Quarterly Report • Nov 10, 2022
Quarterly Report
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Core net debt# increased to €388m (March 2022: €303m), reflecting the initial debt impact of €66m for the Paro acquisition and €16m of innovation capital investments. Net debt to EBITDA of 1.7x (March 2022: 1.4x) in line with expectations
Commercial Netherlands completed the acquisition of the Paro C&D business in Amsterdam in August. Site rationalisation and integration are now underway
Renewi 2.0 programme and Mineralz & Water recovery plan remain on track
We are mindful of the current challenging macroeconomic outlook with continuing inflationary cost pressures, the movement of recyclate prices to normalised levels and ongoing pressure on volumes in the near-term. Accordingly, management's expectations for the full year are unchanged despite a stronger than anticipated first half performance
"We delivered a strong performance in the first half of FY23, ahead of our expectations. Our focus on pricing and cost control, together with high demand for recyclates, resulted in good profitability. Revenue was up 4% as a result of price increases more than offsetting lower volumes for inbound waste.
"Our strategy to grow our leading position as a waste-to-product company is proving to be increasingly relevant with a significant number of attractive investment opportunities. Strategy execution is progressing well across our three value drivers. We increased our market share with the completion of our acquisition of Paro. We recycled more of our incoming waste with the continued investment in circular innovations, we progressed on our journey to digitise our company with the Renewi 2.0 programme, and our Mineralz & Water recovery continues. Together these programmes will deliver an additional €10m of EBIT this year and are on track to deliver their full potential.
"While the Board remains suitably cautious about the challenging macroeconomic outlook in the short term, we are confident the fundamentals of our business will allow us to grow in the medium and longer term. Waste volumes have historically been resilient through cycles and the ongoing transition to increased recycling, driven by legislation, societal pressure and innovation, will continue to support our business model.
| Sep 22 | Sep $21^{#}$ | % change |
|
|---|---|---|---|
| UNDERLYING NON-STATUTORY | |||
| €952.0 | €915.6 | ||
| Revenue | m | m | $+4\%$ |
| טווטכו נאוויש privition וטוב נטא | HIUTI DJ | 111U, 11U | $\mathsf{I} \subset \cup \mathsf{IV}$ |
|---|---|---|---|
| Underlying EPS 1 (cents per share) | 56c | 48c | $+17%$ |
| Adjusted free cash flow 1 | €21.8m | €27.6m | |
| Free cash flow 1 | €4.1m | €15.9m | |
| €387.7 | €336.0 | ||
| Core net debt* | m | m | |
| STATUTORY | |||
| €952.0 | €915.6 | ||
| Revenue | m | m | |
| Operating profit | €83.6m | €57.4m | |
| Profit before tax | €71.6m | €43.9m | |
| Profit for the period | €53.4m | €36.5m | |
| Basic EPS (cents per share) | 66с | 45c | |
| Cash flow from operating activities | €82.3m | €73.8m | |
| €696.4 | €648.4 | ||
| Total net debt* | m | m |
1 The definition and rationale for the use of non-IFRS measures are included in note 18.
* Core net debt used for banking leverage calculations excludes the impact of IFRS 16 lease liabilities and UK PPP net debt.
| Commercial Waste | 694.4 | 670.6 | 4% | 68.4 | 64.7 | 6% | |
|---|---|---|---|---|---|---|---|
| Mineralz & Water | 93.3 | 93.6 | 0% | 2.6 | 4.0 | $-35%$ | |
| Specialities | 186.3 | 168.0 | 11% | 11.3 | 1.7 | $>100\%$ | |
| Group central services | ۰ | ۰ | (7.1) | (5.7) | $-25%$ | ||
| Inter-segment revenue | (22.0) | (16.6) | ۰ | ۰. | |||
| Total | 952.0 | 915.6 | 4% | 75.2 | 64.7 | 16% | |
The underlying figures above are reconciled to statutory measures in note 3 in the consolidated financial statements. September 2021 underlying EBIT for Group central services has been adjusted to reflect a prior year adjustment as referred to in note 2.
Group revenue was up by 4% to €952m and underlying EBIT increased by 16% to €75.2m. Underlying EBIT grew despite lower volumes, supported by ongoing cost initiatives, net price gains which offset inflation and favourable one-off items in the current year relative to adverse items in the prior year. Underlying profit before tax increased by 20% to €61.6m. Underlying earnings per share increased by 17% to 56 cents (2021: 48 cents). The Group statutory profit after tax, including all non-trading and exceptional items was €53.4m.
The business delivered a positive adjusted free cash flow of $\epsilon$ 21.8m (2021: €27.6m). There was a total cash outflow of €80.5m (2021: €1.9m) driven by the Paro acquisition. As anticipated, core net debt to EBITDA increased to 1.7x at 30 September 2022, an increase from 1.4x at the end of March 2022 following investment in acquisitions and the innovation portfolio.
| Total $(\epsilon m)$ | 694.4 | 670.6 | 108.5 | 109.2 | 68.4 | 64.7 | |
|---|---|---|---|---|---|---|---|
| Period on period variance % | |||||||
| Netherlands Commercial | 4% | $-8%$ | $-7%$ | ||||
| Belgium Commercial | 3% | 12% | 31% | ||||
| Total | 4% | $-1%$ | 6% | ||||
| Return on | Underlying | Underlying | |||||
| operating assets | EBITDA margin | EBIT margin | |||||
| Sep 22 | Sep 21 | Sep 22 | Sep 21 | Sep 22 | Sep 21 | ||
| Netherlands Commercial | 25.5% | 22.6% | 14.3% | 16.1% | 8.8% | 9.8% | |
| Belgium Commercial | 51.8% | 38.5% | 18.1% | 16.6% | 11.9% | 9.4% | |
| Total | 31.1% | 26.0% | 15.6% | 16.3% | 9.9% | 9.6% |
The return on operating assets for Belgium excludes all landfill related provisions. The underlying figures above are reconciled to statutory measures in notes 3 and 18 in the consolidated financial statements.
The Commercial Division increased revenues by 4% to €694m and underlying EBIT by 6% to $€68.4m$ , representing an EBIT margin of 9.9%. Return on operating assets remained strongly accretive at 31%.
In the Netherlands, revenue increased by 4% to €459.7m with underlying EBIT declining by 7% to €40.3m. Volumes were 7% lower than the prior year, with higher commercial volumes offset by lower volumes in C&D, bulky and green waste. Inbound revenues were relatively flat and outbound revenues increased
pomoći do dno redupación or une ojneny je pavingo.
In Belgium, revenue increased by 3% to €236.3m and underlying EBIT by 31% to €28.1m. Volumes declined by 13% compared to the prior year. Inbound revenues were 2% ahead of the prior year as a result of pricing and outbound revenues increased by 10%. Given high energy prices and overcapacity in regional incinerators, volumes have been diverted by customers from recycling to incineration. Despite this, in Belgium we have been able to pass through cost increases and offset lower volumes with additional pricing.
The return on operating assets excludes all landfill related provisions. The underlying figures above are reconciled to statutory measures in notes 3 and 18 in the consolidated financial statements.
The Mineralz & Water Division saw revenues flat at €93.3m and underlying EBIT decrease to €2.6m. Whilst EBITDA increased by 5%, additional depreciation from replacement capital investments made in late 2021 impacted EBIT. The waterside business operated at capacity in the first half, with strong demand from customers leading to good pricing. As expected contaminated soil
Underlying EBIT includes utilisation of $\epsilon$ 4.2m (2021: $\epsilon$ 0.5m) from onerous contract provisions. The return on operating assets excludes the UK Municipal business. The underlying figures above are reconciled to statutory measures in notes 3 and 18 in the consolidated financial statements.
The Specialities Division grew revenues by 11% to €186m and delivered an underlying EBIT of €11.3m, driven by non-recurring items relating to Municipal, as well as improvements in Coolrec and Maltha. Coolrec has continued to perform well following the installation of advanced plastic sorting processes in August 2021 leading to increased product quality and stronger commercial offtake opportunities including the recent agreement with Playmobil. Maltha is focused on performance improvement under new management and saw revenue growth and further margin improvement in the first half.
