Appointments
All Directors are required to consult with the Chairman and obtain
Board approval before taking on any additional appointments.
Executive Directors are not permitted to take on more than one
significant appointment as a director of a FTSE 100 company or
any other substantial appointment. As part of the selection process
for any new Board candidates, any significant external time
commitments are considered before an appointment is agreed.
Access to Advice
Should any Director judge it necessary to seek independent legal
advice about the performance of their duties with the Company,
they are entitled to do so at the Company’s expense. All Directors
have access to the advice and services of the Company Secretary.
Time Commitment
All Non-Executive Directors are required to devote sufficient time to
meet their Board responsibilities and demonstrate commitment to
their role. During the year, the Nomination Committee considered
the time commitment of all the Directors and agreed that the
required time commitment from them is still appropriate.
Roles and Responsibilities Table
Role
Chairman
Name
Ken Lever
Chief Executive Officer
Michael Topham
Chief Financial Officer
Richard Pike
Senior Independent Director
David Martin
Non-Executive Director
Michael Averill
Gab Barbaro
Carol Chesney
Company Secretary
Sarah Parsons
Responsibility
The Chairman leads the Board and is responsible for its overall
effectiveness in directing the Company. He promotes a culture of
openness and debate facilitating constructive Board relations and
the effective contribution of all Non-Executive Directors, and ensures
that the Board receive accurate, timely and clear information.
The Chief Executive Officer is responsible for the day-to-day
running of the Group’s businesses and the development and
implementation of strategy, decisions made by the Board and
operational management of the Group, supported by the Group
Executive Team.
The Chief Financial Officer supports the Chief Executive Officer
in developing and implementing strategy, oversees the day-today
financial activities of the Group and ensures that policies and
practices set by the Board are adopted at all levels of the Group.
The Senior Independent Director (SID) is an independent
Non-Executive Director, who provides a sounding board for the
Chairman and serves as an intermediary for the other Directors
and shareholders where necessary. The SID also leads the annual
appraisal and review of the Chairman’s performance.
The Non-Executive Directors are responsible for bringing an
external perspective, sound judgement and objectivity to the
Board’s deliberations and decision making, and to support and
constructively challenge the Executive Directors using their
broad range of experience and expertise.
The Company Secretary acts as Secretary to the Board and all
the Board’s Committees and is responsible for supporting the
Chairman and Chief Executive Officer in the delivery of the
corporate governance agenda.
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Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Board Leadership and Company Purpose
Effective Board
How Governance Supports Strategy
The Board is responsible for delivering value for shareholders by
setting the Group’s strategy and overseeing its implementation by
the Group Executive Team and management. Information on our
strategy is set out on pages 12-13.
During the year, the Board held strategy days in April 2019 and
January 2020 where it received presentations from the Group
Executive Team and the Divisional Finance Directors on the
strategies for the business and functional areas. The Executive
Directors also presented on the overall Group Strategy. The Board
approved the strategy at those meetings and provided further
approvals during the year for material projects. The Board also
receives regular updates on strategy progress at Board meetings in the
Executive reports. See Board activities on page 51 for further details.
Culture, Values and Purpose
The Board is responsible for setting the Company’s purpose and
values and ensuring these are aligned with the Group’s culture.
Our new purpose, ‘changing the way people think about waste’ was
approved by the Board in 2019 and launched in last year’s Annual
Report alongside our vision, ‘to be the leader in UK sustainable
waste management’. This was a focus of the Biffa leadership and
management conferences in June 2020 and following that there
were activities to initiate awareness and understanding.
Our culture is the way that we work together and is fundamental to
how we operate. We pride ourselves on our common-sense approach
to sustainable waste management, our collaborative working and
our ability to get things done. Our culture is underpinned by our
values, see further details on page 29.
Workforce Policies and Practices
The Board and Group Executive Team review and approve all key
workforce policies and practices. Our policies are published on the
intranet and referenced in our employee handbook. The Company
induction process covers the core HR policies for new employees
and we communicate any changes that take place. To ensure
policies are embedded in our business practices we undertake
a number of activities including mandatory e-learning modules
for line managers.
Measuring Our Culture
A number of our non-financial KPIs,
such as Health & Safety and employee
engagement, allow trends and changes in
the culture of the Group to be monitored.
Leading By Example
Our Directors and senior management,
act with integrity and lead by example,
promoting our culture to our employees.
They do this through engagement with
our employees.
Risk Management
Biffa’s risk appetite is approved by
the Board and reviewed annually.
The Group dedicates significant
resources and focus to manage and
monitor risks via our Internal Audit
team. The Audit Committee monitors
risk management processes and
controls on behalf of the Board.
Key Performance Indicators
on page 17
Our People on pages 29-31
Audit Committee Report on page 60
How the
Board
Monitors
Culture
Aligning Remuneration
and Culture
Our annual bonus schemes are directly
linked to the annual Group BBP targets.
These include the results of the annual
employee engagement survey, the Health
& Safety improvement targets, as well as
behaviours underpinned by our values.
Director’s Remuneration Report
on pages 62-83
Listening To Our Employees
Employee engagement is measured
through the annual survey, which
provides valuable insight in respect of
engagement and culture. Key findings
are presented to the Board, improvement
areas are identified and action plans
developed. With the appointment of
our designated Director for workforce
engagement the Board will have the benefit
of further employee engagement feedback.
Ethics, Whistleblowing, Fraud
and Anti-Bribery
Mechanisms are in place to facilitate
employees reporting incidents of
wrongdoing on a named or anonymous
basis. The Audit Committee, with
delegated authority from the Board,
regularly monitors and reviews the
Company policies, incidents and trends
arising from any such incidents and
provides the Board with updates.
Our People on page 29
Audit Committee Report on page 57
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Board Leadership and Company Purpose continued
How the Board Engages with Stakeholders
Shareholders
The Board approved the annual investor relations strategy
during the year which sets out a comprehensive programme
for engaging with shareholders (existing and potential). See
page 54 for further details.
The Board also conducted two consultations with shareholders
in relation to the new Directors’ Remuneration Policy and the
votes against the resolution re-appointing the Chairman.
See pages 68 and 55.
All Board decisions are made with the long-term success of the
Company in mind, which ultimately benefits our investors.
Engaging our Stakeholders pages 4-5
Communicating with our Shareholders page 52
Nomination Committee Report pages 54-56
Directors’ Remuneration Report pages 62-83
Government & Regulators
The UK Government published its Resources and Waste Strategy
for England in December 2018, outlining plans for minimising
waste, promoting resource efficiency and moving towards a circular
economy. There are similar policy ambitions in Scotland, Wales
and Northern Ireland
Our strategy supports the Government’s agenda in this area and
our Sustainability Strategy is aligned to the direction of the UK
Government’s strategy which will come into effect over the next
few years.
Sustainability pages 25-26
Suppliers
The Board receives information about our suppliers and our
payment practices through the Board reports. Material supply
contracts also require Board approval and a number of
these were approved during the year.
During the year, the Board received a presentation on our approach
to the risks of modern slavery and considered and approved our
Modern Slavery Statement.
Operating Review pages 21-24
Communities
The Company provides an essential service to over 95% of UK
postcodes and, as such, plays an important role in the communities
in which it operates. The Board is cognisant of the impact that certain
decisions it makes can have on the community and receives relevant
information in management reports.
A key ambition in our Sustainability Strategy, which the Board
approved during the year, is to continue to be a good corporate
citizen, supporting good causes to make a difference by investing
in communities and supporting biodiversity.
Sustainability pages 25-28
Our People pages 29-31
Our Stakeholders:
The Board considers our stakeholders when making decisions.
The icons below, denote our stakeholders, which have been
identified by the Board.
Employees
Shareholders
Customers
Government
& Regulators
Suppliers
Communities
Much of the day-to-day decision making and stakeholder engagement
at Biffa is carried out at a business level. Further details are set
out on pages 21-24. The Board receives details on this engagement
through the Executive Directors and the reports it receives from
senior management in the Board and Committee papers. More
material matters require the Board’s consideration, with the Board
engaging directly with, primarily, our employees and shareholders.
The relevance of Board decision making for each stakeholder group
depends on the subject matter.
We explain below how, during the year, the Board has engaged with our
stakeholders, the key decisions made during the year and the relevance
to our stakeholders are set out in the Board activities on page 53. There
is also a case study, opposite, explaining how the Board considered the
matters in s172 when approving the Newhurst EfW project which was a
major strategic milestone for the Group this year.
Employees
The Board approved the People Strategy during the year and
received an update later in the year on the progress on the strategy
from the Group HR Director and senior HR team. This included
a presentation on the results of the 2019 employee engagement
survey. See further details on page 30.
The Board approved the appointment of David Martin, our Senior
Independent Director, as Non-Executive Workforce Engagement
Director in 2019 and David has reported back to the Board during the
year on the activities he has attended and feedback received from
the employees he has met. David’s report is set out on page 29.
During the year, the Board engaged directly with employees during
site visits and when they were presenting at Board meetings.
A number of employees also attended a Board dinner in September.
Engaging our Stakeholders pages 4-5
Our People pages 29-31
Customers
During the year, the Board received reports and presentations
from management on the business which included feedback on
engagement with our customers, including what matters to them
such as innovation and sustainability. In addition, the Board was
requested to consider and approve a number of material tenders
and contracts with major customers.
A number of Board members attended the opening of the PET
plant in Seaham and the Capital Markets Day when they had
the opportunity to meet a number of our customers.
Operating Review pages 21-24
4848
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Board in Action
Investing in Energy from Waste (EfW)
infrastructure is a strategic priority
for the Group and a major milestone
was reached in February 2020 with
the announcement of financial close
for a new EfW facility in Newhurst,
Leicestershire, which is a joint venture
with Covanta Holding Corporation and
Macquarie’s Green Investment Group.
This major project required Board
approval and in making its decision,
the Board considered the matters set
out in s172 as outlined below.
s172 Matter
Considerations
Conclusions
Employees
Our employees want us to engage with
them and to be kept informed of any
changes in the business that may affect
them and their teams.
Customers
Our customers want a reliable, cost-
effective and sustainable service.
Our strategy has been openly communicated with our employees,
including regular updates on the progress of the project and associated
benefits to the wider Group. Supporting our I&C business, the secure,
long term disposal solution ensures service continuity and job security
for the I&C division. The project will create over 300 jobs during the
construction period with approximately 40 permanent employees once
operational, providing future job opportunities.
The Newhurst EfW will provide a long-term, secure, cost-effective
disposal solution for our customers’ waste ensuring the diversion of
non-recyclable materials from landfill and the generation of renewable
power, significantly increasing the sustainability of their supply chain.
Shareholders
Our shareholders want to see us
progressing our strategy, maximising the
returns to them in a sustainable way.
The Newhurst EfW progresses our strategy to develop services and
infrastructure. It will generate good returns for the Group: Biffa’s
financial commitment to the project will amount to c£45m, with
a mid-high teens projected return on investment.
Government &
Regulators
The UK Government published its
Resources and Waste Strategy in December
2018, outlining its plans for minimising
waste, promoting resource efficiency and
moving towards a circular economy.
The new facility supports the Government’s strategy to both reduce
reliance on landfill and the UK’s ability to treat more non-recyclable
waste without relying on export to European facilities or disposal to
landfill. Newhurst provides additional UK capacity for the treatment
of non-recyclable waste protecting existing landfill capacity for waste
that cannot be recycled or sent to EfW facilities.
Suppliers
Our suppliers are key to our business
model, and delivering our strategy, and
are looking for opportunities for growth.
The project will create many opportunities for the local supply chain
with a commitment from the project to purchase goods and services
from nearby companies wherever possible.
Communities
Environment
The communities in which we operate
expect us to be a good neighbour, operating
our facilities responsibly with engagement
on any potential concerns or issues.
We are committed to building a circular
economy and tackling climate change
as stated in our Sustainability Strategy –
Resourceful, Responsible.
Local residents, Council Officers and other representatives all participate
in a local liaison group, a forum to provide regular updates on progress
and an opportunity to ask question and be reassured about any concerns.
The Newhurst EfW is a key step in our strategic ambition to unlock
£1.25bn of investment in green economy infrastructure by 2030. The
facility will provide a low-carbon energy source, generating up to 42MW
of electricity (enough to power around 80,000 homes) and will divert
waste from landfill.
Long-term
Reputation
The Board’s decision making is focused
on ensuring the Company is sustainable
in the long term.
The Newhurst EfW has secured a long-term domestic disposal route for
residual waste for our I&C business, supporting continued growth and
is also an attractive investment opportunity.
We are committed to maintaining
a reputation for high standards of
business conduct.
Our reputation is very important to us and the Board will be updated on
the delivery of Newhurst EfW as it progresses to ensure high standards
of business conduct are maintained.
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How the Board Operates
The Board had seven scheduled meetings during the year.
Additional Board calls were also held as and when circumstances
required it to meet at short notice and also following the COVID-19
outbreak when regular update calls were held. Directors’ attendance
at scheduled Board and Committee meetings held during the year
is set out on page 42. An outline of the Board’s activities covered
at those meetings is set out opposite.
Meetings between the Non-Executive Directors, without the
presence of the Executive Directors, are scheduled in the Board’s
annual programme. During the year, Non-Executive Directors met
on two occasions without the presence of the Executive Directors.
These meetings provide the Non-Executive Directors with a forum
in which to share experiences and discuss wider business topics,
fostering debate in Board and Committee meetings and strengthen
working relationships.
Directors are provided with papers at least five days in advance
of each Board or Committee meeting and meeting packs are
accessed from a board portal. For each scheduled Board meeting,
the papers include updates on trading, financial performance
and investor relations and in addition, papers for the special
business of the meeting.
Non-Executive Directors are encouraged to communicate directly
with senior management between Board meetings. Members
of the Group Executive Team are invited to attend at least one
Board meeting each year to present an update on their areas of
responsibility. They also all attended the annual strategy Board
meeting which was held in April 2019 and January this year.
Matters Reserved for the Board
In order to retain control of key decisions and ensure that there
is a clear division of responsibilities between the Board and
the running of the Company business, the Board has a formal
schedule of matters reserved for its decision that is reviewed
annually to ensure it remains fit for purpose. This is available
at www.biffa.co.uk.
Board Allocation of Agenda Time
Agendas for each Board meeting are prepared in advanced and are
aligned with the approved Board programme, which is reviewed
annually, and updated when appropriate. All matters are given
due consideration and are reviewed at the appropriate point in
the regulatory and financial cycles.
Board Site Visits
The September Board meeting was held at West Sussex MBT.
The Board received a presentation from the site manager on
the business and was also given a tour of the MBT. The visit
gave the Board the opportunity to meet the local team and
see how operations are run.
In addition, some of our Board members attended the opening
ceremony, pictured here, of our £27.5m plastic recycling plant
in Seaham, County Durham in January 2020. They got the
opportunity to see how this state-of-the-art recycling facility
is run and got to meet a number of our stakeholders.
5050
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Activities of the Board
During the year, the Board undertook the following key activities:
Strategy, Business Performance
and Capital Investment
Finance
■ Approved the Company’s corporate strategy
■ Approved the Company’s sustainability strategy
■ Considered and approved the Newhurst EfW facility
■ Considered and approved the investment in a Polymers
wash plant
■ Approved the Investor Relations strategy
■ Approved a number of material tenders and contracts
■ Received an update on Project Fusion and IT
■ Approved the Group’s Health & Safety strategy
■ Considered Brexit impact, mitigations and preparations
■ Considered the impact of COVID-19 on the business
■ Received business performance updates
■ Approved the 2019/20 budget and Five Year Plan
■ Reviewed the 2020/21 budget
■ Reviewed and approved the interim and final dividend
recommendations for financial year ended 2019
■ Reviewed and approved the preliminary and interim
results announcements
■ Reviewed and approved the Pre-close Trading Statements
■ Recommended to the shareholders the re-appointment
of the Auditor
■ Reviewed the preliminary results roadshow presentation
■ Approved the Treasury Policy
■ Approved the appointment of a new corporate broker
People and Culture
Governance, Compliance and Risk
■ Approved the Company’s vision and purpose
■ Approved the Company’s People strategy
■ Approved the appointment of David Martin as the
Non-Executive Director for workforce engagement and
approved the workforce engagement framework and plan
■ Approved the Company’s Modern Slavery Statement
■ Approved the Company’s Gender Pay Gap Statement
■ Reviewed and approved the 2019 Annual Report
and Accounts and Notice of AGM
■ Reviewed and approved the schedule of matters
reserved for the Board and the Terms of Reference
to the Board Committees
■ Approved the 2020/21 Board and Board Committee
programmes and calendar
■ Approved the revised Investment Committee Terms
of Reference
■ Received an EVP dispute update
■ Approved the Group’s Whistleblowing Policy
and Procedures
■ Considered the Board and Board Committees
evaluation questionnaire
■ Reviewed and approved the revised Delegated Authorities
■ Approved the Group’s risk appetite
■ Approved the Directors’ Conflicts of Interest register
At each Board meeting there are standing items, which include:
■ review and approval of the previous minutes;
■ status update on any matters outstanding from previous meetings;
■ Board Committee updates to the Board;
■ report from the Chief Executive Officer;
■ report from the Chief Financial Officer; and
■ Investor Relations report.
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Board Leadership and Company Purpose continued
Communicating with Our Shareholders
Shareholder Engagement
The Board is committed to maintaining open channels of
communication with all shareholders, whether institutional
or private. It is important that shareholders understand the
Company strategy and objectives, and for the Company to receive
shareholders’ feedback and consider the issues and questions
raised. To facilitate this, the Company has a comprehensive investor
relations strategy, which is approved by the Board each year.
For our private shareholders there is an opportunity to meet the
Directors at our Annual General Meeting and further information
on the Company can be found on our website. Information on how
the Company communicates with its shareholders, investors and
analysts can be found in Engaging our Stakeholders pages 4-5.
Both the Executive and Non-Executive Directors meet shareholders
and prospective shareholders, both institutional and private, on
a regular basis. Non-Executive Directors are available to meet
shareholders if they wish to raise issues without the Executive
Directors present.
During the year the Executive Directors, assisted by the Investor
Relations team, have held meetings in the UK, USA, Switzerland
and Luxembourg with both existing and potential institutional
shareholders, from countries including UK, USA, Canada, Denmark,
Australia, France, Switzerland, Luxembourg and Germany, providing
insight into the development of the business and its progress. In
addition, our Chairman and Senior Independent Director met a
selection of our largest shareholders during the year.
The Board receives regular updates on the views of our shareholders
and analysts through briefings and in market reports at each Board
meeting, which include:
■ share price performance monitoring;
■ review of shareholder performance and sector analysis;
■ composition of the shareholder register;
■ peer group comparison; and
■ professional and external adviser feedback.
Capital Markets Day
On 17 September 2019, the Company held a successful Capital
Markets Day in London welcoming over 100 investors, analysts,
banks and other stakeholders to meet Biffa’s management team.
Presentations focused on the core areas of the Group’s growth
strategy including: the I&C growth opportunity and investments
in plastics recycling and EfW. The presentation from the day can
be found on our website www.biffa.co.uk/investors/news/capital-
markets-day
Website
The Company’s website www.biffa.co.uk acts as a good medium
through which results and other news releases such as acquisitions,
contract wins and new strategic initiatives are published including
key financial calendar information, details of live webcasting
services for key presentations and the source of past key
presentations and announcements.
Key Shareholder Activities During the Year
2019
June
July
September
October
November
2020
January
March
Full-year results presentation and
roadshows in London and Edinburgh
AGM
Investor roadshows in Zurich,
Luxembourg and London
H1 Pre-close Trading Statement
and Capital Markets Day
Analyst visit to Seaham
Half-year results presentation and
roadshows in London, Edinburgh and USA
Opening event at our plastics recycling
plant in Seaham
H2 Pre-close Trading Statement and
investor calls
Sustainability Strategy launch
JPM Conference and investor meetings
Shareholders by number of shares
As at 27 March 2020
1 to 100
101 to 500
501 to 5,000
5,001 to 100,000
100,001 to 500,000
500,001 to Highest
53.5%
11.7%
12.7%
11.7%
5.4%
5.0%
Shareholder by type
As at 27 March 2020
Public Limited
Company
Nominee
Limited Company
Other
Bank
0.4%
65.8%
26.9%
6.6%
0.2%
5252
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Statement on 2019 Annual General Meeting
Resolution Votes Against
At the Company’s Annual General Meeting (AGM) held on
10 July 2019, 20.48% of votes were cast against the resolution
to re-elect our Chairman, Ken Lever. The resolution was still
passed with the required majority.
There has been an expanded focus on overboarding of
directors following the publication of the Code and a number
of institutional investors and proxy advisers have developed
specific guidelines with regard to this. The Board understands
that some shareholders may have concerns about the number of
directorships held by the Chairman and that this may undermine
his ability to serve effectively on the Board, particularly at times
when urgent issues arise.
Following the AGM, I wrote to those shareholders who had voted
against the resolution to understand their concerns, outline in
more detail the time commitments of the Chairman and explain
why the Board believed that the Chairman was the right person
to lead the Company forward. No responses were received
from this engagement.
The Board has recently considered the time commitment of all the
Directors and specifically whether the Chairman should be required
to address the concerns relating to his other appointments. It has re-
confirmed that it is confident that the Chairman discharges his role
effectively notwithstanding his other Board commitments. This has
particularly been demonstrated during the recent coronavirus crisis
where there has been an increased time commitment requirement
for all the Directors.
The Board believes that the Chairman plays a pivotal role
in helping drive the strategy of the Group and remains fully
supportive of the role and guidance he provides to the Company.
David Martin
Senior Independent Director
Board Evaluation
As required by the Code, the Board undertakes an annual evaluation
of its performance and that of its Committees. Under the Code,
it is recommended that FTSE250 companies have an externally
facilitated Board evaluation every three years.
The Chairman and the Senior Independent Director also reviewed
the performance of each member of the Board and provided
feedback and the Senior Independent Director led the Non-
Executive Directors in a review of the performance of the Chairman.
It was agreed that each Director continued to contribute effectively.
With the substantial changes to Board composition during the
previous year, it was again concluded that it would be more
effective to defer having an externally facilitated evaluation. The
Board and Committee evaluations were therefore facilitated by
the Chairman and Company Secretary by way of an online self-
evaluation questionnaire. As the Company moved into the FTSE250
in March 2020, and it has not had an externally facilitated evaluation
since its IPO in 2016, this is contrary to provision 21 of the Code.
FY20 Board Evaluation
All Directors, regular attendees and the Company Secretary
responded to the Board questionnaire in March 2020, covering
all aspects of Board performance including: Board/Committee
composition; conduct of meetings; corporate strategy, purpose,
values and culture; transactions and approvals; risk management
and internal controls; measuring and monitoring performance; and
stakeholders. The participants were asked to score 25 statements
on a scale of 1 to 5 and provide written comments, including areas
for improvement.
Initial feedback from the evaluation was presented to the Board for
discussion in April 2020. The overall assessment is that the Board
continues to operate effectively and it has performed well during the
year with the overall rating up from the previous year. It was agreed
that the key actions would be defined by the Chairman and those
actions would form part of the Board’s agenda for the coming year.
Update on FY19 Board Evaluation Outcomes
As reported last year, the FY19 Board performance evaluation was
internally facilitated by the Chairman and Company Secretary.
The review identified some opportunities for the Board.
Format and length of Board papers
A Board paper template has been developed by the Company
Secretariat team which has helped improve the format and
length of Board papers. The removal of the repetition of papers
in Board and Committee packs has also helped improve the
overall length of the packs. The recent Board evaluation
highlighted the improvement in this area.
Communication of material matters between Board meetings
The Board agreed that it is not necessary to have scheduled Board
call updates between meetings. The Chairman and CEO have a
weekly catch up and consider whether there is anything that is
required to be notified to the Non-Executive Directors. This is
done by email or ad-hoc call. During the COVID-19 crisis, the
Board have had weekly update calls.
Develop the Non-Executive Directors’ understanding
of shareholders views
The CFO provides an Investor Relations update paper at each Board
meeting. He also provides copies of analysts’ reports when published.
The Non-Executive Directors agreed that this is very comprehensive
and therefore nothing further is required in relation to this.
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Nomination Committee Report
Membership of the Committee and Attendance
The current members of the Committee are the Chairman
as Committee Chair and four Non-Executive Directors.
The Committee met three times during the year and the
attendance at those meetings is shown on page 42.
The Company Secretary attends all the Committee meetings
as Secretary to the Committee and by invitation , they are also
attended by the Chief Executive Officer, the Chief Financial
Officer and the Group HR Director.
Role and Responsibilities of the Committee
The role of the Committee is to lead the process for Board
appointments, ensure plans are in place for orderly succession
to both the Board and senior management positions and oversee
the development of a diverse pipeline for succession to ensure
that the Group has the best talent to perform effectively now
and in the future.
The Committee’s responsibilities are set out in its Terms
of Reference and include:
■ reviewing the structure, size and composition (including
the skills, knowledge, experience and diversity) of the Board
and making recommendations to the Board with regard to
any changes;
■ succession planning for the Board and senior management;
■ leading the process for Board appointments and making
recommendations to the Board;
■ assessing whether Directors can commit sufficient time
to fulfil their responsibilities; and
Members
Ken Lever (Chairman)
Michael Averill
Gab Barbaro
Carol Chesney
David Martin
Areas of Focus in 2020/21
The Committee’s priorities for 2020/21 will be to:
■ review Board and senior management succession planning;
and
■ take an active role in setting diversity objectives for the Company.
■ taking an active role in setting diversity objectives and
Dear Shareholder,
I am pleased to present the Nomination Committee (Committee)
Report on behalf of the Board.
There has been no changes to the composition of the Board
during the year and therefore the Committee has not been
required to lead the process for any new Board appointments.
In FY20, the Committee has embraced its expanded role under
the Code and focused on succession planning for the Board and
the Group Executive Team and the leadership talent pipeline.
It has also continued to consider diversity and inclusion.
As previously reported, the Company entered the FTSE250 in March
2020 and we will therefore be submitting our gender data for the
Group Executive Team and their direct reports to the Hampton-
Alexander review later in the year (see page 30 for more detail).
Ken Lever
Chair, Nomination Committee
4 June 2020
strategies for the Company as a whole and monitoring the
impact of diversity initiatives.
Activities During the Year
During the year, the Committee’s key activities were:
■ Annual review of the structure, diversity, size and composition
of the Board including Board succession planning.
■ Reviewing the succession and development plans of the
Executive Directors.
■ Reviewing the succession plans for the Group Executive Team.
■ Reviewing talent development within the senior leadership team.
■ Undertaking the annual review of Director independence, time
commitment and conflicts of interest.
■ Reviewing and making a recommendation to the Board to approve,
the revised Committee Terms of Reference.
Board Composition and Skills
The Committee considers that the current Board membership
provides the right mix of skills and attributes for the Board to ensure
effective governance and oversight of the strategic and significant
operational decisions of the business and performance monitoring.
Information on each of the Directors’ skills and attributes is set out
in the table opposite.
5454
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Diversity Overview
Diversity
The Board’s policy is for new appointments and succession plans
to be based on merit and against objective criteria but within this
context believes that inclusion and diversity, in its broadest sense
including gender and ethnicity, should be promoted as they are an
important factor in Board effectiveness.
The Committee supports the recommendations of the Hampton-
Alexander Review and the Parker Review and has an ongoing
commitment to increase female and ethnic representation at
Board and senior management level. An overview of the diversity
of the Board is set out below.
As previously outlined, now that we have entered the FTSE250,
we will be submitting our gender data to the Hampton Alexander
review later in the year.
The Board also supports the Company’s policy on inclusion and
diversity and has received updates during the year on progress
against objectives in relation to this. For further details see page 30.
Board Skills and Attributes
Independence
Functional background: Operations
Functional background: Finance
CEO & Leadership experience
Waste sector
Logistics/networks
M&A/ restructuring
Governance & regulatory
International
Stakeholder/IR/PR
Technology/e-commerce
Business evolution/strategy development
People
Composition of the Board
1
Chairman
Executive directors
2
Non-Executive Directors 4
7
Board members
Age
40-49
50-59
60-69
58 years
Average age
2
2
3
Michael
Averill
Gab
Barbaro
Carol
Chesney
Ken
Lever
David
Martin
Richard
Pike
Michael
Topham
3
4
1
6
Length of Tenure
0-2 years
2-4 years
3 years
Average tenure
of the Board
Gender
Female
Male
14%
Female
5555
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Composition, Succession and Evaluation continued
Conflicts of Interest
Under the Company’s Articles of Association, the Board may authorise
any actual or potential conflicts of interest that may arise and
impose limits or conditions as appropriate. The Company has a
detailed process for the management of conflicts of interest which is
monitored by the Committee. On appointment, a Director is required
to disclose any conflicts of interest to the Company Secretary and
on an annual basis, as part of our year end reporting, each Director
reviews the Conflicts of Interest register and confirms any conflicts.
Succession Planning
During the year, the Committee has reviewed the succession plans
for the Board, Group Executive Team and the senior management
talent pipeline. The Committee takes an active interest in the
quality and development of talent and capabilities within Biffa,
ensuring that appropriate opportunities are in place to develop
high-performing individuals such as invitations to Board dinners
and the Group Talent Programme.
Board Appointments Process
The Board has a formal and transparent procedure for the appointment
of new Directors to the Board. This procedure includes the evaluation of
the balance of skills, knowledge, experience and diversity of the Board
by the Committee to ensure that any new appointments complement
or address any shortfalls in any of these areas.
Committee Evaluation
The Committee’s performance during the year was assessed
at the same time as the Board evaluation in March 2020.
Further details on the wider Board evaluation process
can be found on page 53.
FY20 Committee Evaluation
All Directors and the Company Secretary responded to
an online self-evaluation questionnaire, covering all
aspects of Committee performance including: the role
of the Committee and its Terms of Reference; meetings
and papers; succession planning and the development of
a diverse pipeline. The participants were asked to score
13 statements on a scale of 1 to 5 and provide written
comments, including areas for improvement.
Initial feedback from the evaluation was presented to the
Committee and discussed at the Board meeting in May 2020.
The overall assessment is that the Committee is clear on
its role and responsibilities and these were fulfilled during
the year. It was agreed that the key actions would be defined
by the Chairman (as Chair of the Committee) and those
actions would form part of the Committee’s agenda for
the coming year.
The Committee ensures that the selection process is rigorous
and transparent and, if appropriate, it will appoint a professional
external search firm. Candidates from a wide range of backgrounds
that meet the role specification will be considered and all appointments
will be made entirely on merit, with due regard to the benefits of diversity
on the Board, which includes, but is not limited purely to, gender.
Update on FY19 Committee Evaluation Outcomes
As reported last year, the FY19 Committee performance
evaluation was internally facilitated by the Chairman
and Company Secretary. The review identified succession
planning and addressing leadership skills for future Executive
directors as some potential opportunities for the Committee.
The Committee is satisfied that the work undertaken during
the year. It has seen an improvement in executive succession
planning, in particular the Group Talent Programme. This
will remain an area of focus for the Committee with the
Board having further exposure to senior managers and high
potential employees.
Directors’ Induction, Training and Development
On appointment, all Directors receive an induction on their duties
and responsibilities as Directors of a publicly quoted company.
The induction process also comprises a comprehensive programme
which includes meetings with all Directors, members of the Group
Executive Team, the Company Secretary and heads of functions.
To update the Directors’ skills, knowledge and familiarity with the
Company key site visits are incorporated into the programme and
undertaken to meet management and develop greater commercial
awareness of the business. During these visits the Directors receive
briefing sessions from local management, allowing them to ask
questions, learn about the business and spend time with different
teams and individuals to observe and experience first hand how
the culture and values are embedded across the Company.
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Audit Committee Report
Members
Carol Chesney (Chair)
Michael Averill
David Martin
Areas of Focus in 2020/21
The Committee’s priorities for 2020/21 will be to:
■ consider the financial impacts of COVID-19 on the
Company; and
■ monitor the implementation of the business strategy
and its impact on the Group’s internal control and risk
management processes.
Dear Shareholder,
I am pleased to present this year’s Audit Committee (Committee)
Report which aims to provide an understanding of the work of the
Committee over the past year and highlight our areas of focus in 2020.
During the year, the Committee has continued to monitor the
implementation of the business strategy and its impact on the
Group’s internal controls and risk management framework. Further
information on our key activities during the year are on page 60.
In addition, the Committee has considered the impact of COVID-19
on our financial statements. It has reviewed the Group’s profitability,
liquidity and financial headroom as part of a number of forecast
scenarios. As part of this work, the Committee has also reviewed
the viability statement and going concern, following which it was
agreed that the going concern basis of accounting continues to be
an appropriate basis of preparation for the financial statements.
Carol Chesney
Chair, Audit Committee
4 June 2020
Membership of the Committee and Attendance
The current members of the Committee are the Chair and two
Non-Executive Directors all of whom are independent. The Chair
and David Martin are both qualified accountants and the Board
considers their financial experience to be recent and relevant for
the purposes of the Code. The Committee met four times during the
year and the attendance at those meetings is shown on page 42.
The Company Secretary attends all the Committee meetings
as Secretary to the Committee and, by invitation, they are also
attended by the Chairman, Chief Financial Officer, the Chief
Executive Officer, Gab Barbaro (Non-Executive Director), the
External Audit Partner, the Head of Risk and Internal Audit
and the Director of Group Finance.
Role and Responsibilities of the Committee
The role of the Committee is to assist the Board in fulfilling
its oversight responsibilities by monitoring and reviewing
the integrity of the Group’s financial reporting and the
effectiveness of the Internal and External Audit functions
and risk management framework.
The Committee reports to the Board on its activities and makes
recommendations, all of which have been accepted during the
period under review.
The Committee’s responsibilities are set out in its Terms of
Reference on the Company’s website at www.biffa.co.uk.
Whistleblowing
The Board has overall responsibility for monitoring the Group’s
whistleblowing arrangements under the Code. It has delegated
this to the Committee which updates the Board on a regular
basis on all significant whistleblowing matters.
The Committee receives a report on whistleblowing cases
at each meeting. Improvements were made during the year
to the reports that the Committee receives.
The Whistleblowing Policy and Procedures were reviewed by
the Committee during the year. The Committee is satisfied that
they are effective, facilitate the proportionate and independent
investigation of reported matters and allow appropriate follow-up
action to be taken. It recommended to the Board that some minor
changes were made to the Whistleblowing Policy and Procedures
which were approved by the Board. Further details on the Group’s
Whistleblowing Policy and Procedures can be found on page 31.
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Key Activities During the Year
Key areas
Activities during the year
Financial
Reporting
■ Reviewed the Annual Report and Accounts, including whether they are fair, balanced and understandable,
the material judgements and estimates, Going Concern Statement and Viability Statement.
■ Reviewed the half-year accounts, including the material judgements and estimates.
■ Reviewed the External Auditor’s report on the full-year and half-year audits.
■ Reviewed the half-year and full-year results announcements and the September and April Pre-Close Trading Statements.
External Audit
■ Reviewed the External Auditor’s independence, objectivity and effectiveness.
■ Considered the succession plans for the lead Audit partner.
■ Considered the re-appointment of the External Auditor.
■ Considered External Auditor fees and terms of engagement.
■ Reviewed and approved changes to the Non-Audit Services Policy.
■ Reviewed the External Auditor non-audit services and fees.
Risk and
Internal
Controls
■ Monitored the Company’s risk register, including the completeness of the process to identify the Group’s principal
and emerging risks and movement in such exposures.
■ Considered the status of key risk indicators including any breaches of thresholds.
■ Reviewed the effectiveness of the Group’s risk management and internal control systems.
■ Considered responses, and their timeliness, to audit findings and recommendations for control improvements,
including reviewing the External Audit management letter.
■ Reviewed the risk management and internal controls disclosures in the half-year accounts and Annual Report
and Accounts.
■ Received regular updates on the implementation of the new key controls framework.
■ Reviewed, and recommended to the Board approval of a revised, Whistleblowing Policy and Procedures.
■ Received updates on material litigation and whistleblowing matters.
■ Received an update on the GDPR project and its effectiveness.
Internal Audit
■ Approved the annual Internal Audit plan, including its alignment to the principal risks, emerging areas of risk,
coverage across the Group and continuing review of the Group’s processes and controls.
■ Monitored and reviewed the Internal Audit effectiveness and independence of the Internal Audit function
including consideration of key Internal Audit reports; stakeholder feedback on the quality of Internal Audit activity;
and the implementation of Internal Audit recommendations.
■ Reviewed Internal Audit reports, including those related to commodity trading, Municipal tender mobilisation,
credit management, privileged access, M&A integration and GDPR.
Other Areas
■ Reviewed and recommended to the Board approval of the revised Committee Terms of Reference.
■ Reviewed the results of the evaluation of the effectiveness of the Committee.
■ Received an update on Project Fusion including the implementation plan and reviewed the key challenges and
risk of the project.
■ Received an update on tax matters for the Group and reviewed and recommended to the Board approval of the
Group’s annual tax strategy.
■ Reviewed and recommended to the Board approval of a new Treasury Policy and received a treasury update.
■ Reviewed and approved changes to the Related Party Transactions Policy and reviewed the Related Party List.
In making its assessment, the Committee reviews reports from
members of the Finance team and the External Auditor who are
invited to attend all Committee meetings. Through discussions
and detailed written reports, the Committee is able to understand
and assess the significant judgements and estimates and how they
are being recorded and disclosed in the Financial Statements.
The significant financial judgements considered in relation to the
Annual Report and Accounts are detailed in the table opposite.
Financial Reporting
One of the Committee’s principal responsibilities is to review and
report to the Board on the quality and appropriateness of the Group’s
Financial Statements, including the half-year accounts and Annual
Report and Accounts, with a particular focus on:
■ the suitability of accounting policies;
■ the appropriateness of underlying assumptions, judgements
and estimates made by management;
■ key audit matters identified by the External Auditor;
■ compliance with relevant accounting standards and other
regulatory financial reporting requirements including the UK
Corporate Governance Code; and
■ advising the Board, where requested, on whether the Annual
Report and Accounts are fair, balanced and understandable and
provide the information necessary for shareholders to assess the
Company’s position and performance, business model and strategy.
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Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Significant Financial Judgements Considered in Relation to the Annual Report and Accounts
Significant issues considered by the Committee in relation to the Financial Statements
How these issues were addressed by the Committee
Landfill
Accounting
Retirement
Benefit
Obligations
Asset
Impairment
Review
Onerous
Contract
Provision
The Committee reviewed the valuation of the landfill
provisions and assets, the level of such landfill provision
and the extent of the depreciation of such assets, it being
noted that the responsibility for a landfill site extends
beyond the cessation of land filling operations until
the Group has fulfilled its aftercare and restoration
obligations which is estimated to be up to 60 years
post closure of the site.
(See Note 21 on page 140 for further details on
landfill provision).
The Group operates a defined benefit pension scheme
known as the Biffa Pension Scheme (BPS) which is
closed to new joiners and to future accrual as at
31 October 2013. There are currently active members
of the BPS who have protected defined benefit accrual
either by virtue of contract location or legislation. The
BPS was in a pension surplus of £116.7m as at 27 March
2020. Due to the COVID-19 impact on fund valuations,
it was necessary to get valuations for all funds as at
27 March 2020.
(See Note 29 on page 145 for further details on pension
and post-retirement benefits).
The Group carries different classes of intangible assets
on its balance sheet, which include goodwill, landfill gas
rights, the Biffa brand, customer contracts and Project
Fusion development costs. The Group’s assessment of
the carrying value of goodwill and the other intangible
assets is dependent on the disaggregation of cash-
generating units (CGUs) and assumptions of future cash
flows, including both short and long-term growth rates.
The Group performed its last asset impairment review
at the end of the financial year with the assistance of an
external third party. The WACC rate increased due to the
COVID-19 impact and the P&L impact for COVID-19 has
been built into the impairment models.
The Group operates a broad portfolio of complex contracts,
especially in the Municipal and Resources & Energy
businesses. The accounting for certain contracts may
be underpinned by assumptions or judgements made by
management in respect of the outcome of future events.
(See Note 3 on page 121 for further details on
onerous contacts).
The Committee considered the Group Landfill
Capital and Provisioning Policy, which includes
the basis for cost, void space, waste compaction
ratio and gas generation estimates, and associated
accounting methodology.
The Committee determined that with the combination of
external third-party reports and guidance, External Auditor
testing and the Group’s experience to provide for these
estimated costs the current landfill accounting treatment
and value, and level of provisions were appropriate.
The Committee considered reports from management
and the External Auditor in relation to the valuation of
the BPS and reviewed the key actuarial assumptions
used in calculating the defined benefit pension liabilities,
especially in relation to discount rates, inflation rates,
salary growth, rate of pension increase and mortality/life
expectancy, and concluded that the assumptions used
were appropriate and were supported by independent
actuarial experts. Details of the key assumptions used are
set out on page 145 in Note 29 to the Financial Statements.
