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BIFF Biffa Plc

410.00
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Last Updated: 00:00:00
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Biffa Plc LSE:BIFF London Ordinary Share GB00BD8DR117 ORD GBP0.01
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 410.00 409.80 410.00 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
0 0 N/A 0

Biffa plc Acquisition of Company Shop Group (2750Q)

25/02/2021 7:00am

UK Regulatory


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RNS Number : 2750Q

Biffa plc

25 February 2021

This announcement contains inside information

Biffa plc

Acquisition of Company Shop Group

Strengthening Biffa's leadership in the circular economy

25 February 2021

Biffa plc ('Biffa', 'the Group' or 'the Company') (LSE: BIFF), announces a significant strategic step in its commitment to the circular economy with the acquisition of Company Shop Limited ('CSG') for an upfront enterprise value of GBP82.5m.

CSG is the UK's leading and largest redistributor of surplus food and household products. It prevents waste by identifying surplus produce and then collecting, processing and redistributing it for sale through its unique network of membership-based outlets. Surplus produce includes production overruns, trial products, or produce that has been incorrectly labelled or packaged, which without intervention would be destined to become waste. CSG is the only commercial redistributor of scale in the UK, with unrivalled operational capabilities and infrastructure which underpin its strong growth plans.

Key highlights of the acquisition:

-- Leverages Biffa's position as the UK's leading sustainable waste management company, further improving its capability to support its customers' waste reduction and recycling targets

-- Strengthens Biffa's commitment to unlocking circular economy innovation for its customers and enhances Biffa's service provision across the entire waste hierarchy, expanding the Group's offering in commercial surplus redistribution through CSG's unique and market-leading business model

-- Compelling growth opportunities with increasing regulatory, social and environmental tailwinds underpinning a significant addressable market opportunity

-- Funded from existing committed debt facilities and immediately earnings enhancing on completion

Michael Topham, Chief Executive of Biffa plc, commented :

"The acquisition of Company Shop Group strengthens Biffa's leadership position in the UK circular economy. Its redistribution services complement Biffa's established waste and recycling services, and supply of closed loop recycled raw materials. As the only commercial redistributor of scale in the UK, Company Shop Group is the market-leader in a growing sector, with a strong, credible growth plan which we will deliver together. Biffa and Company Shop Group share a common set of goals, including the continued development of profitable, sustainable waste management solutions while making a meaningful contribution to society. We welcome all of Company Shop Group's members, partners and staff to Biffa and look forward to the next stage of the business' development."

Steph McGinty, Group Managing Director of Company Shop Group, commented:

" We are proud to be the UK's leading redistributor of surplus food and household products. We are a passionate business working for our industry, our colleagues, our members and our communities; we call it Corporate Surplus Responsibility.

Hallmarked by long-standing and powerful partnerships, at the heart of our business is the understanding that big challenges need big solutions, and these are always better delivered in partnership. Together, as part of Biffa plc and aligned in vision and purpose, we will continue to innovate and grow, enabling us to provide even more sustainable solutions for all our stakeholders. I am delighted to lead Company Shop Group in this exciting new chapter of its journey."

John Marren, Founder of Company Shop Group, commented:

"Biffa plc is another vanguard, changing the way that people think about waste. Our aligned values and shared ambition will enable both the delivery of a truly unique circular economy proposition to industry alongside continued growth in the important role that sustainable redistribution plays. I am proud that this decision will enable Company Shop Group to step confidently into the future, as part of the global movement to reduce waste in our industry and our society. Today, more than ever, we are called to address the climate emergency, build our economy and support our communities."

About CSG

Prior to the transaction, CSG was majority owned by John and Jane Marren. It is a membership-based business with a 50-year track record of working in long-term partnership with more than 500 supplier partners, including most of the UK's major grocery retailers and global FMCG brands. CSG prevents waste by identifying surplus produce and then collecting, processing and redistributing it for sale through its outlets. Its customers are FMCG sector employees and key workers in healthcare and emergency services, who can buy surplus products at material discounts to normal retail prices. Surplus produce includes production overruns, trial products, or produce that has been incorrectly labelled or packaged, which without intervention would be destined to become waste.

Each year in the UK, an estimated 141,000 tonnes of surplus food and beverages are produced which are suitable for human consumption, as well as a substantial unquantified surplus of non-food items such as health & beauty, homeware and clothing. Only a small proportion is currently redistributed, with the majority falling further down the waste hierarchy.

Sustainable waste management is increasingly at the top of the agenda for retailers, manufacturers and food service organisations, with greater political, regulatory and social pressures to reduce the amount of waste generated by the industry. CSG's value-added, innovative redistribution solution has established it as a market leader and the only commercial redistributor of scale in the UK. Its unrivalled operational capabilities and infrastructure, combined with an attractive and proven store roll-out plan, make it uniquely positioned to capitalise on the significant untapped surplus opportunity that exists, providing environmental, social and commercial return.

CSG's business model and customer relationships, developed over 50 years, ensure strong barriers to entry, with sustainability and waste avoidance at its core:

1. Sourcing surplus : CSG works with manufacturers and retailers to identify and source surplus product. Surplus product could be available for a number of reasons such as overproduction, incorrect labelling or order cancellations. Without CSG's solution, the majority of these products would be treated as waste given the inability for them to move through the supply chain.

2. Intervention : c. 80% of produce that CSG manages requires some intervention before it can be sold, such as relabelling, scanning, washing or repacking, all of which complies with stringent food safety regulation and is carried out in-house by CSG.

3. Redistribution: Produce is then redistributed through CSG's network of membership-based outlets at a significant discount to the normal retail price. Alongside its core network, CSG operates Community Shop, a not-for-profit community interest company that supports some of the most deprived areas of the UK through a network of hubs which sell produce provided by donations from supplier partners at deeply discounted prices, alongside the provision of a number of community services.