Our purpose, our vision and our business strategy are all about supporting climate change mitigation and reducing total carbon emissions through reuse.
is concinent to mineing global warming. The endiblem to circular coordination globally is still in its early stages, as illustrated by the Circularity Gap Report which calculates that the world is currently only 8.6% circular. Europe is leading the way in the circular economy transition and, within Europe, the Netherlands and Belgium are leading with national policies moving faster than EU policy generally.
In November 2021, COP26 set out the necessary steps to avoid catastrophic increases in global temperatures by the end of the century. Production of more secondary materials to reduce virgin material use and the associated carbon emissions is a key requirement to meet these goals. Becoming more circular and cutting virgin material use by 28% within nine years could lead to a reduction in global greenhouse gas emissions by 39% according to the Circularity Gap Report.
Supply of materials for recycling is stimulated by disincentivising landfill and incineration through fiscal policy and prohibitions thus creating an environment where sorting and processing to produce recyclates is economically competitive. This is already in place in the Netherlands and Belgium. The move towards recycling has been further strengthened by progressive increases to incineration taxes in both countries.
Increases in recycling will be driven by new legislation in Flanders which comes into effect in January 2023. The most recent amendment to Vlarema 8 introduces the mandatory pre-sorting of waste to remove recyclates before residues are incinerated, and this legislation is the key driver of our decision to invest in three large state-of-the-art sorting lines in Flanders. It is our expectation that the Walloon and Dutch governments will follow Flanders' lead in due course, also requiring the recovery of recyclates by sorting of residual waste before allowing the residue to be incinerated.
Investment in technology is critical to achieving the circular economy, allowing the industry to achieve better recovery of more materials for reuse, to address ever more difficult waste streams and to produce better quality low carbon
את היותר או דוקווסמו ט קורקומו וווווס המתחורות האחווה ומי קטנווקוס את ההמוויסוסא and close collaboration with partners, such as the collaboration with Shell and Nordsol to build and produce bio-LNG from out-of-date food waste and our collaboration with Ikea and Ikano to recycle mattresses and to recover polyurethane to put back into reuse.
Legislators in Renewi's European markets are considering further action, including carbon taxes on incineration by including them in the EU emissions trading schemes, minimum recycled content levels and producer responsibility for the management of closed loops. All these measures will increase demand for secondary materials and accelerate recycling rates.
During the first half we have made good progress with our strategic sustainability objectives, including the following highlights:
to be commissioned in the second half, to allow our customers to be compliant with Vlarema 8 legislation
An additional 5 zero emission trucks have been ordered
We improved our safety performance with a 25% reduction in our lost time incident rate
Our diversity & inclusion committee has a programme of activity aimed at making Renewi an even more rewarding and inclusive place to work. We have further improved Board gender diversity to 38% with the appointments of Annemieke den Otter and Katleen Vandeweyer
To grow market share, we have three areas of focus:
innovations and €66m for the acquisition of Paro. These investments are being funded by the Group's cash flow and the Group's borrowing capacity. In each case, they provide attractive returns on investment and earnings accretion, whilst maintaining the Group leverage below 2.0x as per the Board's policy. The Board is keeping the dividend under review, taking into account the Group's ongoing investments in growth projects, current trading and longer-term outlook.
We have three specific areas of activity to grow underlying profitability in the period to FY26. These are our ongoing investments in circular innovations, the recovery of our Mineralz & Water business at ATM, and Renewi 2.0 efficiency programme. Each driver is expected to contribute €20m EBIT and €60m in total by FY26 and all are on track to achieve this.
We are investing in innovative solutions to increase recycling rates and product quality, the first two pillars of our strategy to deliver an additional EBIT of €20m by FY26. Last year we announced over €100m of investments across four key areas encompassing plastics recycling, deriving value from organic waste, building materials production and advanced sorting processes in Flanders. These investments are being deployed over three years, with 40% ( $\epsilon$ 45m) currently deployed. Each project will exceed our threshold for pre-tax return on operating assets of 16% as the facilities are commissioned. We have a pipeline of potential innovation projects for future investments.
We are well underway with our Renewi 2.0 programme which is focused on making the company simpler, more customer-focused, more efficient and a better place to work. As previously indicated, the programme is expected to
complemes, which remem de cleveled levels pending end rule delivery or nenewr 2.0 initiatives. We remain confident that we will achieve the targeted savings on schedule.
Recovery at ATM, our major site that cleans contaminated soil and water, is ongoing despite uncertainty by regulators on the adequacy of the current environmental regime leading to both reduced intake of contaminated soil, and difficulty obtaining necessary permits to dispose of TGG. This situation is expected to be resolved when proposed amendments to current legislation are brought forward and should bring much-needed clarity to this part of our business.
The team at Moerdijk are actively working to restore the previous profitability of the activity across several critical workstreams. Investments have been completed to transition the output production from TGG to gravel, sand and filler including the in-line sieve, gravel sorting line and the dust silos. Good progress has been made selling historical production of TGG which is down to 0.6m tonnes with a further 0.2m tonnes under negotiation for shipment during FY23. Lower historic TGG stocks are also expected to have a positive impact on soil import licencing, which is necessary to increase processing volumes. Activity is ongoing towards additional quality certifications and the target "end of waste" status for both sand and filler products to increase end markets and pricing. There is a growing interest in these secondary building materials from concrete and asphalt producers as the construction industry is converting to circularity.
ATM's profit improvement is also supported by growth in water treatment where we have potential to expand our treatment capacity. We therefore anticipate that as the regulatory environment for soil becomes clearer, as our building materials achieve their certification, and as we expand our water treatment, ATM will be able to restore margins and EBIT to €20m.
downtonii doroso Edilopo, micod madro dhangos doo impade die valde or recyclates. While reprocessing is less energy-intensive and therefore less costly, the value of recyclates is also impacted by global demand for materials. As a result, we anticipate lower recyclate pricing in the second half and lower than the prior year.
Waste volumes are typically resilient to economic cycles. In our Commercial Division, the breadth of our customer base supporting 150,000 commercial and industrial customers includes all sectors of the economy, several of which - such as utilities, healthcare and the public sector - are resilient to economic cycles. In addition, significant segments within Renewi's operations are focused on resilient waste streams with lower exposure to economic cycles such as glass, soil, water, UK municipal and electrical goods accounting for around 40% of our total Group volume. We have limited exposure to sectors, such as construction and demolition which accounts for around 6% of total Group volumes, or business to consumer sectors whose demand is affected by the cost-of-living squeeze, such as hospitality and leisure or discretionary retail.
There are continuing inflationary cost pressures across the business in the near term, However, we are more resilient than most to these macroeconomic pressures because our business model allows us to manage the headwinds of recyclate prices, energy costs, wage inflation and price inflation. We provide an essential service to our commercial and industrial customer base, who must have their waste processed and this allows us to recover appropriate inflation costs from our customers. Our larger customers are on multi-year contracts with inflation provisions and our smaller customers have an annual price rise in their contracts which replace the temporary surcharges that are already in place to reflect the higher costs of collection. We actively hedge fuel and energy costs. For diesel requirements 75% is hedged for at least 6 months and 50% for 12 months. Around 80% of our c. 260 GWh energy requirement is now fixed for 2023 calendar year, and in addition we have an offsetting production of 57 GWh from our sites. Payroll costs in Belgium are mandated by government to rise in line with annual inflation and in the Netherlands will rise according to our collective labour agreements which slightly delays the impact of inflation.
| The underlying figures above are reconciled to statutory measures in notes 3 and 18 in the consolidated | ||
|---|---|---|
information.
permitted by the dimensionery the droup must not restated the comparative
To enable a better understanding of underlying performance, certain items are excluded from underlying EBIT and underlying profit before tax due to their size, nature or incidence. Total non-trading and exceptional items excluding tax were a credit of €10.0m in the period (2021: charge €7.4m as adjusted for the change in accounting policy restatement). As previously reported, we have accounted for the cost of the Renewi 2.0 programme as exceptional due to its size and nature. The cost of the programme is still expected to be €40m and is forecast to deliver cost benefits at an annualised run rate of €20m once completed. Benefits of €4.6m were secured in the half with cash spend of €2.0m which was slightly lower than expected. Following on from recent developments in Government bond yields, discount rates used for long-term landfill and onerous contract provisions have been increased, resulting in a noncash credit of €15.3m. Given the current high inflationary environment the assumptions on inflation in the UK Municipal onerous contract provisions for the next two years have been reassessed resulting in a $£8.9m$ increase in provisions. Both of these items are recorded as non-trading and exceptional due to size and nature in line with our policy. Further details are provided in note 5 to the consolidated interim financial statements.