The Committee reviewed and discussed management’s
report on the impairment review and considered the
External Auditor’s testing thereof.
After due consideration, the Committee concluded that
it was satisfied with management’s assumptions and
judgements applied in relation to such testing. Details
of the key assumptions and judgements used are set
out in Note 14 to the Financial Statements.
The Committee reviewed management’s judgements
and assumptions used to determine onerous contracts
and any required provision for future losses. In addition,
External Auditor testing was taken into consideration.
The Committee concluded that it was satisfied by
management’s assessment and the approach adopted,
including the presentation of these as non-underlying
due to the creation of non-recurring provisions.
The last review by the FRC Corporate Reporting Review team
of the Biffa plc Annual Report & Accounts was for the year
ended 30 March 2018. Following the review and responses
from the Company, the FRC advised in February 2019 it had
closed its enquiry. For more information see page 20.
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Risk Management
The Board has overall responsibility for setting the Group’s risk
appetite and ensuring that there is an effective risk management
framework. The Board delegates responsibility for review of
the risk management and the effectiveness of internal controls
to the Committee.
The Chief Executive Officer has overall accountability for the
control and management of the risks that Biffa faces and working
with the Group Executive Team has established processes, as part
of the normal good management of the business, to monitor:
■ strategic plan achievement, through a regular review of progress
towards strategic objectives;
■ financial performance, within a comprehensive financial
planning and accounting framework, including budgeting and
forecasting, financial reporting, analysing variances against
plan and taking appropriate management action;
■ capital investment and asset management;
■ performance, with detailed appraisal, authorisation and
post-investment reviews;
■ that the principal and emerging risks facing the Group are
being identified, evaluated and appropriately managed; and
■ the maintenance of insurance cover to insure all risk areas
of the Group.
The Committee has reviewed the work done by management on
the assessment of the Company’s principal and emerging risks,
noting that a comprehensive review of the principal risks was
completed in September 2019 for our interim reporting and this
exercise, which additionally included an assessment of emerging
risks, was undertaken again at the year end in March 2020.
The Board also undertook, during the year, a robust assessment
of the principal and emerging risks faced by the Group.
Further details of the Group’s risk management systems and
controls, principal and emerging risks and statement following
the viability assessment are included in the Strategic Report on
pages 34–38.
Internal Control
The Company’s system of internal control, along with its design
and operating effectiveness, is subject to review by the Committee,
through reports received from the Company, along with those
from both the Internal and External Auditors. Any control
deficiencies identified will be followed up with action plans
tracked by the Committee.
Policies and procedures, including clearly defined levels of
delegated authority, have been communicated across the Group.
We continue to implement a key controls framework across the
Group, in respect of operational and financial processes, that
requires a quarterly self-certification by management, confirming
that key internal controls within their area of responsibility have
been operating effectively, and will be subject to independent
review by Internal Audit.
It is recognised that the current restrictions imposed on the
Group by the COVID-19 crisis may lead to some changes in risk
management processes and internal controls in the short term
in order to maintain operations. To ensure that we continue to
maintain an effective control environment, we are monitoring
any changes carefully and introducing alternative mitigating
controls where necessary and practicable to support the ongoing
operation of an effective control environment.
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The system of internal control is designed to manage, rather than
eliminate, the risk of failure to achieve business objectives and
it must be recognised that it can only provide reasonable and not
absolute assurance against material misstatement or loss
The Committee intends to keep the risk management and internal
control systems under review and to support the Board in carrying
out an annual review of their effectiveness.
As part of the year-end compliance certification process and senior
management review on the effectiveness of internal controls and
risk management, the Committee has not identified, nor been
advised of, any failings or weaknesses in the internal control
systems or risk management processes that are determined
to be significant.
Risk Appetite
The Company’s approach to risk appetite has been developed in line
with the Code. By clarifying the type and level of risk it is willing to
take in order to achieve its strategic objectives, the Company aims to
support consistent, risk-informed decision making across the Group.
The Company’s risk appetite has been incorporated into the risk
management framework and the Committee monitors whether the
Group is operating within that appetite through a review of a series
of agreed metrics and a review of the principal and emerging risks.
Internal Audit
The Company has an Internal Audit function, led by the Head of Risk
and Internal Audit, which focuses on performing a programme of
reviews of processes and controls implemented across the Group.
Internal Audit findings are presented to the relevant Head of a
Group division or Group function, the Company Secretary and the
Chief Financial Officer for review. The Committee is responsible
for overseeing the work of the Internal Audit function.
The Committee reviews the effectiveness of the Internal Audit
function, reviews and approves the scope of the Internal Audit
annual plan and assesses the quality of Internal Audit reports,
along with management’s actions, and their timeliness, relating to
findings and the closure of recommended actions. The Committee
also considers any stakeholder feedback on the quality of Internal
Audit’s work. In order to safeguard the independence of the Internal
Audit function, the Head of Risk and Internal Audit is given the
opportunity to meet privately with the Committee without any
Executive Directors or other members of management present.
External Auditor
Deloitte LLP was appointed as the External Auditor of the Company
on 23 August 2016 and the current lead Audit Partner, Makhan
Chahal, was appointed in August 2016. Mr Chahal is in his final year
as lead Audit Partner and will rotate off the engagement next year.
The Group confirms it is in compliance with the requirements
of the Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes
and Audit Responsibilities) Order 2014, which relates to the
frequency and governance of external audit tenders and the
setting of a policy on the provision of non-audit services.
The Company intends to conduct a tender process in line with
the regulations and by no later than 2026.
The Committee reviewed the External Auditor’s effectiveness
during the year. In carrying out its assessment it considered:
■ feedback from the Chief Financial Officer and his team who
monitor the External Auditor’s performance, behaviour and
effectiveness during the exercise of its duties;
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 ■ all key External Auditor plans and reports;
■ the regular engagement with the External Auditor during
Committee meetings and ad hoc meetings, including meetings
without any member of management being present;
■ the Committee Chair having discussions with the Senior
Statutory Auditor ahead of each Committee meeting;
■ the External Audit effectiveness review conducted by the Head of
Risk and Internal Audit which was presented to the Committee at
the September Committee meeting. This contained the results of
an External Audit process effectiveness review questionnaire that
was completed by the Directors and key members of management
and staff who were involved in the external audit process; and
■ the independence and objectivity of the External Auditor.
Having completed this review, the Committee concluded that the
audit process, independence and quality of the External Auditor
was satisfactory.
The Committee has made a recommendation to the Board
to re-appoint Deloitte LLP as the Company’s auditor for the
2020/21 financial year. Accordingly, a resolution proposing
their re-appointment will be tabled at the July 2020 AGM.
External Auditor’s Independence and Non-Audit Services
To preserve objectivity and independence, the Committee has
adopted a policy on the provision of non-audit services which
restricts the work and fees available to the External Auditor. This
policy was updated during the year to reflect the requirements of
the FRC Revised Ethical Standard published in December 2019.
The policy specifies certain activities which the External Auditor
may not undertake such as tax, consulting, valuation or corporate
services (other than reporting accounting arrangements). Permitted
services are set out in a whitelist and the fees are capped at 70%
of the average audit fees paid in the last 3 years.
The policy requires prior Committee approval for any non-audit
services work permitted under the policy whose value exceeds
£50,000, or where it will cause the cumulative fees for the year to
exceed 10% of the amount of the prior year’s audit fee, or where the
cumulative fees for the year already exceed 70% of the average of
the external audit fees paid in the last three years. Prior approval
of the Chief Financial Officer is required for any non-audit services
work permitted under the policy whose value exceeds £10,000.
Non-audit fees are monitored by the Committee and the Committee
is satisfied that all non-audit work undertaken this year was
in line with the policy and did not detract from the objectivity
and independence of the External Auditor. The External Auditor
confirms its independence at least annually.
The fees paid to Deloitte LLP in respect of non-audit services during
the year related to the review of interim Financial Statements
and governance compliance certificates and totalled £91,600,
representing 10% of the total audit fee (2019 £97,900 and 10%).
Committee Evaluation
The Committee’s performance during the year was assessed
at the same time as the Board evaluation in March 2020.
Further details on the wider Board and Committee evaluation
process can be found on page 53.
FY20 Committee Evaluation
All Directors, regular attendees and the Company Secretary
responded to an online self-evaluation questionnaire, covering
all aspects of Committee performance including: the role
of the Committee and its Terms of Reference; meetings
and papers; the internal audit plan and effectiveness of
management’s response to internal audit recommendations;
and risk management and internal controls. The participants
were asked to score 20 statements on a scale of 1 to 5 and
provide written comments, including areas for improvement.
Initial feedback from the evaluation was presented to the
Committee and discussed at its meeting in May 2020. The
overall assessment is that it continues to operate effectively
and has performed well overall during the year. It was agreed
that the key actions would be defined by the Chair and those
actions would form part of the Committee’s agenda for the
coming year.
Update on FY19 Committee Evaluation Outcomes
As reported last year, the FY19 Committee performance
evaluation was internally facilitated by the Chairman and
Company Secretary. The review identified some potential
opportunities for the Committee including the on-going
personal development needs of the members and to improve
the implementation of the internal audit recommendations.
The Committee members discussed whether anything further
was required in relation to their personal development needs.
They noted that the External Auditor’s reports cover all the
relevant latest developments and other opportunities for
development are provided by Deloitte Academy membership
and through other external sources and were therefore in
agreement that nothing further was required.
The Committee is satisfied that the work undertaken during the
year has seen an improvement in the quality and effectiveness
of the implementation of Internal Audit’s recommendations.
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Remuneration Committee Report
■ the Group’s annual bonus scheme in respect of 2020/21 has
been suspended and will be reintroduced at the discretion
of the Remuneration Committee when appropriate.
The Report comprises two sections:
■ the Directors’ Remuneration Policy, which will apply for a
maximum of three years from the 2020 AGM and will replace
the Directors’ Remuneration Policy previously approved at
the 2017 AGM; and
■ the Directors’ Annual Report on Remuneration, which sets out
payments and awards made to the Directors for 2019/20 and
how the Policy will operate for 2020/21.
The Directors’ Remuneration Policy will be subject to a binding vote
of shareholders at the forthcoming AGM, with the Directors’ Annual
Report on Remuneration being subject to an advisory vote.
Membership of the Committee and Attendance
The Committee is comprised of independent Non-Executive
Directors and is chaired by Michael Averill, with David Martin and
Carol Chesney also being members. The Remuneration Committee
met seven times during the year and the attendance at those
meetings is shown on page 42.
The Company Secretary attends all the Committee meetings
as Secretary to the Committee and, by invitation, they are also
attended by the Chairman, Chief Executive Officer, Chief Financial
Officer, Gab Barbaro (Non-Executive Director), Group HR Director
and external professional advisers for all or part of any meeting
as and when appropriate and necessary.
Role and Responsibilities of the Committee
The role of the Committee is to establish a formal and
transparent procedure for developing policy on remuneration
in accordance with the Code. It sets the remuneration of the
Chairman, the Executive Directors and senior management
with due account taken of all relevant factors such as, individual
and Group performance and remuneration payable by companies
of a comparable size and complexity and, in relation to the
Executive Directors, the remuneration of, and remuneration
policies applying to, the Group’s employees.
The Committee reports to the Board on its activities and makes
recommendations, all of which have been accepted under the
period of review.
The Committee’s responsibilities are set out in its Terms of
Reference on the Company’s website at www.biffa.co.uk.
Advisers
FIT Remuneration Consultants LLP (FIT), signatories to the
Remuneration Consultants Group’s Code of Conduct, are the
Committee’s appointed adviser. FIT provides advice to the
Committee on matters relating to executive remuneration
and all-employee share awards. During the year, FIT provided
no other services to the Company and, accordingly, the
Committee was satisfied that the advice provided by FIT was
objective and independent. FIT’s fees in respect of the 2019/20
financial year were £101,089 plus VAT, charged on the basis
of the firm’s standard terms of business for advice provided.
Members
Michael Averill (Chair)
David Martin
Carol Chesney
Areas of Focus in 2020/21
The Committee’s priorities for 2020/21 will be to:
■ continue to consider the impacts of COVID-19 on
remuneration; and
■ monitor developments in market best practice.
Dear Shareholder,
I am pleased to introduce the Directors’ Remuneration Report
for 2020.
The whole Board is grateful to our shareholders for the continued
support received on remuneration matters at the Company’s 2019
AGM where our Directors’ Remuneration Report was approved by
over 99% of our shareholders.
This year, in conjunction with our regular duties the Remuneration
Committee (Committee) has been preparing and discussing a
new Remuneration Policy and we have consulted with our major
shareholders on our proposed Policy which will be presented for
approval at the 2020 AGM. I would like to thank those shareholders
who have participated in this process for their feedback and
guidance, which resulted in changes to the original proposal.
As I write, the Committee is continuing to consider the impacts of
COVID-19 on remuneration at Biffa. As announced on 6 April 2020,
we have undertaken the following actions:
■ the Board of Directors and the Group Executive Team members
have volunteered to take a 20% reduction in salary with effect
from 1 April 2020. This will last for the duration of the period
during which the Group is participating in the Government’s
Coronavirus Job Retention Scheme (CJRS);
■ Biffa’s Leadership group, representing a further 85 people,
have also taken a 10% reduction in salary for the same period;
■ all pay increases have been suspended until further notice;
■ bonus entitlements earned in respect of the year to 27 March
2020, which under normal circumstances would be paid in cash
in July 2020, will be calculated in the normal manner but will,
for the most senior participants, be satisfied in shares through
the Group’s employee share plans, subject to final Remuneration
Committee approval; and
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Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Activities of the Committee During the Year
The main Committee activities during the year (further details
of which are set out in the relevant sections of this report)
included the following:
■ Reviewed and agreed an increase to the Chairman’s fees
(although note subsequent decision in relation to COVID-19
detailed above).
■ Agreed the performance against the targets and the payments
for the 2018/19 Executive Director annual bonus awards.
■ Reviewed annual bonus payments for 2018/19 for the Group
Executive Team, senior managers and employees.
■ Set the annual bonus performance targets for 2019/20
for the Executive Directors.
■ Approved the Directors’ Remuneration Report and the
Remuneration Policy for the 2019 Annual Report.
■ Agreed the population, award levels and performance
targets for the 2018/19 PSP awards.
■ Oversaw the grant in 2019/20 under the all-employee
Sharesave Plan.
■ Received an update on Group employee pay and conditions
and employee share plans.
■ Reviewed and recommended the Gender Pay Gap report for
2019/20 to the Board for approval.
■ Reviewed and agreed an increase to the Executive Director
and Group Executive Team base salary levels from 1 April 2020
(although note subsequent decision in respect of COVID-19
detailed above).
■ Reviewed the impact of the 2018 UK Corporate Governance
Code and various changes to the regulatory environment
and market practice.
■ Approved revised shareholding guidelines applying to
the Executive Directors and Group Executive Team.
■ Reviewed and recommended the updated Committee
Terms of Reference to the Board for approval.
■ Agreed the terms of remuneration on appointment of the
General Counsel and Company Secretary.
■ Received an update on the AGM season voting outcomes
and market developments.
■ Considered the Investment Association’s letter to
Remuneration Committee chairs and the Investment
Association’s Principles of Remuneration.
■ Approved the changes to the malus and clawback provisions
in the Deferred Bonus and PSP rules.
■ Undertook a review of the Directors’ Remuneration Policy
and shareholder consultation.
■ Considered remuneration related measures to mitigate
the impact of the COVID-19 outbreak on the business
as noted above.
The Committee is periodically updated on wider employee
matters such as information on our wider workforce pay and
conditions, our CEO to employee pay ratio, our gender pay statistics
and our diversity initiatives. The Committee has reviewed these
elements and is satisfied that the executive remuneration structure
remains appropriate.
Whilst the Company does not currently directly engage with
employees as part of the process of formulating the Directors
Remuneration Policy or reviewing executive pay, the Company
does use several initiatives to obtain insights from the broader
employee population, including the annual engagement survey.
Further detail on engagement with employees is given in the
Our People section which starts on page 29.
The Committee has ensured that the Directors’ Remuneration
Policy and practices are consistent with the six factors set out
in Provision 40 of the Code:
Clarity – Our Directors’ Remuneration Policy is well understood by
our senior management team and has been clearly articulated to
our shareholders and representative bodies (both on an ongoing
basis and during consultation when changes are being made).
Simplicity – The Committee is mindful of the need to avoid overly
complex remuneration structures which can be misunderstood
and deliver unintended outcomes. Therefore, a key objective of
the Committee is to ensure that our Directors’ Remuneration Policy
and practices are straightforward to communicate and operate.
Risk – Our Directors’ Remuneration Policy has been designed to
ensure that inappropriate risk-taking is discouraged and will not
be rewarded via (i) the balanced use of both annual incentives
and long-term incentives which employ a blend of financial,
non-financial and shareholder return targets, (ii) the significant
role played by shares in our incentive plans including the deferral
under the annual bonus share and the holding period under the
PSP (together with in employment and post cessation shareholding
guidelines) and (iii) malus/clawback provisions within all our
incentive plans.
Predictability – Our incentive plans are subject to individual caps,
with our share plans also subject to market standard dilution limits.
Examples of the range of outcomes under the Policy are shown
within the scenario charts. The use of shares within our incentive
plans means that actual pay outcomes are highly aligned to the
experience of our shareholders.
Proportionality – There is a clear link between individual awards,
delivery of strategy and our long-term performance. In addition,
the significant role played by incentive-based pay, together with
the structure of the Executive Directors’ service contracts, ensures
that poor performance is not rewarded.
Alignment to culture – Our executive pay policies are fully aligned
to the Company’s culture through the use of metrics in both the
annual bonus plan and PSP that measure how we perform against
key targets and objectives within the Group Balanced Business Plan.
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Pay and Performance
Biffa has had a strong year demonstrated by the promotion to the
FTSE 250 towards the end of the year. We have delivered a strong
set of financial results, which include increasing net revenues by
7% and maintaining Underlying Operating Profit Margin at 7.8%. The
Group delivered good organic growth and made a series of earnings
enhancing acquisitions. Strong cash management and tight capital
controls resulted in year-end Net Debt of £425.5m, which was 2.4
times Underlying EBITDA.
As a result, in respect of the 2019/20 annual bonus for the Executive
Directors, the actual Operating Profit was between the target and
maximum and the Free Cash Flow result exceeded the maximum
target. In addition, the majority of the strategic/personal objectives
were either partially met or were met in full. As such, bonus awards of
98.64% of salary for Michael Topham and 83.46% of salary for Richard
Pike were awarded. These awards would normally have been paid in
cash where the 200% of salary share ownership guidelines were met,
or a combination of shares and cash where they were not. However,
as part of the COVID-19 measures mentioned above, all bonus
entitlements earned by the Executive Directors will be satisfied in
shares through the Group’s employee share plans. Full details of the
bonus targets and performance against the targets are set out in the
Annual Report on Remuneration.
The July 2017 PSP award is subject to underlying EPS performance
to 27 March 2020 and TSR performance. The estimated overall
payout for the award is 100% of maximum.
The Committee considers that the Remuneration Policy operated
as intended during 2019/20 and that remuneration outcomes are
consistent with the Group performance. The Committee considered
the Board’s recommendation that no final dividend is to be paid for
2019/20 and the implemented measures outlined above regarding
the remuneration for 2020/21 that address the effects of the
COVID-19 pandemic and determined that no discretion needed to
be applied for the above remuneration outcomes although as noted
above the Committee has determined that bonus entitlements for
2019/20 should be satisfied in shares.
Also as noted above, the Group’s annual bonus scheme in respect
of 2020/21 has been suspended and the Committee will consider
the performance delivered for our shareholders when determining
the outcome for 2020/21 if the scheme is reintroduced.
Committee Evaluation
The Committee’s performance during the year was assessed
at the same time as the Board evaluation in March 2020.
Further details on the wider Board and Committee evaluation
process can be found on page 53.
FY20 Committee Evaluation
All Directors, regular attendees and the Company Secretary
responded to an online self-evaluation questionnaire, covering
all aspects of Committee performance including: the role of the
Committee and its Terms of Reference; meetings and papers;
communication with key contacts and dialogue with key
institutional investors and representatives on remuneration
issues. The participants were asked to score 20 statements
on a scale of 1 to 5 and provide written comments, including
areas for improvement.
Initial feedback from the evaluation was presented to the
Committee and discussed at its meeting in April 2020.
The overall assessment is that the Committee is working
well, there is a good mix of skills and experience and all
members contribute to the high quality of debate. It was
agreed that the key actions would be defined by the Chair
and those actions would form part of the Committee’s
agenda for the coming year.
Update on FY19 Committee Evaluation Outcomes
As reported last year, the FY19 Committee performance
evaluation was internally facilitated by the Chairman
and Company Secretary. The review identified potential
opportunities for the Committee including, further
improvement in relation to the content and delivery
of Committee papers and personal development needs
of Committee members.
The Committee receive regular updates from FIT during
the year and agreed nothing further was required. The
recent Committee evaluation noted the improvement in
the content of papers and delivery of the meeting packs.
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As explained above, at the 2020 AGM we will be submitting our
Directors’ Remuneration Policy for renewal by our shareholders.
The policy is materially unchanged from our first policy as a
newly listed company which was approved at our 2017 AGM,
with the changes proposed being made to align the Policy with
the new Code and regulatory reporting requirements.
Base salaries
No change with increases generally
in line with those awarded to other
salaried employees.
Pensions
Annual bonus
Long-term
incentives
Shareholding
guidelines
Pension contributions for new Executive
Director appointments will be aligned
with the pension benefits available to
the majority of the workforce. Pension
provision for current Executive Directors
(20% of salary for the CEO and 15% of salary
for the CFO) will initially remain unchanged
although will align with workforce rates by
2023 (see below).
Maximum bonus unchanged at 130% of
base salary. Annual bonus potential for
the CEO and CFO will continue to be set at
130% and 110% of salary. Compulsory bonus
deferral will be introduced for new Executive
Director appointments, whereby one-third
of any bonus will be deferred into shares for
three years.
Maximum unchanged at 150% of base
salary. The CEO and CFO will continue to
receive a PSP award of up to 150% and 125%
of salary respectively.
A two-year holding period also now applies
to all PSP awards (and was applied to awards
granted to Executive Directors in 2019).
Post-employment shareholding guidelines
will be introduced going forward, requiring
Executive Directors to retain their relevant
shareholding at the date of leaving for two
years post cessation.
As part of its review of the Policy, the Committee spent significant
time considering the most appropriate approach for pension
provision, noting the Code requirement for pension provision to
be aligned with that available to the workforce. Any new Executive
Director appointments will have a pension level that is aligned
with the pension benefits available to the wider workforce. The
Committee determined that the current Executive Directors’
provision will initially remain unchanged, but the Committee will
be aligning the pension contribution for all Executive Directors
to those available across the workforce by 1 January 2023.
The Committee has also been considering the most appropriate
performance targets to be attached to the 2020 PSP awards.
The current intention is to continue to use a mix of EPS and TSR
measures. Due to the current high level of uncertainty surrounding
setting suitably stretching EPS targets, the EPS targets are yet to be
finalised and will be confirmed by the Committee in due course and
in accordance with recent guidance from the Investment Association,
no later than six months following grant. If it is determined that the
Committee is unable to set suitably robust EPS targets within this
timeframe the weighting on the TSR element will be increased to 100%.
Full details of the targets will be set out in an RNS announcement
issued immediately after the PSP award is granted or subsequently
if they are determined later.
As confirmed in the new Policy, the Committee has the ability to
adjust the formulaic outcomes from performance conditions where
appropriate and the Committee will ensure that outcomes reflect
Company and executive performance as well as the experience
of shareholders and other stakeholders. The Committee will also
use its discretion to reduce vesting outcomes where it determines
that windfall gains have been received.
We trust that you find this Report to be informative and
transparent, and we hope to receive your support for both the
Directors’ Remuneration Policy and the Directors’ Annual Report
on Remuneration at our forthcoming AGM.
Michael Averill
Chair, Remuneration Committee
4 June 2020
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Directors’ Remuneration Policy
This Directors’ Remuneration Policy, which has been approved by the Board and is subject to approval of the shareholders at the 2020 AGM,
contains the material required to be set out in the Directors’ Remuneration Report for the purposes of Part 4 of The Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment) Regulations 2008 as amended in 2013 (the DRR regulations).
The Directors’ Remuneration Policy will take effect for all payments made to Directors with effect from the conclusion of the forthcoming
2020 AGM.
In devising the new Directors’ Remuneration Policy, the Committee undertook an extensive review of the existing policy and determined
that it, as approved by 99.7% of shareholders at the 2017 AGM, remains aligned with the Group’s remuneration principles.
The minor amendments to the policy are primarily driven by emerging requirements under the Code and regulatory remuneration reporting,
which the Committee continues to monitor. Set out below is the Directors’ Remuneration Policy table which includes a summary of the
proposed changes from the previous policy.
Directors’ Remuneration Policy Table
Executive Directors
Element and
purpose
Policy and
operation
Maximum
Base salary
The core element of pay, reflecting the individual’s position within the Company and experience.
Base salaries will be reviewed as appropriate, but typically not more than annually. In reviewing base salaries, the
Committee will consider the performance of the Company and individual, any changes in responsibilities or scope
of the role, as well as pay practices in relevant comparator companies of a broadly similar size and complexity.
It is anticipated that any salary increases will generally be in line with those awarded to salaried employees. That
said, in certain circumstances (including, but not limited to, changes in role and responsibilities, market levels,
individual and Company performance) higher increases may be made. However, no incumbent Executive Director’s
salary will increase more than an average of 10% p.a. over the duration of this Policy.
Performance
measures
Changes from
previous policy
n/a
No material changes.
Element and
purpose
Benefits in kind
To provide market-competitive benefits valued by recipients.
The Executive Directors may receive benefits in kind including car allowance, fuel allowance, private family
medical insurance and such other market competitive benefits as the Committee considers appropriate.
Benefits may be provided up to an aggregate value of £50,000 for each Executive Director (or such higher amount
as the Remuneration Committee considers appropriate).
n/a
No material changes.
Pension
To provide retirement benefits.
The Executive Directors will receive a defined contribution provision (or cash supplement).
The maximum employer’s contribution (or cash supplement) is 20% of salary. Pension contributions for new
Executive Director appointments will be aligned with the pension benefits available to the wider workforce.
Current contributions are 20% of salary for the Chief Executive Officer and 15% of salary for the Chief Financial Officer.
These levels will be aligned to the wider workforce from 1 January 2023.
n/a
Newly appointed Executive Directors will be aligned to the wider workforce.
Incumbent Executive Directors remain on current levels through to end of 2022 and then aligned to rate available
to the wider workforce.
Policy and
operation
Maximum
Performance
measures
Changes from
previous policy
Element and
purpose
Policy and
operation
Maximum
Performance
measures
Changes from
previous policy
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Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Element and
purpose
Policy and
operation
Annual bonus
To motivate Executive Directors and incentivise the delivery of business strategy over a one-year operating cycle.
Annual bonus plan levels and the appropriateness of measures are reviewed annually to ensure they continue
to support our strategy.
Once set, performance measures and targets will generally remain unchanged for the year, except to reflect
events (e.g. corporate acquisitions, other major transactions) where the Committee considers it to be necessary
in its opinion to make appropriate adjustments.
The Committee retains the flexibility to pay annual bonus outcomes in cash and/or deferred shares (which may
allow for dividend roll-up). For current Executive Directors, one-third of any bonus earned will be deferred into
shares for three years to the extent that the Executive Director does not at the bonus payment date already hold
sufficient shares to satisfy the share ownership guidelines as may apply from time to time. For new Executive
Director appointments, one-third of any bonus will be deferred into shares for three years.
Clawback and malus provision apply as explained in more detail in the notes to this Policy table.
Maximum
The maximum annual bonus opportunity is 130% of base salary.
For 2020/21, the maximum opportunity will be 130% of salary for the CEO and 110% of salary for the CFO.
Performance
measures
Bonuses will be payable subject to the achievement of performance conditions which will be set by the Committee.
The targets may be financial and/or personal and strategic, with the majority based on financial targets. It is
anticipated that the financial targets will have a significant profit-based element. Where a sliding scale of targets is
used, attaining the threshold level of performance for any measure will not typically produce a pay-out of more than
20% of the maximum portion of overall annual bonus attributable to that measure, with a sliding scale to full pay-out
for maximum performance. Bonus payments will also be subject to the Committee considering that the proposed
bonus amounts, calculated by reference to performance against the targets, appropriately reflect the Company’s
overall performance and shareholders’ experience. If the Committee does not believe this to be the case, it may
adjust the bonus outturn accordingly.
Changes from
previous policy
For newly appointed Executive Directors, one-third of any bonus will be deferred into shares for three years.
The default good leaver treatment is amended so that rather than deferred bonus share awards vesting at cessation,
they will continue to vest at the normal vesting date.
Element and
purpose
Performance Share Plan (PSP)
To motivate Executive Directors and incentivise the delivery of sustained performance over the long term, and
to promote alignment with shareholders’ interests.
Policy and
operation
Awards under the PSP may be granted as nil/nominal cost options or conditional awards which vest to the extent
performance conditions are satisfied over a period normally of at least three years.
Awards will vest at the end of the specified vesting period at the discretion of the Committee and for awards granted
after 10 July 2019, Executive Directors will be required to retain shares vesting under the PSP (net of tax) until the
fifth anniversary of grant.
The PSP rules allow that the number of shares subject to vested PSP awards may be increased to reflect the value
of dividends that would have been paid in respect of any record dates falling between the grant of awards and the
expiry of any vesting period/holding period.
Clawback and malus provisions apply as explained in more detail in the notes to this Policy table.
Maximum
The market value of shares to be awarded to Executive Directors in respect of any year will normally be up to
150% and 125% of base salary for the Chief Executive Officer and Chief Financial Officer respectively, with awards
of a maximum of 250% allowable in exceptional circumstances.
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Executive Directors Performance Share Plan (PSP) continued
Performance
measures
The Committee may impose such conditions as it considers appropriate for each grant which must be satisfied before
any award will vest. This currently includes EPS and TSR that are normally applied with equal weighting.
All awards made to Executive Directors will be subject to performance conditions which measure performance over
a period normally no less than three years.
No more than 25% of awards vest for attaining the threshold level of performance. The Committee also has a standard
power to apply its judgement to adjust the formulaic outcome of all PSP performance measures to take account of
any circumstances (including the performance of the Company, any individual or business) should it consider that
to be appropriate.
Changes from
previous policy
A two-year holding period was applied to PSP awards made to Executive Directors in 2019. This is now included in the
formal Policy for completeness.
Clarified the ability of the Committee to adjust the formulaic outcomes from performance conditions where appropriate.
Element and
purpose
Policy and
operation
Share ownership guidelines
To promote stewardship and to further align the interests of Executive Directors with those of shareholders.
The share ownership guidelines encourage Executive Directors to build or maintain (as appropriate) a shareholding
in the Company.
If any Executive Director does not meet the guidelines, they will be expected to retain up to 50% of the net of tax
number of shares vesting under any of the Company’s discretionary share incentive arrangements (including any
deferred bonus shares) until the guideline is met after which they are expected to retain these levels as a minimum.
These restrictions do not apply to shares acquired through purchase.
From the 2020 AGM, Executive Directors will be required to maintain a shareholding in the Company for a two-
year period after stepping down from that position, being 200% of salary or the Executive Directors’ actual relevant
shareholding at leaving this position if lower.
The Executive Directors’ actual relevant shareholding will include shares vesting under any of the Company’s
discretionary share incentive arrangements (including any deferred bonus shares) from awards granted after the
date the Policy was adopted but excludes shares acquired through purchase and the release of shares under share
incentive plans where the grant occurred prior to the adoption of the Policy.
Maximum
No less than 200% of base salary for any Executive Director.
Performance
measures
Changes from
previous policy
Element and
purpose
n/a
Extended the application of share ownership guidelines for a 2-year period post termination of employment.
All-employee share plans
To facilitate and encourage share ownership by employees, thereby allowing them to share in the long-term success
of the Company and align their interests with those of shareholders.
Policy and
operation
The Executive Directors will be entitled to participate in all of the Company’s employee share plans, including the
Share Incentive Plan and Sharesave Plan, on the same terms as other employees.
These all-employee share plans are established under HMRC tax-advantaged regimes and follow the usual form for
such plans.
The maximum participation levels for all-employee share plans will be the limits for such plans set by HMRC from
time to time.
Consistent with normal practice, such awards would not be subject to performance conditions.
No material changes.
Maximum
Performance
measures
Changes from
previous policy
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Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Chairman and Non-Executive Directors
Element and
purpose
Chairman and Non-Executive Director fees
To enable the Company to recruit and retain Company Chairs and Non-Executive Directors of the highest calibre,
at the appropriate cost.
Policy and
operation
The fees paid to the Chairman and Non-Executive Directors aim to be competitive with other fully listed companies
of equivalent size and complexity.
The fees payable to the Non-Executive Directors are determined by the Board, with the Chairman’s fees determined
by the Committee. No Director participates in decisions regarding their own fees.
The Chairman and Non-Executive Directors do not participate in any new cash or share incentive plans since Admission.
The Chairman and Non-Executive Directors are entitled to benefits relating to travel and office support and such
other benefits as may be considered appropriate.
The Chairman is paid a single fee for the role, although he will be entitled to an additional fee if he is required to
perform any specific and additional services.
Non-Executive Directors receive a base fee for the role. Additional fees are paid for acting as Senior Independent
Director, Chairs of the Audit, Remuneration or other Board Committee and to the designated Non-Executive Director
for workforce engagement to reflect the additional time commitment. They will be entitled to an additional fee if they
are required to perform any specific and additional services.
Maximum
Fees are paid monthly in cash.
The aggregate fees and any benefits of the Chairman and Non-Executive Directors will not exceed the limit from time
to time prescribed within the Company’s Articles of Association for such fees (currently £5,000,000 p.a. in aggregate).
Any increases in fee levels made will be appropriately disclosed.
Performance
measures
Changes from
previous policy
n/a
No material changes.
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Notes to the policy table
1. Stating maxima for each element of the Remuneration Policy
The DRR Regulations and related investor guidance encourages
companies to disclose a cap within which each element of the
Directors’ Remuneration Policy will operate. Where maximum
amounts for elements of remuneration have been set within the
Policy, these will operate simply as caps and are not indicative
of any aspiration.
2. Travel and hospitality
While the Committee does not consider it to form part of benefits
in the normal usage of that term, it has been advised that corporate
hospitality, whether paid for by the Company or another, and
business travel for Directors (and in exceptional circumstances
their families) and any related tax liabilities may technically
come within the applicable rules, and so the Committee expressly
reserves the right for the Committee to authorise such activities.
3. Past obligations
In addition to the above elements of remuneration, any
commitment made prior to, but due to be fulfilled after, the
approval and implementation of this Remuneration Policy
or appointment as a Director will be honoured (such as any
commitments made in relation to the EVP Return Letters).
4. Malus/clawback
The Committee may apply malus (being the ability to withhold or
reduce a payment/vesting) to an award under the annual bonus
plan or PSP where there are circumstances which would justify such
action, such as: those relating to materially financially inaccurate or
misleading results, risk management failure leads to financial loss,
errors in calculating a payment/vesting, a participant’s behaviour
results in material reputational damage, or the Company becomes
insolvent.
The Committee may apply clawback (the ability to reclaim some or all
of a payment/vesting) to an award under the annual bonus plan or PSP
where there are circumstances which would justify such action, such
as: evidence of misconduct or material error, material misstatement
in the audited accounts, errors in calculating a payment/vesting, a
participant’s behaviour results in material reputational damage,
or the Company becomes insolvent.
5. Performance conditions
The performance-related elements of remuneration take into
account the Group’s risk policies and systems, and are designed
to align the senior executives’ interests with those of shareholders.
The Committee reviews the metrics used and targets set for senior
management (not just the Executive Directors and Group Executive
Team) every year, in order to ensure that they are aligned with the
Group’s strategy and to ensure an appropriate level of consistency.
6. Committee discretions
The Committee will operate the annual bonus plan and PSP according
to their respective rules and the Policy table. The Committee retains
discretion, consistent with market practice, in a number of respects,
in relation to the operation and administration of these plans. This
discretion includes, but is not limited to, the following:
■ the selection or participants;
■ the timing of grant of awards;
■ the size of an award/bonus opportunity subject to the maximum
limits set out in the Policy table;
■ the determination of performance against targets and resultant
vesting/pay-outs;
■ when dealing with a change of control or restructuring
of the Company;
■ determination of the treatment of leavers based on the rules
of the relevant plan and the appropriate treatment chosen
(subject to the policy on termination as set out below);
■ adjustments required in certain circumstances
(e.g. rights issue and special dividends); and
■ the annual review of performance measures,
weightings and targets from year to year.
In addition, while performance and targets used in the annual
bonus plan and PSP will generally remain unaltered, if events
occur which the Committee determines have resulted in the
original conditions ceasing to operate as intended, an amended
or different target can be set, provided that it is not materially more
or less difficult to satisfy, having regard to the event in question.
Any use of the above discretion would, where relevant, be explained
in the Annual Report on Directors Remuneration and may, where
appropriate and practicable, be the subject of consultation with
the Company’s major shareholders.
The Committee may make minor amendments to the Remuneration
Policy for regulatory, exchange control, tax or administrative
purposes or to take account of a change in legislation, without
obtaining shareholder approval for that amendment.
Remuneration Policy on Recruitment
The Company’s recruitment remuneration policy aims to give the
Committee sufficient flexibility to secure the appointment and
promotion of high calibre executives to strengthen the management
team and secure the skill sets to deliver our strategic aims.
In terms of the principles for setting a package for a new Executive
Director, the starting point for the Committee will be to apply the
Remuneration Policy and structure a package in accordance with
that Policy (noting that pension contributions for a new Executive
Director will be aligned with the pension benefits available to the
majority of the workforce). Consistent with the DRR Regulations,
any caps contained within the Policy for fixed pay do not apply to
new recruits, although the Committee would not envisage exceeding
these caps in practice unless absolutely necessary.
The annual bonus plan and PSP, including the maximum award
levels, will operate as detailed in the Remuneration Policy in
relation to any newly appointed Executive Director. For an internal
appointment, any variable pay element awarded in respect of the
prior role may either continue on its original terms or be adjusted
to reflect the new appointment as appropriate.
For both external and internal appointments, the Committee may
agree that the Company will meet certain relocation expenses as
it considers appropriate. It is envisaged these would only be offered
for a limited period.
For external candidates, it may be necessary to make additional
awards in connection with the recruitment to buy out awards
forfeited by the individual on leaving a previous employer. For the
avoidance of doubt, buy-out awards are not subject to a formal cap.
Any recruitment-related awards which are not buy-outs will be
subject to the limits for the annual bonus plan and PSP as stated in
the Remuneration Policy. Details of any recruitment-related awards
will be appropriately disclosed.
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Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 For any buy-outs, the Company will not pay more than is necessary
in the view of the Committee and will be limited in value to what the
Committee considers to be a fair estimate of the value of the awards
foregone. The Committee will in all cases seek, in the first instance,
to deliver any such awards under the terms of the existing annual
bonus plan and PSP. It may, however, be necessary in some cases
to make buy-out awards on terms that are more bespoke than the
existing annual bonus plan and PSP.
All buy-outs, whether under the annual bonus plan, PSP or
otherwise, will take due account of the service obligations and
performance requirements for any remuneration relinquished by
the individual when leaving a previous employer. The Committee
will seek, where it is practicable to do so, to make buy-outs subject
to what are, in its opinion, comparable requirements in respect of
service and performance. However, the Committee may choose to
relax this requirement in certain cases, such as where the service
and/or performance requirements are materially completed, or
where such factors are, in the view of the Committee, reflected in
some other way, such as a significant discount to the face value of
the awards forfeited, and where the Committee considers it to be
in the interests of shareholders.
Service Contracts
Executive Directors
Michael Topham entered into a service agreement with the Company
which was dated 26 September 2018. Richard Pike entered into
a service agreement with the Company dated 25 July 2018. The
policy is that each Executive Director’s service agreement should
be of indefinite duration, subject to termination by the Company
or the individual on no more than 12 months’ notice. However, the
Committee reserves flexibility to alter these principles if necessary
to secure the recruitment of an appropriate candidate and if
appropriate introduce a longer initial notice period of up to two
years (reducing over time to no more than 12 months).
The service agreements of all Executive Directors, which are
available for inspection at the Company’s registered office,
comply with this policy as follows:
■ Michael Topham’s service agreement is terminable by the
Company on not less than 12 months’ written notice or by Michael
on not less than 12 months’ written notice. The contract provides
for immediate termination upon payment in lieu of notice and
contains a 12-month garden leave clause.