The combination of all of the above has enabled CSG to develop a highly regarded, pioneering business with strong barriers to entry that combines purpose with profit.

Strategic Rationale

Biffa has a clear strategy for growth, focused on strengthening its circular economy offering and in line with its purpose to change the way people think about waste across three areas: growing Biffa's leading Industrial & Commercial ('I&C') Collections platform, investing to grow its award-winning plastics recycling business Biffa Polymers and investing in Energy-from-Waste ('EfW') infrastructure.

Following the Group's GBP100m equity raise in June 2020, good progress has been made in delivering this strategic investment programme. 95% of those funds have now been committed to acquisitions, the Protos EfW development and on plastics recycling development (Aldridge and Washington facilities). As previously outlined, the Group has since been exploring additional new areas for growth, with waste reduction and reuse a natural progressive step, expanding the Group's established capabilities in this important area of the waste hierarchy.

The acquisition of CSG leverages Biffa's position as the UK's leading sustainable waste management company, further improving its capability to support its customers' waste reduction and recycling targets. Biffa's leading expertise in waste management and recycling, coupled with CSG's unrivalled capabilities in redistributing surplus produce, will deliver a unique circular economy proposition for the food manufacturing, retail and FMCG e-commerce sectors.

Both businesses share strong customer and supplier base alignment and there is a significant opportunity to cross-sell and up-sell Biffa and CSG's complementary services, especially within Biffa's existing Specialist Services business. Biffa has an enviable list of long-standing customers across CSG's target supply sectors, many of whom do not yet engage meaningfully in surplus redistribution. Biffa is uniquely well placed to facilitate the link with these customers, alongside the provision of its existing waste and recycling services.

Further details of the acquisition

CSG has delivered sustained growth over the last few years, through the ability to secure more surplus volume and the growing demand for its services.

The growth in surplus volumes secured has enabled CSG to increase its revenues from GBP44.2m in the year to September 2019 to a run rate as of today of around GBP85m, during which time the number of Company Shop outlets has grown from 6 to 12. During that same timeframe, adjusted EBITDA has increased from GBP3.7m to an annualised run rate of GBP10m today. Working in tandem with its partner organisations, CSG has a clear plan to source sufficient additional surplus volumes and expand its outlet numbers over the next 3-4 years to grow revenue and EBITDA by a further 50%.

Biffa has paid an enterprise value of GBP82.5m to acquire 100% of the share capital of the business. There is also deferred consideration of up to GBP5m, based on trading performance from April to September 2021. The consideration is to be funded from existing committed facilities and will result in the Group exiting FY21 with Net Debt of GBP440-460m (FY20 GBP426m), well within the Group's covenant headroom. There is still significant latitude for the Group to continue to pursue its pre-existing investment goals.

CSG will form part of Biffa's existing Specialist Services business, which provides bespoke solutions to customers in the food manufacturing, retail and FMCG e-commerce sectors with strong customer and supplier base alignment.

Specialist Services will be separated from the Collections division to create a new division of the Group for external reporting purposes. CSG will continue to be run by its Group Managing Director Steph McGinty and her team, who have a wealth of experience in food redistribution, logistics and retail. Both the Collections and Specialist Services businesses will be led by David Bird, who has recently been appointed Chief Operating Officer of the Collections division (including Specialist Services) and will replace Jeff Anderson, who will retire at the end of March 2021.

Presentation on announcement

Further detail around the acquisition will be given during a presentation webcast from management to financial stakeholders, today, 25 February 2021, at 09.30hrs. The webcast details are available on Biffa's website: www.biffa.co.uk/investors

If you prefer to dial-in to the webcast by telephone, you can do so using the following lines:

   --    United Kingdom: 0800 640 6441 
   --    United Kingdom: (Local) 020 3936 2999 
   --    USA (Local): 1 646 664 1960 
   --    All other locations: +44 20 3936 2999 

Access code: 096728

Notes

CSG's audited results for the year ended 30 September 2020, which are not yet published, include Revenue of GBP49.5m, Unadjusted EBITDA of GBP4.2m (pre IFRS16), Unadjusted EBIT of GBP3.5m (pre IFRS16); and Gross assets of GBP33.5m.

CSG's latest published audited results for the year ended 30 September 2019 included Revenue of GBP44.2m, Unadjusted EBITDA of GBP3.4m (pre IFRS16), Unadjusted EBIT of GBP2.9m (pre IFRS16); and Gross assets of GBP25.5m

ENQUIRIES:

Biffa

Investors & Analysts

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

ir@biffa.co.uk

Media

Houston

0204 529 0549

biffa@houston.co.uk

Cautionary statement regarding forward-looking statements

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

The forward-looking statements contained in this document speak only as of the date of this announcement, and Biffa does not undertake to update any forward-looking statement to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

About Biffa

Biffa has been at the forefront of the UK's waste industry for over a hundred years, with operations that span the entire breadth of the waste management process including collection, recycling, treatment, disposal and energy generation. Our purpose is to change the way people think about waste. We help people see the opportunities that exist when we manage our waste in the right way. We understand the vital role we have to play in helping the UK to address the climate emergency and deliver sustainable growth. This involves an ambitious investment programme in green economy infrastructure and low carbon collections, alongside an ongoing commitment to sector leadership in the health, safety and wellbeing of our people. Biffa is a Great British company. It has been listed on the London Stock Exchange since October 2016 under the ticker "BIFF". In March 2020, Biffa entered the FTSE-250. For more information visit www.biffa.co.uk/investors

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

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(END) Dow Jones Newswires

February 25, 2021 02:00 ET (07:00 GMT)

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