Operating profit after taking account of all non-trading and exceptional items was $\epsilon$ 83.6m (2021: $\epsilon$ 57.4m as adjusted for the change in accounting policy restatement).
Net finance costs excluding exceptional items decreased €0.1m to €13.6m (2021: €13.7m), with savings on core borrowings due to lower rates net of increased costs for discount unwind given the 1 April IAS 37 amendment which increased onerous contract provisions by €53.2m. Further details are provided tax rate. A tax charge of €1.9m is attributable to the non-trading and exceptional items of €10.0m as a number of items are not subject to tax.
The Group statutory profit after tax, including all non-trading and exceptional items, was €53.4m (2021: €36.5m as adjusted for the change in accounting policy restatement).
Underlying EPS excluding non-trading and exceptional items was 56 cents per share, an increase of 8 cents. Basic EPS was 66 cents per share compared to 45 cents per share in the prior year.
The table shows the cash flows from an adjusted free cash flow to total cash flow. The adjusted free cash flow measure focuses on the cash generation excluding the impact of historic liabilities relating to Covid-19 tax deferrals, settlement of ATM soil liabilities and spend relating to the UK PPP onerous contracts.
statutory measures in note 18 in the consolidated financial statements. Certain September 2021 values have been adjusted to reflect a prior year adjustment as referred to in note 2.
Adjusted free cash flow was lower at €21.8m despite the EBITDA improvement. The outflow on working capital in the period was mostly driven by a further reduction in payables together with limited increases in inventory and receivables. Days sales outstanding have increased slightly since March but still remain lower than the pre-Covid averages.
Replacement capital spend at $£35.0m$ was ahead of last year in line with expectations and including catch-up from the prior two years. In addition, €16.7m of new leases have been entered into which are reported as right-ofuse assets with a corresponding lease liability. These leases include the continuation of the truck replacement programme, property lease renewals or extensions and other assets. Growth capital spend of €16.0m includes further spend on the Vlarema 8 advanced sorting investments in Belgium and plastics sorting at Acht in the Netherlands.
Interest payments were higher this year due to annual payments for three retail bonds following on from the July 2021 new issue. Tax payments were also €6.5m higher in the current period as certain annual tax settlements fell into the second half last year and some end of year settlements fell into April rather than March.
Looking at the three components that are shown below adjusted free cash flow, there has been a further €9.9m repayment on Dutch Covid-19 tax deferrals as forecast. The remaining balance of €40m will be settled over the next 24 months. Cash spend for placement of TGG soil stocks was limited in the first six months. The balance of the liability of €15m is expected to be placed in the market over the next 12 to 24 months. Cash outflow on UK PPP contracts was $€6.7m$ , slightly lower than the prior year.
The acquisitions net of disposals outflow is principally $\epsilon$ 60.5m for the Paro
ranumy or and nandwr Employed onard aloo mee or bunung universal meoriid from other investments.
Net cash inflow from operating activities increased from $E$ 72.4m in the prior period to €74.4m in the current year. A reconciliation to the underlying cash flow performance as referred to above is included in note 18 in the consolidated interim financial statements.
We continue to pay significant attention to cash, taking into account the future investment needs of the business alongside the ongoing replacement capital and the medium term repayment of the Covid taxes.
The Group's long-term expectations for replacement capital expenditure remain around 80% of depreciation. FY23 full year replacement capital spend is expected to be around €70m which includes some catch-up from the prior two years and some one-offs for compliance in Commercial, the Green Gas project and jetty and pyro improvements at ATM. In addition, up to €40m of IFRS 16 lease investments are expected for the full year, primarily in replacement trucks, although production delays are ongoing given supply chain challenges.
Expenditure on the circular innovation pipeline will continue to increase as the advanced sorting investments in Belgium for Vlarema 8 and expansion in plastics sorting at Acht in the Netherlands progress through the construction phases. Timing of the investment spend has slipped slightly with the FY23 full year spend now expected to be around €45m.
The Group return on operating assets excluding debt, tax and goodwill increased to 44.7% at September 2022 from 42.6% at March 2022. The Group post-tax return on capital employed at September 2022 was 12.2% up from
| Total net debt | (696.4) | (604.0) | (92.4) |
|---|---|---|---|
In November 2022, the Group signed new fixed rate facilities totalling €55m in addition to the existing €200m of fixed rate bonds. The new borrowings include a $\epsilon$ 45m 7-year European Private Placement at 4.676%, and a $\epsilon$ 10m 5-year loan at 4.22%.
The Group operates a committed invoice discounting programme. The cash received for invoices sold at September 2022 was €80m (March 2022: €81m).
The introduction of IFRS 16 on 1 April 2019 brought additional lease liabilities onto the balance sheet with an associated increase in assets. Covenants on our main bank facilities remain on a frozen GAAP basis and exclude IFRS 16 lease liabilities.
Debt borrowed in the special purpose vehicles (SPVs) created for the financing of UK PPP programmes is separate from the Group core debt and is secured over the assets of the SPVs with no recourse to the Group as a whole. Interest rates on PPP borrowings were fixed by means of interest rate swaps at contract inception. At September 2022 this net debt amounted to €72m (March 2022: $£79m$ ).
Around 85% of the Group's provisions are long-term in nature, with the onerous contract provisions against the PPP contracts being utilised over 20 years and landfill provisions for many decades longer. As noted previously, the application of the amendment to IAS 37, Onerous Contracts – Costs of Fulfilling a Contract has resulted in a 1 April 2022 increase of €53m to the onerous contract provisions. The provisions balance classified as due within one year amounts to €40m, including €2m for restructuring, €12m for onerous contracts, €13m for landfill related spend and €13m for environmental, legal and others. Further
| trading | Non- | ||||||
|---|---|---|---|---|---|---|---|
| & | trading | ||||||
| exceptio | Restated* | & | |||||
| Underlyi | nal | Underlyin | exceptio | Restated* | |||
| No | ng | items | Total | g | nal items | Total | |
| te | €m | €m | €m | €m | €m | $\epsilon$ m | |
| 3, | |||||||
| Revenue | $\overline{4}$ | 952.0 | ۰ | 952.0 | 915.6 | ÷ | 915.6 |
| Cost of sales | 5 | (766.2) | 4.9 | (761.3) | (740.0) | (1.8) | (741.8) |
| Gross profit (loss) | 185.8 | 4.9 | 190.7 | 175.6 | (1.8) | 173.8 | |
| Administrative expenses | 5 | (110.6) | 3.5 | (107.1) | (110.9) | (5.5) | (116.4) |
| Operating profit (loss) | 3 | 75.2 | 8.4 | 83.6 | 64.7 | (7.3) | 57.4 |
| 5, | |||||||
| Finance income | 6 | 4.9 | 1.6 | 6.5 | 4.7 | ÷ | 4.7 |
| 5, | |||||||
| Finance charges | 6 | (18.5) | $\blacksquare$ | (18.5) | (18.4) | (0.1) | (18.5) |
| Share of results from associates | |||||||
| and joint ventures | ×, | ٠ | ×, | 0.3 | 0.3 | ||
| Profit (loss) before taxation | 3 | 61.6 | 10.0 | 71.6 | 51.3 | (7.4) | 43.9 |
| 5, | |||||||
| Taxation | $\overline{7}$ | (16.3) | (1.9) | (18.2) | (12.8) | 5.4 | (7.4) |
| Profit (loss) for the period | 45.3 | 8.1 | 53.4 | 38.5 | (2.0) | 36.5 | |
| Attributable to: | |||||||
| Owners of the parent | 44.3 | 8.1 | 52.4 | 38.0 | (2.0) | 36.0 |
| Restated* | |||
|---|---|---|---|
| First half | First half | ||
| No | 2022/23 | 2021/22 | |
| Earnings per share | te | cents | cents |
| Basic | 8 | 66 | 45 |
| Diluted | 8 | 66 | 45 |
| Underlying basic | 8 | 56 | 48 |
| Underlying diluted | 8 | 56 | 48 |
| Restated* | ||
|---|---|---|
| First half | First half | |
| 2022/23 | 2021/22 | |
| €m | €m | |
| Items that may be reclassified subsequently to profit or loss: | ||
| Exchange differences on translation of foreign subsidiaries | 2.4 | 0.5 |
| Fair value movement on cash flow hedges | 13.4 | 5.3 |
| Deferred tax on fair value movement on cash flow hedges | (1.8) | (0.3) |
| Share of other comprehensive income of investments accounted for using the equity | ||
| method | 0.4 | 0.3 |
| 14.4 | 5.8 |
| (3.0) | 6.2 | |
|---|---|---|
| Other comprehensive income for the period, net of tax | 11.4 | 12.0 |
| Profit for the period | 53.4 | 36.5 |
| Total comprehensive income for the period | 64.8 | 48.5 |
| Attributable to: | ||
| Owners of the parent | 63.8 | 48.0 |
| Non-controlling interests | 1.0 | 0.5 |
| Total comprehensive income for the period | 64.8 | 48.5 |
*The comparatives have been restated following the change in accounting policy in relation to Software as a Service arrangements as
explained in note 2 Basis of preparation.