■ Richard Pike’s service agreement is terminable by the Company
on not less than 6 months’ written notice or by Richard on not
less than 6 months’ written notice. The contract provides for
immediate termination upon payment in lieu of notice and
contains a 6-month garden leave clause.
In each case, any payment in lieu of notice will be calculated
by reference to base salary and contractual benefits only and
will not include any entitlement to bonus or holiday pay that
would have accrued during the notice period. The payments in
lieu will be paid in monthly instalments. Each Executive Director
is also obliged to seek alternative employment/income during
this period and the instalment payments will be reduced by the
amount of such income.
Chairman and Non-Executive Directors
The Chairman and Non-Executive Directors’ appointments are
subject to the terms of letters of appointment agreed between
themselves and the Company. They are not entitled to receive
any compensation on termination of their appointment (other
than payment in respect of a notice period where notice is served)
and are not entitled to participate in the Company’s share, bonus
or pension schemes, and are entitled to be reimbursed all
reasonable out-of-pocket expenses incurred in the proper
performance of their duties.
Their appointment may be terminated at any time upon three
months’ written notice. The appointment may also be terminated
pursuant to the Articles or as otherwise required by law. They are
subject to annual re-election by the Company in general meeting.
Non-Executive Director
Appointment Letter of Engagement
Original date of
Ken Lever
12 August 2016
12 March 2018
Michael Averill
25 February 2013
17 October 2016
David Martin
12 August 2016
17 October 2016
Carol Chesney
Gab Barbaro
12 July 2018
12 June 2018
1 January 2019
1 January 2019
Remuneration Policy on Termination
The Committee will consider treatments on a termination having
regard to all of the relevant facts and circumstances available at that
time. This policy applies both to any negotiations linked to notice
periods on a termination and any treatments that the Committee
may choose to apply under the discretions available to it under the
terms of the annual bonus plan and PSP. The potential treatments
on termination under these plans are as follows:
Annual Bonus Plan
If an Executive Director resigns or is dismissed for cause before the
bonus payment date, the right to receive any bonus normally lapses
(unless the Committee determines otherwise). If an Executive
Director ceases employment before the bonus date because of death,
ill health, injury or disability, retirement, redundancy or any other
reason determined by the Committee, such bonus will be payable
as the Committee in its absolute discretion determines taking into
account the circumstances for leaving, time in employment and
performance. Similar treatment will apply in the event of a change
in control of the Company.
If an Executive Director ceases employment unvested deferred
bonus awards will normally lapse. However, if employment
ends because of death, ill health, injury or disability, retirement,
redundancy, the sale or transfer of the employing company or
business (other than on a change of control), or for any other reason
determined by the Committee, the award will vest in full, unless the
Committee decides that it should be subject to a pro-rata reduction
in the number of shares vesting to take account of the proportion
of the vesting period during which the participant will not be in
employment. Release will not typically be accelerated, except
in the case of death in service. The Committee has the ability
to release a good leaver’s awards early in suitable cases.
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Performance Share Plan
If, during the performance or vesting period, a participant:
■ resigns or is dismissed for cause, awards will normally
lapse in full;
■ ceases to be employed due to ill health, injury or disability
(established to the Company’s satisfaction), retirement with the
agreement of the participant’s employer, redundancy, the sale or
transfer of the employing company or business (other than on
change of control), or for other reasons specifically approved by
the Committee, the award will continue and, unless the Committee
determines otherwise, will vest on the original vesting date
subject to the satisfaction of the performance conditions over
the performance period and a pro-rata reduction in the number
of shares vesting to take account of the proportion of the vesting
period during which the participant was not in employment.
Alternatively, on the sale or transfer of the employing company
or business, participants may be required to exchange their
awards for equivalent awards in the acquiring company; and
■ dies, unvested awards will vest at the date of death subject
to performance testing and time pro-rating, unless the
Remuneration Committee determines otherwise.
If there is a takeover, scheme of arrangement, demerger or other
corporate reorganisation of the Company, participants may be
required, or may be allowed, to exchange their awards for equivalent
awards in the acquiring company. If awards are not exchanged, they
will normally vest immediately, the performance conditions will
apply and the number of shares which vest will be time pro-rated
to take account of the proportion of the vesting period which has
elapsed prior to the relevant event unless the Committee, acting
fairly and reasonably, decides that it is appropriate not to apply
pro-rating (or apply it less strictly). An award granted in the form
of an option will normally be exercisable for six months after
the date of vesting and will lapse at the end of that period.
The number of shares subject to an award may be adjusted in such
manner as the Committee considers reasonable if there is rights
issue, corporate restructuring events, demerger, special dividends
or other variation of capital.
The all-employee Share Incentive Plan and Sharesave Plan provide
treatments for leavers in line with HMRC rules for such plans.
The Company has the power to enter into settlement agreements with
Directors and to pay compensation to settle potential legal claims.
In addition, and consistent with market practice, in the event of the
termination of employment of an Executive Director, the Company
may make a contribution towards that individual’s legal fees and
fees for outplacement services as part of a negotiated settlement.
Any such fees will be disclosed as part of the detail of termination
arrangements. For the avoidance of doubt, the policy does not include
an explicit cap on the cost of termination payments.
External Appointments
The Company’s policy is to permit an Executive Director to accept
one non-executive appointment outside the Company when this
does not conflict with the individual’s duties to the Company.
When an Executive Director takes such a role they may be entitled
to retain any fees which they earn from that appointment.
Statement of Consideration of Employment Conditions
elsewhere in the Company
Pay and employment conditions generally in the Company will be
taken into account when setting Executive Directors’ remuneration.
The Committee will receive regular updates on overall pay and
conditions in the Company, including (but not limited to) changes
in base pay, any employee bonuses in operation, gender pay gap
and pay ratios. There is also oversight of the all-employee share
plans which Executive Directors and all other Company employees
can participate in on the same terms and conditions. Reflecting
standard practice, the Company does not currently consult with
employees in drawing up the Directors’ Remuneration Report or
when determining the underlying Policy, although it will continue
to monitor developments in this area.
Differences between the Directors’ Remuneration Policy
and the Policy on Remuneration for Other Employees
The Remuneration Policy for other employees is based on broadly
consistent principles as described above. Annual salary reviews
across the Company take into account Company performance,
local pay and market conditions and salary levels for similar
roles in comparable companies.
Other members of senior management participate in similar
annual bonus arrangements to the Executive Directors, although
award sizes vary by organisational level. PSP awards may also
be granted to a broader population than the Executive Directors.
The Company operates discretionary bonus schemes for eligible
groups of employees under which a bonus is payable subject to the
achievement of appropriate targets. All eligible employees may
participate in the Company’s Share Incentive Plan and Sharesave
Plan on identical terms.
Statement of Consideration of Shareholders’ Views
The Committee considers shareholder views received during the
year and at each Annual General Meeting, as well as guidance from
shareholder representative bodies more broadly, when determining
the Directors’ Remuneration Policy and its implementation.
The Committee seeks to build an active and productive dialogue
with investors on developments on the remuneration aspects
of corporate governance generally and it will consult with major
shareholders in advance of any material change to the structure
and/or operation of the Policy and will seek formal shareholder
approval for any such change if required.
7272
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Illustrations of the application of the Directors’ Remuneration Policy
The charts below show how the Directors’ Remuneration Policy will be applied for Executive Directors for the 2020/21 financial year using
the following assumptions:
Minimum
■ Consists of base salary, benefits and pension.
■ Base salary is the salary to be paid in the 2020/21 financial year.
■ Benefits are based on estimated values for the 2020/21 financial year.
■ Pension is measured as the defined contribution or cash allowance in lieu of Company contributions of 20%
of salary for the Chief Executive Officer and 15% for the Chief Financial Officer.
Michael Topham
Richard Pike
Base salary
£495,000
£325,000
Benefits
£11,000
£11,000
Pension
£99,000
£49,000
Total fixed
£605,000
£385,000
Target
Based on what the Executive Director would receive if performance was on-target (excluding share price
appreciation and dividends):
■ Annual bonus: consists of the on-target bonus (60% of maximum opportunity used for illustrative purposes).
■ Long term incentive plan (LTIP): consists of the threshold level of vesting (25% vesting) under the PSP.
Maximum
Based on the maximum remuneration receivable (excluding share price appreciation and dividends):
■ Annual bonus: consists of maximum bonus of 130% of base salary for the Chief Executive Officer and 110%
of base salary for the Chief Financial Officer.
■ LTIP: consists of the face value of awards (150% of base salary for the Chief Executive Officer and 125% of base
salary for the Chief Financial Officer) under the PSP.
■ As the maximum scenario plus the value resulting from share price growth of 50% from the PSP award.
Maximum
with 50% share
price growth
£’000
Fixed pay (salary, benefits, pension)
Annual Bonus
LTIP
Share price growth
£2,362
16%
£1,991
38%
31%
32%
27%
£1,177
16%
33%
£605
100%
51%
30%
26%
£2,500
£2,250
£2,000
£1,750
£1,500
£1,250
£1,000
£750
£500
£250
£0
£1,352
£1,149
15%
35%
30%
31%
26%
£701
15%
31%
£401
100%
54%
34%
28%
Minimum On Target Maximum Maximum
with share
price growth
Minimum On Target Maximum
Maximum
with share
price growth
Michael Topham
Chief Executive Officer
Richard Pike
Chief Financial Officer
7373
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Directors’ Remuneration Report continued
Directors’ Annual Report on Remuneration
2019/20 Remuneration
The following section provides details of how the Directors were paid during the financial year to 27 March 2020.
Single Total Figure Table (audited)
The remuneration for the Executive and Non–Executive Directors who performed qualifying services during the year is detailed below
(with prior year comparatives).
Directors
Executive Directors
Michael Topham5
Richard Pike6
Non–Executive Directors
Michael Averill
Ken Lever7
David Martin
Carol Chesney
Gab Barbaro8
Former Executive Director
Ian Wakelin9
Salary/Fees
Taxable
benefits1
Bonus2
Long-term
incentives34
Pension
Total
Remuneration
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
£495,000
£410,000
£325,000
£188,250
£57,000
£57,000
£180,000
£180,000
£67,000
£57,000
£57,000
£41,069
£50,000
£12,500
–
£9,425
£9,865
£12,514
£6,288
£488,264
£412,507
£271,258
£161,451
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
£495,733
£624,226
–
–
–
–
–
–
–
–
–
–
–
–
–
£99,000
£82,000
£48,750
£27,187
£1,587,422
£1,538,598
£657,522
£383,176
–
–
–
–
–
–
–
–
–
–
–
£57,000
£57,000
£180,000
£180,000
£67,000
£57,000
£57,000
£41,069
£50,000
£12,500
–
£255,000
£7,304
£273,219
£724,463
£51,000
£1,310,986
1
Taxable benefits received comprised car allowance, fuel card and private family medical insurance and the intrinsic value of Sharesave options granted during
the year.
2 The bonus is to be in paid in shares.
3
The estimated outturn for the 2017 PSP which vests in 2020 is 100% and the vesting share price has been estimated at 270.9 pence, based on the three-month
average share price ending 27 March 2020. For further information see page 64. £89,485 of the above figure for Michael Topham be attributed to a share price
appreciation of 48.9 pence per share, based on an actual award price of 222 pence.
In June 2019, the Committee confirmed that the 2016 PSP awards would vest as to 73%. The long-term incentive figures in the 2019 comparatives have therefore
been updated to reflect this and the actual share price on vesting (223 pence) rather than the three-month average used in the 2019 Annual Report (195.2 pence).
4
5 Michael Topham was appointed CEO on 29 September 2018; his 2019 recorded salary therefore includes only that as CEO for part of the year.
6 Richard Pike was appointed CFO on 29 September 2018; his 2019 recorded salary therefore relates to part year tenure.
7 Ken Lever’s Fees restated for 2019 (£187,096) which previously included arrears for Fees relating to 2017/18
8 Gab Barbaro joined the Board with effect from 1 January 2019.
9 Ian Wakelin stepped down from the Board and left the Company on 28 September 2018.
The aggregate emoluments (being salary/fees, bonuses, benefits and pension allowances) of all Directors for year ended 27 March 2020
was £2,160,210 (2019: £2,238,736). Aggregate value of vested long-term incentives of all Directors for year ended 27 March 2020 was £495,733
(2019: £1,348,689).
2019/20 Annual Bonus (audited)
The Executive Directors’ annual bonus targets were set at the beginning of the financial year. As a result of strong underlying financial
performance, the Group exceeded the threshold underlying profit before tax and underlying free cash flow targets set by the Board for
the purposes of awarding the 2019/20 annual bonuses of the Executive Directors.
More particularly, the profit before tax and free cash flow bonus targets were as follows:
Threshold
£m
–1
36.18
Target
£m
69.70
40.20
Maximum
£m
74.93
44.22
Maximum.
Potential Pay-
out
Actual Pay-out
(out of
maximum
stated)
50.0%
20.0%
70.0%
35.0%
20.0%
55.0%
Actual
£m
71.7
53.6
–
Underlying Profit Before Tax
Underlying Free Cash Flow
Total
1 No payment was payable for below target performance.
7474
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 In respect of the personal performance targets set for each Executive Director, these were set against a range of strategic targets at the start
of the year. The targets set were aligned to Biffa’s corporate objectives having due regard to the five-year strategy.
Details of the measures, to the extent they are not commercially sensitive are shown below.
Personal Performance Targets – CEO
Measure
Target
Performance
Maximum
Potential
Actual
Payout
Safety and Sustainability
Demonstrate further progress
and improvement in safety and
environmental performance
Improve safety
engagement score by 2%
Reduce Group LTI
by 40% (to 0.26%)
■ Safety engagement score reduced. Target
5.0%
3.3%
not met
■ Group LTI rate reduced by more than 40%
(to 0.23%)
Reduce no of RTA’s
■ Reduction in many RTA categories but
increase overall
■ Target not achieved due to odour issues
at a number of landfill sites
■ Completed and launched March 2020
■ Safer Together Senior Leader
training completed
■ Score 58% (no improvement)
5.0%
0.0%
3% improvement in
permit compliance
score vs number of
permits ratio.
Launch Sustainability
Report.
Roll out safety
leadership training
to all senior leaders
Survey improvement
2% points at Group level
(to 60%)
Progress as per
approved strategy/five
year plan
■ Partial achievement on M&A
■ PET plant built
■ Newhurst financial close complete
5.0%
2.5%
■ Capital Markets day delivered strategy
5.0%
5.0%
■ Updated investor slide deck and
sustainability strategy launch
5.0%
5.0%
Strategy approved
and communicated
to markets including
deliverable plan for
financing
Board assessment – to
include policy thought
leadership and public
interest items (e.g.
safety, sustainability)
as well as IR-related
activities
Board assessment
■ Annual talent review completed with an
5.0%
5.0%
additional focus on manager hi-potentials.
Newly developed Biffa Advanced
Leadership Programme commenced.
30.0%
20.8%
Employee Engagement
Deliver an improvement in the
group Employee engagement score
as demonstrated by the Annual
Employee Engagement Survey
Strategy Execution
Make demonstrable progress
in delivery of the strategy
Strategy development and financing
Develop and gain approval for the
Group’s growth strategy and ensure
appropriate funding arrangements
are in place to underpin its delivery
Communications
Develop and implement a proactive
comprehensive communications strategy
Talent management and succession
Implement a formal talent management
programme; further develop/improve
the broader leadership team/identify
appropriate successors for Group Executive
Team positions where relevant
7575
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Directors’ Remuneration Report continued
Personal Performance Targets – CFO
Measure
Target
Performance
Maximum
Safety and Sustainability
Demonstrate further progress
and improvement in safety and
environmental performance
Improve safety
engagement score by 2%
Reduce Group LTI by
40% (to 0.26%)
■ Safety engagement score reduced. Target
5.0%
not met
■ Group LTI rate reduced by more than 40%
(to 0.23%)
Reduce no of RTA’s
■ Reduction in many RTA categories but
Actual
Payout
3.3%
3% improvement in
permit compliance
score vs number of
permits ratio.
Launch Sustainability
Report.
Roll out safety
leadership training
to all senior leaders
Survey improvement
2% points at Group level
(to 60%)
increase overall
■ Target not achieved due to odour issues
at a number of landfill sites
■ Completed and launched March 2020
■ Safer Together Senior Leader
training completed
■ Engagement score remained static.
5.0%
0.0%
Target was not met
Progress as per
approved strategy/
five year plan
■ Partial achievement on M&A
■ PET plant built
■ Newhurst financial close complete
5.0%
2.5%
■ All delivered/progressing to plan
5.0%
5.0%
■ Outperformed budgeted working capital,
5.0%
5.0%
improved terms of bonds, overdraft
secured, commenced work for US
private placement bond
■ CMD delivered, sustainability
5.0%
5.0%
strategy launched
Near term Fusion sub
projects delivered to
plan and longer term
delivery plan approved
and in place
To include: financing
for strategy (e.g. equity
raise), out-performance
of budgeted working
capital position,
improved terms of
bonds, securing access
to other pools of finance
where appropriate
To include: improved
direct communications
with investors and
prospects (including
website), Capital
Markets event, launch
of ESG/sustainability
strategy
30.0%
20.8%
Employee Engagement
Deliver an improvement in the group
Employee engagement score as
demonstrated by the Annual
Employee Engagement Survey
Strategy Execution
Make demonstrable progress
in delivery of the strategy
Efficiency and Process Improvement
Reset Project Fusion
Financing
Deliver key initiatives to improve
the availability and cost of the
Group’s financing
Investor Relations
Develop and deliver a more proactive
investor relations programme
7676
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 On the basis of the above performance, the Committee determined that payment of 20.8% for the CEO and 20.8% for the CFO out of the
maximum of 30% for this part of the bonus was proportionate and reasonable in the circumstances. This performance resulted in the
following performance assessment for the year:
Financial performance (% of potential)
Strategic performance (% of potential)
Total performance outcome (% of potential)
Total performance outcome (% of salary)
Weightings
Outcomes
CEO/CFO
70%
30%
100%
Michael
Topham
Richard Pike
55.0%
20.8%
75.8%
98.6%
55.0%
20.8%
75.8%
83.5%
Vesting of Long-Term Incentive Awards (audited)
The PSP award granted on 3 July 2017 is partly subject to EPS performance to the year ended 27 March 2020 and partly based on TSR
performance to the date of the preliminary announcement of results for the year. The performance conditions attached to this award
and performance against these conditions is as follows:
(i) Underlying EPS targets as to 50% of the award, and (ii) relative TSR targets as to the remaining 50% of the award. The details of these
targets are shown in the tables below:
Underlying EPS for 2019/20 financial year (50% of award)
Portion of award vesting
Below 19.5p
19.5p
19.5p to 22.5p
Above 22.5p
Actual performance
Vesting level
Biffa’s TSR2 ranking vs the FTSE 250 (excluding financial
services companies and investment trusts) (50% of award)
Below median
Median
Pro-rata on straight-line basis between 25% and 100%
0%
25%
100%
23.6p
100%
Portion of award vesting
0%
25%
Between median and upper quartile
Pro-rata on straight-line basis between 25% and 100%
Upper quartile
Actual performance
Vesting level (estimated)
To be confirmed at end of performance period
100%
100%
2
TSR (calculated based on Biffa plc share price movements, plus dividends reinvested into Biffa plc shares on the relevant ex-dividend dates, over the performance
period) is measured over the period from the date of grant to the date of the preliminary announcement of results for the 2019/20 financial year.
Based on the estimated vesting percentage above, details of the shares under award and their estimated value (based on the three-month
average share price at 27 March 2020 of 270.9 pence per share) are as follows:
Executive
Michael Topham
Maximum
Number
of shares
Number
of shares
to vest
Number
of shares
to lapse
Estimated
value at
vesting £1
Face value
of awards
vesting2
Impact of
share price
on vesting3
182,995
182,995
0
£495,733
£406,249
£89,485
1 Based on the three-month average share price to 27 March 2020.
2 Based on the number of shares vesting multiplied by the share price at the date of grant (222 pence).
3 Based on the estimated value at vesting, less the face value of awards vesting.
The awards also receive the value of dividend equivalents.
7777
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Directors’ Report on Remuneration continued
EVP Awards (audited)
As described in last year’s Annual Directors’ Report on Remuneration, prior to the Company’s admission to the London Stock Exchange
certain Directors were granted EVP Return Letters by WasteHoldco 1 Limited (then the parent Company of the Biffa Group of companies)
in connection with a dispute with HMRC regarding the payment of landfill tax for certain of its operations in the UK (the EVP Dispute).
These EVP Return Letters were granted in recompense for the diminution in value of their interests in the Group resulting from the EVP
Dispute which was linked to incentive arrangements in existence prior to Admission, full details of which appear below in Note 34, on
page 150 of the Financial Statements. As part of the proceedings, the Company was required to pay HMRC approximately £63m shortly
following Admission (the EVP Paid Amount).
If the EVP Dispute is irrevocably settled in the Company’s favour and the EVP Paid Amount is unconditionally returned to the Company
(less any amounts which the Group is required to pay in respect of costs incurred by HMRC or penalties or other associated costs of the
EVP Dispute together with the EVP Interest payable (see below)) (the EVP Return), the EVP Return Letters shall be settled and these
Directors shall be entitled to a cash payment (less tax and national insurance contributions) under the EVP Return Letters as follows:
Director
Michael Topham
Michael Averill
% of net EVP
Return to
which they
are entitled
2.129
0.194
In the event the EVP Dispute is irrevocably settled in favour of HMRC, then subject to the Group receiving a net reduction in the tax liability
of the Group (after taking into account any increase in the tax liability arising in respect of any profit and loss account credits in WasteHoldco
1 Limited in respect of the EVP preference shares granted to certain shareholders prior to Admission (the Tax Deduction)) the EVP Return
Letters shall be cancelled and the Directors shall be entitled to a cash payment equal to a percentage of the Tax Deduction subject to a
maximum payment and a payment in respect of EVP Interest (see below) (less tax and social security contributions) as detailed below:
Director
Michael Topham
Michael Averill
% of Tax
Deduction
Maximum Tax
Deduction Cash
Payment
EVP Interest
Payable
Total Max
Payment
2.366
0.215
£236,559
£185,226
£421,785
£21,505
£16,839
£38,344
The Company was advised by HMRC in November 2017 that the remaining penalty interest of £8.7m, payable on the EVP Paid Amount,
was no longer due (EVP Interest). Once the EVP Dispute has been irrevocably settled, the EVP preference shareholders shall be entitled
to receive a proportion of the EVP Interest in line with their shareholding and, the holders of the EVP Return Letters shall be entitled to
receive EVP Interest (less tax and social security contributions), as detailed above.
Biffa was successful in its appeal at the Upper Tax Tribunal hearing held in November 2019. HMRC has appealed this decision to the
Court of Appeal.
7878
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Statement of Directors’ Shareholding and Share Interests (audited)
For each Director, the total number of Directors’ interests in shares at 27 March 2020 was as follows:
Number of Ordinary shares held
as at 27 March 2020
Number of Ordinary shares held
as at 29 March 2019
Michael
Topham1
Richard
Pike
Michael
Averill
Ken
Lever
David
Martin
Carol
Chesney
Gab
Barbaro
805,371
367,401
71,340
52,777
25,000
6,500
661,004
358,046
71,340
52,777
25,000
6,500
–
–
1 Number of shares held includes 155 shares in respect of the Biffa Share Incentive Plans SIP Award for Michael Topham.
The shareholdings above include those held by Directors and their respective connected persons. There were no changes in the current
Directors’ interests in shares between 27 March 2020 and 4 June 2020 other than those noted above. Under the share ownership guidelines,
the Executive Directors are required to build and maintain a shareholding equivalent to at least 200% of salary. At the 2020 year-end, Michael
Topham complied with this requirement. Richard Pike’s shareholding increased during 2019/20 and was equivalent to 198% of salary based
on the year end share price (175.4 pence).
PSP Awards Granted in the Year (audited)
The following conditional share awards were granted under the PSP in 2019:
Director
Michael Topham
Richard Pike
Date of grant
01 July 19
01 July 19
Basis of award
(% of salary)
Face value of
awards at grant
Number of
shares under
award1
Date of vesting
150%
125%
£742,500
£406,250
359,564
04 Jul 22
196,731
04 Jul 22
1 Based on the three-day average share price of 206.5 pence to 30 June 2019.
These awards vest in 2022 subject to performance relating to (i) underlying EPS targets as to 50% of the award, and (ii) relative TSR targets as to the remaining
50% of the award. The details of these targets are shown in the tables below:
Underlying EPS for 2021/22 financial year (50% of award)
Portion of award vesting
Below 24p
24p
24p to 28p
Above 28p
Biffa’s TSR3 ranking vs the FTSE 250 (excluding financial services
companies and investment trusts) (50% of award)
Below Median
Median
Between Median and Upper Quartile
Upper quartile
Pro-rata on straight-line basis between 25% and 100%
0%
25%
100%
Portion of award vesting
0%
25%
Pro-rata on straight-line basis between 25% and 100%
100%
3
TSR (calculated based on Biffa plc share price movements, plus dividends reinvested into Biffa plc shares on the relevant ex-dividend dates, over the performance
period) is measured over the period from the date of grant to the date of the preliminary announcement of results for the 2021/22 financial year.
Awards Granted in the Year under the Sharesave Plan (audited)
During 2019, all employees, including the Executive Directors, were eligible to participate in the Sharesave Plan. This table details the
number of options granted to Richard Pike under the Sharesave Plan:
Director
Richard Pike
1 Based on a 20% discount to the share price at the invitation date.
Date of grant
Share price at
grant (£)
Exercise price
(£)1
Number of
shares
Date of vesting
12 Jul 19
2.26
1.81
1,988
01 Sep 22
7979
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020
Directors’ Report on Remuneration continued
Outstanding Share Plan Awards (audited)
Details of all outstanding share awards made to Executive Directors are set out below:
Director
Michael Topham
Award
type
Exercise
Price (£)
Grant
date
Interest
at
29/03/19
Awards
granted
in the
year
Awards
lapsed in
the year
Awards
vested in
the year
Interest
at
27/03/20
Date of
vesting/
Exercise
period
PSP1
PSP1
PSP2
PSP2
PSP3
SIP4
0 20-Oct-16
361,111
0 03-Jul-17
182,995
0 02-Jul-18
131,048
0 01-Oct-18
97,029
–
–
–
–
0 01-Jul-19
0 21-Nov-16
SAYE5
1.58
21-Jul-17
–
359,564
150
2,278
5
–
–
84,905
276,206
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
182,995 01-Jul-20
131,048 01-Jul-21
97,029 01-Jul-21
359,564 01-Jul-22
155 See Note 4
2,278 01-Sep-20
121,330 01-Jul-21
196,731 01-Jul-22
1,988 01-Sep-22
Richard Pike
PSP2
PSP3
0 01-Oct-18
121,330
0 01-Jul-19
–
196,731
SAYE5
1.81
12-Jul-19
1,988
1 Performance targets for the 2017 PSP awards are presented above.
2 Performance targets for the 2018 PSP awards are presented in last year’s Directors Remuneration Report.
3 Performance targets for the 2019 PSP awards are detailed above.
4
Award of free shares under the Biffa plc SIP 2016. The awards were granted on 21 November 2016 and are subject to the normal terms of an HMRC SIP. Awards
granted in the year relate to the award of related dividend shares under the SIP.
5 Awards granted under the Biffa plc 2017 Sharesave Scheme. Awards are based on a three-year savings contract.
The aggregate gains by all Directors during 2019/20 from share plan awards was £1,348,689 (2018/19: £ nil). The market price of the
shares at the end of the financial year was 175.4 pence; the highest and lowest share price during the financial year were 307 pence
and 175.4 pence respectively.
Payments to Past Directors (audited)
Other than the payments made to Ian Wakelin outlined in the Single Total Figure Table there were no payments to past Directors in the
financial year 2019/20 (2018/19: nil).
Payments for Loss of Office (audited)
No payments were made to any Director in respect of loss of office in the financial year 2019/20 (2018/19: nil).
8080
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Review of Past Performance and CEO Remuneration Table (unaudited)
The graph below shows the TSR of the Company and the FTSE 250 Index (excluding Investment Trusts) over the period from Admission to
27 March 2020. This is considered an appropriate comparator for Biffa, and this aligns with the use of the FTSE 250 in the TSR performance
measure for the PSP.
Biffa TSR vs FTSE 250 since Admission
Biffa
FTSE 250 Excl. Investment Trusts
Total shareholder return (rebased to 100)
135
130
125
120
115
110
105
100
95
90
85
Oct 2016
Mar 2017
Mar 2018
Mar 2019
Mar 2020
(Source: Thomson Reuters)
The table below details certain elements of the CEO’s remuneration since Admission.
2019/20
2018/19
2017/18
2016/17
Single figure
of total
remuneration
Annual bonus
pay-out as % of
maximum
Long-term
incentive
vesting rates as
% of maximum
£1,587,422
£1,819,483
£1,220,437
£10,681,021
75.9%
82.4%
90.1%
94.5%
100%
72.8%
–
–
1
It should be noted that £9,507,310 of the above amount relates to the bonus paid under the Management Incentive Plan which was in place from 2013 until the
Company’s Admission and was therefore ‘one-off’ in nature.
Percentage Change in Remuneration of the CEO (unaudited)
The table below presents the year-on-year percentage change in remuneration received by the CEO, compared with the change in
remuneration received by all Biffa employees:
Salary
Short-term incentives
All taxable benefits
1 This percentage change reflects the change in the incumbent over the period.
CEO1
-1.5%
-9.3%
-23.0%
All Biffa
employees
4.6%
30.8%
10.9%
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Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020
Directors’ Report on Remuneration continued
CEO to Employee Pay Ratio
The table below shows how the CEO’s single figure remuneration (as taken from the single figure remuneration table on page 81) compares to
the equivalent single figure remuneration for full-time equivalent UK employees, ranked at the 25th, 50th and 75th percentile.
Year
2019/20
Method
25th
percentile
pay ratio
Median pay
ratio
75th
percentile
pay ratio
A
80:1
61:1
49:1
The relevant regulations provide three options which may be used to calculate the pay for the employees at the 25th percentile, median
and 75th percentile. We have used Option A, following guidance that this is the preferred approach of some proxy advisors and institutional
shareholders. Option A captures all relevant pay and benefits for all employees in line with the single figure for remuneration calculated for
Executive Directors.
The ratios shown are representative of the FTE 25th percentile, median and 75th percentile pay for UK employees within the Group during
2019/20. Full-year pay data for the 2019/20 financial year has been used to calculate the ratios.
The pay for part-time employees has been grossed-up to one FTE.
The Committee has reviewed the employee data and believes the median pay ratio to be consistent with the pay, reward and progression
policies for the company’s UK employees over the period.
The Chief Executive Officer’s pay is based on the single figure of remuneration set out on page 81 of this report. Because a large portion
of the Chief Executive Officer’s pay is variable, the pay ratio is heavily dependent on the outcomes of variable pay plans and, in the case
of long-term share-based awards, share price movements.
The total pay and benefits and the salary component of total pay and benefits for the employee at each of the 25th percentile, the median
and the 75th percentile are shown below:
Year
2019/20
25th
percentile
pay ratio
Salary
Median pay
ratio
Total pay and benefits
75th
percentile
pay ratio
25th
percentile
pay ratio
Median pay
ratio
75th
percentile
pay ratio
26:1
20:1
18:1
80:1
61:1
49:1
Relative Importance of Spend on Pay (unaudited)
The table below details the change in total employee pay between financial years 2018/19 and 2019/20 as detailed in Note 7 to the Financial
Statements, compared with distributions to shareholders by way of dividend, share buy-backs or any other significant distributions or
payments. These figures have been calculated in line with those in the audited Financial Statements.
Total gross employee pay
Distributions to shareholders
% change
3.3%
7.6%
2019/20
£’000
2018/19
£’000
£254.7m
£246.5m
£18.3m
£17.0m
Statement of Shareholder Voting (unaudited)
The table below shows the advisory vote on the 2018/19 Directors’ Remuneration Report at the AGM held on 10 July 2019 and the binding vote
on the Directors’ Remuneration Policy at the AGM held on 19 July 2017:
AGM resolution
Remuneration Policy
Remuneration Report
Votes for
%
Votes against Votes withheld
192,592,197
193,472,429
99.73
99.01
514,821
7,467,112
1,928,292
2,434
Implementation of Policy for 2019/20 (unaudited information)
Base salary
Base salaries will be as follows (unchanged from the prior year):
Director
Michael Topham
Richard Pike
1 April 2020
% Increase
£495,000
£325,000
0%
0%
Any increases to salaries have been suspended and the salaries above are therefore unchanged from the prior year. As disclosed in the
Committee Chair’s letter introducing this report, the Executive Directors along with other members of the management team, have agreed
a 20% reduction in the salary they will be paid from 1 April 2020 as part of the Company’s mitigation against the COVID-19 crisis for the
duration of the period during which the Group is participating in the CJRS.
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Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Benefits in Kind and Pension Provision
Benefits will be paid in line with the Directors’ Remuneration Policy. Details of the benefits received by Executive Directors are set out
in the single figure table on page 81. There is no intention to introduce changes to existing benefits in 2020/21.
Pension provision for Michael Topham and for Richard Pike will remain at 20% and 15% of base salary respectively. Contributions may
be made as cash supplements in full or in part.
Annual Bonus
The Committee had intended to operate the 2020/21 annual bonus in line with previous years. However, as disclosed in the Committee
Chair’s letter introducing this report the scheme is suspended and will be reintroduced at the discretion of the Committee when appropriate.
If the scheme is reintroduced it will continue to be based on a maxima of 130% of salary for the Chief Executive Officer and 110% of salary
for the Chief Financial Officer which will be calculated on a pro-rata basis. 33% of any bonus earned will be deferred into shares for three
years to the extent that the Chief Executive Officer and Chief Financial Officer do not satisfy the Share Ownership Guidelines on the bonus
payment date.
The Committee will consider the appropriate conditions to apply if the scheme is introduced, taking into account the evolving situation
at the time. In determining any payments, the Committee will consider affordability, and supporting disclosures will be made in next
year’s report.
PSP Awards
A PSP award will be made in 2020 to Michael Topham as Chief Executive Officer and Richard Pike as Chief Financial Officer, of shares
worth 150% of salary and 125% of salary respectively.
It is currently envisaged that the performance conditions will be a mix of EPS (50% of award) and relative TSR (50% of award). These are
measures which encourage the generation of sustainable long term returns to shareholders. Due to the current high level of uncertainty
surrounding setting suitably stretching EPS targets, the appropriate range has yet to be finalised but will be confirmed within 6 months
of the date of grant. If it does not prove possible to set a robust EPS range, the weighting of the TSR element will be increased to 100%.
Full details of the targets will be set out in an RNS announcement issued immediately after the PSP award is granted or subsequently
if the targets are determined later.
Biffa’s TSR1 ranking vs the constituents of the FTSE 250 (excluding financial
services companies and investment trusts) (50% of award)
Below Median
Median
Between Median and Upper Quartile
Upper Quartile
Portion of award vesting
0%
25%
Pro-rata on straight-line basis between 25% and 100%
100%
1
TSR (calculated based on Biffa plc share price movements, plus dividends reinvested into Biffa plc shares on the relevant ex-dividend dates, over the performance
period) is measured over the 3-year period from the date of grant.
The 2020 PSP awards will be subject to a 2-year post vesting holding period.
Chairman and Non-Executive Director Fees
Ken Lever is entitled to a fee of £180,000 p.a. as Chairman (with no additional fee payable for chairing the Nomination Committee).
The Non-Executive Directors are entitled to a fee of £50,000 p.a., with an additional fee of £7,000 p.a. for each of the Senior Independent Director,
Chairs of the Audit Committee and Remuneration Committee and to the designated Non-Executive Director for workforce engagement.
Any increases to fees have been suspended and the fees above are therefore unchanged from the prior year. The Chairman and Non-Executive
Directors have also volunteered to a 20% reduction in their fees for the duration of the period during which the Group is participating in the CJRS.
This report was reviewed and approved by the Board on 4 June 2020 and signed on its behalf by order of the Board.
Michael Averill
Chair, Remuneration Committee
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Directors’ Report
This Directors’ Report sets out the information required to be disclosed by the Company in compliance with the Act, the UK Listing Rules and
the Financial Conduct Authority’s Disclosure and Transparency Rules (DTR). It forms part of the management report as required under the
DTR, along with the Strategic Report (pages 1-39) and other sections of this Annual Report and Accounts including the Corporate Governance
Report (pages 40-85) all of which are incorporated by reference, as outlined in the table below.
Information
Acquistions and disposals
Business model
Corporate Governance Framework
Community and charitable giving
Directors’ conflicts of interest
Directors’ share interests and remuneration
Director training and development
Diversity, equality and inclusion
Employee engagement
Employees with diabilities
Financial instruments
Future developments and strategic priorities
Going concern statement
Greenhouse gas emissions
Prinicpal risk and risk management
Modern Slavery Statement
Non-Financial Information Statement
Results
Section 172 Statement
Stakeholder engagement
Statement of Directors Responsibilities
Viability Statement
Reported in
Strategic Report
Strategic Report
Corporate Governance Report
and Statement of Directors’
Responsibilities
Strategic Report
Corporate Governance Report
Directors’ Report on Remuneration
Corporate Governance Report
Strategic Report
Strategic Report
Strategic Report
Financial Statements (Note 19)
Strategic Report
Strategic Report
Strategic Report
Strategic Report
Strategic Report
Strategic Report
Consolidated Income Statement
Strategic Report
Strategic Report
Directors Report
Strategic Report
Pages
13
2-3
45
31
58
81
58
30
29
30
134
12-13
39
26
34-38
31
27
102
5
4-5
89
39
Annual General Meeting
The Company’s AGM will be held at 11:00am on Thursday 16 July 2020 at its offices, Biffa plc, Coronation Road, Cressex, High Wycombe,
Bucks, HP12 3TZ. The Notice of the AGM accompanies the Annual Report and Accounts and is available on the Company’s website at
www.biffa.co.uk/investors.
Articles of Association
The Company’s Articles of Association may only be amended by a special resolution at a general meeting of the shareholders and can
be found on our website www.biffa.co.uk
Branches
The Company does not have any branches outside of the UK.
8484
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Political Donations
No political donations have been made during the financial year.
Post Balance Sheet Events
There have been no material events from 27 March 2020 to the date
of this Report.
Powers for the Company issuing or Buying Back its Shares
The Company was authorised by shareholders at the 2019 AGM
to allot shares up to a nominal amount of £833,333 and to
make market purchases of up to 25,000,000 of its own shares
(representing 10% of the issued share capital).
No shares were allotted or purchased under these authorities
during the year.
Share Capital
The Company’s issued share capital as at the date of this Report
is composed of a single class of 250,000,000 ordinary shares of
1 pence each: each share carries the right to one vote at general
meetings of the Company. The Company may vary the rights
attaching to its shares by special resolution, subject to the Articles
of Association and applicable laws and regulations.
The Articles of Association contain provisions governing the
ownership and transfer of shares. There are no restrictions on the
transfer of shares beyond those required by applicable law under
the Articles of Association or insider trading laws. In accordance
the Company’s share dealing policy, the Directors and certain
employees are required to seek prior approval of the Company
before dealing in its shares.
The Company is not aware of any agreements between
shareholders that may result in restrictions on the transfer
of shares and/or voting rights.
On 4 June 2020, the Biffa plc Share Incentive Plan 2016 held
594,685 shares and the Biffa PSP plan held 2,481,169 shares
in the Employee Benefit Trust. The right to receive any dividend
has been waived by the Trustee of the EBT over the entire holding
of the trust and by Wealth Nominees Limited in respect of all
Biffa plc shares in their custodian account.
Employees who participate in the PSP and SIP and whose shares
remain in the Plan’s trust give directions to the Trustee to vote on
their behalf by way of a Form of Direction.
Change of Control
The Group has in place a £350m multi-currency revolving credit
facility (RCF) with a syndicate of 10 banks which is due to mature
in March 2025. Under the terms of the RCF, if there is a change
of control of the Company then any lender may request that its
commitment be cancelled and all other outstanding amounts
be repaid to that lender. The Company is not aware of any other
significant agreements to which it is party that take effect, alter
or terminate upon a change of control of the Company following
a takeover bid.
There are no agreements between the Company and the Directors
or employees of the Group providing for compensation for loss of
office or employment following a takeover bid.
Charitable Donations
During the year, the Company made a charitable donation of
£100,000 to WasteAid. Further details can be found on page 31.
Company Registration
Biffa plc is a company incorporated in England and Wales with
company number 10336040.
Directors
Details of the Directors who served during the year are set out on
pages 42-43. The Company’s Articles of Association provide that
all Directors will stand for re-election every three years but in
compliance with the Code all Directors at the AGM will retire and
present themselves for re-election to the Board.