As at 30 September 2022
| Restated* | ||||
|---|---|---|---|---|
| 30 | 30 | |||
| September | September | 31 March | ||
| Not | 2022 | 2021 | 2022 | |
| e | €m | €m | €m | |
| Assets | ||||
| Non-current assets | ||||
| Goodwill and intangible assets | 10 | 635.3 | 595.1 | 592.8 |
| Property, plant and equipment | 10 | 580.1 | 546.9 | 553.6 |
| Right-of-use assets | 10 | 232.9 | 227.0 | 213.8 |
| Defined benefit pension scheme surplus | 14 | 4.5 | 5.9 | 8.6 |
|---|---|---|---|---|
| Other receivables | 4.3 | 4.0 | 5.1 | |
| Deferred tax assets | 35.0 | 48.3 | 41.6 | |
| 1,639.4 | 1,579.4 | 1,565.9 | ||
| Current assets | ||||
| Inventories | 26.7 | 22.5 | 22.5 | |
| Investments | 10.7 | 11.5 | 11.1 | |
| Loans to associates and joint ventures | 0.6 | 0.9 | 0.9 | |
| Financial assets relating to PPP contracts | 7.7 | 7.1 | 7.7 | |
| Trade and other receivables | 290.0 | 253.4 | 269.3 | |
| Derivative financial instruments | 15 | 4.3 | 3.4 | 6.6 |
| Current tax receivable | 0.9 | 1.6 | 0.9 | |
| Cash and cash equivalents - including restricted cash | 11 | 58.9 | 100.3 | 63.6 |
| 399.8 | 400.7 | 382.6 | ||
| Assets classified as held for sale | 10 | 1.5 | 3.3 | |
| 401.3 | 400.7 | 385.9 | ||
| Total assets | 2,040.7 | 1,980.1 | 1,951.8 | |
| Liabilities | ||||
| Non-current liabilities | ||||
| Borrowings | 11 | (705.3) | (600.9) | (518.7) |
| Derivative financial instruments | 15 | (0.3) | (22.3) | (14.6) |
| Other non-current liabilities | (25.3) | (44.4) | (36.2) |
| Current liabilities | ||||
|---|---|---|---|---|
| Borrowings | 11 | (50.0) | (147.8) | (148.9) |
| Derivative financial instruments | 15 | (0.6) | $\blacksquare$ | (0.1) |
| Trade and other payables | (507.3) | (509.8) | (528.4) | |
| Current tax payable | (31.5) | (22.3) | (24.2) | |
| Provisions | 13 | (39.6) | (34.9) | (31.1) |
| (629.0) | (714.8) | (732.7) | ||
| Total liabilities | (1,693.8) | (1,692.8) | (1,613.6) | |
| Net assets | 346.9 | 287.3 | 338.2 | |
| Issued capital and reserves attributable to the owners of | ||||
| the parent | ||||
| Share capital | 99.5 | 99.5 | 99.5 | |
| Share premium | 473.8 | 473.6 | 473.8 | |
| Exchange reserve | (12.4) | (14.3) | (15.0) | |
| Retained earnings | (222.0) | (278.1) | (227.1) | |
| 338.9 | 280.7 | 331.2 | ||
| Non-controlling interests | 8.0 | 6.6 | $7.0\,$ | |
| Total equity | 346.9 | 287.3 | 338.2 |
*The comparatives have been restated following the change in accounting policy in relation to Software as a Service arrangements as
explained in note 2 Basis of preparation.
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| Total comprehensive (loss) income for the year | (0.2) | 97.7 | ||
|---|---|---|---|---|
| Share-based compensation | 2.5 | |||
| Movement on tax arising on share-based compensation | 1.3 | |||
| Proceeds from exercise of employee options | 0.2 | |||
| Own shares purchased by the Employee Share Trust | (1.8) | |||
| Balance as at 31 March 2022 | 99.5 | 473.8 | (15.0) | (227.1) |
| Balance at 1 April 2021 - restated* | 99.5 | 473.6 | (14.8) | (326.8) |
| Profit for the period - restated* | ÷, | 36.0 | ||
| Other comprehensive income: | ||||
| Exchange gain on translation of foreign subsidiaries | 0.5 | |||
| Fair value movement on cash flow hedges | $\overline{a}$ | 5.3 | ||
| Actuarial gain on defined benefit pension schemes | 8.0 | |||
| Tax in respect of other comprehensive income items | (2.1) | |||
| Share of other comprehensive income of investments accounted for using the equity method |
0.3 | |||
| Total comprehensive income for the period | 0.5 | 47.5 | ||
| Share-based compensation | 0.8 | |||
| Movement on tax arising on share-based compensation | 0.4 | |||
| Balance as at 30 September 2021 - restated* | 99.5 | 473.6 | (14.3) | (278.1) |
*The comparatives have been restated following the change in accounting policy in relation to Software as a Service arrangements as
explained in note 2 Basis of preparation.