The business of the Company is managed by the Board, which
may exercise all the powers of the Company subject to its Articles
of Association and the Companies Act 2006.
Directors’ Indemnities and Insurance
The Company’s Articles of Association provide for the Directors and
officers of the Company to be appropriately indemnified subject to
the provisions of the Companies Act 2006. In addition, the Group
maintains liability insurance for its Directors and officers. Neither
the Company’s indemnity nor insurance covers claims arising from
dishonesty or fraud.
Dividend
The interim dividend of 2.47 pence per share was paid on
20 December 2019. As announced on 25 March 2020, the Directors
are not recommending the payment of a dividend for FY20. For more
information see page 20.
External Auditor
So far as each Director is aware, there is no relevant information of
which the Company’s External Auditor is unaware. Each Director
has taken all steps that ought to have been taken as a Director to
make themselves aware of any relevant audit information and to
establish that Deloitte LLP are aware of that information.
As detailed on page 62, the Audit Committee recommended, and the
Board approved, the proposal that the current Auditor, Deloitte LLP,
be re-appointed as Auditor of the Company at the AGM. Resolutions to
re-appoint Deloitte LLP as the Company’s Auditor until the conclusion
of the AGM in 2021 and to authorise the Directors to determine their
remuneration will be proposed to shareholders at the AGM.
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Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Directors’ Report continued
Substantial Shareholdings
The table below shows the holdings in the Company’s ordinary shares that had been notified to the Company under the Disclosure and
Transparency Rules (DTR 5). The information below was correct at the date of notification. It should be noted that these holdings may have
changed since the Company was notified. However, notification of any change is not required until an applicable threshold is crossed.
Shareholder
As at 27 March 2020
As at 4 June 2020
Direct/Indirect
Number of
shares held
Holding of
issued
share capital
%
Direct/Indirect
Number of
shares held
Holding of
issued
share
capital %
Avenue Europe International Management, L.P
Direct
21,626,174
Global Alpha Capital Management
Indirect
17,914,663
Angelo, Gordon and Co
Indirect
17,907,894
Goldman Sachs International
Indirect
14,299,746
Franklin Templeton Investments
Indirect
13,567,254
Legal and General Investment Management
Indirect
13,409,608
8.65
7.17
7.16
5.72
5.43
5.36
Direct
21,447,472
Indirect
17,914,663
Indirect
17,317,964
Indirect
16,689,258
Indirect
12,748,354
Indirect
13,409,608
8.58
7.17
6.93
6.84
5.09
5.36
On behalf of the Board.
Sarah Parsons
Company Secretary Biffa plc
Registered in England and Wales No. 10336040
8686
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Statement of Directors’ Responsibility under
the Disclosure and Transparency Rules
Each of the Directors, as at the date of this report, confirms
to the best of their knowledge that:
■ the Financial Statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair
view of the assets, liabilities, financial position and profit
of the Group and the Company;
■ the Strategic Report and the Directors’ Report include a fair
review of the development and performance of the business
and the position of the Group and the Company, together
with a description of the principal risks and uncertainties
that they face; and
■ the Annual Report and Financial Statements, taken as a
whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the
Group’s performance, business model and strategy.
This statement was approved by the Board on 4 June 2020.
Ken Lever
Chairman
4 June 2020
Statement of Directors’ Responsibilities
Statement of Directors’ Responsibilities in Respect
of the Annual Report and Accounts
The Directors are responsible for preparing the Annual Report, the
Directors’ Remuneration Report and the Group and Company Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements
for each financial year. Under that law, the Directors are required
to prepare the Group Financial Statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union and Article 4 of the International Accounting
Standards Regulation and have elected to prepare the Company
Financial Statement in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law), including FRS 101 ‘Reduced
Disclosure Framework’.
Under company law, the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and Company and of
their profit or loss for that period. In preparing these Financial
Statements, the Directors are required to:
■ select suitable accounting policies and then apply them consistently;
■ make judgements and estimates that are reasonable and prudent;
■ present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
■ in respect of Group Financial Statements, state whether they have
been prepared in accordance with IFRSs as adopted by the EU;
■ in respect of the Company Financial Statements, state whether
applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in those
statements; and
■ prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Group and the
parent Company will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that its Financial Statements comply with the Companies Act
2006. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Group and
to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
8787
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Independent Auditor’s Report to the members of Biffa plc
Report on the audit of the financial statements
1. Opinion
In our opinion:
■ the financial statements of Biffa plc (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and
fair view of the state of the group’s and of the parent company’s affairs as at 27 March 2020 and of the group’s
profit for the period then ended;
■ the group financial statements have been properly prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union and IFRSs as issued by the International
Accounting Standards Board (IASB);
■ the parent company financial statements have been properly prepared in accordance with IFRSs as adopted
by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
■ the financial statements have been prepared in accordance with the requirements of the Companies Act
2006 and, as regards the group financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements which comprise:
Group:
■ the consolidated income statement;
■ the consolidated statement of other comprehensive income;
■ the consolidated statement of financial position;
■ the consolidated statements of changes in equity;
■ the consolidated statement of cash flows; and
■ the related notes 1 to 39 for the consolidated financial statements;
Parent Company:
■ the parent company statement of financial position;
■ the parent company statement of changes in equity; and
■ the related notes 1 to 9 of the parent company financial statements.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted
by the European Union and as regards the parent company financial statements, as applied in accordance with the
provisions of the Companies Act 2006.
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the
financial statements section of our report.
We are independent of the group and the parent company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’)
Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. The non-audit services provided to the group and parent company for the year
are disclosed in note 8 to the financial statements. We confirm that the non-audit services prohibited by the FRC’s
Ethical Standard were not provided to the group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
8888
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 3. Summary of our audit approach
Key audit matters The key audit matters that we identified in the current year were:
■ Landfill accounting
■ Retirement benefit obligations and pension assets
■ Asset impairment in the Resources and Energy division
■ Onerous contract provisions
■ Capitalisation and classification of costs associated with Project Fusion
■ Impact of COVID 19 on going concern and viability
The last two key audit matters are newly identified key audit matters in the current period. Project Fusion comprises of
the investment within a new ERP system which is entering its most active phases, where judgement is used to capitalise
material costs on a yearly basis.
As a consequence of the COVID-19 outbreak, which has severely affected the UK economy, there are financial reporting
impacts particularly with respect to key judgments, estimates, pension assets, going concern assumption and associated
disclosures within the financial statements. In response to this, we performed an updated audit risk assessment and
identified the impact of COVID-19 on going concern and viability as a key audit matter.
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
Scoping
Significant
changes in
our approach
The materiality that we used for the group financial statements was £4.4 million which was determined on a combined
basis considering revenue, underlying EBITDA and profit before tax, exceptional items and re-measurements (“adjusted
profit before tax”). This equates to 0.4% of group revenue; 2.5% of underlying EBITDA and 6.1% of underlying profit before tax.
We performed full scope audits on 15 legal entities in the United Kingdom and specified audit procedures on one legal
entity located in Gibraltar. All United Kingdom entities are managed from one central location in the UK and all audit
work is completed by the group audit team. These entities account for 98% of the group’s revenue, 96% of profit before
tax and 98% of net assets.
Apart from the changes to key audit matters as explained above there have been no other key changes in our approach.
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Independent Auditor’s Report to the members of Biffa plc continued
4. Conclusions relating to going concern, principal risks and viability statement
4.1. Going concern
We have reviewed the directors’ statement in page 39 to the financial statements about whether they considered
it appropriate to adopt the going concern basis of accounting in preparing them and their identification of any
material uncertainties to the group’s and company’s ability to continue to do so over a period of at least twelve
months from the date of approval of the financial statements.
We considered as part of our risk assessment the nature of the group, its business model and related risks including
where relevant the impact of the COVID-19 pandemic and Brexit, the requirements of the applicable financial
reporting framework and the system of internal control. We evaluated the directors’ assessment of the group’s
ability to continue as a going concern, including challenging the underlying data and key assumptions used
to make the assessment, and evaluated the directors’ plans for future actions in relation to their going concern
assessment; further details are set out in the impact of COVID 19 on going concern and viability key audit matter.
We are required to state whether we have anything material to add or draw attention to in relation to that statement
required by Listing Rule 9.8.6R(3) and report if the statement is materially inconsistent with our knowledge
obtained in the audit.
4.2. Principal risks and viability statement
Based solely on reading the directors’ statements and considering whether they were consistent with the
knowledge we obtained in the course of the audit, including the knowledge obtained in the evaluation of the
directors’ assessment of the group’s and the company’s ability to continue as a going concern, we are required
to state whether we have anything material to add or draw attention to in relation to:
■ the disclosures on pages 34-38 that describe the principal risks, procedures to identify emerging risks,
and an explanation of how these are being managed or mitigated;
■ the directors’ confirmation on page 39 that they have carried out a robust assessment of the principal and
emerging risks facing the group, including those that would threaten its business model, future performance,
solvency or liquidity; or
■ the directors’ explanation on page 39 as to how they have assessed the prospects of the group, over what period,
which for Biffa is 3 years, they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the group will be able to continue in operation
and meet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
We are also required to report whether the directors’ statement relating to the prospects of the group required
by Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
Going concern is the
basis of preparation
of the financial
statements that
assumes an entity will
remain in operation
for a period of at least
12 months from the
date of approval of the
financial statements.
We confirm that we
have nothing material
to report, add or draw
attention to in respect
of these matters.
Refer to this key audit
matter for procedures
performed and key
observations.
Viability means the
ability of the group to
continue over the time
horizon considered
appropriate by the
directors.
We confirm that we
have nothing material
to report, add or draw
attention to in respect
of these matters.
Refer to this key audit
matter for procedures
performed and key
observations.
9090
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team.
Throughout the course of our audit we identify risks of material misstatement (‘risks’). We consider both the likelihood of a risk and the
potential magnitude of a misstatement in making the assessment. The extent of the risk determines the level of evidence we seek in
providing assurance that the associated financial statement item is not materially misstated.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
5.1. Landfill accounting
Key audit matter
description
Account balances: Provisions. Please refer to note 21 to the financial statements. The Audit Committee has included
their assessment of this risk on page 59 and is included within the key sources of estimation uncertainty in Note 1.
For specifics of the group’s accounting policy please see page 117.
As at 27 March 2020 the group holds a landfill restoration and aftercare provision of £56.6 million (29 March 2019: £67.4 million).
The group operates a number of landfill sites in the UK. A significant cost of owning and operating a landfill site in the
UK arises after the land filling operation ceases due to the constructive and legal obligation to restore sites and then to
care for them until it can be demonstrated that they present no ongoing risk to the environment. The liabilities extend
until the waste is considered to be inert, which is generally assumed to be up to 60 years following closure of the site.
The group makes the provision, within the financial statements, for such long-term obligations through its provisions for
restoration. The level of costs expected are uncertain and can vary significantly from site to site. Biffa uses internal and
external experts to help determine the total expenditure required to remediate sites.
As these provisions arise in connection with an asset, under IAS 16 “Property, Plant and Equipment” the costs are
capitalised and depreciated over the remaining life of the associated asset.
The key audit matter arises from a number of estimation uncertainties which exist in relation to the level of the provision
and depreciation required. These include the appropriateness of the total cost and void data as well as the accuracy of
the underlying calculations with the key variables being gross cost assumptions, void assumptions and the discount rate
applied to the forecast cashflow.
As part of our assessment of risk of material misstatements due to fraud, we evaluated which of the judgements and
assumptions in landfill provision might give rise to potential fraud risks. We have focused our audit procedures to detect
the inflation of performance through the manipulation of the provision.
Our audit response focused on verifying and challenging the underlying data and key assumptions used by management
in calculating the restoration and aftercare provisions.
As part of the audit we obtained and inspected the experts’ reports for consistency with publicly available information
and their reflection in the forecasts prepared. We have also assessed the competence, objectivity and independence of
the internal and external experts.
We performed procedures to understand the adequacy of the design, implementation and tested the operating
effectiveness of controls in place over the completeness and accuracy of accounting for landfill provisions.
We assessed and challenged the assumptions and judgements in management’s calculations with reference to market
and historical data, this included discount rates applied in the forecast cash flows. We independently calculated an
appropriate discount rate range and used this to assess management’s rate. We performed a sensitivity analysis of the
environmental provision utilising our independently calculated range. We also tested the mathematical accuracy of the
calculations prepared including the reversal or utilisation of provisions in the current period.
Furthermore we performed an assessment of the reasonableness of the forecast earnings, that underpin the cash flows
used in the calculation of the provision, for a sample of sites with comparison to historical financial information and
agreement to budget; tested landfill related provisions through analytical reviews; and re-performed the arithmetical
accuracy of the cost of the provision.
How the scope
of our audit
responded to the
key audit matter
Key observations Whilst we considered management’s assumptions to lie towards the optimistic end of the reasonable range, based on the
work performed as outlined above we conclude the assumptions to be appropriate and concur with management that the
level of landfill provision is adequate.
We are satisfied with the group’s related disclosures of environmental provisions in light of the underlying assumptions
and accounting judgments made.
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Independent Auditor’s Report to the members of Biffa plc continued
5.2. Retirement benefit obligations and pension assets
Key audit matter
description
Account balance: Pensions and other post-retirement benefit obligations and associated assets. Refer to note 29
to the financial statements. The Audit Committee has included their assessment of this risk on page 59 and
is included within the key sources of estimation uncertainty in Note 1. For specifics of the group’s accounting
policy please see page 117.
How the scope
of our audit
responded to the
key audit matter
The group operates several defined benefit pension schemes which are accounted for under IAS 19 (“Employment
Benefits”). At 27 March 2020, the group have recognised a net defined benefit surplus arising from the defined benefit
schemes of £116.7 million (29 March 2019: £79.0 million). Included within this figure is a gross defined benefit obligation of
£485.9 million (2019: £523.8 million), which comprised of valuations of property and alternative investments which as at
27 March 2020 make up £80.9 million (2019: £92.8 million) out of scheme assets of £599.3 million (2019: £587.6 million).
Pension accounting is a specialist area requiring the exercise of significant management judgement and the use of
technical expertise to determine the surplus or deficit of the scheme in accordance with generally accepted actuarial
practices. The assumptions used in valuing the defined benefit pension liabilities including the discount rate, yield
curves, mortality assumption, inflation level, pension increase and measures of longevity are complex and changes to
the assumptions can have a material impact on the value of pension liabilities.
The COVID-19 pandemic has resulted in the valuation of certain property assets being subject to increased uncertainty.
In addition the valuation of certain alternative investments including those held in private equity portfolios are subject to
an unusually high level of uncertainty due to the most recent valuations on them being performed prior to the significant
economic impacts of the COVID-19 pandemic. Management obtained updated valuations of these assets at the balance
sheet date and provided relevant disclosures regarding the material uncertainty inherent in the valuation in note 29 of
the financial statements.
Management also determined to account for certain local government pension schemes previously accounted for as
defined contribution schemes on the basis of materiality as defined benefit schemes in the current year. This is a key
audit matter which requires significant judgement to determine the correct accounting treatment of these schemes
and associated reimbursable assets.
We performed walk through procedures to evaluate the adequacy of the design and implementation controls in place
over the accounting of retirement benefit obligation.
We tested the significant judgements made by third party actuaries and assessed their competence and independence.
We also involved our internal actuarial experts to assess the key assumptions applied in determining the pension
obligation for the schemes, and determined whether the key assumptions are reasonable. The assessment included
reviewing and challenging available yield curves, discount rate, inflation and mortality data to recalculate a reasonable
benchmark for the key assumptions. We challenged management to understand the sensitivity of changes in key
assumptions and quantified the impact of illustrative benchmark rates that could be used in their calculations.
Additionally we considered the independence, objectivity and competence of the independent actuaries engaged by
management to perform valuations of the relevant schemes. We also tested a sample of the data used in the actuarial
valuation, as well as assessed the basis on which pension surpluses were recognised. The latter involved agreeing
related terms to the deeds of the relevant group pension scheme.
We also engaged internal specialists to challenge management’s valuation of scheme assets, in particular the property
and certain alternative investments assets. Our work has included assessing the reasonableness of the valuation
methodologies applied, reviewing publically available information on these assets, comparing the valuations to
internal benchmarks and confirmation of inputs used by management to determine the asset values. In response to
the ‘material valuation uncertainty’ in investment properties as a result of COVID-19, we also assessed how it impacts
upon sensitivities of future sources of estimation uncertainty. We reviewed the appropriateness of new key estimates
disclosures in note 1 and the associated sensitivity analysis in note 29.
With regards to the inclusion of the local government pension scheme and associated reimbursable assets, we assessed
the appropriateness of the accounting treatment with comparison to others within the industry, and through consultation
with internal specialists. We also evaluated the valuation of the reimbursable asset with consultation with internal
specialists, and reviewed the terms of the contract to assess whether the calculations were appropriate.
Key observations Based on the work performed as outlined above, we are satisfied that the methodologies and other key actuarial
assumptions applied in relation to determining the pension valuation, when taken in aggregate, fall within our
internally developed reasonable range.
Whilst we note increased estimation uncertainty in relation to property investments as a result of Covid-19,
we considered the disclosures in notes 1 and note 29 to be reasonable.
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5.3. Asset impairment in the Resources and Energy division
Key audit matter
description
Account balance: £1,046.8 million. Refer to note 12 to the financial statements. The Audit Committee has included
their assessment of this risk on page 59 and is included within the key sources of estimation uncertainty in Note 1.
For specifics of the group’s accounting policy please see page 117.
How the scope
of our audit
responded to the
key audit matter
As at 27 March 2020 the group held non-current assets of £1,046.8 million (29 March 2019: £856.6 million) which could be
at risk of impairment, including a goodwill balance of £132.2 million (2019: £128.2 million) arising as a result of the previous
group restructurings and acquisitions. The group carries different classes of intangible assets including, gas reserves,
brand name and customer contracts. Additionally, the group has classes of tangible assets. The carrying value of these is
dependent on future cash flows and if these cash flows do not meet the group’s expectations there is risk that the assets will
be impaired. The impairment reviews performed by the group contain a number of significant estimates including energy
prices, gate fees, forecast tonnage prices, gas yield projections, long-term growth and discount rates. Management relies on
a number of third party experts to value a number of these key estimates.
Changes in these assumptions can have a significant impact on the headroom available in the impairment calculations.
In the current period, two generating units within the Resources and Energy divisions were identified to have low levels of
headroom and high sensitivity to key inputs. The group has incorporated a COVID-19 risk adjustment across both divisions
to reflect the associated risks in the group’s modelling based on reasonable and supportable information available to
management at year end.
We held discussions with management to understand the process that the group followed in its asset impairment
assessment. Following these discussions we assessed the design and implementation of the controls that management
operates over the process.
We reviewed the forecast reports provided by management’s experts for consistency with other third party experts,
publicly available information and the reflection in the cashflow forecasts. We assessed the independence, objectivity,
and competency of the internal and external experts used.
We evaluated the accuracy of future cash flow forecasts with reference to recent performance, trend analysis and an
assessment of historical forecasting accuracy of their forecasts against actual outturn that underpin the cash flows
used in the assessment.
Having ascertained the extent of change in those assumptions that either were individually or collectively would
be required for the goodwill and intangible assets to be impaired, we considered the likelihood of such movements
in those key assumptions arising.
We involved our internal valuation specialists to determine an acceptable range of discount rates utilising market
comparable information and compared the rate calculated by management. We challenged management on their long
term growth rates and compared them to those used by comparable competitors. We assessed whether they fell within
a reasonable range of external market data. Where they did not, we applied our independent view of a more appropriate
rate to management’s forecast. We also tested the mathematical accuracy of the calculation as performed.
We validated the integrity of management’s impairment model through testing the mechanical accuracy and verifying
the application of the input assumptions. We also evaluated the process management undertook to prepare the cash
flow forecasts in its impairment model including agreement with the latest Board approved plans and management
approved forecasts.
We considered reasonable possible changes in assumptions to challenge the appropriateness of management’s
assessment of reasonable possible change scenarios. Our challenge was informed by input from certain of our
internal valuation specialists, utilising their knowledge and expertise.
Key observations Whilst we considered management’s assumptions to lie towards the optimistic end of the reasonable range, based on
the work performed as outlined above we conclude the assumptions to be appropriate and concur with management
that the key estimates are materially accurate.
We are satisfied that the disclosures in notes 13 and 14 appropriately highlighted the reasonable possible changes in
key assumptions to the recoverable amounts of the cash generating units within the Resource and Energy divisions.
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5.4. Onerous contract provisions
Key audit matter
description
Account balances: Provisions. Please refer to note 21 to the financial statements. The Audit Committee has included
their assessment of this risk on page 59 and is included within the key sources of estimation uncertainty in Note 1.
For specifics of the group’s accounting policy please see page 117.
Certain of the group’s contracts are onerous and long-term in nature. These contracts can be complex and contain key
performance indicator clauses where penalties may be incurred in the event of non-compliance. The group is therefore
required to make operational and financial assumptions to estimate future losses over periods that can extend beyond
seven years. In the period ending 27 March 2020, the provision against onerous contracts reduced to £15.4 million (2019:
£17.1 million).
Variability of contract penalties, underlying delivery costs, commodity prices applied and customer claims or disputes
can put additional pressure on margins and on future contract profitability, giving rise to onerous contract provisions.
The prediction of future events over extended periods contains inherent risk and the outcome of customer and sub-
contractor claims is uncertain and involves a high degree of management estimation.
Due to the size and nature of the onerous provision and management’s judgements and estimates used in forecasting
future financial performance, we have determined this is a key audit matter. The key sources of estimation uncertainty
are in relation to the Retail Price Index (RPI), commodity process applied and unavoidable costs under the contracts.
How the scope
of our audit
responded to the
key audit matter
We performed procedures to assess the design and implementation of controls in place to identify contracts which may
be onerous, and to determine whether the potential liability is appropriately accounted and disclosed in the group’s
financial statements. We performed analytics on contract margins to identify unusual or unexpected trends and to
assess whether management’s process had identified all onerous and problematic contracts.
For the identified onerous contracts, we obtained and read the key contractual terms to evaluate whether revenue was
recognised in accordance with these terms and whether it is supported by evidence of service delivery. We read and
understood the contract penalty clauses and evaluated the completeness of penalties through discussions with contract
managers and reading minutes of meetings.
We assessed each of the key assumptions underpinning management’s forecasts to quantify onerous contract provisions
and independently sensitised management’s model. We evaluated the accuracy of future forecasted cash flow forecasts
with reference to recent performance, trend analysis, an assessment of historical forecasting accuracy and operational
improvements against the contracts.
Additionally, we assessed the forecast assumptions used by management around RPI, commodity values against external
market data and other rates in the model checked against underlying signed contracts and agreements. We also tested the
appropriateness of the discount rate used to present value the obligation, evaluating whether the rates used appropriately
reflect the risk in the underlying cash flows.
We reviewed the models created by management for arithmetical accuracy and the approach taken in relation to the
recent IAS 37 “Provisions, Contingent Liabilities, and Contingent Assets” amendments published by the Financial
Reporting Council (“FRC”) in May 2020.
Key observations We considered the level of provisioning to be acceptable and in accordance with IAS 37 “Provisions, Contingent Liabilities,
and Contingent Assets. We are satisfied with the group’s related disclosures of these onerous contracts in light of the
underlying assumptions and accounting judgments made.
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Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020
5.5. Capitalisation and classification of costs associated with Project Fusion
Key audit matter
description
Account balances: Intangible assets. Please refer to note 13 to the financial statements. The Audit Committee has
included their assessment of this risk on page 59 and is included within the key sources of estimation uncertainty
in Note 1. For specifics of the group’s accounting policy please see page 117.
In the year ended 27 March 2020 management hold a net book value of £14.1 million of intangible assets in relation
to costs capitalised under the IT infrastructure modernisation Project Fusion. Amounts capitalised included internal
development costs of £15.9 million (2019: £17.4 million).
We identified this as a key audit matter due to the significant amounts invested and the level of judgement involved,
for example in considering whether internal costs should be capitalised, existing assets being potentially impaired
(due to technology being superseded) and also the appropriateness of the useful economic life assigned to project
assets. As assessment of useful life or potential impairment of assets requires considerable judgement including
the proposed benefits and has an impact on the amounts recorded as an expense in the Income Statement, there
is a potential risk of misstatement due to fraud or error.
In the current year our audit procedures also considered the risk of impairment in the context of significant sums
being invested, the change in the systems integrator resetting projected costs and the fast pace of development. New
technology could supersede previously capitalised costs or inappropriate amortisation rates could be used. Given
the current year developments, we challenged management’s assessment of the impact of COVID-19 on the control
environment and cash flow forecasts.
How the scope
of our audit
responded to the
key audit matter
We held discussions with management to understand the process that the group followed in the recognition of costs
associated with Project Fusion and their process for assessing impairment, for example a half-yearly review of project
status involving project managers and finance. Following these discussions we assessed the design and implementation
of the controls that management operates over the process.
We compared a sample of costs capitalised to external invoices or timesheets, where appropriate, to assess whether
costs have been appropriately capitalised, by reference to the recognition criteria of the applicable accounting standards,
including challenging the group’s assessment of the technical feasibility of the related assets.
We also met with project managers responsible to inform our assessment of the feasibility and economic benefits of
the projects, and to identify any indicators of impairment. We assessed the reasonableness of the assumptions used in
management’s impairment review, including corroborating key inputs such as forecast costs and benefits, to internal
performance reporting and knowledge gained performing our other audit procedures. Specifically in relation to recoverability,
we challenged the group’s assessment of which assets represent inefficient spend and should therefore be discontinued.
Key observations We consider the capitalisation and classification of Project Fusion related costs to be appropriate and fairly disclosed
in the financial statements.
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5.6. Impact of COVID 19 on going concern and viability
Key audit matter
description
The COVID-19 pandemic has had a significant impact on the UK economy with consequences to the judgements and
estimates made by the group, principally in relation to the valuation of certain pension assets. Refer to the going
concern assumption in note 1 to the financial statements and the Audit Committee’s discussion on page 59.
How the scope
of our audit
responded to the
key audit matter
From February 2020 the scale and impact of the COVID-19 pandemic on the global economy and markets in which the
group operates has increased significantly. This has impacted the results of the group for the 2020 financial year to date
and is expected to continue to impact the group for the remainder of 2020, albeit the severity of the impact is expected
to reduce over time.
A risk was also identified in relation to the impact of the pandemic on the group’s cash flows and liquidity and accordingly
its ability to continue as a going concern. In order to conclude that it is appropriate for the financial statements to be drawn
up on a going concern basis and on the viability of the Group, management have performed a detailed bottom-up analysis
of the impact of COVID-19 on revenue, profit and cashflows including cost measures given the period of uncertainty.
In response Management has assessed the completeness of accounting considerations across the group and determined
that the primary risks that arose from the COVID-19 pandemic related to the valuation of unquoted pension assets,
particularly certain assets in the property and alternative investment portfolios which are subject to increased valuation
uncertainties. The key judgements related to the valuation of certain unquoted pension assets are discussed in the
‘retirement benefit obligations’ key audit matter.
In doing so, management have made estimates and judgements that are critical to the outcome of these considerations,
such as the speed of macroeconomic recovery and the quantum and timing of collected tonnages over the next twelve
months. This analysis has been used in conjunction with an assessment of the group’s liquidity and consideration of loan
covenants. Management have a reasonable expectation that the group has adequate resources to continue in operational
existence for the foreseeable future and have therefore adopted the going concern basis of accounting in preparing the
financial statements.
We held discussions with management to understand the process that the group has followed in respect of the going
concern and viability assessment. Following these discussions we assessed the design and implementation of the
controls that management operates in the process.
We assessed both the baseline going concern model prepared by management, and the COVID-19 overlay adjustments,
which have been used to sensitise the base case model.
In relation to the baseline model, we agreed the key inputs including EBITDA and net debt values back to board approved
budgets. In addition, we considered the historical accuracy of the budgeting process to assess the reliability of the data.
Specifically, in relation to the COVID-19 overlay, we obtained management’s COVID-19 analysis and challenged the
underlying assumptions used with group management. This included consideration of the quantum and timing of
cash flows and assessing long-term growth assumptions against Bank of England and OBR projections. Further this
involved an understanding of the mitigating cost actions being taken, including those involving local government
assistance. We challenged a these assumptions based on our understanding of the business and our knowledge of
the industry sectors in which the group operates.
In conjunction with the above we reviewed management’s analysis of both liquidity and loan covenant compliance
to assess whether any breaches are anticipated over the period of assessment. As the results for April and May 2020
have become available, we have updated our analysis to reflect the most recent data. From this, we have rebased our
reasonable worst case to build upon current levels of cash and drawdowns on the current facilities in place. We have
focused on the working capital cash flow and assessed the actual movements.
In relation to covenant compliance we assessed the stress testing performed on management’s adjusted baseline
model and considered to what extent sufficient headroom exists to absorb any further downside risk in relation to
both EBITDA and net debt. We have performed further analysis on the levels of overdue debt held by the Group and
the plans in place with key customers to assess the recoverability of debtor balances and the impacts to forecasted
cash flows. We also reviewed the appropriateness and feasibility of management’s mitigations in the case of a
reasonable worst case scenario in order to meet covenant compliance.
Lastly, we reviewed the adequacy of the group’s disclosures in relation to the impact of COVID-19 on going concern
and appropriateness of the sensitivity analysis presented in the notes of the financial statements.
Key observations Our conclusion on the valuation of certain pension assets is set out in our ‘net pension obligation’ key audit matter.
Our conclusion on going concern is set out in the ‘Conclusions relating to going concern, principal risks and viability
statement’ section of this report. We are satisfied that appropriate disclosures are provided in the Annual Report and
the notes of the financial statements.
We concluded that management’s disclosures included in note 1 to the accounts in respect of the key judgements and
areas of estimation uncertainty are appropriate.
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Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions
of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work
and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Materiality
£4.4 million (2019: £4.0m)
Parent company financial statements
£1.8 million (2019: £1.7m)
Basis for
determining
materiality
Materiality has been determined with reference to revenue, underlying
EBITDA and profit before tax, exceptional items and re-measurements
(“adjusted profit before tax”). The materiality determined of £4.4 million
equates to 0.4% (2019: 0.3%) of revenue.
The Company materiality was determined
on the basis of net assets and equates to 0.6%
(2019: 0.6%) of the Company’s net assets.
Rationale for
the benchmark
applied
In making this determination, we calculated an adjusted profit before
tax as follows:
■ taking the statutory profit before tax;
■ adding back items classed as exceptional in note 3; and
■ adjusting the effect of the change in discount rate on aftercare
provisions, so that its impact on adjusted profit represents a five
year normalised average figure.
The business is currently highly acquisitive, and therefore profit before
tax is very low in the overall context of the balances within the financial
statements. We believe that using a materiality based on these benchmarks
reflects critical underlying measures of the group which is given substantial
prominence throughout the annual report and reflects the key metrics
used by analysts in their reports and communications to shareholders
and investors, as well as the communications of peer companies.
In calculating an adjusted profit before tax figure, we removed exceptional
items as these are not reflective of the underlying performance of the
Group. We consider that the impact of the change in discount rate on the
aftercare provision is a recurring item and have therefore included it in our
calculation; however, because of its volatility, we have taken an average
over five years. We consider this measure suitable having considered
also other benchmarks: our materiality equates to 2.7% (2019: 2.7%) of
Underlying EBITDA, 1.1% (2019: 1.1%) of Net Assets, 8.8% (2019: 8.8%) of
operating profit; and 0.5% (2019: 0.5%) of revenue.
Adjusted PBT
£71.7m
Revenue
Group materiality
As the Company is non-trading and operates
primarily as a holding company for the
group’s trading entities, we believe that the
net asset position is the most appropriate
benchmark to use. The entity is not in itself
profit-oriented. The strength of the balance
sheet is the key measure of financial health
that is important to shareholders since the
primary concern of the parent company is the
payment of dividends and servicing of debt.
Group materiality
£4.4m
Component materiality
range of £3.5m to £1.50m
Audit Committee
reporting threshold £0.22m
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6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a whole. Group performance materiality was set at 60% of group
materiality for the year ended 27 March 2020 (2019: 70%). In determining performance materiality, we considered our cumulative
experience from prior year audits, our risk assessment, including our understanding of the entity and its environment, the quality
of the control environment and the history of uncorrected misstatements in previous years.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.22 million (2019: £0.20 million),
as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee
on disclosure matters that we identified when assessing the overall presentation of the financial statements.
7. An overview of the scope of our audit
7.1. Identification and scoping of components
Biffa primarily operates in the United Kingdom; the group has two active overseas entities based in Gibraltar that provide insurance services
to the group. In the prior year this component was based in Malta, however in response to Brexit the group decided to move the company to
Gibraltar. However our audit approach has not changed in this respect.
We consider the statutory reporting structure to reflect the components of the group as this is how management monitor and control the
business. The materiality and scope of work for each entity has been assessed based upon its significance and contributions to the group. Audit
procedures are then performed based upon the level of scope identified.
Based on this assessment, we performed full scope audits on 15 (2019: 15) legal entities and specified audit procedures on one (2019: one) legal
entity located in the United Kingdom and Gibraltar. All United Kingdom entities are managed from one central location in the UK and all audit
work is completed by the group audit team. The full scope and specified audit procedures entities account for 99% (2019: 98%) of the group’s
revenue, 98% (2019: 98%) of profit before taxation and 99% (2019: 98%) of net assets.
In addition to the work performed at a component level the group audit team also performs audit procedures on the parent company financial
statements including but not limited to corporate activities such as treasury and pensions as well as on the consolidated financial statements
themselves, including entity level controls, litigation provisions, the consolidation, financial statement disclosures and risk assessment work
on components not included elsewhere in the scope of our audit. In addition we carried out review procedures to confirm our conclusion that
there were no significant risks of material misstatement of the aggregated financial information of the remaining components not subject to a
full scope audit or specified audit procedures.
Full audit scope
Specified audit procedures
Review at group level
98%
0%
2%
Full audit scope
Specified audit procedures
Review at group level
96%
2%
2%
Full audit scope
Specified audit procedures
Review at group level
97%
1%
2%
7.2. Our consideration of the control environment
We have taken a controls reliance approach on landfill accounting, revenue recognition, fixed assets and financial reporting by testing
whether key controls on these areas were operating effectively during the period. We have not taken a controls reliance approach over a
number of other areas: asset impairment, onerous contracts, Project Fusion, retirement benefit obligations, expenditure and payroll. The
control improvements that are identified in relation to these areas are reported to management and the Audit Committee as appropriate.
Management determines their response to these observations and continues to monitor their resolution with reporting to and oversight
from the Audit Committee. In the current year, we have highlighted the potential to enhance the formality of the control and process
documentation including evidencing their operation. We have taken a substantive audit approach on all other areas not mentioned above.
7.3. Working with other auditors
A senior member of the group audit team oversaw the Deloitte component team’s work on the Gibraltar entity. We included them in our team
briefings, discussed the risk assessment, attended the closing meeting and reviewed their audit working papers. In response to the COVID-19
pandemic and restrictions on in person meetings after the year-end, frequent calls were held between the group and the component team
and remote access to relevant documents was provided.
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Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 8. Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected material misstatements of the other information
include where we conclude that:
■ Fair, balanced and understandable – the statement given by the directors that they consider the annual report and financial statements
taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the group’s
position and performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
■ Audit committee reporting – the section describing the work of the audit committee does not appropriately address matters
communicated by us to the audit committee; or
■ Directors’ statement of compliance with the UK Corporate Governance Code – the parts of the directors’ statement required under the
Listing Rules relating to the company’s compliance with the UK Corporate Governance Code containing provisions specified for review by
the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate
Governance Code.
■
We have nothing to report in respect of these matters.
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to continue
as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud and non-compliance with laws
and regulations are set out below.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
9999
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Independent Auditor’s Report to the members of Biffa plc continued
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and then design
and perform audit procedures responsive to those risks, including obtaining audit evidence that is sufficient and appropriate to provide
a basis for our opinion.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
■ the nature of the industry and sector, control environment and business performance including the design of the group’s remuneration
policies, key drivers for directors’ remuneration, bonus levels and performance targets;
■ results of our enquiries of management, internal audit, and the Audit Committee about their own identification and assessment of the
risks of irregularities;
■ any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
■ the matters discussed among the audit engagement team, including significant component teams, and involving relevant internal
specialists, including tax, valuations, pensions, IT, and industry specialists regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud.
A a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified
the greatest potential for fraud in the following areas: landfill accounting, impairment of assets in the Resource and Energy divisions, provision
for onerous contracts and the capitalisation and classification of costs associated with Project Fusion. In common with all audits under ISAs
(UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions of those laws and
regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and
regulations we considered in this context included the UK Companies Act, Listing Rules, pensions legislation and tax legislation in all relevant
juristictions where the Group operates.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance
with which may be fundamental to the group’s ability to operate or to avoid a material penalty.
11.2. Audit response to risks identified
As a result of performing the above, we identified landfill accounting, impairment of assets in the Resource and Energy divisions, provision
for onerous contracts and the capitalisation and classification of costs associated with Project Fusion as key audit matters related to
the potential risk of fraud. The key audit matters section of our report explains the matters in more detail and also describes the specific
procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
■ reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant
laws and regulations described as having a direct effect on the financial statements;
■ enquiring of management, the Audit Committee and in-house legal counsel concerning actual and potential litigation and claims;
■ performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement
due to fraud;
■ reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing correspondence with
HMRC; and
■ in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating
the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including
internal specialists and significant component audit teams, and remained alert to any indications of fraud or non-compliance with laws
and regulations throughout the audit.
100100
Biffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
■ the information given in the strategic report and the directors’ report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
■ the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course
of the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
13. Matters on which we are required to report by exception
13.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
■ we have not received all the information and explanations we require for our audit; or
■ adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from
branches not visited by us; or
■ the parent company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
13.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not been
made or the part of the directors’ remuneration report to be audited is not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14. Other matters
14.1. Auditor tenure
Following the recommendation of the audit committee, we were appointed by the Board on 23 August 2016 to audit the financial statements
for the period ending 24 March 2017 and subsequent financial periods. The period of total uninterrupted engagement including previous
renewals and reappointments of the firm is 4 years, covering the periods ending 24 March 2017 to 27 March 2020.
14.2. Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISAs (UK).
15. Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Makhan Chahal ACA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
9 June 2020
101101
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020Biffa Annual Report and Accounts 2020 Consolidated Income Statement
Notes
2
Revenue
Cost of sales
Gross profit
Operating costs
Expected credit loss recognised
16
Operating profit
Finance income
Finance charges
Share of results in joint venture
Profit/(loss) before taxation
Taxation
Profit/(loss) for the period
Profit/(loss) attributable
to shareholders of the
parent Company
Basic earnings/(loss)
per share (pence)
Diluted earnings/(loss)
per share (pence)
4
4
6
9
10
10
52 weeks ended 27 March 2020
52 weeks ended 29 March 2019
Underlying
activities
£m
Other items
£m
(Note 3)
Total
£m
Underlying
activities
£m
Other items
£m
(Note 3)
1,163.1
(1,012.7)
150.4
(57.7)
(2.2)
90.5
2.3
(21.0)
(0.1)
71.7
(14.3)
57.4
57.4
23.1
22.5
–
1,163.1
(11.6)
(11.6)
(4.8)
–
(16.4)
1.1
–
–
(15.3)
3.5
(11.8)
(11.8)
(4.8)
(4.6)
(1,024.3)
138.8
(62.5)
(2.2)
74.1
3.4
(21.0)
(0.1)
56.4
(10.8)
45.6
45.6
18.3
17.9
1,091.2
(959.0)
132.2
(50.1)
(0.4)
81.7
1.5
(19.2)
–
64.0
(12.5)
51.5
51.5
20.6
19.9
Total
£m
1,091.2
(993.5)
97.7
(51.9)
(0.4)
45.4
1.5
(25.4)
–
21.5
(3.5)
18.0
–
(34.5)
(34,5)
(1.8)
–
(36.3)
–
(6.2)
–
(42.5)
9.0
(33.5)
(33.5)
18.0
(13.4)
(13.0)
7.2
6.9
Other items includes exceptional items, the impact of real discount rate changes to landfill provisions and amortisation of acquisition intangibles.