| €m | ŧm | |
|---|---|---|
| Profit before tax | 71.6 | 43.9 |
| Finance income | (6.5) | (4.7) |
| Finance charges | 18.5 | 18.5 |
| Share of results from associates and joint ventures | (0.3) | |
| Operating profit | 83.6 | 57.4 |
| Amortisation and impairment of intangible assets | 4.0 | 3.9 |
| Depreciation and impairment of property, plant and equipment | 34.1 | 35.5 |
| Depreciation and impairment of right-of-use assets | 23.3 | 22.8 |
| Impairment of investment in associate | ÷ | 1.9 |
| Net gain on disposal of property, plant and equipment, intangible assets and | ||
| subsidiaries | (2.6) | (0.6) |
| Net decrease in provisions | (10.8) | (4.4) |
| Portfolio management and provision non-trading and exceptional items | (11.9) | |
| Payment related to committed funding of the defined benefit pension schemes | (1.8) | (1.8) |
| Share-based compensation | 1.2 | 0.8 |
| Operating cash flows before movement in working capital | 119.1 | 115.5 |
| Increase in inventories | (4.0) | (1.9) |
| Increase in receivables | (11.7) | (6.0) |
| Decrease in payables | (21.1) | (33.8) |
| Cash flows from operating activities | 82.3 | 73.8 |
| Income tax paid | (7.9) | (1.4) |
| Proceeds from disposals of property, plant and equipment | 4.7 | 2.1 |
|---|---|---|
| Acquisition of subsidiary, net of cash acquired | (53.5) | |
| Disposals of subsidiary and business assets net of acquisition of business assets | 0.4 | 0.2 |
| Net movements in associates and joint ventures | (1.0) | 1.2 |
| Purchase of other short-term investments | (2.2) | |
| Outflows in respect of PPP arrangements under the financial asset model net of | ||
| capital received | 2.9 | 2.8 |
| Finance income | 5.3 | 5.0 |
| Net cash outflow from investing activities | (96.9) | (28.5) |
| Financing activities | ||
| Finance charges and loan fees paid | (19.4) | (16.5) |
| Investment in own shares by the Employee Share Trust | (3.5) | |
| Proceeds from retail bonds | 125.0 | |
| Repayment of retail bonds | (100.0) | |
| Proceeds from bank borrowings | 303.2 | 126.6 |
| Repayment of bank borrowings | (132.6) | (228.9) |
| Settlement of cross-currency interest rate swaps | ×, | 6.4 |
| Repayment of PPP debt | (5.4) | (3.5) |
| Repayment of obligations under lease liabilities | (23.2) | (21.9) |
| Net cash inflow (outflow) from financing activities | 19.1 | (12.8) |
| Net (decrease) increase in cash and cash equivalents | (3.4) | 31.1 |
| Effect of foreign exchange rate changes | (1.3) | 0.4 |
Renewi plc is a public limited company listed on the London Stock Exchange with a secondary listing on Euronext Amsterdam. Renewi plc is incorporated and domiciled in Scotland under the Companies Act 2006, registered number SC077438. The address of the registered office is 16 Charlotte Square, Edinburgh, EH2 4DF. The nature of the Group's operations and its principal activities are set out in note 3.
This condensed set of consolidated interim financial statements for the six months ended 30 September 2022 has been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom Financial Conduct Authority and with IAS 34 Interim Financial Reporting as adopted for use in the UK. They should be read in conjunction with the 2022 Annual Report and Accounts, which have been prepared in accordance with UK adopted accounting standards in conformity with the requirements of the Companies Act 2006. The 2022 Annual Report and Accounts are available from the Company's website www.renewi.com.
These primary statements and selected notes comprise the unaudited consolidated interim financial statements of the Group for the six months ended 30 September 2022 and 2021, together with the audited results for the year ended 31 March 2022. These interim financial results do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The comparative figures as at 31 March 2022 have been extracted from the Group's statutory Annual Report and Accounts for that financial year, but do not constitute those accounts. Those statutory accounts for the year ended 31 March 2022 were approved by the Board of Directors on 24 May 2022 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.
The Board of Directors approved, on 9 November 2022, these consolidated interim financial statements which have been reviewed by BDO LLP but not been audited.
an 18-month period to 31 March 2024. This includes expectations on the future economic environment as well as other principal risks associated with the Group's ongoing operations. The assessment includes a base case scenario setting out the Directors' current expectations of future trading and a plausible but severe downside scenario after applying mitigating actions to assess the potential impact on the Group's future financial performance. The key judgement in both scenarios is the level of economic disruption primarily caused by recent geopolitical events.
The downside scenario includes significantly weaker macroeconomic conditions leading to a volume decline below the forecast economic outlook in all our territories in the remaining months of FY23 and FY24. Other downsides include a significant decline in recyclate prices from the current levels to well below long-term averages and a settlement of the provision arising from the European Commission investigation into alleged state aid in Belgium. These factors reduce FY24 EBIT by 29% compared to the base case. Appropriate cash mitigating actions such as deferral of uncommitted capital expenditure and other working capital actions have been applied to our downside modelling to arrive at a plausible and mitigated downside position.
In the base case and plausible downside scenarios the Group has sufficient liquidity and headroom in its existing facilities and no covenants are breached at any of the forecast testing dates.
In addition, a reverse stress test calculation has been undertaken to consider the points at which the covenants may be breached. Underlying EBIT in FY24 would need to reduce by 48% compared to the base case without considering any mitigating cost actions. In the opinion of the Directors there is no plausible scenario or combination of scenarios that we consider to be remotely likely that would generate this result.
Having considered all the elements of the financial projections, sensitivities and mitigating actions, the Directors confirm they have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and to meet all banking covenants.
In the second half of the year ended 31 March 2022 the Group revised its accounting policy in relation to Software as a Service (SaaS) arrangements and related configuration and customisation costs following
specifical and produced as a proportional conditions of a construction of the second order of the operation of The €1.7m intangible cost net of related tax credit is considered to be a non-trading and exceptional administrative item consistent with the treatment in March 2022. The €0.9m amortisation charge net of tax was an adjustment to underlying profit. The prior period Income Statement, Balance Sheet, Statement of Cash Flows and earnings per share as at 30 September 2021 have been restated with the details shown below. The 31 March 2021 restatements were disclosed in the March 2022 Annual Report and Accounts.
The impact of the above restatement on the Interim Consolidated Income Statement for the period ended 30 September 2021 is as follows:
The impact of the above restatement on the Interim Consolidated Balance Sheet as at 30 September 2021 is as follows:
| Balance Sheet extract | tm | €m | ||
|---|---|---|---|---|
| Goodwill and intangible assets | 603.2 | (7.3) | (0.8) | |
| Deferred tax assets | 46.3 | 1.8 | 0.2 | |
| Non-current assets | 1,585.5 | (5.5) | (0.6) | 1, |
| Current assets | 400.7 | ÷, | $\overline{\phantom{a}}$ | |
| Total assets | 1,986.2 | (5.5) | (0.6) | 1, |
| Non-current liabilities | (978.0) | ÷ | $\blacksquare$ | ( |
| Current liabilities | (714.8) | ÷, | $\frac{1}{2}$ | $\overline{(\overline{\phantom{a}})}$ |
| Total liabilities | (1,692.8) | ÷, | $\blacksquare$ | (1, 6) |
| Net assets | 293.4 | (5.5) | (0.6) | |
| Issued capital and reserves attributable to the owners of the parent |
||||
| Retained earnings | (272.0) | (5.5) | (0.6) | $\overline{z}$ |
| Other equity | 558.8 | $\overline{a}$ | ||
| 286.8 | (5.5) | (0.6) | ||
| Non-controlling interests | 6.6 | ÷, | ÷, | |
| Total equity | 293.4 | (5.5) | (0.6) |
The impact of the above restatement on the Interim Consolidated Statement of Cash Flows for the period ended 30 September 2021 is as follows:
$\mathbf{r}$
| Cash and cash equivalents at 30 September 2021 | 100.3 | - | |
|---|---|---|---|
The impact of the above restatement on basic and diluted earnings per share for the period ended 30 September 2021 is as follows:
The amendment to IAS 37 Onerous Contracts - Costs of Fulfilling a Contract, effective from 1 April 2022, clarifies that the costs of fulfilling a contract should include an allocation of other costs that relate directly to fulfilling the contract in addition to the incremental costs. As required by the pre-amended IAS 37, the Group's accounting policy previously only included incremental direct costs when measuring the costs to fulfil a contract. The Group assessed the impact of this amendment which resulted in an increase to the onerous contract provisions of €53.2m. A deferred tax asset has not been recognised on the increase in the provision due to the uncertainty of future profit streams in the UK. The cumulative effect of initially applying the amendment has been recognised as an adjustment to the opening balance of retained earnings as at 1 April 2022 as shown in the Statement of Changes in Equity. As permitted by the amendment, the Group has not restated the comparative information.
No other accounting standards, amendments or revisions to existing standards or interpretations have been effective which had a significant impact on the Group's condensed consolidated financial
______________________________________
adopted by the Group.
There are a number of new standards and amendments effective for the period beginning 1 April 2023 however the Group does not expect a significant impact.
In addition to the Group's presentational currency of Euros, the most significant currency for the Group is Sterling with the closing rate on 30 September 2022 of €1:£0.877 (30 September 2021: €1:£0.859) and an average rate for the period ended 30 September 2022 of €1:£0.852 (30 September 2021: €1:£0.858).