Consolidated Statement of Other Comprehensive Income
Profit for the period
Other comprehensive income/(loss)
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit pension scheme
Share of other comprehensive income of joint ventures
Tax relating to items that will not be reclassified subsequently to profit or loss
Items that may be reclassified subsequently to profit or loss:
Net loss on cash flow hedge
Net loss on cash flow hedge in joint venture
Other comprehensive income for the period, net of income tax
Total comprehensive income for the period
Attributable to shareholders of the parent Company
52 weeks ended
27 March 2020
£m
52 weeks ended
29 March 2019
£m
Notes
45.6
18.0
29
9
40.9
27.3
(8.3)
32.6
(0.6)
(1.8)
30.2
75.8
75.8
(4.9)
22.4
(0.4)
–
22.0
40.0
40.0
102
Biffa Annual Report and Accounts 2020 Consolidated Statement of Financial Position
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment in joint venture
Long-term receivables
Deferred tax assets
Retirement benefit surplus
Current assets
Inventories
Trade and other receivables
Contract assets
Financial assets
Current tax assets
Cash and cash equivalents
Assets held for sale
Current liabilities
Borrowings
Derivative financial instruments
Trade and other payables
Contract liabilities
Provisions
Total current liabilities
Net current liabilities
Non-current liabilities
Borrowings
Trade and other payables
Provisions
Deferred tax liability
Total non-current liabilities
Net assets
Equity
Called up share capital
Share premium
Hedging reserves
Merger reserve
Retained earnings
Total equity attributable to shareholders
As at
27 March 2020
£m
As at
29 March 2019
£m
Notes
12
13
14
33
16
22
29
15
16
37
19
17
18
19
19
20
37
21
19
20
21
22
24
24
24
25
132.2
197.0
527.7
3.0
68.2
–
124.7
1,052.8
16.1
165.3
56.2
6.7
–
87.8
0.1
332.2
(43.6)
(1.2)
(274.2)
(17.8)
(10.2)
(347.0)
(14.8)
(511.0)
(13.6)
(85.1)
(17.3)
(627.0)
411.0
2.5
235.3
(2.8)
74.4
101.6
411.0
128.2
213.0
365.4
–
68.9
2.1
79.0
856.6
14.4
142.0
54.2
15.7
0.5
66.2
0.1
293.1
(31.7)
(0.7)
(232.0)
(17.6)
(16.0)
(298.0)
(4.9)
(387.5)
(13.7)
(90.3)
–
(491.5)
360.2
2.5
235.3
(0.4)
74.4
48.4
360.2
The Financial Statements were approved by the Board of Directors and authorised for issue on 9 June 2020. They were signed on its behalf by:
Richard Pike
Director
Company no: 10336040
103
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Consolidated Statement of Changes in Equity
Called up
share capital
£m
Share
premium
£m
Notes
2.5
235.3
Merger
reserve
£m
74.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2.5
235.3
74.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
23
23
Hedging
and other
reserves
£m
Retained
earnings
£m
–
–
(0.4)
(0.4)
–
–
(0.4)
–
(2.4)
(2.4)
–
–
–
22.8
18.0
22.4
40.4
2.2
(17.0)
48.4
45.6
32.6
78.2
(9.1)
2.4
(18.3)
101.6
Total
equity
£m
335.0
18.0
22.0
40.0
2.2
(17.0)
360.2
45.6
30.2
75.8
(9.1)
2.4
(18.3)
411.0
2.5
235.3
74.4
(2.8)
As at 30 March 2018
Profit for the period
Other comprehensive (loss)/income
Total comprehensive (loss)/income
Value of employee service in respect
of share option schemes (net of tax)
Dividends paid
As at 29 March 2019
Profit for the period
Other comprehensive (loss)/income
Total comprehensive (loss)/income
Share purchased by employee benefits trust
Value of employee service in respect
of share option schemes (net of tax)
Dividends paid
As at 27 March 2020
104
Biffa Annual Report and Accounts 2020 Consolidated Statement of Cash Flows
Cash flows from operating activities
Cash generated from operations
Restructuring and exceptional costs
Receipt of funds held on long-term deposit
Net cash from operating activities
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Purchases of intangible assets
Compensation
Purchase of business, net of cash acquired
Investment in joint venture
Proceeds from the sale of property, plant and equipment
Loan to joint venture
Interest received
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Employee share scheme purchase
Drawdown of borrowings
Fees payable on 1 year extention to RCF
Lease liabilities principal payments
Dividends paid
Net cash flow used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
52 weeks ended
27 March 2020
£m
Notes
52 weeks ended
29 March 2019
Restated
£m
26
11
27
27
17
193.8
(14.0)
–
179.8
(0.2)
179.6
(56.8)
(3.8)
4.4
(5.1)
(5.0)
1.6
(2.4)
0.3
133.0
(4.5)
6.1
134.6
(0.2)
134.4
(42.4)
(3.7)
–
(41.5)
–
0.9
–
0.3
(66.8)
(86.4)
(17.2)
(6.0)
1.0
(0.5)
(50.2)
(18.3)
(91.2)
21.6
66.2
87.8
(16.3)
(1.4)
45.1
–
(33.0)
(17.0)
(22.6)
25.4
40.8
66.2
105
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Notes to the Consolidated Financial Statements
1. Accounting Policies
Basis of preparation
The consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and
related interpretations as issued by the IASB and IFRS adopted by the European Union (EU) and therefore comply with Article 4 of the EU IAS
regulations and the parts of the Companies Act 2006 applicable to entities reporting under IFRS. The comparative financial information has
also been prepared on this basis.
The Consolidated Financial Statements have been prepared on a historical cost basis, except for the recording of pensions assets and
liabilities and the revaluation of certain derivative financial liabilities instruments.
The Financial Statements for 2020 have been prepared for the 52-week period ended 27 March 2020. The prior year was a 52-week period, to
29 March 2019. The upcoming year will also be a 52-week period, to 26 March 2021. The Notes to the accounts refer to 2020 and 2019 meaning
52-week period ended 27 March 2020 and 52-week period ended 29 March 2019 respectively.
The preparation of Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the consolidated Financial Statements are disclosed
on page 117.
The Group’s income statement and segmental analysis separately identify financial results before exceptional and other items. The Directors
believe that the presentation of the results in this way is relevant to an understanding of the Group’s financial performance. Presenting
financial results before exceptional and other items is consistent with the way that the financial performance is measured by management
and reported to the Board and aids the comparability of reported results from year to year in this context. The Group’s income statement and
segmental analysis separately identify a number of Alternative Performance Measures (APMs) in addition to those reported under IFRS. The
Directors believe that the presentation of the results in this way, which is not meant to be a substitute for or superior to IFRS measures, is
relevant to an understanding of the Group’s underlying trends, financial performance and position. These APMs are also used to enhance the
comparability of information between reporting periods and the Group’s divisions, by adjusting for non-recurring or uncontrollable factors
which affect IFRS measures, to aid the user in understanding the underlying performance. Our APMs and KPIs are aligned to our strategy
and together form the basis of the performance measures for remuneration. Consequently, APMs are consistent with how the business
performance is planned and reported internally to the Board and Operating Committees to aid their decision making. Additionally, some
of these measures are used for the purpose of setting remuneration targets.
Going concern
The Group meets its day-to-day working capital requirements through its bank facilities. The current economic and political conditions
create uncertainty; however, the Group’s forecasts and projections, taking account of reasonably possible changes in trading performance,
show that the Group should be able to operate within the current level of its facilities. Having assessed the principal risks and other matters
discussed in connection with the Viability Statement, the Directors consider it appropriate to adopt the going concern basis in preparing the
Consolidated Financial Statements.
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the
Strategic Report on pages 1-39. The financial position of the company, its cash flows, liquidity position and borrowing facilities are described
in the Chief Financial Officer’s review on page 18. In addition, note 19 to the Financial Statements include the company’s objectives, policies
and processes for managing its capital; its financial risk management objectives; details of its financial instruments
and hedging activities; and its exposures to credit risk and liquidity risk.
The Group has significant financial resources including unutilised bank facilities of £98m and net cash of £87.8m at 27 March 2020. These
funds, together with the Group’s long-term customer contract portfolio, flexible cost base coupled with the geographically diverse operating
footprint of the Group and breadth of customer industry groupings, means that the Group is well placed to manage the direct business impacts
and the current global economic uncertainty arising from the COVID-19 pandemic. This view is underpinned by sensitivity analysis which
has been carried out to model the potential financial impact on the Group of the pandemic over 2020. The Directors have assessed the
principal risks discussed on pages 34-38, including by modelling a reasonable worst-case scenario. This scenario covers the cash flow
impact associated with an extended lockdown for a period of 3 months and a gradual recovery in the remainder of the year. The main cash
flow impacts identified in the reasonable worst-case scenario are:
■ a significant reduction in the collections business and landfill businesses driven by lower demand;
■ a reduction in capital expenditure across the Group;
■ a reduction in discretionary spend across all areas;
■ no payment of the final FY20 dividend;
■ the FY20 annual bonus will not be paid in cash;
■ the exec are taking a 20% pay cut with senior management (85 employee’s) taking a 10% pay reduction for the duration of the furloughing period;
■ there is a recruitment freeze in place; and
■ an intensive furloughing programme involving both operational and central support services. This consists of approx. 1200 employees
As part of their analysis the Board also considered the following potential levers at their discretion to improve the position identified
by the reasonable worst-case scenario including:
■ a number of further reductions in operating expenditure across the Group primarily related to workforce cost options; and
■ further reduction in capital expenditure
Having considered the reasonable worst-scenario and further levers at the Board’s discretion, the Group continues to have headroom against
the Group’s committed facilities identified in note 19 to the Financial Statements. The Bank of England CCFF scheme is being explored by the
Group in order to increase headroom in the case of an extreme downside scenario. Other factors considered by the Board as part of their going
concern assessment included the potential impact of Brexit trade talks, alongside inherent uncertainties in cash flow forecasts.
106
Biffa Annual Report and Accounts 2020 Based on the above, the Directors have concluded the Group is well placed to manage its financing and other business risks satisfactorily,
and have a reasonable expectation that the Group will have adequate resources to continue in operation for at least twelve months from
the signing date of these Consolidated Financial Statements. They therefore consider it appropriate to adopt the going concern basis of
accounting in preparing the Financial Statements.
Basis of consolidation
The consolidated financial statements incorporate the Financial Statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 27 March 2020. Control is achieved when the Company:
■ has the power over the investee;
■ is exposed, or has rights, to variable returns from its involvement with the investee; and
■ has the ability to use its power to affect its returns
The company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more
of the three elements of control listed above.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control
of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in the Income Statement from
the date the Company gains control until the date when the Company ceases to control the subsidiary.
All intra-group transactions are eliminated as part of the consolidation process. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by the Group.
Changes in accounting policies and disclosures
New and amended IFRS Standards that are effective for the current year
Impact of initial application of IFRS 16 Leases
IFRS 16 Leases was adopted by the Group on 30 March 2019 and replaces IAS 17 Leases. IFRS 16 removes the distinction between operating
leases and finance leases. The result is that the majority of leases are capitalised on the statement of financial position as a right-of-use
asset within property, plant and equipment, with a corresponding finance creditor. The cost of leasing these assets in the income statement
is recognised as a depreciation charge and an interest charge, opposed to the operating lease charge previously reflected under IAS 17. The
exception to this is the leasing of assets for a period of less than 12 months and the leasing of low-value assets which do not require the
recognition of a right of use asset or corresponding creditor.
On transition, IFRS 16 allows for either a full retrospective approach whereby all prior year comparatives are restated or the modified retrospective
approach. The Group has adopted the modified retrospective approach. On transition the Group has made use of the practical expedients to
exclude leases where the term ends within 12 months from the date of initial application, and to not reassess whether a contract is or contains
a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to apply to those leases entered or modified
before 30 March 2019. The Group has applied a single discount rate to portfolios of assets with similar characteristics.
The Group assesses whether a contract is or contains a lease at inception of the contract. The Group recognises a right-of-use asset and
a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases
with a lease term of 12 months or less) and leases of low-value assets (defined by management to not exceed £5,000). For these leases, the
Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic
basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. The Group’s
incremental borrowing rate is defined as the rate of interest that the lessee would have to pay to borrow over a similar term and with a similar
security the funds necessary to obtain an asset of a similar value in a similar economic environment.
Lease payments included in the measurement of the liability comprise:
■ fixed lease payments, less any lease incentives;
■ variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
■ the amount expected to be payable by the lessee under residual value guarantees;
■ the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
■ payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease
The lease liability is presented within borrowings in the consolidated statement of financial position.
The lease liability is subsequently measured by increasing the carrying amount to reflect the interest on the lease liability (using the
effective interest method) and by reducing the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
■ the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability
is remeasured by discounting the revised lease payments using a revised discount rate;
■ the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual
value, in which cases the lease liability is remeasured by discounting the revised lease payments using the initial discount rate
(unless the lease payment change is due to a change in floating rate, in which case a revised discount rate is used); or
■ a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability
is remeasured by discounting the revised lease payments using a revised discount rate.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payment at or before the commencement
day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses.
107
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 1. Accounting Policies continued
Changes in accounting policies and disclosures continued
Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore
the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37.
The costs are included in the related right-of-use asset.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset. If a lease transfers ownership
of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-
use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease.
At implementation the Group recognised right of use assets of £134.9m and the corresponding lease liability of £134.9m.
To aid comparability the tables below highlight the differences arising as a result of the adoption of IFRS 16 showing the impact on Statement
of Financial Position and Income Statement. A reconciliation of the closing balance under IAS 17 to the opening balance under IFRS 16 is
detailed in Note 28. The tables below use APM’s to demonstrate the IFRS 16 impact as this provides a comparable pre-exceptional position.
Group £m (unless stated)
Property, plant and equipment
Lease liability
Other
Net assets
Group £m (unless stated)
Revenue
Net Revenue
Underlying EBITDA
Underlying EBITDA margin
Depreciation
Underlying Operating Profit
Underlying Operating Profit margin
Statutory operating Profit
Underlying net Finance Charges
Underlying Profit before Tax
Statutory profit before Tax
Underlying Profit after Tax
2020
Post
IFRS 16
527.7
(258.0)
141.3
411.0
2020
Post
IFRS 16
1,163.1
1,102.8
174.0
15.0%
(83.5)
90.5
7.8%
74.1
(18.7)
71.7
56.4
57.4
2020
IFRS 16
adjustment
(139.4)
141.0
(0.5)
1.1
2020
IFRS 16
adjustment
–
–
(18.9)
–
16.1
(2.8)
–
(2.8)
4.2
1.4
1.4
1.1
The table above shows underlying measurements; IFRS 16 has no further impact on statutory measures.
Group £m (unless stated)
Return
Average Capital Employed
ROCE
Group £m (unless stated)
Average Net Debt
Collections £m
Revenue
Net Revenue
Underlying EBITDA
% margin
Underlying Operating Profit
% margin
108
2020
Post
IFRS 16
2020
IFRS 16
adjustment
73.6
823.1
8.9%
(2.8)
(137.5)
2020
Post
IFRS 16
2020
IFRS 16
adjustment
(477.3)
137.9
2020
Post
IFRS 16
2020
IFRS 16
adjustment
870.8
870.8
126.4
14.5%
72.2
8.3%
–
–
(11.2)
(1.7)
2020
Pre
IFRS 16
388.3
(117.0)
140.8
412.1
2020
Pre
IFRS 16
1,163.1
1,102.8
155.1
13.3%
(67.4)
87.7
7.5%
71.3
(14.5)
73.1
57.8
58.5
2020
Pre
IFRS 16
70.8
685.6
10.3%
2020
Pre
IFRS 16
(339.4)
2020
Pre
IFRS 16
870.8
870.8
115.2
13.2%
70.5
8.1%
2019
365.4
(122.6)
137.6
360.1
2019
1,091.2
1,030.8
150.7
13.8%
(69.0)
81.7
7.5%
45.4
(17.7)
64.0
21.5
51.5
2019
65.2
692.3
9.4%
2019
(336.0)
2019
797.2
797.2
106.5
13.4%
61.5
7.7%
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 Resources & Energy £m
Revenue
Net Revenue
Underlying EBITDA
% margin
Underlying Operating Profit
% margin
2020
Post
IFRS 16
2020
IFRS 16
adjustment
2020
Pre
IFRS 16
292.3
232.1
63.4
21.7%
37.7
12.9%
–
–
(5.6)
–
(0.8)
–
292.3
232.1
57.8
19.8%
36.9
12.6%
2019
293.9
233.5
59.1
20.1%
37.1
12.6%
In the current year, the Group has applied a number of amendments to IFRS Standards and Interpretations issued by the International
Accounting Standards Board (IASB) that are effective for an annual period that begins on or after 1 January 2019. Their adoption has not
had any material impact on the disclosures or on the amounts reported in these Financial Statements.
The UK’s Financial Conduct Authority announced that LIBOR will cease to exist by the end of 2021, and will be replaced by alternative
reference rates. In September 2019, the IASB amended IFRS 9 and IFRS 7 by issuing Interest Rate Benchmark Reform, which provides
exceptions to specific hedge accounting requirements to ensure that hedging relationships are not considered to be modified as a result
of the change in the reference rate. The amendments were endorsed in January 2020 for adoption in the EU. The Group early-adopted
these changes to IFRS 7 and IFRS 9 with effect from 1 April 2019. There were no transition adjustments on adoption.
IAS 19 (amendments)
Plan Amendment, Curtailment or Settlement
Annual Improvements to IFRS Standards 2015–2017 Cycle
Amendments to IFRS 3 Business Combinations, IAS 12 Income Taxes
and IAS 23 Borrowing Costs
IFRS 9 (amendments)
Prepayment Features with Negative Compensation
IFRS 10 and IAS 28 (amendments)
IFRIC 22 1 January 2018
Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture
Foreign Currency Transactions and Advance Consideration
Annual Improvements to IFRS Standards 2014–2016 Cycle
Amendments to IFRS 1, IFRS 12 and IAS 28 1 January 2018
IFRIC 23
Uncertainty over Income Tax Treatments
Adoption of the above has not had any material impact on the disclosures or on the amounts reported in these Financial Statements.
Changes in accounting policies and disclosures – future developments
At the date of authorisation of these Financial Statements, the Group has not applied the following new and revised IFRSs that have been
issued but are not yet effective:
IFRS 17
IFRS 3 (amendments)
Insurance Contracts
Definition of a Business
IAS 1 and IAS 8 (amendments)
Definition of Material
Conceptual Framework
Amendments to references to the Conceptual Framework in IFRS Standards
There are no other IFRSs or IFRIC Interpretations that are not yet effective that would be expected to have a material impact on the Group.
Business combinations
The Group accounts for acquisitions of businesses using the acquisition method. The consideration transferred in a business combination
is measured at fair value, which is calculated as the sum of the acquisition date fair values of the assets transferred to the Group, liabilities
incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the
acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:
■ deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in
accordance with IAS 12 Income Taxes and IAS 19 Employee Benefits respectively;
■ liabilities or equity measurements related to share-based payment arrangements of the acquiree or share-based payment arrangements of
the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 Share based
payments at the acquisition date;
■ assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree,
and the fair value of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the
identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable
assets and acquired and the liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess is recognised
immediately in profit or loss as a bargain purchase gain.
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Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 1. Accounting Policies continued
Business combinations continued
When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration
arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration transferred in
a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted
retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional
information obtained during the measurement period (which cannot exceed one year from the acquisition date) about facts and circumstances
that existed at the acquisition date.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs,
the Group reports provisional amounts for the items for which the accounting is incomplete.
Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to
reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected
the amounts recognised at that date.
Goodwill
Goodwill is initially recognised and measured as set out above.
Goodwill is tested annually for impairment or if there is an indication of impairment. Gains and losses on the disposal of a cash-generating
unit include the carrying amount of goodwill relating to that cash-generating unit.
For the purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units)
that is expected to benefit from the synergies of the business combination. If the recoverable amount of the cash-generating unit is less than
the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and
then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.
Gains and losses on the disposal of a cash-generating unit include the carrying amount of goodwill relating to that cash-generating unit.
Investment in joint venture
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint
arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the
relevant activities require unanimous consent of the parties sharing control.
Under the equity method, an investment in an associate or a joint venture is recognised initially in the consolidated statement of financial
position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate
or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint
venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture),
the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred
legal or constructive obligations or made payments on behalf of the associate or joint venture.
An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an
associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over
the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within
the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the
cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments,
has been identified as the Group Executive Team.
The 52-weeks ended 29 March 2019 has been restated to reflect the Group reorganisation into two operating divisions. The historical
Municipal and Industrial & Commercial divisions have been merged into the Collections division. The Resource Recovery & Treatment
and Energy divisions have been merged into the Resources & Energy division. The Hazardous Waste business was transferred from the
Resource Recovery & Treatment division into the new Collections division.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable once performance obligations have been fulfilled. Revenue
is reduced for value added taxes, trade discounts and commodity rebates. The methodology and assumptions for the calculations of trade
discounts and commodity rebates are monitored and adjusted regularly with reference to contractual and legal obligations, historical trends,
past experience and projected market conditions. The nature of the service provided by the Group means that returns or refunds are extremely
limited. Landfill Tax is included within both revenue and cost of sales.
Revenue from the sale of goods is recognised when the performance obligation has been met, the goods are delivered and titles have passed.
Revenue from the provision of services is recognised at the point when service has been provided. Collection revenues are recognised at
the point of collection from customer sites. For municipal collections, revenue is recognised in accordance with quantities specified in the
customer contracts.
When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is
recognised as the services are provided and in accordance with the terms of the contract.
Revenue from waste processing, treatment and landfill facilities is recognised when the performance obligation has been met which is
deemed to be when waste is physically received at the Group sites.
Energy generation revenue is recognised at the point that power is supplied to the customer based on the quantity of units supplied.
The Group’s standard terms for payment offered to customers is typically 30 days.
110
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 Leasing
The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of-use asset and a
corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with
a lease term of 12 months or less) and leases of low-value assets (such as tablets and personal computers, small items of office furniture and
telephones). For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease
unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted
by using the rate implicit in the lease. If this rate cannot be readily determined, the Group uses its incremental borrowing rate. Lease
payments included in the measurement of the lease liability comprise:
■ fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
■ variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
■ the amount expected to be payable by the lessee under residual value guarantees;
■ the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
■ payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently
measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing
the carrying amount to reflect the lease payments made.
The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
■ the lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment
of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using
a revised discount rate;
■ the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value,
in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate
(unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); or
■ a lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is
remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate
at the effective date of the modification.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the
commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less
accumulated depreciation and impairment losses. Whenever the Group incurs an obligation for costs to dismantle and remove a
leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions
of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are
included in the related right-of-use asset, unless those costs are incurred to produce inventories.
Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset.
If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise
a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts
at the commencement date of the lease.
The right-of-use assets are disclosed within property, plant and equipment note 14 to the Financial Statements.
The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described
in the ‘Property, plant and equipment’ policy. Variable rents that do not depend on an index or rate are not included in the measurement the
lease liability and the right-of-use asset. The related payments are recognised as an expense in the period in which the event or condition
that triggers those payments occurs.
Foreign currencies
In preparing the financial information of each individual Group entity, transactions in currencies other than the entity’s functional currency
(foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period,
monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair
value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:
■ exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included
in the cost of those assets when they are recognised as an adjustment to interest costs on those foreign currency borrowings; and
■ exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned
nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other
comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.
For the purposes of presenting these Consolidated Financial Statements, the Group’s foreign currency denominated assets and liabilities
are translated into Sterling using the exchange rates prevailing at the end of each reporting period. Income and expense items are translated
at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange
rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and
accumulated in equity.
111
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 1. Accounting Policies continued
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily
take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets
are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount
of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial
asset to that asset’s net carrying amount on initial recognition.
Government grants
Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them
and that the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the
related costs for which the grants are intended to compensate. Specifically, Government grants whose primary condition is that the Group
should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the consolidated statement of
financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.
Employee benefits
Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling
them to the contributions.
For defined benefit retirement plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial
valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses and the
return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognised
in other comprehensive income in the period in which they occur.
Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to
profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the
discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:
■ Service cost (including current service cost, past service cost as well as gains and losses on curtailments and settlements)
■ Net interest expense or income
■ Remeasurement
The Group presents service costs in operating costs and net interest expense or income is included in finance income. Curtailment gains
and losses are accounted for as past service costs.
The retirement benefit obligation recognised in the consolidated statement of financial position represents the actual deficit or surplus
in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits
available in the form of refunds from the plans or reductions in future contributions to the plans. The Group makes contributions under
Admitted Body status to a number of Local Government Pension Schemes (LGPS) for the period to the end of the relevant customer contracts.
The Group will only participate in LGPS for a finite period up to the end of the relevant customer contracts. At re-bid, any deficit or surplus
will be transferred to the next contractor. The Group recognises the defined benefit obligation less the fair value of scheme assets, and an
adjustment to only recognise the amount of defined benefit for which it is responsible under the contract. Movements in this adjustment
are recognised in the same way as movements in plan assets.
A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit
and when the entity recognises any related restructuring costs.
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the
related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.
Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be
paid in exchange for the related service.
Share-based payment plans
The Group’s management awards employee share options, from time to time, on a discretionary basis which are subject to vesting conditions.
The economic cost of awarding the share options to its employees is recognised as an employee benefit expense in the income statement
equivalent to the fair value of the benefit awarded. The fair value is determined by reference to the stochastic pricing model. The charge is
recognised over the vesting period of the award.
Exceptional items
Exceptional items are those that in the Directors’ view are required to be separately disclosed by virtue of their size or incidence to enable
a full understanding of the Group’s performance. This facilitates comparison with prior periods to assess trends in financial performance
more readily. It is determined by management that each of these items relates to events or circumstances that are non-recurring in nature.
Cash flow
Cash and cash equivalents as defined for the Statement of Cash Flows comprise cash in hand, cash held at bank with immediate access,
other short-term investments and bank deposits with maturities of three months or less from the date of inception, and bank overdrafts.
In the Consolidated Statement of Financial Position, cash and cash equivalents are presented net of bank overdrafts where there is a legal
right to offset, otherwise are included within borrowings in current liabilities.
112
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 Following a review in the year, we have restated our presentation of £6.1 million of cash inflows in relation to the receipt of funds held
on long term deposits in the cash flow statement, to be presented as operating activities rather than financing activities for the financial
period ending on 29 March 2019. The reclassified cash flows relate to consideration arising from the modification of a revenue contract,
and are therefore more appropriately presented as operating activities which is where the cash flows from revenue would be presented.
Taxation
Income tax represents the sum of the tax currently payable and deferred tax. This facilitates comparison with prior periods to assess
trends in financial performance more readily. It is determined by management that each of these items relates to events or circumstances
that are non-recurring in nature.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as reported in the consolidated
income statement because of items of income or expense that are taxable or deductible in other years and items that are never taxable
or deductible. The Group’s current tax is calculated using rates that have been enacted or substantively enacted by the end of the
reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities and their tax bases. Deferred
tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible
temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary
differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial
recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the
accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition
of goodwill.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled
or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the
Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive
income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly
in equity respectively. Where current or deferred tax arises from the initial accounting of a business combination, the tax effect is
included in accounting for the business combination.
Property, plant and equipment
Landfill sites are recorded at cost less accumulated depreciation and accumulated impairment losses. The cost of landfill sites includes
the cost of acquiring, developing and engineering sites. There are no directly attributable borrowing costs. Property, plant and equipment
is stated at cost less accumulated depreciation and accumulated impairment losses.
Depreciation is recognised so as to write off the cost of assets less their residual value over their useful economic lives. The estimated
useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes
in estimate accounted for on a prospective basis.
In the Financial Statements depreciation was recognised so as to write off the assets on the below basis:
■ Buildings – length of lease straight-line method
■ Plant, vehicles and equipment – 4 to 15 years straight-line method
■ Landfill sites – 2 to 51 years void consumed
Where the obligation to restore a landfill site is an integral part of its future economic benefits, a non-current asset within property, plant
and equipment is recognised. Changes to the obligation are recorded as adjustments to the carrying value of the asset. The asset recognised
is depreciated based on energy production and void used.
Right-of-use assets are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable
certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their
useful lives.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the
continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined
as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.
Intangible assets
Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment
losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method
are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible
assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
113
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 1. Accounting Policies continued
Intangible assets continued
The following useful lives have been applied to the intangible assets during the period:
■ Brand – indefinite life
■ Customer contracts – 3 to 20 years
■ IT development – 3 to 5 years
■ Landfill gas rights – length of projected profitable gas extraction based on landfill site content degradation (average 28 year)
An internally generated intangible asset arising from development (or from the development phase of an internal project) is recognised if,
and only if, all of the following have been demonstrated:
■ the technical feasibility of completing the intangible asset so that it will be available for use of sale;
■ the intention to complete the intangible asset and use or sell it;
■ the ability to use or sell the intangible asset;
■ how the intangible asset will generate probable future economic benefits;
■ the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
■ the ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date when the
intangible asset first meets the criteria listed above. When no internally generated intangible asset can be recognised, development expenditure
is recognised in profit or loss in the period in which it is incurred. Expenditure on research activities is recognised as an expense in the period
in which it is incurred.
Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated
impairment losses on the same basis as intangible assets that are acquired separately. An intangible asset is derecognised on disposal,
or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset,
measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when
the asset is derecognised.
Impairment of tangible and intangible assets other than goodwill
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.
Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds
its recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Inventories
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in-first-out basis. Net realisable
value represents the estimated selling price for inventories less estimated costs of completion and costs necessary to make the sale. Full provision
is made for obsolete or defective stock.
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the
Group will be required to settle the obligation, and a reliable estimate can be made of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the
reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash
flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time
value of money is material). The effects of inflation and unwinding of the discount element on existing provisions are reflected in the
Financial Statements as a finance charge.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable
is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be
measured reliably.
Provisions for the cost of restoring landfill sites and aftercare costs are made as the obligation to restore the site arises. Costs are charged
to the profit or loss over the operational life on the basis of the usage of void space for each landfill site. The restoration obligation is
typically fulfilled within two years of the landfill site being closed to waste.
Provisions for aftercare costs are made as the aftercare liability arises. Costs are charged to the profit or loss over the operational life of each
landfill site on the basis of usage of void space. When the obligation recognised as a provision gives access to future economic benefits, an
asset in property, plant and equipment is recognised. Changes in the provision arising from revised estimates that relate to the asset are
recorded as adjustments to the carrying value of the asset. The asset is depreciated over the period of gas generation which commences
during the active phase of landfill and extends beyond the closure date, producing commercial volumes of gas for up to 16 years. Aftercare
costs are provided for based on the Directors’ expectation that the obligation will have been fulfilled 60 years post closure of the site.
Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist
where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic
benefits expected to be received from the contract.
Service concession arrangements
Where the Group has constructed infrastructure on behalf of a third party as part of an integrated waste management contract which grants
the Group unconditional, contractual rights to future revenues, the right to consideration is recorded as a financial asset. This financial asset
accrues finance income and is reduced as the financial payments are received.
114
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 Financial instruments
Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of the instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition
or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss)
are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction
costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised
immediately in profit or loss.
Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date the entity becomes party to the contractual provisions of the instrument and
are subsequently remeasured at their fair value at each balance sheet date. The method of recognising the resulting gain or loss depends
on whether the derivative is designated as a hedging instrument and the nature of the item being hedged.
The Group designates certain derivatives as either a) fair value hedge (hedges of the fair value of recognised assets or liabilities);
or b) cash flow hedge (hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction);
or c) net investment hedge (hedges of net investments in foreign operations).
The Group documents the transaction relationship between the hedging instruments and hedged items at inception.
At inception and at each reporting date the Group assesses whether the derivatives used have been effective in offsetting changes in the fair
value of hedged items.
The fair values of derivative instruments used for hedging are shown in Note 19. Movements in the hedging reserve are shown in the statement
of changes in equity.
At the reporting date the Group has no fair value hedges or net investment hedges.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated as cash flow hedges are recognised in equity. The Group’s
cash flow hedges in respect of forward foreign exchange contracts result in recognition in either profit and loss or in the hedging reserve.
When a hedging instrument expires or is sold, any cumulative gain or loss in equity at that time remains in equity and is recognised when
the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in
equity will be transferred to the income statement.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio but the risk management objective
for that designated hedging relationship remains the same, the Group adjusts the hedge ratio of the hedging relationship so that it meets
the qualifying criteria again.
Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the
income statement.
Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases
or sales are purchases or sales of financial assets that require delivery of assets within the timeframe established by regulation or
convention in the marketplace.
Financial assets are classified into the following specified categories: financial assets at fair value through profit or loss (FVTPL) and
loans and receivables.
All recognised financial assets are measured subsequently in their entirety at either amortised cost or fair value depending on the
classification of the financial asset.
Debt instruments that meet the following conditions are measured subsequently at amortised cost:
■ The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and
■ The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive
income (FVTOCI):
■ The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling
the financial assets; and
■ The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
115
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 1. Accounting Policies continued
Financial assets continued
By default, all other financial assets are measured subsequently at FVTPL.
Amortised cost and effective interest method
The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and
points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts)
through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Income is recognised on an effective interest basis for debt instruments measured subsequently at amortised cost and at FVTOCI.
Financial assets at FVTPL
Financial assets that do not meet the criteria for being measured at amortised cost or FVTOCI are measured at FVTPL. Specifically:
■ Investments in equity instruments are classified as at FVTPL, unless the Group designates an equity investment that is neither
held for trading nor a contingent consideration arising from a business combination as at FVTOCI on initial recognition.
■ Debt instruments that do not meet the amortised cost criteria or the FVTOCI criteria are classified as at FVTPL. The Group has
not designated any debt instruments as at FVTPL.
Financial assets at FVTPL are stated at fair value, with any gains or losses arising on remeasurement recognised in profit or loss to the
extent that they are not part of a designated hedging relationship.
Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. The Group
recognises a loss allowance for expected credit losses. The amount of expected credit losses is updated at each reporting date to reflect
changes in credit risk since initial recognition.
The expected credit losses are estimated based on the Group’s historical credit loss experience, adjusted for factors that are specific to the
debtors, general economic conditions and an assessment of both the current as well as the forecast future conditions at the reporting date.
For financial assets, the expected credit loss is estimated as the difference between all contractual cash flows that are due to the Group
in accordance with the contract and all the cash flows that the Group expects to receive, discounted at the original effective interest rate.
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group compares the
risk of a default occurring on the financial instrument at the reporting date with the risk of a default occurring on the financial instrument
at the date of initial recognition. In making this assessment, the Group considers both quantitative and qualitative information that is
reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort.
Irrespective of the outcome of the above assessment, the Group presumes that the credit risk on a financial asset has increased significantly
since initial recognition when contractual payments are more than 90 days past due, unless the Group has reasonable and supportable
information that demonstrates otherwise.
Impairment of financial instruments
The Group assumes that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial
instrument is determined to have low credit risk at the reporting date. A financial instrument is determined to have low credit risk if:
■ the financial instrument has a low risk of default;
■ the debtor has a strong capacity to meet its contractual cash flow obligations in the near term; and
■ adverse changes in economic and business conditions in the longer term may, but will not necessarily, reduce the ability of the borrower
to fulfil its contractual cash flow obligations.
All customers are subject to credit scoring on a quarterly basis. The Group considers a financial asset to have low credit risk when the
external credit rating of the counterparty exceeds the Group’s minimum required score, and when the counterparty has a strong financial
position and payments are being made within the contractual terms.
The Group regularly monitors the effectiveness of the criteria used to identify whether there has been a significant increase in credit risk
and revises them as appropriate to ensure that the criteria are capable of identifying a significant increase in credit risk before the amount
becomes past due.
The Group considers the below as constituting an event of default as historical experience indicates that financial assets that meet the
following criterion are generally not recoverable:
■ information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including
the Group, in full (without taking into account any collateral held by the Group).
Financial assets may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice
where appropriate.
A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that
financial asset have occurred. Evidence that a financial asset is credit-impaired includes observable data such as significant financial
difficulty of the borrower or it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation. The Group
writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic
prospect of recovery.
116
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 Derecognition of financial assets
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another party.
On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received
and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity
is recognised in profit or loss.
The Group has not participated in any material supplier financing arrangements during the current or prior year.
Financial liabilities and equity instruments
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Any difference between the amount initially recognised
(net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the
effective interest method.
Commitment and borrowing fees are capitalised as part of the loan and amortised over the life of the relevant agreement. All other borrowing
costs are recognised in the income statement in the period in which they are incurred.
Borrowings are classified as non-current liabilities where the Group has an unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or they expire. The difference
between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.
Share capital
Ordinary Shares are classified as equity and recorded at par value of proceeds received. Where shares are issued above par value, the proceeds
in excess of par value are recorded in the share premium account net of direct issue costs.
Dividend distribution
Final dividend distribution to the Company’s shareholders is recognised as a liability in the Financial Statements in the period in which
the dividends are approved. Interim dividends are recognised when paid.
Areas of judgement and key sources of estimation uncertainty
The preparation of IFRS compliant Financial Statements requires the use of accounting estimates and assumptions and also requires
management to exercise its judgement in the process of applying Group accounting policies. The Group continually evaluates its estimates,
assumptions and judgements based on available information and experience. As the use of estimates is inherent in financial reporting,
actual results could differ from these estimates.
Judgements
The cost of internally generated assets is capitalised as an intangible asset where it is determined by management’s judgement that the ability
to develop the assets is technically feasible, will be completed, and that the asset will generate economic benefit that outweighs its cost.
The Group also applies judgement in identifying the significant, exceptional and non-recurring items of income and expense. We have
summarised the policy in more detail in Note 3.
Estimates
The Group has the following key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial period:
■ Asset impairment; growth rates, pre-tax discount rate, food waste, energy prices, ROC rates, gate fees and haulage costs, see Note 14
■ Intangible assets; The assessment of the useful economic life of the Group’s assets involves a significant amount of estimation
uncertainty based on the anticipation of future events which may impact their useful life, such as changes in technology or methods
of remediation. Given the significant investment in technology and other assets, the Group undertakes a review of the remaining useful
lives of assets each year and will reduce the remaining useful lives, or impair where necessary, assets that are being superceded by new
technology, see Note 13.
■ Environmental and aftercare commitments; Landfill aftercare provision is a key source of estimation uncertainty in the calculation
of the provision including, long-term inflation rates, discount rates and the estimates for future expenditure of up to 60 years depending
on the date of each site closure. Estimates are applied on a site by site basis to reflect the time scales, see Note 21
■ Pension obligations: discount rate, mortality, inflation, salary and longevity, see Note 29
■ Uncertain tax provisions; The uncertain tax disputes; EVP, HMRC have been paid and this is treated as a prepayment in the accounts
with a corresponding liability recognised. Also, Hazardous soils assessment has similarly been paid to HMRC and treated as a prepayment
in the current year, see Notes 32 and 33
In order to illustrate the impact that changes in assumptions could have on the Group’s results and financial position, sensitivity analysis
has been included within the Notes.
117
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 1. Accounting Policies continued
Areas of judgement and key sources of estimation uncertainty continued
In light of the current ongoing impact of the COVID-19 pandemic, valuations of certain assets and liabilities are necessarily more subjective.
In particular further areas of estimation uncertainty impacting the Group’s position as at 27 March 2020 have been identified including the
valuation of certain pension assets, in particular unquoted equities and property investments Note 19.
The Board believes that the potential impact of Brexit on the Group will be relatively limited given that it operates primarily within the United
Kingdom. Principal risks include foreign exchange movements, imposition of tariffs and potential constraint of labour supplies. The Board will
continue to closely monitor developments in the UK Government’s Brexit plans and any potential impacts on the Group. Similarly, management
will continue to monitor potential cost impacts on services and seek to discuss those with customers as appropriate, on a case by case basis.
2. Segmental Information
The Group is managed by type of business and is organised into two operating divisions. With effect from the start of the 52 weeks ended
27 March 2020, the Group has been reorganised into two operating divisions. The divisions were merged according to type of service offered.
Collections comprises of Waste and recycling collections and related services to industrial, commercial, municipal and household customers.
Resources & Energy consists of Waste and recycling treatment and energy generation services. The historic Municipal and Industrial &
Commercial divisions have been merged into the Collections division. The Resource Recovery & Treatment and Energy divisions have been
merged into the Resources & Energy division. The Hazardous Waste business was transferred from the Resource Recovery & Treatment
division into the new Collections division. The prior period results have therefore been restated for comparison purposes.
These divisions represent the business segments in which the Group reports its primary segment information and are consistent with the
internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating
resources and assessing performance of the operating segments, has been identified as the Group Executive Team. The activities of the
divisions are detailed on pages 21-24. The Group’s segmental results are as follows:
Revenue within segments is eliminated on consolidation.
2019
£m
restated
797.3
293.9
1,091.2
2019
£m
1,091.2
(60.4)
1,030.8
Growth
factor
4.5%
2.5%
2020
£m
870.8
292.3
1,163.1
2020
£m
1,163.1
(60.3)
1,102.8
£m
1,030.8
46.7
25.3
1,102.8
Revenue
Collections
Resources & Energy
Statutory Revenue
Revenue reconciliation
Statutory Revenue
Landfill Tax
Net Revenue
FY19 Net Revenue
Acquisition revenue growth
Organic revenue growth
FY20 Net Revenue
Sales between operating divisions are carried out at arm’s length.
118
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 All trading activity and operations are in the United Kingdom and there is therefore no secondary reporting format by geographical segment.
There is no single customer that accounts for more than 10% of Group revenue (2019: none).
Underlying EBITDA
Collections
Resources & Energy
Group costs
Underlying EBITDA
Depreciation and amortisation
Underlying Operating Profit
Exceptional items (Note 3)
Amortisation of acquisition intangibles
Impact of real discount rate changes to landfill provisions
Operating Profit
Finance income
Finance charges
Share of result in joint venture
Profit before taxation
2020
Post IFRS 16
£m
IFRS 16
Adjustment
£m
2020
Pre IFRS 16
£m
2019
£m
restated
126.4
63.4
(15.8)
174.0
(83.5)
90.5
(4.4)
(16.9)
4.9
74.1
3.4
(21.0)
(0.1)
56.4
(11.2)
(5.6)
(2.1)
(18.9)
16.1
(2.8)
–
–
–
(2.8)
–
4.2
–
1.4
115.2
57.8
(17.9)
155.1
(67.4)
87.7
(4.4)
(16.9)
4.9
71.3
3.4
(16.8)
(0.1)
57.8
106.5
59.1
(14.9)
150.7
(69.0)
81.7
(18.2)
(16.5)
(1.6)
45.4
1.5
(25.4)
–
21.5
The 52-week period ended 29 March 2019 has been restated to reflect the Group reorganisation into two operating divisions. The historical
Municipal and Industrial & Commercial divisions have been merged into the Collections division. The Resource Recovery & Treatment and
Energy divisions have been merged into the Resources & Energy division. The Hazardous Waste business was transferred from the Resource
Recovery & Treatment division into the new Collections division.
Group costs represent those components of shared services and corporate costs (including, inter alia, board and corporate costs, finance,
HR, IT, legal and insurance, external affairs and SHEQ) that cannot be meaningfully allocated to the operating segments.
Underlying EBITDA represents the underlying profit earned by each segment without allocation of the share of depreciation and amortisation,
exceptional items, finance costs, material impacts of changes in real discount rate applied to the Group’s long-term landfill provisions
and income tax expense. Underlying Operating Profit recognises the impact of depreciation and amortisation excluding the amortisation
of acquisition intangibles. These measures are both reported to the Group Executive Team for the purpose of resource allocation and
assessment of segment performance.
The exceptional costs of £4.4m (2019: £18.2m) are disclosed in Note 3.
Underlying Operating Profit
Collections
Resources & Energy
Group costs
2020
Post IFRS 16
£m
IFRS 16
Adoption
£m
2020
Pre IFRS 16
£m
2019
£m
restated
72.2
37.7
(19.4)
90.5
(1.7)
(0.8)
(0.3)
(2.8)
70.5
36.9
(19.7)
87.7
61.5
37.1
(16.9)
81.7
119
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 2. Segmental Information continued
The 52-week period ended 29 March 2019 has been restated to reflect the Group reorganisation into two operating divisions. The historical
Municipal and Industrial & Commercial divisions have been merged into the Collections division. The Resource Recovery & Treatment and
Energy divisions have been merged into the Resources & Energy division. The Hazardous Waste business was transferred from the Resource
Recovery & Treatment division into the new Collections division.
Tangible and intangible assets net book value
Collections
Resources & Energy
Shared services and corporate
Total
2020
Post IFRS 16
£m
325.6
309.6
89.5
724.7
2020
IFRS 16
adoption
£m
(77.6)
(47.4)
(14.4)
(139.4)
2020
Pre
IFRS 16
£m
248.0
262.2
75.1
585.3
2019
£m
restated
247.0
256.5
74.9
578.4
The 52-week period ended 29 March 2019 has been restated to reflect the Group reorganisation into two operating divisions. The historical
Municipal and Industrial & Commercial divisions have been merged into the Collections division. The Resource Recovery & Treatment and
Energy divisions have been merged into the Resources & Energy division. The Hazardous Waste business was transferred from the Resource
Recovery & Treatment division into the new Collections division.
Capital expenditure
Collections
Resources & Energy
Shared services and corporate
2020
Post
IFRS 16
£m
2020
IFRS 16
adoption
£m
2020
Pre
IFRS 16
£m
65.4
48.1
6.4
119.9
(13.2)
(8.5)
–
(21.7)
52.2
39.6
6.4
98.2
2019
£m
restated
78.0
21.3
7.1
106.4
Capital expenditure comprises additions to intangible assets and property, plant and equipment including leased assets.
The 52-week period ended 29 March 2019 has been restated to reflect the Group reorganisation into two operating divisions. The historical
Municipal and Industrial & Commercial divisions have been merged into the Collections division. The Resource Recovery & Treatment and
Energy divisions have been merged into the Resources & Energy division. The Hazardous Waste business was transferred from the Resource
Recovery & Treatment division into the new Collections division.
The Industrial & Commercial division expenditure includes £3.2m of acquired assets as detailed in Note 11.
Depreciation and amortisation
Collections
Resources & Energy
Shared services and corporate
Amortisation of acquisition intangibles
Total
2020
Post
IFRS 16
£m
2020
IFRS 16
adoption
£m
2020
Pre
IFRS 16
£m
2019
£m
restated
54.2
25.7
3.7
83.6
16.9
100.5
(9.5)
(4.9)
(1.7)
(16.1)
–
(16.1)
44.7
20.8
2.0
67.5
16.9
84.4
45.0
22.0
2.0
69.0
16.5
85.5
Depreciation and amortisation relates to the write down of both intangible and tangible fixed assets over their estimated useful economic
lives. Amortisation of acquisition intangibles is disclosed separately in line with the segmental Underlying Operating Profit.
The 52-week period ended 29 March 2019 has been restated to reflect the Group reorganisation into two operating divisions. The historical
Municipal and Industrial & Commercial divisions have been merged into the Collections division. The Resource Recovery & Treatment and
Energy divisions have been merged into the Resources & Energy division. The Hazardous Waste business was transferred from the Resource
Recovery & Treatment division into the new Collections division.
120
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020
3. Other Items
The Group’s financial performance is analysed into two components, underlying performance (which excludes other items) and other items.
Underlying performance is used by management to monitor financial performance as it is considered it aids comparability of the reported
financial performance year to year. The Group’s income statement and segmental analysis separately identify a number of Alternative
Performance Measures (APMs) in addition to those reported under IFRS. The Directors believe that the presentation of the results in this way,
which is not meant to be a substitute for or superior to IFRS measures, is relevant to an understanding of the Group’s underlying trends, financial
performance and position. These APMs are also used to enhance the comparability of information between reporting periods and the Group’s
divisions, by adjusting for non-recurring or uncontrollable factors which affect IFRS measures, to aid the user in understanding the underlying
performance. Our APMs and KPIs are aligned to our strategy and together form the basis of the performance measures for remuneration.
Consequently, APMs are consistent with how the business performance is planned and reported internally to the Board and Operating
Committees to aid their decision making. Additionally, some of these measures are used for the purpose of setting remuneration targets.
Other items includes exceptional items, amortisation of acquisition intangibles and the impact of real discount rate changes in landfill provisions.
Management utilises an exceptional item framework that has been approved by the Board. This follows a three step process which considers
the nature of the event, the financial materiality involved and the particular facts and circumstances.
Items of income and expense that are considered by management for designation as exceptional items include items such as significant
corporate restructuring costs, acquisition-related costs, write downs or impairments of non-current assets, movements on onerous contract
provisions and strategy-related costs, including the implementation of Project Fusion.
Included within operating profit:
Exceptional items:
Acquisition related costs
Onerous contracts
Strategy related and corporate restructuring costs
Pensions GMP equalisation
Total exceptional items
Other non-underlying items:
Amortisation of acquisition intangibles
Impact of real discount rate changes to landfill provisions
Total non-underlying items
Corporate restructuring costs included within finance costs:
Finance charges
Taxation impact of other items
Segmental exceptional items:
Collections
Resources & Energy
Group costs
2020
£m
1.1
(1.5)
4.8
–
4.4
16.9
(4.9)
16.4
(1.1)
(3.5)
2020
£m
0.7
(1.5)
5.2
4.4
2019
£m
2.8
10.2
2.1
3.1
18.2
16.5
1.6
36.3
6.2
(9.0)
2019
£m
9.3
3.7
5.2
18.2
Acquisition-related costs
Delivery of the Group’s strategy includes investment in acquisitions that enhance the quality of its operations. The exclusion of significant
items arising from M&A activity is designed by the Board to align short-term operational decisions with this longer-term strategy. Accordingly,
amounts arising on acquisitions are excluded from underlying profit measures. The £1.1m of acquisition-related expenditure in the 52 weeks
ended 27 March 2020 relates to professional fees and other costs which are directly attributable to acquisitions.
The £2.8m of acquisition-related expenditure in the 52 weeks ended 29 March 2019 relates to professional fees and other costs which are
directly attributable to acquisitions. This includes £0.7m in relation to the acquisition of 100% of the issued share capital of Specialist
Waste Recycling Limited and £0.9m in relation to the acquisition of Weir Waste Services Limited.
Onerous contracts
Onerous contract costs reflect all movement on onerous service contract provisions. In the prior period the Group identified two contracts
which were loss making and not expected to return to profitability; the Directors accordingly provided for these. In the 52-weeks ended
27 March 2020, no further onerous contracts have been identified. Onerous contract costs include the unwinding of provisions recognised
on all loss-making contracts in prior periods. Any additional provisions required against these contracts, or unwinding of these provisions,
is reflected within exceptional items on the basis that they do not represent the underlying year-on-year trading of each of these contracts.
121
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 3. Other Items continued
Strategy-related and corporate restructuring costs
Strategy-related costs arise from Group-wide initiatives to reduce the ongoing cost base and improve efficiency in the business. These
costs are substantial in scope and impact, and do not form part of recurring operational or management activities that the Directors would
consider part of our underlying performance. Adjusting for these charges provides a measure of operating profitability that is comparable
over time. Strategy-related costs primarily relate to the Group’s system replacement programme Project Fusion. Within the year the Group
received compensation of £4.4m from the original systems integrator, this was offset against a write off of some previously capitalised costs.
The net charge relating to Project Fusion is £3.8m, this was incurred progressing Project Fusion following the project pause and change of
advisers. The Project has now been put on hold temporarily due to COVID-19.
Amortisation of acquisition intangibles
Amortisation of acquisition intangibles represents the amount amortised by the Group in each period in respect of intangibles from prior
acquisitions, which amounts are reported separately from the Group’s depreciation and amortisation charges. The charges are reported
separately and performance of the acquired business is assessed through the underlying operational results. The Group uses this alternative
performance measure (APM) to improve the comparability of information between reporting periods and its divisions to aid the user
of the Annual Report in understanding the activities taking place across the Group’s portfolio.
GMP equalisation
As a result of the 2018 High Court ruling that Lloyds Banking Group must amend its pension schemes in order to equalise benefits for men
and women. In the prior year an additional past service cost of £3.1m being recognised in the 52-week period ended 29 March 2019. This
was reported separately to aid the understanding of the Group’s performance as it is a non-operational item.
Impact of real discount rate changes to landfill provisions
Impact of real discount rate changes to landfill provisions reflects the impact on provisions which arises wholly due to the change in
discount rate on landfill provisions as this is not reflective of operational performance.
In addition to the Other items disclosed above, the Group uses Return on Operating Assets and Return on Capital Employed as performance
measures. These are aligned to the strategy and are reported internally to the Board and Operating Committees to aid their decision making.
These are calculated as below:
Return on Operating Assets
Underlying Operating Profit1
Average of property, plant and equipment2
Average net working capital3
Total average of property, plant and equipment plus net working capital⁴
Return on Operating Assets⁵
2020
Post IFRS 16
£m
IFRS 16
Adoption
£m
2020
Pre IFRS 16
£m
90.5
514.0
(46.7)
467.3
19.4%
(2.8)
(134.9)
–
(134.9)
87.7
379.1
(46.7)
332.4
26.4%
2019
£m
81.7
357.5
(37.6)
319.9
25.5%
1 Profit before exceptional items, amortisation of acquired intangibles, impact of real discount rate changes to landfill provisions, finance costs and taxation.
2 Average of opening and closing net book value of property, plant and equipment.
3 Average balance in 2020 and 2019 of the closing net of inventories, trade and other receivables and trade and other payables.
4 Average property, plant and equipment has been adjusted for the balance recognised on the adoption of IFRS 16.
5 Return on Operating Assets is determined by Underlying Operating Profit divided by the average of opening and closing PP&E plus net working capital.
Return on Capital Employed
Operating profit
Exceptional items (Note 3)
Impact of real discount rate changes to landfill provisions (Note 3)
Adjusted operating profit
Average of shareholders’ equity1
Average net debt2
Average retirement benefits
Average environmental provisions
Average Return on Capital Employed3
1 Average of opening and closing shareholders’ equity.
2 Net debt comprises the average net debt in 2020 and 2019 (Note 27).
2020
Post IFRS 16
£m
IFRS 16
Adjustment
2020
Pre IFRS 16
£m
74.1
4.4
(4.9)
73.6
385.6
477.3
(101.8)
62.0
823.1
8.9%
(2.8)
–
–
(2.8)
0.5
(138.0)
–
–
(137.5)
71.3
4.4
(4.9)
70.8
386.1
339.3
(101.8)
62.0
685.6
10.3%
2019
£m
45.4
18.2
1.6
65.2
350.7
336.0
(65.2)
70.8
692.3
9.4%
3 Return on Capital Employed is determined by adjusted operating profit divided by the average of opening and closing shareholders equity, plus the average
of net debt, pensions and environmental provisions.
122
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 4. Finance Income and Charges
Finance charges
Interest on bank overdrafts, bonds and loans
Interest on obligations under lease liabilities
IFRS 16 lease interest
Interest unwind on discounted provisions
Interest on forward contracts
Total finance charges
Interest income
Interest on net retirement benefit (pension)
Finance income
Net finance charges
Recognised in other items (Note 3)
Finance charges
Interest on bank overdrafts, bonds and loans
Fair value discount unwind on EVP preference instrument
Total finance charges
2020
£m
(11.0)
(4.2)
(4.2)
(1.6)
–
(21.0)
1.4
2.0
3.4
2019
£m
(17.9)
(5.0)
–
(2.0)
(0.5)
(25.4)
0.2
1.3
1.5
(17.6)
(23.9)
2020
£m
–
1.1
1.1
2019
£m
(3.8)
(2.4)
(6.2)
During the period total finance charges have decreased by £4.4m. The reduction of interest on bank overdrafts, bonds and loans is largely due
to the refinancing in March 2019. During the year the Group has also renegotiated loan borrowings and bonding facilities at more favourable
rates. There has also been a natural decline in the number of older, more expensive lease liabilities, resulting in reduced financing costs. This
amount also includes an additional £4.2m of interest on right-of-use asset leases recognised due to the implementation of IFRS 16. The £3.8m
of interest on bank loans recognised in the prior period in other items is the write off of previously capitalised borrowing costs which arose a
result of the completion of the Group refinancing in the prior year. The finance charges are adjusted by £1.1m for the fair value EVP discount
unwind which is not part of the Group’s underlying results as defined in Note 3. Further details on EVP are expanded in Note 34.
5. Financial Instrument Gains and Losses
Financial assets at amortised cost
Interest income
Financial liabilities at amortised cost
Interest expense
6. Profit/(Loss) Before Taxation
The following items have been included in arriving
at the pre-tax profit/(loss):
Employee costs (Note 7)
Depreciation of property, plant and equipment
■ Owned assets
■ Assets held under lease liabilities
Amortisation of intangible assets
■ Acquisition intangibles (Note 2)
■ Other intangibles
Expense relating to short-term leases and leases of low-value assets:
■ Plant and machinery
■ Other
Exceptional items (Note 3)
Income from sub-leasing right-of-use assets
Profit on disposal of property, plant and equipment
2020
£m
2019
£m
3.4
1.5
(21.0)
(25.4)
2020
Post IFRS 16
£m
2020
IFRS 16
adoption
£m
2020
Pre IFRS 16
£m
2019
£m
292.4
36.3
46.3
16.9
1.0
–
0.7
4.4
(2.2)
1.0
–
–
(16.1)
–
–
–
16.1
–
–
–
292.4
283.0
36.3
30.2
16.9
1.0
–
16.8
4.4
(2.2)
1.0
38.0
29.7
16.5
1.3
1.9
12.9
18.2
n/a
2.2
123
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 6. Profit/(Loss) Before Taxation continued
Underlying operating costs have been split into administration and distribution costs as detailed below:
Operating costs
Distribution costs
Administrative expenses
2020
£m
20.1
39.8
59.9
2019
£m
21.7
28.8
50.5
7. Employees and Directors
The average monthly number of persons (including Executive Directors) employed by reporting segment, by the Group during the period was:
By segment
Collections
Resources & Energy
Shared services and corporate
2020
Number
6,989
788
368
8,145
2019
Number
restated
6,501
967
354
7,822
The 52-week period ended 29 March 2019 has been restated to reflect the Group reorganisation in two operating divisions. The historical
Municipal and Industrial & Commercial divisions have merged into the Collections division. The historical Resource Recovery & Treatment
and Energy divisions have been merged into the Resources & Energy division. The Hazardous Waste business was transferred from the
Resource Recovery and Treatment division into the new Collections division.
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
Redundancy and termination payments
2020
£m
254.7
24.2
12.3
1.2
292.4
2019
£m
246.5
19.4
15.3
1.8
283.0
The remuneration of the Directors is set out on pages 62-87 within the Directors’ Report on Remuneration described as being audited and
forms part of these Financial Statements.
Key management compensation
Their aggregate remuneration comprised:
Wages and salaries
Social security costs
Other pension costs
Long-term incentives
Short-term incentives
Key management personnel have been defined as the Group Executive Team.
2020
£m
2.2
1.1
0.3
2.5
1.4
7.5
2019
Restated
£m
2.4
0.6
0.3
1.1
1.5
5.9
124
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 8. Auditor’s Remuneration
The analysis of the Company and Biffa Group’s auditor’s remuneration is as follows:
Fees payable to the Company’s auditor for the audit of the Company’s Consolidated annual
Financial Statements
Fees payable to the Company’s auditor for the audit of the Company’s subsidiaries
Total audit fees
Audit-related assurance services
Total audit and non-audit fees
2020
£m
0.6
0.3
0.9
0.1
1.0
The other assurance services provided by the auditor related to agreed upon procedures and other assurance services outside of
statutory requirements.
9.
Income Tax Recognised in Profit or Loss
Current tax
In respect of the current year
Adjustment in respect of prior years
Deferred tax
Origination and reversal of temporary differences
Adjustment in respect of prior years
Adjustment attributable to changes in tax rates and laws
Total tax charge
2020
£m
–
0.1
0.1
11.4
(0.8)
0.1
10.7
10.8
2019
£m
0.6
0.3
0.9
0.1
1.0
2019
£m
0.2
(0.1)
0.1
5.0
(1.1)
(0.5)
3.4
3.5
Corporation tax is calculated at 19% (2019: 19%) of the estimated assessable profit for the period. The charge for the period can be reconciled
to the profit per the consolidated income statement as follows:
Profit before tax
Profit on ordinary activities multiplied by the standard rate of corporation tax
in UK of 19% (2019: 19%)
Effects of:
Over provision in respect of prior years
Expenses not deductible for tax purposes
Non-taxable income
Effect of change in tax rate
Total taxation
Underlying
activities
£m
71.7
13.6
–
0.8
(0.1)
–
14.3
2020
Other
items
£m
(15.3)
(2.9)
–
–
–
(0.6)
(3.5)
Total
£m
56.4
10.7
–
0.8
(0.1)
(0.6)
10.8
125
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 9.
Income Tax Recognised in Profit or Loss continued
Profit before tax
Profit on ordinary activities multiplied by the standard rate of corporation tax
in UK of 19% (2018: 19%)
Effects of:
Over provision in respect of prior years
Expenses not deductible for tax purposes
Non-taxable income
Effect of change in tax rate
Total taxation
Underlying
activities
£m
64.0
12.2
–
0.5
(0.2)
–
12.5
2019
Other
items
£m
(42.5)
(8.1)
(1.2)
0.8
–
(0.5)
(9.0)
In addition to the amount credited to the consolidated income statement, the following amounts have been credited/(charged) directly
to equity:
Deferred tax (charge) arising on actuarial (gains)/losses
Deferred tax (charge) arising on share-based payments
Total deferred tax charged directly to equity
2020
£m
(8.3)
(0.2)
(8.5)
Total
£m
21.5
4.1
(1.2)
1.3
(0.2)
(0.5)
3.5
2019
£m
(4.9)
(0.9)
(5.8)
Budget 2020, substantively enacted on 17 March 2020, announced that the main UK corporation tax rate applicable from 1 April 2020 now
remains at 19%, rather than the previously enacted reduction to 17%. As deferred tax assets and liabilities are measured at the rates expected
to apply in the period of the reversal, deferred tax balances have been calculated at 19%.
As the Group’s presence is mainly in the UK we do not envisage a significant impact on the Group following the decision of the UK
Government to invoke Article 50 to leave the EU.
The UK have introduced various stimulus/reliefs for businesses to cope with the impact of COVID 19 pandemic. We will monitor as the
details become available for any that may materially impact our future tax charges.
10. Earnings per Share
Basic Earnings per Ordinary Share are based on the Group profit for the year and a weighted average of 250,000,000 (2019: 250,000,000)
Ordinary Shares in issue during the year.
An underlying Earnings per Ordinary Share figure has been presented to eliminate the effects of exceptional items, amortisation of acquisition
intangibles and the impact of the change in the real discount rate to long-term provisions. The presentation shows the trend in Earnings
per Ordinary Share that is attributable to the underlying trading activities of the Group.
The reconciliation between the basic and underlying figures for the Group is as follows:
2020
2019
Profit attributable to owners of parent Company for basic Earnings per Share
calculation
Other items (Note 3)
Underlying earnings
Earnings
per Share
pence
18.3
4.8
23.1
£m
45.6
11.8
57.4
Total number of Ordinary Shares
Shares held in employee benefit trust in respect of share options
Weighted average number of Ordinary Shares for the purposes of basic Earnings per Share
Effect of dilutive potential Ordinary Shares
Share options
Weighted average number of Ordinary Shares for the purposes of diluted Earnings per Share
£m
18.0
33.5
51.5
2020
250.0
(1.9)
248.1
6.5
254.6
Earnings
per Share
pence
7.2
13.4
20.6
2019
250.0
–
250.0
–
250.0
126
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 11. Acquisitions
52 weeks ended 27 March 2020
On 1 July 2019, the Group paid IWMS Wastecollection.com Limited £2.5m for the purchase of customer lists in both the collections and
brokerage arms of the business, along with the Wastecollection.com brand and containers. It was acquired in order to extend the Group’s
commercial customer base and market presence in the region, and is highly complementary to the Group’s existing business. IWMS
Collection.com Limited contributed £2.3m of revenue and £0.3m of profit for the period between the date of acquisition and the balance
sheet date. If the acquisition had been completed on the first day of the financial period, Group revenues would have increased by £3.2m
and Group profit would have increased by £0.4m.
On 30 September 2019, the Group acquired vehicles, containers, lease liability and customer lists from Ribbex UK Limited for £2.0m.
During the year the Group also acquired certain trade and assets of:
■ Kier Group
■ Winchester City Council I&C contract; and
■ Thamesdown Recycling
Total net assets of £0.5m were acquired for cash consideration of £0.6m resulting in goodwill of £0.1m being recognised. If these acquisitions
had been completed on the first day of the financial period, Group revenues would have increased by £6.6m and Group profit before interest
and tax would have increased by £0.8m.
The preliminary amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below:
Property, plant and equipment
Intangible assets
Debtors
Cash and cash equivalents
Deferred tax (liability)/asset
Creditors
Borrowings
Total net assets
Goodwill
Total consideration
Satisfied by:
Cash
Total consideration transferred
Net cash outflow arising on acquisition:
Cash consideration
Less: cash and cash equivalent balances acquired
IWMS Waste
Collection.com
Limited
£m
Ribbex
Limited
£m
Other
acquisitions
£m
Total
preliminary
£m
0.1
1.3
–
–
(0.2)
–
–
1.2
1.3
2.5
2.5
2.5
2.5
–
2.5
0.6
0.7
–
–
(0.1)
–
(0.5)
0.7
1.3
2.0
2.0
2.0
2.0
–
2.0
–
0.5
–
–
–
–
–
0.5
0.1
0.6
0.6
0.6
0.6
–
0.6
0.7
2.5
–
–
(0.3)
–
(0.5)
2.4
2.7
5.1
5.1
5.1
5.1
–
5.1
No contingent liabilities were identified at the acquisition date. Acquisition-related costs included in exceptional costs amount to £1.1m.
The preliminary total goodwill of £2.7m arising from these acquisitions represents an increase in Industrial & Commercial businesses
and the Group’s strategy to become the leading UK-based integrated waste management business. None of the goodwill is expected to
be deductible for income tax purposes.
52 weeks ended 29 March 2019
On 16 August 2018, the Group acquired 100% of the issued share capital of Weir Waste Services Limited, a leading provider of waste and
recycling solution in the Birmingham and West Midlands region. It was acquired in order to extend the Group’s commercial customer
base and market presence in the region, and is highly complementary to the Group’s existing business.
On 11 March 2019, the Group acquired 100% of the issued share capital of Specialist Waste Recycling Limited. It was acquired in order
to extend the Group’s commercial customer base and is highly complementary to the Group’s existing business.
The Group acquired certain trade and assets of:
■ London Recycling Services Limited on 30 April 2018
■ Bisset Waste Management Limited on 30 April 2018
127
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 11. Acquisitions continued
52 weeks ended 29 March 2019 continued
■ H&A Recycling Limited 31 August 2018
■ The Kier Group on 31 October 2018
■ Saving British Business Money Limited on 30 November 2018
Total net assets of £19.2m were acquired for cash consideration of £46.9m resulting in goodwill of £27.7m being recognised.
If these acquisitions had been completed on the first day of the financial period, Group revenues for the period would have increased by
£57.9m and Group profit would have increased by £2.7m.
12. Goodwill
Cost:
As at 30 March 2018
Additions
As at 29 March 2019
Purchase price adjustment
Additions
As at 27 March 2020
Amortisation:
As at 30 March 2018
As at 29 March 2019
As at 27 March 2020
Net book amount:
As at 27 March 2020
As at 29 March 2019
By segment
Collections
Resources & Energy
Total
£m
100.8
27.9
128.7
1.3
2.7
132.7
(0.5)
(0.5)
(0.5)
132.2
128.2
2019
£m
88.9
39.3
128.2
2020
£m
92.9
39.3
132.2
The purchase price adjustment is in relation to Weir Waste Services Limited and the associated deferred tax. The Group completed the
acquisition of Weir Waste Services on 16 August 2018. Subsequent to the acquisition it was identified that the previous operators had been
operating the MRF in a non-compliant way and as a result the underlying MRF performance was misstated at acquisition. As a result of these
issues, it has also been determined that the carrying value of the plant should be written down.
The purchase price allocation has been reconsidered and an adjustment made to reflect the revised carrying value of the MRF
The Group reviews at each reporting period whether there are any indicators of impairment in accordance with IAS 36 Impairment of Assets.
An annual impairment review is completed by comparing the carrying amount of the goodwill for each operating segment to its recoverable
amount. The recoverable amount is the higher of its fair value less costs of disposal and its value in use. If the recoverable amount is less
than the carrying amount, an impairment loss is allocated first to reduce the carrying amount of the goodwill and then to the assets of
the cash-generating unit. In the current year all cash-generating units have been valued on the basis of value in use, with the exception
of Leicester which uses fair value less costs of disposal.
The valuation of goodwill allocated to the Resources & Energy cash-generating unit is noted to be most sensitive to any changes in assumptions
due to the limited headroom of £53m. The key assumptions when calculating the value in use are forecast revenue and costs. Management’s
calculation of value in use has been developed from forecast five-year cash flows which are prepared on the basis of past performance,
expectation of future performance and market information and a consistent growth rate thereafter, based on the underlying assets of each
division. The final year growth rate assumption used beyond the five-year plan period based on market trends, after adjusted for assumed
inflation, is 3.0% (2019: 3.0%) for the landfill gas CGU and 2.0% (2019: 2.0%) for the other operating divisions. These assumptions are considered
appropriate based on the long-term nature of the business. These forecasts are adjusted to the extent that events since they were developed
(the impact of COVID 19) indicate that they may no longer be relevant. A pre-tax discount rate of 9.01% (2019: 8.26%) was applied across all
cash-generating units as the inherent risks have been included in the segmental cash flow forecasts. No reasonably foreseeable change in
the assumptions used in the value in use calculations would cause an impairment to any of the Collections or Resources & Energy cash-
generating units.
128
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 13. Other Intangible Assets
Cost:
As at 30 March 2018
Opening IFRS 15 adjustment
Additions
Acquired through business combination
Disposals
As at 29 March 2019
Acquired through business combination
Additions
Compensation
Disposals
As at 27 March 2020
Accumulated amortisation:
As at 30 March 2018
Opening IFRS 15 adjustment
Charge for the period
Disposals
As at 29 March 2019
Charge for the period
Disposals
As at 27 March 2020
Net book amount:
As at 27 March 2020
As at 29 March 2019
As at 30 March 2018
Landfill gas
rights
£m
IT
development
£m
Brand
£m
Customer
contracts
£m
190.2
–
–
–
–
190.2
–
–
–
–
190.2
(47.9)
–
(10.2)
–
(58.1)
(10.2)
–
(68.3)
121.9
132.1
142.3
16.1
–
3.7
0.3
(0.7)
19.4
–
3.8
(4.4)
(0.4)
18.4
(1.2)
–
(1.3)
0.5
(2.0)
(0.9)
0.4
(2.5)
15.9
17.4
14.9
Total
£m
298.5
(6.9)
3.7
15.9
(0.7)
310.5
2.5
3.8
(4.4)
(0.4)
34.6
–
–
2.1
–
36.7
0.3
–
–
–
57.6
(6.9)
–
13.5
–
64.2
2.2
–
–
–
37.0
66.4
312.0
(0.8)
–
(0.4)
–
(1.2)
–
–
(31.7)
1.4
(5.9)
–
(36.2)
(6.8)
–
(81.6)
1.4
(17.8)
0.5
(97.5)
(17.9)
0.4
(1.2)
(43.0)
(115.0)
35.8
35.5
33.8
23.4
28.0
25.9
197.0
213.0
216.9
All amortisation charges are recognised in profit or loss. Included within IT development costs are internally generated assets with a net
book value of £14.1m (2019: £16.5m). The amortisation charge in relation to these assets was £0.9m (2019: £0.8m). During the current period
the Group received compensation of £4.4m from one of its suppliers due to the non-performance of its obligations under contracted terms.
Given the significant investment in technology and IT development, the Group undertakes a review of the remaining useful lives of assets
each year and impairs where necessary those that are superseeded by new technology. The key estimates underpinning the value
in use for IT projects is the forecast costs. A 10% change in the forecast cost would reduce the value in use by £1.4m.
The landfill gas rights are amortised over the length of projected profitable gas extraction based upon landfill site degradation. The calculations
that determine available gas reserves involve a number of estimates and judgements. Should the amortisation profile be shortened to reflect a
weighted gas consumption in earlier years, this could result in an increased amortisation charge of circa. £8.8m in the next year, which would
the subsequently reduce in future years.
As at 27 March 2020, the landfill gas CGU had a value in use of £133.9m against assets of £131.0m. The Group’s reasonable worst case scenario
represents an increase in the gas degradation rate of the sites by an additional 2%, which would reduce the value in use by £10.5m. A change
in the discount rate from the pre tax rate from 9% to 12% would reduce the values in use by £13.5m.
The export energy prices have been assumed to be £52.42 at the end of FY24. The reasonable worst case scenario of no growth in energy
prices beyond this point would result in a reduction of £8.9m to the value in use.
IFRS 3 requires that on acquisition, intangible assets are recorded at fair value. The Biffa brand was first created in the early 20th century
and has been used throughout the Group since then. It remains a highly recognisable brand. Given the longevity of the brand, the Directors
consider the asset to have an indefinite life. The Directors reconsider the valuation of the brand at each reporting date. The recognition of
brand and landfill gas rights as intangible assets initially arose during the fair value exercise undertaken following the acquisition of the
Biffa Group by Wasteshareholderco 1 in 2008. The values were subsequently remeasured following the restructuring of the Group in 2013.
In 2019, the SWR brand was acquired on acquisition of Specialist Waste Recycling Limited for £2.1m.
129
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 14. Property, Plant and Equipment
Cost:
As at 30 March 2018
Additions
Acquired through business combination
Disposals
Reclassifications
As at 29 March 2019
Adoption of IFRS 16
As at 30 March 2019
Additions
Acquired through business combination
Disposals
Reclassifications¹
As at 27 March 2020
Accumulated depreciation:
As at 30 March 2018
Charge for the period
Impairment of assets
Disposals
Reclassifications
As at 29 March 2019
Purchase price adjustment
Charge for the period
Disposals
Reclassifications1
As at 27 March 2020
Net book amount:
As at 27 March 2020
As at 29 March 2019
As at 30 March 2018
Land and
buildings
£m
Landfill Sites
£m
Plant , vehicles
and Equipment
£m
Total
preliminary
£m
70.6
1.8
3.5
(0.4)
0.2
75.7
129.6
205.3
11.6
–
(2.1)
–
214.8
(15.6)
(4.0)
–
0.4
–
(19.2)
–
(16.5)
1.0
–
77.8
6.6
–
–
(0.5)
83.9
–
83.9
4.7
–
–
(0.2)
88.4
(41.0)
(6.1)
–
–
–
(47.1)
–
(4.9)
–
–
308.0
69.6
5.9
(45.0)
(2.9)
335.6
5.3
340.9
96.5
0.7
(42.3)
–
395.8
(50.3)
(57.6)
(0.8)
44.7
0.5
(63.5)
(1.5)
(61.2)
41.6
–
456.4
78.0
9.4
(45.4)
(3.2)
495.2
134.9
630.1
112.8
0.7
(44.4)
(0.2)
699.0
(106.9)
(67.7)
(0.8)
45.1
0.5
(129.8)
(1.5)
(82.6)
42.6
–
(34.7)
(52.0)
(84.6)
(171.3)
180.1
56.5
55.0
36.4
36.8
36.8
311.2
272.1
257.7
527.7
365.4
349.5
1 Reclasifications relate to Landfill sites includes £6.7m (2019: £7.7m) in relation to future economic benefit to be derived as a result of actively fulfilling aftercare
obligations that results in gas generation. Landfill site additions include £0.2m (2019: £0.7m) in relation to the future economic benefit to be derived as a result of
actively fulfilling aftercare obligations that results in gas generation. When the obligation recognised as a provision gives access to future economic benefits, an
asset in property, plant and equipment is recognised. Changes in the provision arising from revised estimates that relate to the asset are recorded as adjustments
to the carrying value of the asset. When the carrying value of the asset is negative, these are classified to provisions.
130
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 The Group leases assets including buildings and plant and equipment. The average lease term is 4.5 years (2019: 3.4 years). The Group has
options to purchase certain plant and equipment for a nominal amount at the end of the lease term. The Group’s obligations are secured
by the lessors’ title to the leased assets for such leases.
The valuation of certain assets within the landfill gas energy (see Note 13) and certain organic cash generating units within the Resource
and Energy segments are sensitive to a number of assumptions: the value in use is considered to be most sensitive to changes on future ROC
Recycle price, market prices for food waste, export energy prices, the growth rate and discount rates. The assumptions have been calculated
based on external market reports within the 5 year plan period. Beyond the 5 year plan period the assumptions have been inflated using the
cash-generating units assumed growth rate of 2% with the exception of landfill gas which uses 3%.
As at the 27 March 2020 the Poplars AD CGU had a value in use of £22.3m versus gross segmental assets of £21.0m.
Based on third party reports, the Group has assumed the market price for food waste at the end of FY24 to be c£28/te. The reasonable worst case
scenario would be a reduction of the price by in excess of 27% to c£20/te, this would result in a reduction to the value in use of £5.0m. An annual
reduction in haulage of £0.2m has been assumed, if this assumption was removed the value in use would reduce by £1.6m. If the Poplars AD
energy price remained flat at £52.16 this would reduce value in use by £1.0m. The ROC recycle benefit has been modelled at £7.93, if this was
£4 per ROC, it would reduce the value in use by £5.3m. If the discount rate increased to 12% this would reduce the value in use by £3.1m.
The above sensitivity analysis considers each assumption and related reasonable worst case scenario in isolation. The commercial reality
is that typically there will be mitigating operating factors that would offset the above impact in instances where the reasonable worst case
scenario is realised.
The maturity analysis of lease liabilities is presented in Note 19.
The carrying amount of the Group’s total right-of-use assets are analysed as follows:
Group £m (unless stated)
At 30 March 2019 on adoption of IFRS 16
Additions
Depreciation
Disposals
The split of new right-of-use assets recognised in the period is as follows:
Group £m (unless stated)
At 30 March 2019 on adoption of IFRS 16
Additions
Depreciation
Disposals
2020
Land and
buildings
2020
Plant,
vehicles and
equipment
131.7
9.0
(12.5)
(1.1)
127.1
137.5
41.8
(33.8)
(0.1)
145.4
2020
Land and
buildings
2020
Plant,
vehicles and
equipment
129.6
9.3
(12.4)
(1.1)
125.4
5.3
12.4
(3.7)
–
14.0
2020
Total
269.2
50.8
(46.3)
(1.2)
272.5
2020
Total
134.9
21.7
(16.1)
(1.1)
139.4
The carrying amount of the Group’s property, plant and equipment includes £422.4m (2019: £134.3m) in respect of leased assets, analysed as follows:
Group £m (unless stated)
Land and buildings
Plant, vehicles and equipment
2020
Post IFRS 16
2020
IFRS 16
adjustment
2020
Pre IFRS 16
141.3
281.1
422.4
(125.4)
(14.0)
(139.4)
15.9
267.1
283.0
2019
2.1
132.2
134.3
The accumulated depreciation of the Group’s property, plant and equipment includes £16.1m (2019: n/a) in respect of right-of-use assets.
Group £m (unless stated)
Land and buildings
Landfill sites
Plant, vehicles and equipment
No other assets have been pledged to secure borrowings.
2020
Post IFRS 16
2020
IFRS 16
adjustment
2020
Pre IFRS 16
14.2
–
135.8
150.0
(12.4)
–
(3.7)
(16.1)
1.8
–
132.1
133.9
2019
2.1
–
132.2
134.3
131
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020
14. Property, Plant and Equipment continued
Land and buildings and landfill sites at net book amount comprise:
Freehold
Long leasehold
Short leasehold
2020
2019
Land and
buildings
£m
Landfill
sites
£m
Land and
buildings
£m
36.0
40.3
103.8
180.1
15.0
13.4
8.0
36.4
37.0
13.0
6.5
56.5
Landfill
sites
£m
15.5
14.0
7.3
36.8
As at 27 March 2020 the Group had entered into contractual commitments for the acquisition of plant, property and equipment amounting to
£7.9m (2019: £6.5m).
15. Inventories
Raw materials and consumables
Finished goods
2020
£m
1.8
14.3
16.1
2019
£m
2.5
11.9
14.4
Inventories are stated at the lower of cost and net realisable value.
Inventories consumed in the period ended 27 March 2020 were £55.3m (2019: £45.8m). Inventory written down in the period totalled £nil
(2019: £nil). Reversals of inventory previously written down in the period were £nil (2019: £nil).
16. Trade and Other Receivables
Amounts falling due within one year
Trade receivables
Less expected credit loss allowance
Trade receivables – net
Other debtors
Prepayments
Prepaid landfill provision expenditure
2020
£m
139.4
(4.3)
135.1
3.2
24.1
2.9
165.3
2019
£m
125.8
(2.1)
123.7
5.0
11.9
1.4
142.0
All amounts included within other debtors and prepayments are due within one year. The movement in prepayments relate to the timing of
payments to suppliers. The in year increase £8.5m that has been paid to HMRC in respect of Landfill tax on sub-soils, further detail on this
is disclosed in Note 32. Trade receivables are non-interest bearing. Due to their short maturities, the fair value of trade and other receivables
approximates to their book value. The average credit period taken on invoices was 38.1 days (2019: 36.1days).