As set out in the Task Force on Climate-related Financial Disclosures (TCFD) on pages 66 to 73 of the Annual Report and Accounts 2022, the Group has considered the impact of climate change. A TCFD roadmap which will lead to quantifying the business impact of material climate related risks and opportunities is underway. Physical climate change poses risk to our operations and supply chain however mitigation measures are either already in place or are in the process of being further developed therefore no medium-term impact is expected from climate change. As a waste-to-product company, Renewi is in the business of sustainability. Waste management is an essential component of climate change mitigation through the creation of circular economies, with significant opportunities as well as risks associated with climate change itself. In preparing these condensed consolidated financial statements, the Directors have continued to consider the impact of climate change. There have been no material impacts identified on the financial reporting judgements and estimates in line with the year ended 31 March 2022.
The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenditure. In preparing these condensed consolidated interim financial statements, management have reviewed the nature of the significant judgements in applying nominal discount rate applied has been assessed and increased by 1% in line with recent movements in Government bond yields. We have also considered the impact of the current high inflationary environment. All anticipated inflationary increases are not expected to be recovered by permitted contractual price increases resulting in an increase to the provision. As set out in note 13 the combined impact of both discount rate and inflationary changes is a net increase of €0.6m.
Onerous contract provisions These principally relate to UK Municipal PPP contracts. The
Landfill related provisions – These are principally located in the Netherlands and Belgium. The nominal discount rate applied has been assessed and increased by 0.5% in line with recent movements in Government bond yields in those territories. We have undertaken a review of the future cash flows in light of the current high inflationary environment. We have determined that due to the nature of the costs which are principally for capping and covering of the landfill and mineral extraction sites there is no requirement to increase the provision at this time. As set out in note 13 the impact of the discount rate change is a decrease of €7.0m.
diodp conditions invices
The profit measure the Board of Directors uses to evaluate performance is underlying EBIT. The Group accounts for inter-segment trading on an arm's length basis.
The Commercial Waste reportable segment includes the Netherlands Commercial Waste and Belgium Commercial Waste operating segments which have been aggregated and reported as one reportable segment as they operate in similar markets in relation to the nature of the products, services, processes and type of customer. Those entities acquired with the acquisition of GMP Exploitatie B.V, as detailed in note 12, are included within the Netherlands Commercial Waste operating segment.
*The comparatives for Group central services underlying EBIT and non-trading and exceptional items have been restated following the change in accounting policy in relation to Software as a Service arrangements as explained in note 2 Basis of preparation.
| הזהה הווחדונות החורות | 1.19900 | ., | ||||
|---|---|---|---|---|---|---|
| Gross current assets | 207.9 | 35.5 | 79.0 | 14.8 | 64.1 | |
| Gross liabilities | (368.6) | (197.6) | (222.8) | (70.7) | (834.1) | (1,6) |
| Net assets (liabilities) | 945.3 | 90.6 | 63.7 | (22.1) | (730.6) | |
| 31 March 2022 | ||||||
| Gross non-current assets | 1,010.8 | 257.5 | 219.3 | 36.3 | 42.0 | 1, |
| Gross current assets | 192.0 | 37.9 | 67.7 | 17.2 | 71.1 | |
| Gross liabilities | (399.3) | (206.4) | (174.7) | (79.7) | (753.5) | (1,6) |
| Net assets (liabilities) | 803.5 | 89.0 | 112.3 | (26.2) | (640.4) |
The following tables show the Group's revenue by type of service delivered and by primary geographical market.
Revenue recognised at a point in time amounted to €841.1m (2021/22: €861.7m) with the remainder recognised over time. The majority of the Commercial Waste and Specialities revenue is recognised at a point in time, whereas for Mineralz & Water 65% of revenue (2021/22: 61%) is recognised over time.
To improve the understanding of the Group's financial performance, items which are not considered to reflect the underlying performance are presented in non-trading and exceptional items.
$\overline{\phantom{a}}$
| Portfolio management activity: | |
|---|---|
| Prior year disposals | |
| Disposal of business assets in the Mineralz & Water division | |
| Other items: | |
| Inflationary increase reassessment in UK Municipal onerous contract provisions | |
| Changes in long-term provisions due to increase in discount rates | |
| Configuration or customisation costs in cloud computing, Software as a Service arrangements | |
| Amortisation of acquisition intangibles | |
| Ineffectiveness and impact of termination of cash flow hedges | |
| Non-trading and exceptional items in profit before tax | |
| Tax on non-trading and exceptional items | |
| Exceptional tax credit |
*The comparatives have been restated following the change in accounting policy in relation to Software as a Service
arrangements as explained in note 2 Basis of preparation.
Renewi 2.0 improvement programme is a significant one-off business improvement project with expected capital and one-off costs of €40m over a three-year period and as a result is considered to be exceptional. Following the transformational merger five years ago, the goal of the Renewi 2.0 programme is to make
الراوية وجديد وللملم بحوية ومتعرضه والمورية المداخلة والمساوية والمتحل والانتام المالحات المتحدثومية المدور يعارض بالمراجعات relation to prior disposals and during the period certain business assets in the Mineralz & Water division were sold generating a profit of €3.8m (2021/22: €nil). The €5.5m credit is all recorded in administrative expenses.
The charge of €8.9m in relation to the reassessment of UK Municipal onerous contract provisions is due to the expectation of increases in future costs as a result of the current high inflationary environment. Full recovery of all anticipated inflationary increases are not expected to be recovered by permitted price increases across the already onerous contract provisions.
The credit for changes in long-term provisions of €15.3m relates to the increase in discount rates as a result of increased Government bond yields which has impacted landfill related and onerous contract provisions.
Configuration or customisation costs in cloud computing, Software as a Service (SaaS) arrangements, relate to the Group updating its accounting policy on when software can be capitalised following the IFRIC interpretation as documented in the 2022 Annual Report and Accounts. This guidance clarified the criteria under IAS 38 Intangible assets in relation to SaaS arrangements as explained in note 2 Basis of preparation. In line with the March 2022 assessment, €1.7m of costs capitalised in the six month period to 30 September 2021 have been expensed as a prior year restatement as they do not meet the criteria for recognition as an asset. The costs have been expensed as a non-trading and exceptional item due to the size, nature and incidence as they are not reflective of underlying performance which is in line with the approach taken in the year ended 31 March 2022.
The total credit of €6.4m has been recorded in cost of sales and the 2021/2022 charge of €1.7m was recorded in administrative expenses.
Amortisation of intangible assets acquired in business combinations of €1.5m (2021/22: €1.6m) is all recorded in cost of sales.
The €1.6m credit (2021/22: €0.1m charge) relates to ineffectiveness of the Cumbria PPP project interest
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Net finance charges
$12.0$
The tax charge based on the profit for the period is made up as follows:
*The comparatives have been restated following the change in accounting policy in relation to Software as a Service arrangements as explained in note 2 Basis of preparation.
Tax expense is recognised based on management's best estimate of the full year effective tax rate on expected full year profits to March 2023. The estimated average underlying annual tax rate for the year to 31 March 2023 is 26.5% (2021/22: 25.0%).
In the UK Chancellor's Budget of 3 March 2021 it was announced that the UK corporation tax rate would increase to 25% with effect from 1 April 2023. This measure was substantively enacted on 24 May 2021. As a result, the UK deferred tax position has been calculated based on the substantively enacted rates of 19% and 25% (2021/22: 19% and 25%). This resulted in an exceptional tax credit of €3.7m in the prior vear.
Underlying basic and diluted earnings per share excludes non-trading and exceptional items net of related tax. Non-trading and exceptional items are those items that are disclosed separately on the face of the Income Statement, because of their size or incidence, to enable a better understanding of performance. The Directors believe that adjusting earnings per share in this way enables comparison with historical data calculated on the same basis to reflect the business performance in a consistent manner and reflect how the business is managed and measured on a day to day basis.
*The comparatives have been restated following the change in accounting policy in relation to Software as a Service arrangements as explained in note 2 Basis of preparation.
The reconciliation between underlying earnings per share and basic earnings per share is as follows:
*The comparatives have been restated following the change in accounting policy in relation to Software as a Service arrangements as explained in note 2 Basis of preparation.