Credit limits for new customers are assigned based on the potential customer’s credit quality. An external credit scoring system is used
before assigning any credit limit over £500. Management monitors the utilisation of credit limits regularly. The trade receivables balance
consists of a large number of customer balances, represented largely by local account customers, and there is no significant concentration
of credit risk.
Included in the Group’s trade receivables balances are debts with a carrying amount of £21.1m (2019: £19.1m) which are past due at the
reporting date. As a result of COVID-19 and associated circumstances as at the 27 March 2020, there has been an increase in credit risk due
to a number of factors such as payment behaviour and financial position of our customers. This increase in credit risk has lead to an increase
in ECL of £2.0m.
The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there
is no realistic prospect of recovery. None of the trade receivable that have been written off is subject to enforcement activities.
The following table details the risk profile of trade receivables. As the Group’s historical credit loss experience does not show significantly
different loss patterns for different customer segments, the provision for loss allowance based on past due status is not distinguished
between the Group’s type of customer.
132
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 As at 27 March 2020
Trade receivables – days past due
1 to 30 days
31 to 60 days
61 to 90 days
91 to 120 days
Over 120 days
As at 29 March 2019
Trade receivables – days past due
1 to 30 days
31 to 60 days
61 to 90 days
91 to 120 days
Over 120 days
Expected
credit loss
rate %
Lifetime
expected
credit loss
1%
1%
1%
50%
50%
0.3
–
–
0.5
1.5
Expected
credit loss
rate %
Lifetime
expected credit
loss
1%
1%
1%
50%
50%
0.2
–
–
0.6
1.3
The allowance for ECL includes individually impaired trade receivables which are in excess of 120 days overdue, in liquidation or are the
subject of legal action. The ECL recognised represents the difference between the carrying amount of these trade receivables and the present
value of any expected recoveries.
The following table shows the movement in ECL that has been recognised in trade and other receivables in accordance with the simplified
approach set out in IFRS 9.
Movement in expected credit losses
Balance at the beginning of the period
Impairment losses recognised
Amounts recovered during the period
Amounts written off as uncollectable
Expected credit losses in relation to increase in credit risk
The Directors consider that the carrying amount of trade receivables approximates their fair value.
Long-term receivables
Amounts falling due after more than one year
Funds on long-term deposit
Prepayment in respect of EVP Dispute (Note 34)
Loans to Employee Benefit Trust
Other long-term debtors
2020
£m
2.1
0.2
1.4
(1.4)
2.0
4.3
2020
£m
2.2
63.6
–
2.4
68.2
2019
£m
1.7
0.7
0.7
(1.0)
–
2.1
2019
£m
2.4
63.6
2.9
–
68.9
The Group is engaged in a dispute with HMRC in relation to the Landfill Tax treatment of certain materials used in the engineering of landfill
sites from September 2009 to May 2012. Prior to the IPO, the Group had hardship relief which meant payment was not required to be made to
HMRC. Subsequent to the IPO the Group pre-paid the disputed amount to HMRC as disclosed in Note 34.
In determining the expected credit losses for these long-term receivables, the Directors have taken into account the historical default
experience and financial position of the counterparties. No expected credit loss has been recognised on the basis that the counterparties
are HMRC and A-rated financial institutions.
133
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 17. Cash and Cash Equivalents
Cash at bank and in hand
Short-term deposits
Balance at the end of the period
2020
£m
53.6
34.2
87.8
2019
£m
24.4
41.8
66.2
Deposits comprise £25.0m (2019: £36.2m) of funds on overnight deposit via a Group cash pooling facility and an insurance deposit of
£9.2m (2019: £5.7m) which represents cash held as security for self-insurance obligations. Included within the total cash balance is £12.0m
(2019: £6.6m) which cannot be accessed by the Group as it is held as collateral against insurance liabilities by Bray Insurance Company
Limited, which is the Group’s captive insurance company.
18. Assets Classified as Held for Sale
Freehold land held for sale
2020
£m
0.1
2019
£m
0.1
The Group holds a freehold property that it no longer requires and intends to dispose of it within the next 12 months. A search is currently
under way for a buyer and the Directors expect that the fair value less costs to sell will be higher than the carrying amount.
19. Financial Instruments
Amortised cost
Liquidity fund1
2020
£m
3.3
3.3
2019
£m
13.1
13.1
1 Current investments held by Bray Insurance Company Limited, the Group’s captive insurance company.
Derivative financial instruments
The derivatives that the Group has entered into qualify for hedge designation as a cash flow hedge under IFRS 9. The Group has entered into
forward foreign exchange rate contracts which all mature within one year. During the year the Group has also entered into interest rate swaps
which mature in line with the Group’s revolving credit facility (RCF).
The forward foreign exchange contracts have resulted in the recognition of a derivative asset of £0.4m. During the year a loss of £0.6m has
been recognised in the statement of other comprehensive income.
The fair value of forward foreign exchange contracts and interest rate swaps are calculated by discounting the contracted forward values and
translating at the balance sheet rates. The fair value measurements are classified as Level 2 in the fair value hierarchy as defined by IFRS 13
Fair Value Measurement, as the inputs are from observable quoted exchanges.
The fair value and the notional amounts are as follows:
Forward foreign exchange contracts
Interest rate swaps
2020
2019
Fair
value
£m
0.4
(1.6)
(1.2)
Notional
£m
10.9
200.0
210.9
Fair
value
£m
(0.7)
–
(0.7)
Notional
£m
16.0
–
16.0
134
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 Borrowings
Current
Lease liabilities
Non-current
Lease liabilities
Bank loans
EVP preference instrument
Bank borrowings including finance leases
EVP preference instrument
Book
value
Post
IFRS 16
£m
2020
Book
value
IFRS 16
adoption
£m
Book
value
Pre
IFRS 16
£m
2019
Average
interest
rate %
Book
value
£m
Average
interest
rate %
43.6
(15.0)
28.6
4.4%
31.7
214.4
249.0
47.6
511.0
554.6
(126.0)
–
–
(126.0)
(141.0)
88.4
249.0
47.6
385.0
413.6
4.4%
2.6%
5.5%
90.9
248.0
48.6
387.5
419.2
2020
£m
507.0
47.6
554.6
5.8%
5.8%
3.2%
5.5%
2019
£m
370.6
48.6
419.2
At 27 March 2020 the Group has an undrawn revolving credit facility (RCF) of £98m, (2019: £99m). Due to the nature of the RCF
and continued repayments and drawdowns, the cash flows were presented on a net basis in the Statement of Cash Flows.
In the year ended 29 March 2019, the Group settled its £200m term facility and entered into a £350.0m RCF. The costs of £3.0m attributed
to obtaining the facility were capitalised and continue to be amortised over the existing life of the facility. The unamortised costs of £3.8m
in relation to the historic £200m term facility were written off as a finance charge in Other items (Note 3).
In the year ended 24 March 2017 certain pre-IPO lenders were issued with preference share capital in Wasteholdco 1 Limited in exchange for
settlement of amounts due to them. In the event that the Group is successful in its EVP case (see Note 34) with HMRC, the EVP preference
shareholders will be entitled to certain funds recovered from HMRC by the Company.
The Directors consider it likely that the Group will be successful in the case and accordingly have recognised a liability in respect of the EVP
preference shares. In the event that the Group is unsuccessful in the EVP proceedings and does not recover the amount prepaid to HMRC,
the Group expects to release the majority of the associated EVP liability as disclosed in Note 34.
Borrowings are measured at amortised cost with the exception of the EVP preference instrument which is measured at fair value. All
financial assets and financial liabilities have been categorised as Level 2. Level 2 financial instruments have been valued using inputs
other than quoted prices that are observable for the asset or liability either directly or indirectly.
Interest rates on borrowings
Term facility
2020
2019
Principal
£m
249.0
Average
interest
rate
%
2.6%
Principal
£m
–
Average
interest
rate
%
3.2%
Unamortised transaction costs of £3.0m incurred in the origination of these facilities have been netted against the carrying value of the
loans. The EVP preference instrument is non-interest bearing; however, in accordance with IFRS 9 Financial Instruments, an imputed
interest charge of 5.5% (2019: 5.5%) is being recognised.
135
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 19.
Financial Instruments continued
Fair value of financial assets and liabilities
Borrowings
EVP preference instrument
Trade and other payables1 (Note 20)
Derivative financial instrument
Trade and other receivables2 (Note 16)
Financial asset arising on liquity fund³
Financial asset arising from IFRIC 12³ (Note 35)
Funds on long-term deposit
Prepayment in respect of EVP Dispute
Other long-term debtors
Cash and cash equivalents (Note 17)
2020
2019
Book
value
£m
(507.0)
(47.6)
(233.2)
(1.2)
135.1
3.3
3.4
2.2
63.6
2.5
87.8
Fair
value
£m
(507.0)
(47.6)
(233.2)
(1.2)
135.1
3.3
3.4
2.2
63.6
2.5
87.8
Book
value
£m
(370.6)
(48.6)
(189.1)
(0.7)
123.7
13.1
–
2.4
63.6
2.9
66.2
Fair
value
£m
(370.6)
(48.6)
(189.1)
(0.7)
123.7
13.1
–
1.4
62.9
2.9
66.2
(491.1)
(491.1)
(337.1)
(338.8)
1 Trade and other payables excludes deferred income, taxation and social security and other non-financial liabilities.
2 Trade and other receivables excludes prepayments, other debtors and accrued income.
3 Total financial assets are the liquidity fund and IFRIC 12.
The fair values of financial assets and liabilities are determined as follows:
Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves
derived from quoted interest rates.
The fair values of non-derivative financial assets and liabilities are determined based on discounted cash flow analysis using current market
rates for similar instruments.
Financial risk management
The Group’s activities expose it to a variety of financial risks: market risk (including capital risk management, cash flow interest rate risk,
currency risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programmes focus on the unpredictability
of financial markets and seek to minimise potential adverse effects on the Group’s financial performance. Financial risk management in
the above areas is carried out under a policy approved by the Board of Directors.
Capital risk management
The Group manages its capital structure using a number of measures and taking into account its future strategic plans. Such measures
include its net interest cover, liquidity and leverage ratios. Total capital is calculated as ‘equity’ as shown in the consolidated statement of
financial position plus Net Debt. Net Debt is calculated as total borrowings (including ‘current and non-current borrowings as shown in the
consolidated statement of financial position) less cash and cash equivalents. The Directors are satisfied that the current risk management
strategy is appropriate and effective.
Cash flow interest rate risk
The Group’s interest-bearing assets include cash and cash equivalents which earn interest at floating rates. The Group’s income and
operating cash flows are substantially independent of changes in market interest rates. The Group’s interest rate risk arises from long-term
borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Group policy is to maintain an appropriate
proportion of its borrowings at fixed rate using interest rate swaps to achieve this when necessary.
136
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 The interest rate risk profile of the Group’s financial assets and liabilities was as follows:
Financial liabilities
Floating rate financial liabilities (excluding derivatives)
Fixed rate financial liabilities
Non-interest bearing financial liabilities
Non-interest bearing EVP preference instrument
Total financial liabilities
2020
Post IFRS 16
£m
2020
IFRS 16
adoption
£m
2020
Pre IFRS 16
£m
249.0
258.0
233.2
47.6
787.8
–
(141.0)
–
–
(141.0)
249.0
117.0
233.2
47.6
646.8
Fixed rate financial liabilities relate to lease liabilities. Non-interest bearing financial liabilities comprise trade payables.
Financial assets
Floating rate financial assets (excluding derivatives)
Floating rate financial assets (cash and cash equivalents)
Non-interest bearing assets
Liquidity fund
Non-interest bearing financial assets
Total financial assets
2020
£m
65.7
87.8
153.5
3.4
135.1
138.5
292.0
2019
£m
248.0
122.6
189.1
48.6
608.3
2019
£m
68.6
66.2
134.8
13.1
123.7
136.8
271.6
The interest on fixed rate financial instruments is fixed until the maturity of the investment. The interest on floating rate financial
instruments is re-set at intervals of less than one year. The other financial assets and liabilities of the Group that are not included in
the above tables are non-interest bearing and therefore not subject to interest rate risk.
Fixed rate and non-interest bearing financial assets and liabilities are exposed to fair value interest rate risk and floating rate financial
assets and liabilities to cash flow interest rate risk.
The minimum payments for lease liabilities fall due as follows:
No later than one year
Later than one year but not more than five years
More than five years
Future finance charges on leases liabilities
Present value of lease liabilities
2020
Post IFRS 16
£m
51.7
145.6
144.3
341.6
(83.6)
258.0
2020
IFRS 16
£m
(19.5)
(63.8)
(123.4)
(206.7)
65.7
(141.0)
2020
Pre IFRS 16
£m
32.2
81.8
20.9
134.9
(17.9)
117.0
2019
£m
35.6
84.1
23.3
143.0
(20.4)
122.6
Currency risk
The Group is exposed to currency risk arising from currency exposures primarily related to the disposal of RDF via export to Europe. The
Group enters into forward contracts to purchase Euros based upon expected costs. These derivatives are classified as cash flow hedges.
Price risk
The Group is not materially exposed to any equity securities price risk. Both divisions are exposed to commodity price risks to a greater
or lesser degree on their outputs. The commodities that the Group is exposed to commodity price risks on are fuel, electricity, paper, glass,
cardboard, steel, aluminium and plastics (including HDPE and PET). The price risk associated with commodities is considered to be in the
ordinary course of business for the Group.
Credit risk
Credit risk is managed on a Group basis as appropriate. Credit risk arises from cash and cash equivalents, derivative financial instruments
and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables. For banks
and financial institutions, only independently rated parties with a minimum rating of A are accepted.
137
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 19. Financial Instruments continued
Credit risk continued
Management does not expect any significant losses of receivables that have not been provided for as shown in Note 16.
The carrying amount of financial assets recorded in the financial information, which is net of impairment losses, represents the Group’s
maximum exposure to credit risk. These amounts include receivable balances from local authority clients, hence are not exposed to
significant credit risk. Given the above factors, the Board does not consider it necessary to present a detailed analysis of credit risk.
Liquidity risk
The Group ensures that there are sufficient committed loan facilities in order to meet short-term business requirements, after taking into
account the cash flows from operations and its holding of cash and cash equivalents. The expected undiscounted cash flow of the Group’s
financial liabilities (including derivatives), by remaining contractual maturity, at the balance sheet date is shown below:
Non-derivative financial liabilities
Borrowings, excluding lease liabilities
Lease liabilities
IFRS 16 lease liability
Trade and other payables
Contract liabilities
Non-derivative financial assets
Cash and cash equivalents
Liquidity fund
Trade and other receivables
Contract assets
Non-derivative financial liabilities
Borrowings, excluding finance lease
Finance lease liabilities
Interest payments on borrowings
Other non-interest bearing liabilities
Non-derivative financial assets
Cash and cash equivalents
Liquidity fund
Non-interest bearing financial assets
2020
Due within
one year
£m
Due between
one and
two years
£m
Due between
two and
five years
£m
Due five
years and
beyond
£m
–
(252.0)
(25.9)
(13.8)
(49.4)
(37.3)
–
(13.1)
(74.9)
Total
£m
(252.0)
(117.0)
(141.0)
(233.2)
(17.9)
87.8
3.4
203.3
56.2
–
–
–
–
–
–
–
–
–
–
–
–
–
(28.6)
(15.0)
(233.2)
(17.9)
87.8
3.4
135.1
56.2
(12.2)
–
–
–
–
68.2
–
28.5
(338.7)
(88.0)
(410.4)
2019
Due within
one year
£m
Due between
one and
two years
£m
Due between
two and
five years
£m
Due five
years and
beyond
£m
–
(35.6)
–
(189.1)
66.2
13.1
123.7
(21.7)
–
(28.3)
(251.0)
(55.7)
–
(23.3)
–
–
–
–
68.9
40.6
–
–
–
–
–
–
–
–
–
–
(306.7)
(23.3)
Total
£m
(251.0)
(142.9)
–
(189.1)
66.2
13.1
192.6
(311.1)
Interest rate sensitivity analysis
The sensitivity analyses below have been determined based on the exposure to interest rates for both derivative and non-derivative
instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared taking an average of the liability outstanding
over the period.
During the year ended 27 March 2020, the Group entered into a £200m Interest Rate Swap to fix its variable exposure to LIBOR. If interest
rates had been 2% higher/1% lower and all other variables were held constant, the Group’s result for the 52 weeks ended 27 March 2020 would
increase/(decrease) by the amounts shown in the table below. This analysis assumes that, where interest rates are currently less than 1%, any
reduction is capped at zero.
2020
2019
2% increase
interest rates
£m
1% decrease
interest rates
£m
2% increase
interest rates
£m
1% decrease
interest rates
£m
Gain/(loss) – variable rate financial instruments
(1.0)
0.4
(4.2)
2.7
138
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 20. Trade and Other Payables
Current
Trade payables
Taxation and social security
Interest payable
Accruals
Other payables
Non-current
Trade and other payables
£13.0m has been recognised in relation to the EVP Dispute as disclosed in Note 33.
2020
£m
176.7
40.9
0.8
55.2
0.6
274.2
2019
£m
155.9
42.9
–
32.6
0.6
232.0
13.6
13.7
21. Provisions
As at 30 March 2018
Utilised
Charged/(credited) to profit and loss account
Impact of real discount rate changes to profit and loss
account
Unwinding of discount
Transfers from fixed/other assets
As at 29 March 2019
Utilised
(Credited)/charged to profit and loss account
Impact of real discount rate changes to profit and loss
account
Unwinding of discount
Transfers from fixed/other assets
As at 27 March 2020
Provisions have been analysed between current and non-current as follows:
Current
Non-current
Landfill
restoration &
aftercare
£m
Insurance
£m
Onerous
Contracts
£m
74.2
(9.3)
(0.8)
1.6
2.0
(0.3)
67.4
(8.0)
(0.9)
(4.9)
1.7
1.3
56.6
12.6
–
(1.1)
–
–
–
11.5
(0.4)
(0.1)
–
–
–
7.7
–
9.4
–
–
–
17.1
–
(1.7)
–
–
–
Other
£m
11.9
(1.1)
(0.5)
–
–
–
10.3
(2.4)
4.4
–
–
–
11.0
15.4
12.3
2020
£m
10.2
85.1
95.3
Total
£m
106.4
(10.4)
7.0
1.6
2.0
(0.3)
106.3
(10.8)
1.7
(4.9)
1.7
1.3
95.3
2019
£m
16.0
90.3
106.3
Landfill restoration and aftercare
As part of its normal activities, the Group undertakes to restore its landfill sites and to maintain the sites and control leachate and methane
emissions from the sites. Provision is made for these anticipated costs. A number of estimate uncertainties affect the calculation, including
the impact of regulation, accuracy of site surveys, transportation costs and changes in the real discount rate. The provisions incorporate
our best estimates of the financial effects of these uncertainties, but future changes in any of these estimates could materially impact the
calculation of the provision. Restoration costs are incurred as each site is filled and in the period immediately after its closure. The provision
incorporates the best estimate of the financial effect of these uncertainties, but future changes in any of the assumptions could materially
impact the calculation of the provision.
Maintenance and leachate and methane control costs are incurred as each site is filled and for a number of years post closure.
Aftercare costs are incurred as each site is filled and for a number of years post closure. This period can vary significantly from site to site,
depending upon the types of waste landfilled and the speed at which it decomposes, the way the site is engineered and the regulatory
requirements specific to the site.
139
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 21. Provisions continued
Changes in the provision arising from revised estimates or discount rates or changes in the expected timing of expenditures that relate
to property, plant and equipment are recorded as adjustments to their carrying value and depreciated prospectively over their remaining
useful economic lives; otherwise such changes are recognised within the income statement.
The associated outflows are estimated to arise over a period of up to 60 years depending on the date of each site closure. In determining the
provision, the estimates for future expenditure required to settle the obligation are inflated using longer-term inflation rates, and discounted
using the nominal discount rate. The rates utilised reflect the period of the obligation on a site by site basis which varies between 10 and
60 years.
Long-term aftercare provisions included in landfill restoration and aftercare provisions have been inflated and discounted using the below
nominal rates:
Period of obligation
5 years
10 years
20 years
30 years
60 years
Inflation rate
Discount rate
2020
2.1%
2.3%
2.3%
2.1%
1.6%
restated
2019
2.4%
2.4%
2.7%
2.5%
2.1%
2020
2.1%
2.1%
2.5%
2.4%
2.2%
2019
1.4%
1.9%
2.5%
2.5%
2.4%
An increase of 1% in the real discount rate (at current cost) would result in a decrease of environmental provisions of approximately £10.3m.
A 10% increase in cash outflows would result in an increased environmental provision of £5.9m.
Long-term aftercare provisions included in landfill restoration and aftercare provisions have been inflated at a rate of 2.3% (2019: 2.4%).
An increase of 1% in the rate of inflation would result in an increase of environmental provisions of approximately £14.3m.
Insurance
The associated outflows are estimated to arise over a period of up to five years from the balance sheet date.
Other
Other provisions include a provision for dilapidations of £7.8m (2019: £8.0m) and £15.4m (2019: £17.1m) relating to onerous contracts.
The associated outflows are estimated to arise over a period of up to 20 years from the balance sheet date.
22. Deferred Taxation
The following are the major deferred tax assets and liabilities recognised by the Group and movements thereon during the current period:
Temporary
difference
arising on
property,
plant and
equipment
£m
32.4
(0.5)
(2.4)
–
–
29.5
0.3
(7.9)
–
21.9
Share-based
payments
£m
Provisions
£m
Retirement
benefit
obligation
£m
Goodwill
£m
Intangible
assets
£m
Recognised
tax losses
carried
forward
£m
1.8
–
0.5
–
(0.9)
1.4
–
(0.4)
(0.2)
0.8
1.9
–
(1.0)
–
–
(8.5)
–
–
(4.9)
–
0.9
(13.4)
–
–
–
–
(1.9)
(8.3)
8.6
–
(0.9)
–
–
7.7
–
–
–
(33.5)
(2.7)
3.0
–
–
(33.2)
(0.5)
(0.7)
–
0.9
(23.6)
7.7
(34.4)
11.8
–
(2.6)
–
–
9.2
–
0.2
–
9.4
Total
£m
14.5
(3.2)
(3.4)
(4.9)
(0.9)
2.1
(0.2)
(10.7)
(8.5)
(17.3)
As at 30 March 2018
Acquired
Credit/(charge) to income statement
Credit/(charge) to SOCI
Credit/(charge) to retained earnings
As at 29 March 2019
Acquired
Credit/(charge) to income statement
Credit/(charge) to SOCI
As at 27 March 2020
A deferred tax liability of £17.3m (2019: £2.1m asset) has been recognised in the current year using the tax rate of 19% (2019: 17%). Deferred
tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities.
As at 27 March 2020 the Group had unused tax losses of £66.9m (2019: £71.9m) available for offset against future profits.
A deferred tax asset has been recognised in respect of £49.6m (2019: £54.7m) of these losses. No deferred tax asset has been recognised
in respect of the remaining £17.2m (2019: £17.2m) as it is not considered probable that there will be future taxable profits available in the
statutory entity in which these losses are being carried forward.
140
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 23. Share-based Payments
Date of grant
20 October 2016
24 January 2017
3 July 2017
1 September 2017
2 July 2018
1 October 2018
11 December 2018
1 July 2019
The following share-based expenses charged in the year are included within administration expenses:
Performance Share Plan
2020
Number
–
–
2019
Number
2,282,240
59,088
1,575,164
1,622,420
26,230
870,176
218,359
18,819
1,773,988
2020
£m
3.0
26,230
936,125
218,359
18,819
–
2019
£m
3.8
During the year the Group had three conditional share-based payment arrangements granted to Directors and employees. The schemes are
equity settled.
Performance Share Plan
Date of grant
20 October 2016
24 January 2017
3 July 2017
1 September 2017
2 July 2018
1 October 2018
11 December 2018
1 July 2019
Number of
options
originally
granted
Contractual
life
(years)
Share price
at date
of grant
(pence)
Number of
employees
at grant
Expected
volatility
Expected life
(years)
Risk free
rate
Fair value
per option
(pence)
2,635,794
2.65
84,189
2,198,313
26,230
1,014,880
218,359
18,819
1,773,988
2.4
3.0
2.8
2.9
2.9
2.9
3.0
179.5
186.8
221.8
228.8
251.0
253.0
192.2
211.0
13
4
78
1
36
2
1
37
27%
27%
26%
26%
24%
24%
24%
25%
2.65
2.4
3.0
2.83
2.93
2.93
2.93
3.0
0.25%
0.23%
0.36%
0.22%
0.71%
0.89%
0.90%
0.54%
105.2
109.3
154.6
161.8
173.2
173.8
114.1
112.8
The Group has used the stochastic model to value its share awards.
The expected volatility is a measure of the amount by which a share price is expected to fluctuate during the period. It is typically calculated
based on statistical analysis of daily share prices over the length of the award period. Due to the recent listing of Biffa plc this information
is not available. Instead it has been based on the volatility of another company of a similar size which operates in the same market.
A reconciliation of movements in the number of share awards can be summarised as follows:
Date of grant
20 October 2016
24 January 2017
3 July 2017
1 September 2017
2 July 2018
1 October 2018
11 December 2018
1 July 2019
At 27 March 2020
Number of
options
originally
granted
Vested
Lapsed/
forfeited
27 March 2020
2,635,794
(1,664,399)
(971,395)
84,189
(43,157)
(41,032)
–
–
2,198,313
26,230
1,014,880
218,359
18,819
1,773,988
–
–
–
–
–
–
(623,149)
1,575,164
–
(144,704)
–
–
–
26,230
870,176
218,359
18,819
1,773,988
7,970,572
(1,707,556)
(1,780,280)
4,482,736
141
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 23. Share-based Payments continued
The Performance Share Plan (PSP) provides for the grant of awards in the form of conditional free shares or nil-costs options. Shares in
relation to the award will be released to participants subsequent to the date of the preliminary announcement of results for the 2019/20
financial year dependent upon the extent to which the performance conditions of achievement of adjusted EPS targets for the fiscal year
ended March 2020 and performance of the Company’s relative total shareholder growth have been satisfied. The EPS fair value is equivalent
to the share price at grant date on the basis that it is a non-market based measure.
In 2017 the Group launched the Biffa Sharesave Plan 2017 (the Scheme) to all employees with six months’ or more continuous employment
at the date of the Scheme launch. The Scheme is subject to HMRC rules which limit monthly contributions to £500 and the option price for
this award was £1.58 being a 20% discount to the average market price over the three consecutive days preceding the offer date. The Scheme
term is for three years and options may be exercised during the six months after completion of the Save as You Earn contract.
During the period 444,438 options were granted at a fair value of 34.8 pence, and as at 27 March 2020 403,290 were outstanding under the
Scheme. The share price at award was £2.07 and the option price was £1.81.
24. Share Capital
As at 29 March 2019
As at 27 March 2020
Number of
shares
Called up share
capital
£
250,000,000
2,500,000
250,000,000
2,500,000
Share premium
The share premium represents amounts received in excess of the nominal value of shares issued upon IPO, net of the direct costs associated
with issuing those shares.
As at 27 March 2020 and 29 March 2019
£m
235.3
Merger reserve
The merger reserve of £74.4m arose on the acquisition of Wasteholdco 1 Limited and is the difference between the carrying value of the net
assets acquired and the nominal value of the share capital.
25. Retained Earnings/(Deficit)
Retained earnings/(deficit) at the start of the period
Adjustment in respect of adoption of IFRS 15
Profit for the period
Other comprehensive income for the period
Shares purchased by employee benefit trust
Employee service in respect of share option schemes (Note 23)
Dividends paid
Retained surplus at the end of the period
2020
£m
48.4
–
45.6
32.6
(9.1)
2.4
(18.3)
101.6
2019
£m
29.0
(6.2)
18.0
22.4
–
2.2
(17.0)
48.4
142
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 26. Cash Flows from Operations
Profit/(loss) for the period
Adjustments for:
Finance income
Finance charges
Share of result in joint venture
Taxation
Operating profit
Share based payments
Exceptional items (Note 3)
Amortisation of intangibles (Note 6)
Depreciation of property, plant and equipment (Note 6)
Profit on disposal of fixed assets
(Increase) in inventories
(Increase)in receivables
Increase in payables
(Increase)/decrease in financial asset
(Decrease) in provisions
Total cash generated from operations
27. Reconciliation of Net Cash Flow to Movement in Debt
Net increase in cash and cash equivalents
Net (increase) in borrowings
Movement in Net Debt in the period
Net Debt at beginning of period
Net Debt at end of period
Analysis of Net Debt
Cash and cash equivalents
Lease liabilities
Bank loans
EVP preference liability
Reported Net Debt
EVP preference liability
2020
£m
45.6
(3.4)
21.0
0.1
10.8
74.1
3.0
4.4
17.9
82.6
(1.0)
(1.7)
(14.7)
32.3
9.2
(12.3)
193.8
2020
£m
21.6
(135.4)
(113.8)
(353.0)
(466.8)
2020
Pre IFRS 16
£m
87.8
(117.0)
(249.0)
(6.3)
(284.5)
(41.3)
(325.8)
2019
£m
18.0
(1.5)
25.4
–
3.5
45.4
3.8
18.2
17.8
67.7
(2.2)
(1.7)
(0.9)
4.1
(8.2)
(11.0)
133.0
2019
£m
25.4
(59.5)
(34.1)
(318.9)
(353.0)
2019
£m
66.2
(122.6)
(248.0)
(6.3)
(310.7)
(42.3)
(353.0)
2020
Post IFRS 16
£m
87.8
(258.0)
(249.0)
(6.3)
(425.5)
(41.3)
(466.8)
2020
IFRS 16
£m
–
141.0
–
–
141.0
–
141.0
Of the EVP preference liability, £6.3m has been included within Reported Net Debt as it will be payable to EVP preference shareholders
irrespective of the outcome of the EVP Dispute. The remaining £41.3m has been excluded on the basis that it will only become payable
subject to the outcome of the EVP Dispute and will be funded by recovery of funds from HMRC.
The Groups leverage is calculated on reported Net Debt as follows:
Cash and cash equivalents
Lease liabilities
Bank loans
EVP preference liability
Reported Net Debt
Reported Net Debt: EBITDA
2020
Post IFRS 16
£m
87.8
(258.0)
(249.0)
(6.3)
(425.5)
2.4x
2020
IFRS 16
£m
–
141.0
–
–
141.0
(0.6)x
2020
Pre IFRS 16
£m
87.8
(117.0)
(249.0)
(6.3)
(284.5)
1.8x
2019
£m
66.2
(122.6)
(248.0)
(6.3)
(310.7)
2.1x
143
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 27. Reconciliation of Net Cash Flow to Movement in Debt continued
Changes in liabilities arising from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes.
Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s
consolidated cash flow statement as cash flows from financing activities.
As at
27 March
2020
(258.0)
(249.0)
(47.6)
As at
29 March
2019
Adoption of
IFRS 16
Financing
cash flows
Fair value
movements
Acquisition
of subsidiary
New
finance
leases
Other
changes
Non-cash changes
Lease liabilities
Bank loans
EVP preference liability
(122.6)
(134.9)
(248.0)
(48.6)
–
–
(419.2)
(134.9)
50.2
(1.0)
–
49.2
–
–
1.0
1.0
(0.5)
(50.8)
–
–
–
–
0.6
–
–
(0.5)
(50.8)
0.6
(554.6)
The cash flows in respect of the Group’s bank loans include repayments of £251.0m and drawdowns of £252.0m.
Obligations under finance leases
Bank loans
EVP preference liability
Non-cash changes
As at
29 March
2018
(118.8)
(194.7)
(46.2)
(359.7)
Financing
cash flows
Fair value
movements
Acquisition
of subsidiary
New
finance
leases
Other
changes
33.0
(45.1)
–
(12.1)
–
–
(2.4)
(2.4)
(1.9)
(36.5)
–
–
–
–
(1.9)
(36.5)
1.6
(8.2)
–
(6.6)
As at
29 March
2019
(122.6)
(248.0)
(48.6)
(419.2)
28. Lease Liabilities
2020 undiscounted lease liability maturity analysis under IFRS 16
Within one year
Between one and five years
After five years
Reconciliation of operating leases under IAS 17 to opening IFRS 16
Operating lease commitments disclosed under IAS 17 at 29 March 2019
Short-term and low-value lease commitments straight-line expensed under IFRS 16
Effect of discounting
Exempt
Lease liabilities recognised at 30 March 2019
Land and
buildings
£m
15.0
54.8
133.0
202.8
2020
Other
£m
36.7
90.8
11.3
138.8
Total
£m
51.7
145.6
144.3
341.6
2020
£m
173.4
(0.7)
(37.6)
(0.2)
134.9
Amounts recognised in the Income Statement arising from IFRS 16 lease liabilities have been included in Note 6. These charges include
depreciation and short-term or exempt leases. Interest on lease liabilities have been summarised in Note 4. Right-of-use assets and
the associated movement in the year are summarised in Note 14. The transition narrative in relation to IFRS 16 is included in Note 1.
Repayment of lease liabilities are included within the Statement of Cash flow.
2019 operating leases under IAS 17
Within one year
Between one and five years
After five years
144
Land and
buildings
£m
14.4
51.0
102.5
167.9
2019
Other
£m
2.4
3.1
–
5.5
Total
£m
16.8
54.1
102.5
173.4
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020
29. Pension and Post-retirement Benefits
Defined contribution schemes
Defined contribution expense
2020
£m
10.2
2019
£m
9.8
Defined benefit schemes
The Group operates a number of defined benefit schemes: Biffa Pension Scheme (BPS), the Cornwall Pension Fund (the Cornwall Fund), an
Unfunded Unapproved Retirement Benefits Scheme (UURBS), the Federated Pension Plan (FPP), Prudential Platinum (Platinum), the Kent
County Council Pension Fund (the Kent Fund), the Staffordshire Pension Fund (the Staffordshire Fund) and the Greater Manchester Pension
Fund (GMPF) (collectively, the Schemes). The Schemes offer both pensions in retirement and death benefits to members. All the Schemes
are closed to new members. The BPS, Platinum, the Cornwall Fund, the Kent Fund and the Staffordshire Fund are open to accrual although
the BPS is closed for the majority of members and only a few employees with statutory protections remain in active service. The BPS makes
up around 95% of the total liability across the Schemes.
The Schemes expose the Group to actuarial risks such as market (investment) risk, interest rate risk, inflation risk currency risk and
longevity risk. Contributions to the Schemes for the year ended 26 March 2021 are expected to be £5.9m.
The Schemes’ are administered by Trustees and the assets are held separately to the legal entity that is the Group. The Trustee board
of the Schemes is composed of an independent Trustee, and other employer and member nominated Trustees (where the legal minimum
proportion of member nominated Trustees has been upheld). The Trustees are required by law to act in the best interests of the members
of the Scheme. The Trustees are responsible for the investment policy with regard to the assets of the Schemes.
The Group considers two measures of the Schemes surplus or deficit. The accounting position is shown on the Group balance sheet. The
funding position, calculated at the triennial actuarial assessment, is used to agree contributions to the Schemes. The two measures will
vary because they are for different purposes, and are calculated at different rates and in different ways. The key calculation difference is
that the funding position considers the expected returns of Scheme assets when calculating the Schemes liability, whereas the accounting
position under IAS 19 discounts liabilities based on corporate bond yields.
The Schemes have an accounting surplus that is fully recognised on the basis that future economic benefits are unconditionally available
in the form of a reduction in the future cash contributions or as a cash refund. Where a surplus of a defined benefit scheme arises or there
is potential for a surplus to arise from committed future contributions the rights of the Trustees to prevent the Group obtaining a refund
of that surplus is considered in determining whether it is necessary to restrict the amount of the surplus that is recognised.
A full actuarial valuation of the Schemes was carried out as at 31 March 2015 which revealed a funding shortfall of £66.7m. The Group
committed to deficit payments of £3.85m each year to 31 March 2017 and escalating with RPI inflation each year from 31 March 2018 to
31 March 2024.
The Group is an admitted body in one other scheme that is part of the Local Government Pension Schemes. The contractual terms of the
commercial agreements that admit the Group to the schemes limit the actuarial risk that the Group is exposed to; consequently the scheme
has been accounted for as a defined contribution scheme.
Investment risk
The present values of the Schemes’ liabilities are calculated using a discount rate determined by reference to yields available on high-quality
AA-rated corporate bond yields; in other words, from the position of being fully funded then if the return on the Schemes’ assets were below
this rate, it would create a deficit in the Schemes.
In addition to the natural interest rate hedging provided by its investment in bonds the Trustee also purchases derivatives to ensure that the
funding position of the Schemes are, overall, hedged against 60% of movements in long-term risk free interest rates and 60% of movements
in inflation expectations. No annuities or specific mortality hedging products have been purchased by the schemes.
Interest risk
A decrease in the corporate bond yield will increase the Schemes’ liabilities; however, this will be partially offset by an increase in the value
of the Schemes’ corporate bond assets.
Longevity risk
The present values of the Schemes’ liabilities are calculated by reference to the best estimate of the mortality of the Schemes’ members
both during and after their employment. An increase in the life expectancy of the Schemes’ members will increase the Schemes’ liabilities.
Inflation risk
The present values of the Schemes’ liabilities are calculated by reference to the future expected pension indexation (both indexation in
deferment and pension increases in payment), which will depend on future inflation expectations. As such, an increase in the expectation
of future inflation will increase the Schemes’ liabilities.
The lump sum death benefits paid to the dependants of the Schemes’ members are insured with an external insurance company.
The present value of the obligation, and the related current service cost and past service cost, were measured using the projected unit
credit method.
The COVID-19 pandemic
The COVID-19 pandemic has had a global impact on economies, equity and bond markets. Market volatility during March has had an impact
on the value of assets held by our DB and DC pension plans. Our UK DB plans have low-risk investment strategies with limited exposure to
equities and other return seeking assets.
145
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 29. Pension and Post-retirement Benefits continued
A full actuarial valuation of the Schemes was carried out as at 31 March 2015 and has been updated to 27 March 2020 by a qualified
independent actuary. The major assumptions used by the actuary were (in nominal terms) as follows:
Discount rate
Rate of salary increase
Rate of inflation – RPI
Rate of inflation – CPI
Rate of pension increases1 – RPI with floor of 0% cap of 2.5% p.a.
Rate of pension increases1 – RPI with floor of 0% cap of 5.0% p.a.
Rate of pension increases1 – RPI with floor of 0% cap of 6.0% p.a.
Rate of pension increases1 – CPI with floor of 0% cap of 3.0% p.a.
Longevity (years)
Expected future lifetime of a male pensioner currently aged 65
Expected future lifetime of a female pensioner currently aged 65
Expected future lifetime from age 65 of a male member currently aged 50
Expected future lifetime from age 65 of a female member currently aged 50
1 In excess of any Guaranteed Minimum Pension (GMP).
The assets in the Schemes were:
Asset category
Equities
Bonds
Properties and infrastructure
Hedge funds
Other
Actual return on plan assets
2020
£m
102.8
327.8
80.9
39.5
48.3
599.3
26.3
%
17.1%
54.7%
13.5%
6.6%
8.1%
2019
£m
2.5%
3.3%
3.3%
2.3%
2.2%
3.2%
3.3%
2.2%
21.0
23.3
22.0
24.1
%
21.4
51.4
15.8
8.5
2.9
2020
£m
2.5%
2.5%
2.8%
2.0%
2.1%
2.8%
2.8%
1.9%
20.9
22.9
21.9
24.5
2019
£m
126.2
301.9
92.8
49.9
16.8
587.6
46.9
The fair value of all of the above asset classes are determined based on quoted (bid) market prices. Virtually all equity and debt instruments
have quoted prices in active markets. Derivatives are classified as Level 2 instruments and hedge funds and property as Level 3 instruments.
It is the policy of the Schemes to use hedge funds and liability driven investments to hedge some of their exposure to interest rate and
inflation risks. This policy has been implemented during the current and prior years.
The key source of estimation uncertainty relates to the valuation of the property portfolio, where a valuation is obtained annually from
professionally qualified external valuers. The evidence to support these property valuations is based primarily on recent, comparable
market transactions on an arm’s length basis. However the assumptions applied are inherently subjective and so are subject to a degree
of uncertainty, especially as a result of Covid-19 and volatile assumptions as at the balance sheet date.
An increase in the property valuation of 10% would increase pension assets by £8.1m. An increase in the valuation of unquoted assets of 10%
would increase pension assets by £1.2m.
Reconciliation of opening and closing balances of the present value of the defined benefit obligation
Benefit obligation at beginning of period
Newly recognised obligations
Service cost
Past service cost
Interest cost
Contributions by Scheme participants
Net remeasurement (gains)/losses – financial
Net remeasurement (gains) – demographic
Net remeasurement (gains) – experience
Benefits paid
Benefit obligation at end of period
146
2020
£m
523.8
–
2.8
–
12.9
0.4
(29.3)
(0.4)
(4.5)
(19.8)
485.9
2019
£m
472.8
42.6
3.2
3.1
13.7
0.5
29.2
(7.9)
(14.5)
(18.9)
523.8
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 Reconciliation of opening and closing balances of the fair value of Schemes’ assets
Fair value of Schemes’ assets at beginning of period
Newly recognised GMPF asset
Interest income on Schemes’ assets
Return on assets, excluding interest income
Contributions by employers
Contributions by Schemes’ participants
Benefits paid
Scheme administrative cost
Fair value of plan assets at end of period
Amounts recognised in comprehensive income in respect of defined benefit Schemes
Current service cost
Past service cost
Administrative cost
Adjustment in respect of Greater Manchester Pension Fund
Net interest on the net defined benefit liability
Components of defined benefit cost recognised in profit or loss
Remeasurement on the net defined benefit liability
Return on Schemes’ assets (excluding amounts in net interest expense)
Actuarial gains and losses from changes in financial assumptions
Actuarial gain from changes in demographic assumptions
Actuarial gain from changes in experience assumptions
Movement in asset ceiling
Components of defined benefit cost recognised in other comprehensive income
2020
£m
587.6
–
14.5
11.8
5.9
0.4
(19.8)
(1.1)
599.3
2020
£m
2.8
–
1.1
(0.7)
(2.0)
1.2
11.8
29.4
0.4
4.5
(5.2)
40.9
2019
£m
524.9
29.2
14.6
32.3
5.8
0.5
(18.9)
(0.8)
587.6
2019
£m
3.2
3.1
0.8
(0.8)
(1.3)
5.0
32.3
(29.2)
7.9
14.5
1.8
27.3
The current service cost is included in operating costs in profit or loss. The net interest expense is included within finance charges in the
consolidated statement of profit or loss.
The remeasurement of the net defined benefit liability is included in other comprehensive income.
The amount included in the consolidated statement of financial position arising from the Group’s obligation in respect of its defined benefit
Schemes is as follows:
Present value of funded defined benefit obligation
Fair value of funded Schemes’ assets
Adjustment for the restriction in asset benefit
Adjustment in respect of GMPF agreement
Net asset arising from defined benefit obligation
2020
£m
(485.9)
599.3
(1.7)
13.0
124.7
2019
£m
(523.8)
587.6
(0.3)
15.5
79.0
Significant actuarial assumptions for the determination of the defined benefit obligation are the discount rate, expected future inflation
and mortality. The sensitivity analyses below have been determined based on reasonably possible changes of the respective assumptions
occurring at the end of the reporting period, while holding all other assumptions constant.
If the discount rate is 0.5% lower the defined benefit asset would decrease by £50.5m (2019: £56.6m).
If the inflation assumption increases by 0.5% the defined benefit asset would decrease by £42.6m (2019: £44.2).
If the life expectancy increases by one year for both men and women, the defined benefit asset would decrease by £19.4m (2019: £21.8m).
147
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020
29. Pension and Post-retirement Benefits continued
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely
that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the
projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation
liability recognised in the statement of financial position.
The Schemes’ participating employers are Biffa Waste Services Limited, Biffa Municipal Limited, Biffa Environmental Municipal Services
Limited, Biffa Leicester Limited and Biffa West Sussex Limited. These subsidiaries fund the cost of any protected members’ future accrual
(to the extent that any protected members remain working for each of these companies) earned on a yearly basis.
Protected members pay a range of fixed contributions of pensionable salary depending on what section of the Schemes they are in. These
contributions range from 3% to 6% of pensionable salary. The residual contribution (including past service augmentations) is paid by the
above entities of the Group. These contributions, required to fund accrual, are agreed between Biffa Corporate Holdings Limited (the Principal
Employer) and the Trustees of the Schemes following each triennial valuation of the Schemes.
In accordance with the Pensions Act 2004, the Schemes’ liabilities are measured using a prudent discount rate at the triennial valuation,
but some asset outperformance is allowed for when calculating the deficit recovery contributions paid for by the participating employers.
Additional liabilities stemming from past service due to augmentation of benefits are added to the Schemes’ deficit.
The average duration of the benefit obligation at 27 March 2020 is approximately 21 years (2019: 21 years).
The Group expects to make a contribution of £4.0m (2019: £4.1m) to the Schemes during the financial year to 26 March 2021.
30. Related Party Transactions
There have been no material related party transactions in the 52 weeks ended 27 March 2020 (2019: nil) except for key management
compensation as set out in the Directors’ Remuneration Report.
Details of the Directors’ remuneration are set out in the Directors’ Remuneration Report on pages 62–83. There have been no related party
transactions with any directors in the year or in the subsequent period.
During the year to 27 March 2020, the Group invested £5m in Newhurst ERF Limited a joint venture that the Group holds 50% share in through
Newhurst ERF Holding Limited. This is therefore a related party of Biffa Plc. On financial close the Group received from the joint venture
reimbursement for development costs incurred. There was one other related party transaction in the year. The Group issued loan notes
of £2.2m to Newhurst ERF Holding Limited, the parent company of Newhurst ERF Limited. Both parties can redeem the notes at any time.
Annual rate of interest on the notes is eight per cent. This whole balance remained outstanding at year end. None of the amount is deemed
to be uncollectable and no expenses have been recognised during the period in respect of bad or doubtful debts in this regard.
No Directors held any material interest in any contract with the Company or the Group in the year or subsequent period to 27 March 2020.
The Group has made £10.2m (2019: £9.2m) contributions to the pension schemes.
31. Subsidiary Undertakings
All subsidiary undertakings have a financial year ended coterminous with Biffa plc unless otherwise noted. The Companies disclosed below
are deemed to be the principal subsidiaries of the Group.
Principal subsidiary
Biffa Municipal Limited1
UK Waste Management Limited1
Biffa Waste Management Limited1
Biffa West Sussex Limited1
Bray Insurance Company Limited2
Barge Waste Management Limited1
Island Waste Services Limited1
Place of incorporation
Activity
Shareholding
England and Wales
Waste management
100%
England and Wales
Waste management
100%
England and Wales
Waste management
100%
England and Wales
Waste management
100%
Gibraltar
Insurance services
100%
England and Wales
Waste management
100%
England and Wales
Waste management
100%
Poplars Resource Management Company Limited1
England and Wales
Waste management
100%
Biffa Waste Services Limited1
Biffa Leicester Limited1
England and Wales
Waste management
100%
England and Wales
Waste management
100%
Biffa Environmental Municipal Services Limited1
England and Wales
Waste management
100%
Weir Waste Services Limited1
Weir Recycling Services Limited1
England and Wales
Waste management
100%
England and Wales
Waste management
100%
Specialist Waste Recycling Limited3*
England and Wales
Waste management
100%
1 Registered at Coronation Road, Cressex, High Wycombe, Buckinghamshire HP12 3TZ.
2 Registered at Fiduciary Management Limited, Suite 23 Portland House, Glacis Road, Gibraltar, GXll 1AA
3 Registered at Annan Suite, 10 York Place, Edinburgh, Scotland EH1 3EP
148
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 32. Contingent Liabilities
The Group must satisfy the financial security requirements of environmental agencies in order to ensure that it is able to discharge the
obligations in the licences or permits that the Group holds for its landfill sites. The Group satisfies these financial security requirements
by providing financial security bonds. The amount of financial security which is required is determined in conjunction with the regulatory
agencies, as is the method by which assurance is provided. The Group has existing bond arrangements in England and Wales of approximately
£85.7m outstanding at 27 March 2020 (2019: £84.9m) in respect of the Group’s permitted waste activities where the Group has obligations
under the Environment Agency’s fit and proper person test to make adequate financial provision in order to undertake those activities.
Additionally the Group has bonds to a value of £18.0m (2019: £19.8m) in connection with security for performance of local authority and
other contracts. No liability is expected to arise in respect of these bonds. The Group also has two letters of credit in relation to Newhurst EfW
amounting to £38.8m.
The Group is engaged in a dispute with HMRC in relation to the landfill tax treatment of certain materials used in the engineering of landfill
sites from September 2009 to May 2012, which is fully explained in Note 34.
The Group is also engaged in a dispute with HMRC in relation to the landfill tax treatment of sub-soils with low levels of contamination from
asbestos. At the date of signing of the accounts the outcome is not certain, however the Group has received a protective assessment of £8.5m,
which has been paid and is included in prepayments in the current year as the Group is disputing this assessment.
The Group is subject to a number of other HMRC enquiries which are on-going.
33. Joint Ventures
Details of each of the Group’s joint ventures at the end of the reporting period are as follows:
Name of joint venture
Principal activity
Place of incorporation and
principal place of business
Proportion of ownership interest and voting
rights held by the group
Newhurst ERF Holding Ltd
Energy from waste
England and Wales
Newhurst ERF Limited
Energy from waste
England and Wales
2020
50%
50%
All of the above joint ventures are accounted for using the equity method in these consolidated financial statements as set out in the
Group’s accounting policies in note 1.
Summarised financial information in respect of each of the Group’s material joint ventures is set out below. The summarised financial
information below represents amounts in joint ventures financial statements prepared in accordance with IFRS Standards adjusted by
the Group for equity accounting purposes.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
The above amounts of assets and liabilities include the following:
Cash and cash equivalents
Current financial liabilities (excluding trade and other payables and provisions)
Non-current financial liabilities (excluding trade and other payables and provisions)
Revenue
Profit or loss from continuing operations
Profit/(loss) for the year
Other comprehensive income attributable to the owners of the company
Total comprehensive income
The above profit (loss) for the year include the following:
Depreciation and amortisation
Interest income
Interest expense
Income tax expense (income)
2020
£m
4.4
28.0
(7.0)
(22.2)
1.9
(5.2)
(22.2)
–
(0.1)
(1.8)
(1.9)
–
–
–
–
149
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 33. Joint Ventures continued
Reconciliation of the above summarised financial information to the carrying amount of the interest in the joint venture recognised in the
Consolidated financial statements:
Net assets of joint venture
Proportion of the Group’s ownership interest in the joint venture
Goodwill
Carrying amount of the Group’s interest in the joint venture
Interest in joint venture at 30 March 2019
Addition
Share of post-tax results
Share of net loss on cash flow hedge in joint venture
Interest in the joint venture at 27 March 2020
34. EVP-related Items
2020
£m
6.0
50%
–
3.0
2020
£m
–
4.9
(0.1)
(1.8)
3.0
The Group is engaged in a dispute with HMRC concerning historical Landfill Tax.
HMRC claims that the Group is liable for £61.9m of Landfill Tax in respect of certain waste materials deposited in Biffa’s landfill sites from
2009 to 2012 (EVP). Biffa contests that the material was used in the sites for an engineering purpose and is not therefore subject to Landfill
Tax. Notwithstanding the Group’s opinion on the tax treatment of this material, since 2012 all materials of this nature have been subjected
to Landfill Tax. The matter was heard by the Second tier Tax Tribunal which found in Biffa’s favour. The Environment Agency has exercised
its right to appeal this decision.
The contested amount was originally unpaid under a hardship agreement with HMRC but was paid to HMRC following the refinancing
of the Group upon its IPO in October 2016. In addition to the payment of £61.9m, the Group paid £1.7m in interest in the prior year.
The Directors, having taken appropriate advice, do not believe that a liability to tax exists, and accordingly have treated the payment
of the tax and associated interest as a prepayment.
As part of the IPO of the Group, arrangements were put in place to make certain payments to the shareholders and certain members of employee
incentive schemes of the Group immediately prior to its Listing, subject to and in respect of the outcome of the dispute. A liability of £47.6m
has been recognised in borrowings, an accrual of £13m has been recognised in non-current liabilities, and a non-underlying non-cash interest
charge of £1.1m has been recognised in finance charges in respect of these obligations. Of the liability of £47.6m, £6.3m has been included
within Reported Net Debt as it will be payable irrespective of the outcome of the dispute. The remaining balance of £41.3m has been excluded
from Reported Net Debt.
35. Service Concession Arrangements
The Group has two integrated waste management contracts with Leicester City Council (25 years – awarded in 2003) and West Sussex
County Council (25 years – awarded in October 2010). The concessions vary as to the extent of their obligations, but typically require
the construction and operation of an asset during the concession period including scheduled maintenance and capital expenditure.
The operation of the assets includes the provision of waste management services such as collection, recycling and disposal. Typically
at the end of concession periods the assets are returned to the concession owner. There have not been any significant changes to these
arrangements in the period. The construction of the infrastructure for West Sussex County Council was funded by the Council and
therefore falls outside of the scope of IFRIC 12 and no financial asset or intangible has been recognised. A financial asset of £3.4m
has been recognised in relation to the Leicester City Council contract (Note 19).
These contracts generated revenue of £45.7m in the 52 weeks ended 27 March 2020 (2019: £49.6m). The contract with Leicester City
Council is loss making and a return to profitability is not expected and as such an onerous contract provision has been recognised.
36. Non-principal Subsidiary Undertakings
The following entities complete the full list of the Company’s subsidiary undertakings. All subsidiaries are 100% owned and consolidated
unless otherwise stated.
Name
Wasteholdco 1 Limited***2
Wasteholdco 2 Limited*2
Biffa Group Holdings Limited*2
Biffa Group Limited*1
GS Equity Co⁵
GS Acquisitions Limited*1
150
Country of incorporation Activity
Shareholding
Jersey
Jersey
Jersey
Holding company
Holding company
Holding company
England and Wales
Holding company
Cayman Islands
Holding company
England and Wales
Holding company
100%
100%
100%
100%
100%
100%
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020
Name
Biffa GS Holdings Limited*1
Material Recovery Nominees Limited*1
Biffa GS UK Holdings Limited*1
Biffa GS (LPP) Limited*1
Biffa GS Environmental Limited*1
Biffa GS (RUR) Limited*1
Country of incorporation Activity
Shareholding
England and Wales
Holding company
England and Wales
Dormant
England and Wales
Holding company
100%
100%
100%
England and Wales
Waste management
100%
England and Wales
Waste management
100%
England and Wales
Dormant
100%
Biffa GS Environmental Recycling Limited*1
England and Wales
Waste management
100%
Biffa GS (M&B) Limited*1
Biffa GS (FC) Limited*1
Biffa (WES) Limited*¹
Biffa Group Holdings (UK) Limited*1
Biffa Corporate Services Limited*1
Biffa Corporate Holdings Limited*1
Biffa Netherlands B.V.*4
England and Wales
Waste management
100%
England and Wales
Waste management
100%
England and Wales
Waste management
100%
England and Wales
Holding company
England and Wales
Dormant
England and Wales
Holding company
Netherlands
Holding company
100%
100%
100%
100%
Biffa Servicios de Energia Mexico SA de C.V.**
Mexico
Waste management
100%
Empresa de Servicios Espezialoados en Generación de Ener-gía, S.A. de C.V.**
Mexico
Waste management
100%
Biffa Waste Limited*1
Biffa Holdings (Jersey) Limited*2
Biffa UK Group Limited*1
Biffa UK Limited*1
Biffa (UK) Holdings Limited*1
UK Waste Management Holdings Limited*1
A Smith & Sons (Waste Disposal) Limited*1
Biffa (Land) Limited*6
Pilmuir Waste Disposal Limited*1
Biffa (Roxby) Limited*1
Norwaste Limited*1
Loristan Services Ltd
Biffa West Sussex Holdco Limited*1
Bray 2008 (Malta) Limited*7
Reclamation & Disposal Limited*1
Biffa Holdings Limited*1
Biffa (Jersey) Limited*2
Richard Biffa (Reclamation) Limited*1
M Joseph & Son (Birmingham) Limited*1
Biffa Pension Scheme Trustees Limited*1
Cressex Insurance Services Limited*1
White Cross Limited*1
Wastedrive Limited*1
Wastedrive (Manchester) Limited1
Amber Engineering Limited*1
England and Wales
Waste management
100%
Jersey
Holding company
England and Wales
Dormant
England and Wales
Dormant
100%
100%
100%
England and Wales
Waste management
100%
England and Wales
Waste management
100%
England and Wales
Dormant
100%
Guernsey
Waste management
100%
England and Wales
Dormant
100%
England and Wales
Waste management
100%
England and Wales
Dormant
England and Wales
Dormant
England and Wales
Dormant
Malta
Holding company
England and Wales
Dormant
England and Wales
Holding company
Jersey
Holding company
England and Wales
Dormant
England and Wales
Dormant
England and Wales
Dormant
England and Wales
Dormant
England and Wales
Dormant
England and Wales
Dormant
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
England and Wales
Waste management
100%
England and Wales
Waste management
100%
O’Brien Waste Recycling Solutions Holdings Limited*1
England and Wales
Holding company
100%
O’Brien Waste Recycling Solutions Limited*1
England and Wales
Waste management
100%
SWR Plastics Limited*1
SWR Waste Management Limited*1
Smash & Grab Glass Recycling Limited*1
Wastecutter Limited*1
New Star Environmental Limited*1
SWR Equipment Limited*1
England and Wales
Dormant
England and Wales
Dormant
England and Wales
Dormant
England and Wales
Dormant
100%
100%
100%
100%
England and Wales
Waste management
100%
England and Wales
Dormant
100%
151
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 36. Non-principal Subsidiary Undertakings continued
Name
SWR Smash & Grab Limited*1
RUR3 Environmental Limited*1
National Waste Collection Limited*1
SWR Just Bins Limited*1
SWRNewstar Limited*1
Protos Investco Limited
Newhurst ERF Holding Limited**⁸
Newhurst ERF Limited**⁸
* Financial year ended 27 March 2020.
** Financial year ended 31 December 2019
*** Directly held by Biffa plc.
Country of incorporation Activity
Shareholding
England and Wales
Waste management
100%
England and Wales
Waste management
100%
England and Wales
Dormant
England and Wales
Dormant
England and Wales
Dormant
100%
100%
100%
England and Wales
Waste management
100%
England and Wales
Waste management
England and Wales
Waste management
50%
50%
1 Registered at Coronation Road, Cressex, High Wycombe, Buckinghamshire HP12 3TZ.
2 Registered at 44 Esplanade, St Helier, Jersey, JE4 9WG.
4 Registered at Strawinskylaan 3127, 8e verdieping, 1077ZX Amsterdam.
5 Registered at Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue, George Town, Grand Cayman KY19005
6 Registered at PO Box 119, Martello Court, Admiral Park, St Peter Port, Guernsey, GY1 3H.
7 Registered at Development House, St Anne Street, Floriana, Malta.
8 Registered at Suite 1, 3rd Floor 11-12 St. James’s Square, London, England, SW1Y 4LB
37. Assets and liabilities related to contracts with customers
The Group has recognised the following contract assets and liabilities related to contracts with customers:
Current contract assets
Current contract liabilities
2020
£m
56.2
2019
£m
54.2
(17.8)
(17.6)
The timing of payments received from customers, relative to the recording of revenue, can have a significant impact on the contract-related
assets and liabilities recorded on the Group’s Statement of Financial Position.
Contract liability is what was previously referred to as deferred income under IAS 18. Included within contract liability is £0.1m (2019: £0.1m)
in relation to Government grants which will be recognised in less than one year.
Certain contracts have payment terms based on contractual milestones, which are not necessarily aligned to when revenue is recognised,
particularly for those contracts with revenue recognised over-time by reference to the stage of completion. Where work is carried out and
revenue recognised in advance of the customer being invoiced this creates a contract asset. Where revenue is received in advance of work
carried out and therefore the revenue recognised a contract liability arises.
The contract assets primarily relate to the Group’s right to consideration for work completed but not invoiced at the Statement of Financial
Position date. The contract assets are transferred to trade receivables when the amounts are agreed by the customer. On most contracts,
certificates and agreement is by the customer on a monthly basis. All contract assets held at 27 March 2020 are expected to be invoiced
and transferred to trade receivables within the next 12 months. The movement in contract assets relates to £56.2m performance obligations
satisfied in the year and recognised as revenue £54.2m which has been transferred to trade receivables.
None of the contract assets at the end of the reporting period are past due, and, taking into account the historical default experience
and the future prospects in the industry, the directors consider that no contract assets are impaired.
The contract liabilities primarily relate to the advance consideration received from customers in respect of performance obligations which
have not yet been fully satisfied and for which revenue has not been recognised. All contract liabilities held at 27 March 2020 are expected
to satisfy performance obligations in the next 12 months. The movement in contract liabilities relates to £17.6m performance obligations
satisfied and recognised as revenue in the year and £17.8m cash received for performance obligations not satisfied.
38. Dividends
As announced in the COVID-19 update on 25 March 2020 the Board recommended there will be no final dividend for the year ended
27 March 2020. An interim dividend of 2.47p per share was paid on 20 December 2019. All dividends were paid from distributable reserves.
39. Post balance sheets
There have been no post balance sheet events.
152
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 Parent Company Statement of Financial Position
The parent company statements are prepared under FRS 101 and relate to the Company and not to the Group. The accounting policies which
have been applied to these accounts can be found on page 155 and a separate independent auditor’s report on page 88-101.
Assets
Non-current assets
Investments
Trade and other receivables
Current assets
Other receivables
Cash and cash equivalents
Current liabilities
Derivatives financial instruments
Trade and other payables
Net current assets/(liabilities)
Net assets
Equity
Called up share capital
Share premium
Retained earnings
Hedging and other reserves
Total surplus/(deficit) attributable to shareholders
Retained profit for the year was £17.9m (2019: £27.6m).
The Financial Statements on pages 153 to 154 were approved by the Board and signed on its behalf by:
Richard Pike
Director
Biffa plc
Registered no: 10336040
Notes
2020
£m
2019
£m
2
3
3
4
5
6
7
255.8
34.3
290.1
–
0.1
(1.3)
(33.6)
(34.8)
255.3
2.5
235.3
19.8
(2.3)
255.3
255.7
2.9
254.4
34.0
0.1
(0.7)
(29.3)
4.1
262.7
2.5
235.3
20.2
4.7
262.7
153
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Parent Company Statement of Changes in Equity
As at 30 March 2018
Profit for the period
Cashflow hedges
Value of employee service in respect of share option
schemes and share awards
Dividends paid
As at 29 March 2019
Profit for the period
Cashflow hedges
Shares purchased by employee beneift trust
Value of employee service in respect of share option
schemes and share awards
Dividends paid
As at 27 March 2020
Called up
share capital
£m
Share
premium
£m
Hedging and
other reserves
£m
Retained
earnings/
(deficit)
£m
2.5
235.3
–
–
–
–
–
–
–
–
2.5
235.3
–
–
–
–
–
–
–
–
–
–
2.5
235.3
1.8
–
(0.4)
3.3
–
4.7
–
(0.6)
(8.8)
2.4
–
(2.3)
9.6
27.6
–
–
(17.0)
20.2
17.9
–
–
–
(18.3)
19.8
Total
equity
£m
249.2
27.6
(0.4)
3.3
(17.0)
262.7
17.9
(0.6)
(8.8)
2.4
(18.3)
255.3
As permitted by section 408 of the Companies Act 2006, the Company has not presented its own income statement or statement of comprehensive
income. The profit of the Company for the year attributable to shareholders was £17.9m.
The Company’s distributable reserves amount to £19.8m (2019: £20.2m) at the end of the period. The Company regularly reviews its distributable
reserves and makes dividend recapitalisations as and when necessary to ensure it can make all expected dividend payments. The company
has sufficient subsidiary reserves to enable recapitalisation in 2021 and going forward.
154
Biffa Annual Report and Accounts 2020 Accounting Policies to the Parent Company Financial Statements
Basis of Preparation
These Financial Statements relate to Biffa plc, a publicly traded company incorporated and domiciled in England and Wales. The registered
address is Coronation Road, Cressex, High Wycombe, Buckinghamshire, HP12 3TZ.
These Financial Statements present the results of the Company as an individual entity and are prepared on the going concern basis,
in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101) and the Companies Act 2006.
The Company is part of a larger group and participates in the Group’s centralised treasury and banking arrangements. The Company
is expected to generate positive cash flows to continue to operate in the foreseeable future.
The Company has not presented its own income statement or statement of comprehensive income as permitted by section 408
of the Companies Act 2006.
The Financial Statements have been prepared in accordance with the accounting policies set out below, which have been consistently
applied to all the years presented except where the Company has elected to take the following exemptions under FRS 101:
■ The requirements of IAS 7 ‘Statement of Cash Flows’.
■ The requirements of paragraph 17 of IAS 24 ‘Related Party Disclosures’ in respect of key management personnel.
■ Requirements of IAS 24 ‘Related Party Disclosures’ to disclose transactions between wholly owned members of the Group.
■ The requirements of IFRS 7 ‘Financial Instruments: Disclosures’, as equivalent disclosures are provided in the consolidated Financial
Statements of the Group to which the Company belongs.
■ The requirements of IFRS 2 ‘Share-based Payments’.
■ The requirements of paragraphs 91 to 99 of IFRS 13 ‘Fair Value Measurements’, as equivalent disclosures are presented in the consolidated
Financial Statements.
Areas of Judgement and Key Sources of Estimation Uncertainty
Judgement
Due to the uncertainty following COVID-19 the company considers Expected Credit Loss (ECL) on inter-company balances to be a key judgement.
Estimation
The Company does not have any key assumptions concerning the future, or other key areas of estimation uncertainty in the reporting period
that may have a significant risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year.
Investments
Investments are initially stated at cost. Investments are tested for impairment when an event that might affect asset value has occurred.
An impairment loss is recognised to the extent that the carrying amounts cannot be recovered either by selling the asset or by the discounted
future cash flows from the investment.
Dividend Distribution
Final dividend distribution to the Company’s shareholders is recognised as a liability in the Company’s Financial Statements in the period
in which the dividends are approved by the Company’s shareholders. Interim dividends are recognised when paid.
Other Receivables
Other receivables are recognised initially at fair value less any provision for expected credit loss. They are subsequently held at amortised
cost less any provision for expected credit loss.
155
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Accounting Policies to the Parent Company Financial Statements continued
Derivative Financial Instruments and Hedging Activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and subsequently remeasured at fair value
at each balance sheet date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged.
The Company designates certain derivatives as either a) fair value hedge (hedges of the fair value of recognised assets or liabilities);
or b) cash flow hedge (hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction);
or c) net investment hedge (hedges of net investments in foreign operations).
The Company documents the transaction relationship between the hedging instruments and hedged items at inception. At inception and
at each reporting date the Company assesses whether the derivatives used have been highly effective in offsetting changes in the fair value
of hedged items.
The fair values of derivative instruments used for hedging are shown in Note 5. Movements in the hedging reserve are shown in the statement
of changes in equity.
At the reporting date the Company has no fair value hedges or net investment hedges.
Cash Flow Hedge
The effective portion of changes in the fair value of derivatives that are designated as cash flow hedges are recognised in equity. The Company’s
cash flow hedges in respect of forward foreign exchange contracts result in recognition in either profit and loss or in the hedging reserve.
When a hedging instrument expires or is sold, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or
loss in equity at that time remains in equity and is recognised when the forecast transaction occurs. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that was reported in equity will be transferred to the income statement.
Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the income statement.
Other Payables
Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current
liabilities.
Share Capital
Ordinary shares are classified as equity and are recorded at par value of proceeds received. Where shares are issued above par value,
the proceeds in excess of par value are recorded in the share premium account net of direct issue costs.
156
Biffa Annual Report and Accounts 2020 Notes to the Parent Company Financial Statements
1. Employees and Directors
Details of the remuneration received by Directors of Biffa plc are included in the Directors’ Remuneration Report on pages 66 to 83. Biffa plc
has two employees (2019: two).
2.
Investments
As at 29 March 2019
Movements relating to share options granted/(issued) on behalf of subsidiary employees
As at 27 March 2020
2020
£m
255.7
0.1
255.8
There have been no indicators of impairment during the year and no requirement for impairment. The Directors believe that the carrying
value of the investments is supported by their underlying net assets.
Disclosure of the Company’s subsidiaries is given in Notes 31 and 36 of the Group Financial Statements.
3. Trade and Other Receivables
Amounts falling due within one year
Amounts due from subsidiary undertaking
Amounts falling due after more than one year
Amounts due from subsidiary undertaking
Other receivables
Total
2020
£m
2019
£m
–
34.0
34.0
0.3
34.3
–
2.9
2.9
During the year amounts due from subsidiary undertakings was reclassified to falling due after more than one year due to managements assessment.
The Directors consider that the carrying amount of trade receivables approximates their fair value.
4. Cash and Cash Equivalents
Cash at bank and in hand
2020
£m
0.1
2019
£m
0.1
157
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Notes to the Parent Company Financial Statements continued
5. Fair Value of Financial Assets and Liabilities
Financial assets and liabilities
Derivative asset
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Total financial assets and liabilities
2020
2019
Book value
£m
Fair value
£m
Book value
£m
Fair value
£m
(1.3)
34.3
0.1
(33.6)
(0.5)
(1.3)
34.3
0.1
(33.6)
(0.5)
(0.7)
36.9
0.1
(29.3)
7.0
(0.7)
36.9
0.1
(29.3)
7.0
Derivative financial instruments
Full details of the derivative financial instruments are disclosed in Note 19 of the Group Consolidated Statements. The fair value and the
notional amounts are as follow:
2020
2019
Forward foreign exchange contracts
Interest rate swaps
6. Trade and Other Payables
Non-current
Amounts payable to subsidiary undertakings
Other
Total trade and other payables
All creditors are unsecured.
Fair value
£m
0.4
(1.6)
Notional
£m
10.9
200.0
Fair value
£m
Notional
£m
(0.7)
–
2020
£m
(33.6)
–
(33.6)
16.0
–
2019
£m
(29.3)
–
(29.3)
The fair value of non-derivative financial assets and liabilities are determined based on discounted cash flow analysis using current market
rates for similar instruments.
7. Called up share capital
As at 27 March 2020 and 29 March 2019
Number of
shares
No
Called up
share capital
£
250,000,000
2,500,000
8. Related Party Transactions
There have been no material related party transactions in the 52 weeks ended 27 March 2020 (2019: nil) except for key management compensation
as set out in the report of the remuneration committee.
158
Biffa Annual Report and Accounts 2020 9. UK Registered Subsidiaries Exempt from Audit
The following UK subsidiaries will take advantage of the audit exemption set out within section 479A of the Companies Act 2006 for the
period ended 27 March 2020. Unless otherwise stated, the undertakings listed below are 100% owned, either directly or indirectly, by Biffa plc.
Name
GS Acquisitions Limited
Biffa GS Holdings Limited
Materials Recovery Nominees Limited
Biffa GS UK Holdings Limited
Biffa GS (LPP) Limited
Biffa GS Environmental Limited
Biffa GS (RUR) Limited
Biffa GS Environmental Recycling Limited
Biffa GS (M&B) Limited
Biffa GS (FC) Limited
Biffa Group Holdings (UK) Limited
Reclamation and Disposal Limited
Biffa Waste Limited
Biffa UK Group Limited
Biffa UK Limited
Biffa (UK) Holdings Limited
UK Waste Management Limited
A. Smith & Sons (Waste Disposal) Limited
Pilmuir Waste Disposal Limited
Biffa Waste Management Limited
Biffa (Roxby) Limited
Norwaste Limited
White Cross Limited
Proportion of shares held by subsidiary (%)
Company number
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
07255980
04602885
05186581
04631832
02276396
03446693
04594882
04786413
01173507
04800628
04081901
00879315
04084432
03650457
03650459
03249158
01362615
01346573
01829739
01138022
02031961
01041912
01537610
159
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 9. UK Registered Subsidiaries Exempt from Audit continued
Name
Wastedrive Limited
Wastedrive (Manchester) Limited
Biffa Holdings Limited
Richard Biffa (Reclamation) Limited
Barge Waste Management Limited
Island Waste Services Limited
M. Joseph & Son (Birmingham) Limited
Amber Engineering Limited
O’Brien Waste Recycling Solutions Limited
O’Brien Waste Recycling Solutions Holdings Limited
Weir Recycling Services Limited
Weir Waste Services Limited
SWR Equipment Limited
SWR Plastics Limited
SWR Waste Management Limited
Smash & Grab Glass Recycling Limited
Wastecutter Limited
National Waste Collection Limited
SWR Just Bins Limited
SWRNewstar Limited
UK Waste Management Holdings Limited
Protos Investco Limited
Biffa (WES) Limited
Biffa West Sussex Holdco Limited
New Star Environmental Limited
SWR Smash & Grab Limited
RUR3 Environmental Limited
Loristan Services Limited
Newhurst ERF Holding Limited
Newhurst ERF Limited
Proportion of shares held by subsidiary (%)
Company number
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
01396771
01517244
01032104
00929000
02849409
01552791
00440100
01067283
09362987
09560589
9390664
03777183
06974078
07800637
07800679
07800734
08212454
09700337
10060304
11098385
02536345
12215502
02729607
07001231
07306131
05667032
06304761
01390710
11998817
12006738
In accordance with section 479C of the Companies Act 2006, the Company will guarantee the debts and liabilities of the above UK subsidiary
undertakings. As at 27 March 2020 the total sum of these debts and liabilities is £33.7 million.
160
Notes to the Consolidated Financial Statements continuedBiffa Annual Report and Accounts 2020 Glossary
A
Acquisition
Net Revenue
Growth
Anaerobic
Digestion
Admission
APM
C
CO₂e
E
EfW
ERF
ESG
ESOS
EV
EVP
Acquisition Net Revenue Growth in any period
represents the Net Revenue Growth in the
relevant period from (i) acquisitions completed
in the relevant period and (ii) acquisitions
completed in the 12 months ended to the
start of the relevant period up to the 12 month
anniversary of the relevant acquisition date
(to the extent such Net Revenue falls in the
current period). Acquisition Revenue Growth is
calculated on the same basis, using revenue in
place of Net Revenue
Anaerobic digestion, a process that generates
renewable electricity using biogas created from
biodegradable waste material (primarily food
waste) in the absence of oxygen
The Company’s admission of its shares to the UK
Listing Authority’s Official List and listing on the
Main Market of the London Stock Exchange on
20 October 2016
F
FTSE
FY
G
GDPR
GHG
H
HDPE
I
I&C
IPO
K
Financial Times Stock Exchange
Financial Year
General Data Protection Regulation
Greenhouse gas
High-density polyethylene
Industrial and commercial business
Initial Public Offering
Alternative Performance Measures
KPIs
Key Performance Indicators
Carbon dioxide equivalent is a standard
unit in carbon accounting to quantify
greenhouse gas emissions, emissions
reductions and carbon credits
Energy from waste, typically from the
incineration of RDF
Energy recovery facility
Environmental, Social and Governance
Energy Savings Opportunity Scheme –
a mandatory energy assessment scheme
for organisations in the UK that meet the
qualification criteria
Electric Vehicle
Engineered into the void permanently, related
to the use of certain material at a landfill site,
placed at specified depths immediately below
the geomembrane layer at the top of a landfill
cell, for use in capping the site
Thousand tonnes
Ratio of Reported Net Debt to Underlying EBITDA
Lost Time Injury Frequency rate, a safety
benchmarking measure calculated as the
number of lost time injuries occurring in
a workplace per 100,000 hours worked
Mergers & acquisitions
Mechanical and biological treatment
Materials recycling facility
Megawatt
Megawatt hour
ktns or kt
L
Leverage
Ratio
LTI
M
M&A
MBT
MRF
MW
MWh
N
National Grid High-voltage electric power transmission
network in the UK
Net Capex
Cash capex less proceeds from disposal of
tangible assets
Net Revenue
Statutory Revenue excluding landfill tax,
unless stated otherwise, ‘revenue’ refers
to Statutory Revenue
161
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Glossary continued
O
Organic Net
Revenue
Growth
P
PET
PSP
R
RCF
RDF
Recyclate
Reported
Net Debt
Return on
Capital
Employed
(ROCE)
The increase/(decrease) in net revenue in the
period excluding net revenue from acquisitions
completed in the period and net revenue from
acquisitions completed in the prior period up
to the anniversary of the relevant acquisition
date, to the extent such net revenue falls in the
current period. Organic net revenue growth can
be expressed both as an absolute financial value
and as a percentage of prior period revenue
Polyethylene terephthalate
Performance Share Plan
Revolving credit facility
Refuse-derived fuel, produced by processing
solid waste to segregate largely combustible
components for incineration
Raw material sent to, and processed in, a waste
recycling plant or materials recycling facility
Net Debt excluding the EVP preference instrument
Operating Profit excluding exceptional items
and impact of real discount rate changes to
landfill provisions divided by the average of
opening and closing shareholders’ equity plus
Net Debt (including finance leases), pensions
and environmental provisions
Return on
Operating
Assets (ROOA)
Underlying Operating Profit divided by the
average of opening and closing Tangible Fixed
Assets plus net working capital
RIDDOR
Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations 2013
ROC
S
SDGs
Section 172
or s172
SHEQ
SIP
SWR
Renewable Obligations Certificate
Sustainable Development Goals – a collection
of 17 global goals (set by the UN) designed to
be a “blueprint to achieve a better and more
sustainable future for all”
Section 172 of the Companies Act 2006
Safety, health, environment and quality
Share Incentive Plan
Specialist Waste Services
U
Underlying
Earnings per
Share
Underlying Earnings per Share is expressed
as underlying profit after tax dividend by the
weighted average number of shares in the year
UN
United Nations
Underlying
EBITDA
Underlying
Free Cash
Flow
Underlying
Operating
Profit
Underlying
Profit after
Tax
Profit before depreciation and amortisation,
exceptional items, impact of real discount rate
changes to landfill provisions, finance costs and
taxation. Divisional underlying EBITDA is stated
after allocation of shared services costs
The net increase/(decrease) in cash and cash
equivalents excluding dividends, restructuring
and exceptional items, acquisitions, movement
in financial assets and movements in borrowings
or share capital (but including finance lease
principal payments)
Profit before exceptional items, amortisation of
acquisition intangibles, impact of real discount
rate changes to landfill provisions, finance costs
and taxation. Divisional underlying operating
profit is stated after allocation of shared
service costs
Underlying Profit after tax is the profit or loss
for the period as adjusted for non-underlying
operating items (exceptional items, amortisation
of acquisition intangibles and impact of real
discount rate changes to landfill provisions),
non-underlying net interest items and
non-underlying taxation
Underlying
Operating
Profit Margin
Underlying Operating Profit margin is expressed
as Underlying Operating Profit as a percentage of
Statutory Revenue
V
vlogs
Void
W
WEEE
Working
Capital
Movement
Video blogs
Measure of potential capacity of a landfill site
in cubic metres
Waste Electronic and Electrical Equipment
Working Capital Movement represents the
movement from the previous period in relation
to inventories, trade and other receivables, trade
and other payables and provisions adjusted for
the impact of acquisitions on these balances
162
Biffa Annual Report and Accounts 2020 Corporate Information
Registered Office
Biffa plc
Coronation Road
Cressex
High Wycombe
Buckinghamshire
HP12 3TZ
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Auditor
Deloitte LLP
2 New Street Square
London
EC4A 3BZ
Corporate Brokers
HSBC Bank plc
8 Canada Square
London
E14 5HQ
Numis Securities Limited
10 Paternoster Square
London
EC4M 7LT
Solicitors
Linklaters LLP
1 Silk Street
London
EC24 8HQ
Financial PR Advisers
Houston
New Wing
Somerset House
357 Strand
London
WC2R 1LT
163
Strategic ReportCorporate GovernanceFinancial StatementsAdditional InformationBiffa Annual Report and Accounts 2020 Forward-looking statements
Certain statements made in this Annual Report are forward-looking
and are based on current expectations. The statements are subject
to assumptions, inherent risks and uncertainties, many of which
are beyond the Company’s control and which could cause actual
results to differ significantly from those expected. Unless required
by law, regulations or accounting standards, the Company does
not undertake to update or revise any forward-looking statement,
whether as a result of new information or future developments. Any
forward-looking statements made by or on behalf of the Group speak
only as of the date that they are made and are based on knowledge
and information available to the Directors on the date of this Annual
Report. Nothing in this Annual Report should be regarded as a profit
forecast or constitute an offer to sell or an invitation to buy any
shares in Biffa plc.
Website
The Company’s website www.biffa.co.uk gives additional information
on the business. Notwithstanding the references made in the Annual
Report to the website, none of the information made on the website
constitutes part of this Annual Report or is deemed to be incorporated
by reference herein.
164
Biffa Annual Report and Accounts 2020 Inside the production of this report
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Biffa plc
Coronation Road, Cressex,
High Wycombe
Buckinghamshire, HP12 3TZ
01494 521 221
ir@biffa.co.uk
www.biffa.co.uk/investors
Registration No: 10336040
The photos on the front and back covers
show just some of the hundreds of thank
you messages given to our front line teams
during the COVID-19 crisis.