The weighted average number of shares takes into account the movements in the Renewi Employee Share Trust, The Trust owns 578,722 (2021/22: 315,851) £1 shares of the issued share capital of the Company in trust for the benefit of employees of the Group. During the period 426,468 £1 shares were purchased by the Trust at a cost of €3.5m and 380,447 £1 shares were transferred to individuals under the LTIP and DAB schemes.
The Directors do not recommend an interim dividend for the current year (2021/22: nil per share). The Directors did not recommend a final dividend for the year ended March 2022 (2021: nil per share).
| Net book value at 30 September 2022 | 593.0 | 42.3 | 580.1 | 232.9 | 1, |
|---|---|---|---|---|---|
| Impairment charge | ÷, | (0.6) | |||
| Amortisation and depreciation charge | $\blacksquare$ | (4.0) | (34.1) | (22.7) | |
| Transfer from right-of-use assets to property, plant and equipment |
$\ddot{\phantom{1}}$ | ÷, | 1.0 | (1.0) | |
| Transferred to Assets held for sale | $\overline{a}$ | (0.2) | |||
| Disposals | $\blacksquare$ | ä, | (3.4) | (0.7) | |
| Acquisitions through business combinations | 41.4 | 0.6 | 18.9 | 27.5 | |
| Additions/modifications | ÷, | 4.5 | 44.3 | 16.6 | |
| Net book value at 31 March 2022 | 551.6 | 41.2 | 553.6 | 213.8 | 1, |
| Impairment charge | ÷, | (2.3) | (5.4) | (0.7) | |
| Amortisation and depreciation charge | $\blacksquare$ | (8.8) | (69.3) | (44.8) | ( |
| Reclassifications | $\frac{1}{2}$ | (0.4) | 0.4 | ||
| Transferred to Assets held for sale | $\sim$ | ÷, | (2.6) | ||
| Disposals | $\overline{a}$ | (0.2) | (3.7) | (1.6) | |
| Acquisitions through business combinations | $\blacksquare$ | 0.3 | 0.2 | ||
| Additions/modifications | 9.3 | 73.3 | 27.1 |
*The intangible assets at 1 April 2021 have been restated following the change in accounting policy in relation to Software as a Service arrangements as explained in note 2 Basis of preparation.
The goodwill acquisition through business combinations of $€41.4m$ is provisional as permitted by IFRS 3 and includes amounts which may subsequently be reclassified to either other acquisition assets or separately identified intangibles with further details set out in note 12.
Commercial Division. All these assets are expected to be sold within the next 12 months.
المعتوية والحمامي والقيمة فمعر والماحمة المتمودية لمحمود فموارده المقالية فمواجعهم لمقلعة رقومهموه فتنف
Cash and cash equivalents are analysed as follows:
Borrowings are analysed as follows:
| Retail bonds | $\blacksquare$ | 99.9 | |
|---|---|---|---|
| Lease liabilities | 43.4 | 41.5 | |
| Bank loans and overdrafts | 1.4 | 1.5 | |
| PPP non-recourse debt | 5.2 | 4.9 | |
| 50.0 | 147.8 |
On 16 June 2022 the €100m green retail bonds with an annual gross coupon of 3.65% were repaid on maturity.
| PPP non-recourse net debt | (79.1) | 4.9 | $\overline{\phantom{0}}$ | 2.6 | ||
|---|---|---|---|---|---|---|
| Total net debt | (604.0) | (45.4) | (33.1) | (16.6) | 2.7 | 16 |
At 30 September 2022 the balance of interest accrued relating to borrowing was €2.0m (2021/22: €2.6m) and was included in trade and other payables. This balance was after finance charges of €13.5m (2021/2022: €14.3m) net of a cash outflow of €19.4m (2021/2022: €16.5m) excluding loan fees.
Amsterdam. The site of 130,000m2 has excellent road and water access operating two advanced sorting lines for processing mixed construction and demolition waste as well as household waste. In addition, a minerals classification and washing installation produces secondary construction materials from construction and demolition waste. The acquisition will deliver synergies from site rationalisation, route and waste flow optimisation and other operational benefits as part of the Group's Netherlands Commercial Waste division.
rice document oporación com la agran de mais pominista positional processo y que a con la porta de la agr
Given the short period of time since the completion of the transaction, the asset identification and fair value allocation processes have not been completed and the table below shows provisional values. External specialists have been engaged to assist with determining the final balance sheet and specifically with regard to intangible assets acquired. The Group expects to separately identify customer relationships and permits as acquisition related intangibles but no value has yet been allocated. The goodwill arising on the acquisition as noted below is attributable to management's expectations of synergies to be achieved post acquisition and will most likely reduce on completion of the purchase price allocation. None of the goodwill on this acquisition is expected to be deductible for tax, however there will be deferred tax recognised on acquisition intangibles as required under IAS 12 Income Taxes and this will be determined as part of the final purchase price allocation.
| Borrowings - Lease liabilities | |
|---|---|
| Net identifiable assets acquired | |
| Add: Goodwill arising on acquisition | |
| Net assets acquired |
In the period from the acquisition to 30 September 2022 the business contributed €6.9m to the Group's revenue and a loss of €0.9m to the Group's profit before tax. If the acquisition had been completed on the first day of the financial year, the business would have contributed €28.5m to the Group's revenue and a loss of €0.9m to the Group's profit before tax.
In addition during September 2022 the Netherlands Commercial division completed a business assets acquisition for cash consideration of €1.6m. The assets acquired were €1.0m of plant and machinery with €0.3m allocated to an acquisition related intangible for customer lists and the balance of €0.3m to goodwill.
On 27 June 2022 the Mineralz & Water division disposed of net liabilities totalling €3.6m in relation to its North Business for a cash consideration of €0.2m generating a profit on sale of €3.8m which has been recorded as a non-trading and exceptional item in line with the Group's policy due to the significant value
| Between five and ten years | 50.8 | 23.1 | 0.5 | $\sim$ | 3.4 | |
|---|---|---|---|---|---|---|
| Over ten years | 51.1 | 24.2 | 2.3 | ۰ | 9.0 | |
| At 31 March 2022 | 156.9 | 79.9 | 23.1 | 4.0 | 25.3 |
The site restoration provisions at 30 September 2022 relate to the cost of final capping and covering of the landfill and mineral extraction sites. These site restoration costs are expected to be paid over a period of up to 30 years from the balance sheet date. Aftercare provisions cover post-closure costs of landfill sites which include such items as monitoring, gas and leachate management and licensing. The dates of payments of these aftercare costs are uncertain but are anticipated to be over a period of at least 30 years from closure of the relevant landfill site. All site restoration and aftercare costs have been estimated by management based on current best practice and technology available and may be impacted by a number of factors including changes in legislation and technology.
Onerous contract provisions arise when the unavoidable costs of meeting contractual obligations exceed the cash flows expected. They are provided for at the lower of the net present value of either exiting the contracts or fulfilling our obligations under the contracts. As a result of the amendment to IAS 37 for Onerous contracts, from 1 April 2022 provisions for onerous contracts have increased by €53.2m as the amendment now requires that costs of fulfilling a contract consist of both the incremental cost of fulfilling that contract and an allocation of other costs that related directly to fulfilling contracts. Prior to this amendment the Group only included incremental direct costs with an allocation of the central overheads now included. The provisions have been calculated on the best estimate of likely future cash flows over the contract term based on the latest expectations including assumptions on inflationary increases, tonnage inputs, plant performance with efficiency improvements, off-take availability and recyclates pricing. The provisions are to be utilised over the period of the contracts to which they relate with the latest date being 2040.
Legal and warranty provisions relate to legal claims, warranties and indemnities. Under the terms of the agreements for the disposal of certain businesses, the Group has given a number of warranties and indemnities to the purchasers which may give rise to payments. The Group has a liability until the end of Group and a provision of €15.1m has been recognised in both the current year and the prior year as noncurrent as timing of any cash flow is expected to be after 12 months from the balance sheet date. The matter remains ongoing and based on legal advice management consider this value to be their best estimate of the potential exposure based on the most likely outcome. Further contingent liability information is provided in note 16.
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The restructuring provision primarily relates to redundancy and related costs incurred as a result of restructuring initiatives. As at 30 September 2022 the provision is expected to be spent in the following twelve months as affected employees leave the business.
Other provisions includes dilapidations €7.2m (March 2022: €9.1m), long-service employee awards €7.3m (March 2022: €7.0m) and other environmental liabilities €10.3m (March 2022: €9.2m). The dilapidations provisions are determined on a site by site basis using internal expertise and experience and are calculated as the most likely cash outflow at the end of the contracted obligation. The provisions will be utilised over the period up to 2071.
The Group has the legacy Shanks UK defined benefit scheme which provides pension benefits for pensioners, deferred members and eligible UK employees which is closed to new entrants and to future benefit accrual. In addition there are a number of defined benefit pension schemes eligible for certain employees in both the Netherlands and Belgium.
The amounts recognised in the Income Statement were as follows:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
| $\sim$ | |||
|---|---|---|---|
On 5 March 2021, the UK's Financial Conduct Authority (FCA) formally announced the cessation of all GBP London Interbank Offered Rate (LIBOR) benchmark settings published by ICE Benchmark Administration (IBA) after 31 December 2021. In response, work has been undertaken by the Group with the providers of the PPP non-recourse borrowings and interest rate swaps to amend the benchmark rate referenced in the loan agreements and derivative hedging instruments from GBP LIBOR to GBP SONIA (Sterling Overnight Index Average) including a credit adjustment spread on the debt to compensate for the basis differential between the two benchmarks. In the six months to 30 September 2022 all amendments have been completed and the non-recourse borrowings and interest rate swaps are now referenced to SONIA. This did not result in any accounting implications.
As referenced in note 13, there is an ongoing investigation by the European Commission in which it alleges the Walloon region of Belgium provided state aid to the Group in relation to the Cetem landfill. An adverse judgement would require the Walloon region to seek repayment from the Group. Both the Walloon Region and Renewi believe that no state aid was offered and will defend their conduct vigorously. Renewi has provided €15m based on legal advice which represents management's best estimate of the most likely outcome. It is noted that the potential maximum claim is €58m (excluding compound interest currently amounting to €5m), and therefore there is a potential further liability should the Group be wholly unsuccessful in its defence. A ruling from the European Commission has not been received and is expected during FY23 but no monies would likely become payable until FY24 should the European Commission conclude Renewi did receive state aid.
The criminal investigation into the production of thermally cleaned soil at ATM has been closed without any prosecution. It is noted that there are discussions ongoing on the application of thermally cleaned soil in certain areas in the Netherlands and it cannot be ruled out that this could result in liability for damages resulting from third party claims in the future.
Due to the nature of the industry in which the business operates, from time to time the Group is made aware of claims or litigation arising in the ordinary course of the Group's business. Provision is made for the Directors' best estimate of all known claims and all such legal actions in progress. The Group takes
| Underlying EBITDA margin |
Underlying EBITDA as a percentage of revenue | Provides insight into mare development and trends |
|---|---|---|
| Underlying profit before tax |
Profit before tax excluding non-trading and exceptional items, amortisation of intangible assets arising on acquisition and the change in fair value remeasurements of derivatives |
Facilitates underlying per evaluation |
| Underlying EPS | Earnings per share excluding non-trading and exceptional items, amortisation of intangible assets arising on acquisition and the change in fair value remeasurements of derivatives |
Facilitates underlying per evaluation |
| Underlying effective tax rate |
The effective tax rate on underlying profit before tax |
Provides a more compara analyse our tax rate |
| Return on operating assets |
Last 12 months underlying EBIT divided by a 13- month average of net assets excluding core net debt, IFRS 16 lease liabilities, derivatives, tax balances, goodwill and acquisition intangibles |
Provides a measure of the assets across the Division Group excluding goodwill acquisition intangible ball |
| Free cash flow | di oud comerciado da reportada mi encepciónal charges in the past and caused by adverse market conditions not identified at the inception of the contract Net cash generated from operating activities principally excluding non-trading and exceptional items and including interest, tax and replacement capital spend |
Measure of cash available regular replacement capil expenditure to pay divide growth capital projects ar acquisitions |
|---|---|---|
| Free cash flow conversion |
The ratio of free cash flow to underlying EBIT | Provides an understandin our profits convert into ca |
| Non-trading and exceptional cash flow items |
Renewi 2.0 and other exceptional cash flows are presented in cash flows from operating activities and are included in the categories in note 5, net of opening and closing Balance Sheet positions |
Provides useful informati trading and exceptional c spend |
| Total cash flow | Total cash flow is the movement in net debt excluding loan fee capitalisation and amortisation, exchange movements, settlement of cross-currency interest rate swaps, movement in PPP cash and PPP non-recourse debt, additions to IFRS 16 lease liabilities and lease liabilities acquired through a business combination |
Provides an understandin cash flow of the Group |
| Core cash | Core cash excludes cash and cash equivalents relating to UK PPP contracts |
The cash relating to UK PI contracts is not freely ava the Group and is excluded financial covenant calcula main multicurrency greer facility therefore excludir a suitable measure of cas Group |
| covenants on the main multicurrency green finar remain on a frozen GAAP |
||
|---|---|---|
| Liquidity | Liquidity headroom includes core cash, money market funds and undrawn committed amounts on the multicurrency green finance facility |
Provides an understandin available headroom to the |
| Net debt to EBITDA/leverage ratio |
Adjusted net debt to a comparable adjusted annualised underlying EBITDA in accordance with frozen GAAP, excluding lease liabilities which are a result of IFRS 16, and translated at an average rate of exchange for the period |
Commonly used measure leverage and consistent v covenant definition |
Reconciliation of operating profit (loss) to underlying EBITDA
| Underlying EBITDA | 65.7 | 42.8 11.6 14.3 (2.5) | ||
|---|---|---|---|---|
*The comparatives for operating loss and non-trading and exceptional items in Group central services have been restated following the change in accounting policy in relation to Software as a Service arrangements as explained in note 2 Basis of preparation.
Reconciliation of statutory profit before tax to underlying profit before tax
61.6
*The comparatives for statutory profit before tax and non-trading and exceptional items in operating profit have been restated following the change in accounting policy in relation to Software as a Service arrangements as explained in note 2 Basis of preparation.
Reconciliation of adjusted free cash flow and free cash flow as presented in the Finance review
| Free cash flow | 4.1 | |
|---|---|---|
| Include UK Municipal contracts | (6.7) | |
| Include offtake of ATM soil | (1.1) |
| Movement in PPP cash and cash equivalents | (0.5) | |
|---|---|---|
| Capitalisation of loan fees net of amortisation | (0.6) | |
| Exchange movements | 2.7 | |
| Settlement of cross-currency interest rate swaps | ||
| Movement in total net debt (note 11) | (92.4) |
| EXLIUDE IFR.3 TO IEASE IIADIIILIES | 631.1 | 6.36.0 | |
|---|---|---|---|
| Net debt under covenant definition | (387.7) | (336.0) |
In November 2022 the Group signed two additional fixed rate facilities totalling €55m including a €45m 7 year European Private Placement at 4.676% and a €10m 5 year loan at 4.22%.
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2022 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2022 which comprises the Consolidated Interim Income Statement, the Consolidated Interim Statement of Comprehensive Income, the Consolidated Interim Balance Sheet, the Consolidated Statement of Changes in Equity and the Consolidated Interim Statement of Cash Flows and the related notes 1 to 19.
We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with UK adopted international accounting standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the group to cease to continue as a going concern.
The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible for assessing the 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 company or to cease operations, or have no realistic alternative but to do so.
In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.
Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.
BDO LLP Chartered Accountants London, UK 9 November 2022
| Category Code: | IR |
|---|---|
| TIDM: | RWI |
| LEI Code: | 213800CNEIDZBL17KU22 |
| OAM Categories: | 1.2. Half yearly financial reports and audit reports/limited reviews |
| 3.1. Additional regulated information required to be disclosed under the laws of a Member State |
|
| Sequence No.: | 199998 |
| EQS News ID: | 1483201 |
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