Collections are still the star of the show for waste management group Biffa (BIFF), helping it to achieve profits and EPS ahead of the board's expectations in the first half of the year. However, management said the growing demand for plastic recycling offers an appealing growth opportunity.
Industrial and commercial waste was the main driver of growth in the period, with revenues up 9.6 per cent and increased density contributing to a 30 basis point improvement in the group’s underlying operating margin. Chief executive Michael Topham said that unlike other route-based businesses, which try to add route density by increasing the number of services they can offer within an area, the group seeks to make acquisitions that “do the same services as us in the same markets as us”, then reroute vehicles in the overlapping area to improve efficiency.
The group’s resources and energy business has now recovered from the impact of China’s import ban, growing revenues 4.2 per cent in the period. Within this, recycling – of plastics in particular – led the way with a jump of a fifth. Management stressed the growing importance of plastics recycling, and the group is investing £27.7m in the construction of a plastic bottle recycling facility in Seaham, County Durham.
Broker Numis is forecasting pre-tax profits of £68.6m, giving EPS of 22p in 2020, up from £64m and 20.6p last year.
| BIFFA (BIFF) | ||||
| ORD PRICE: | 253p | MARKET VALUE: | £518.7m | |
| TOUCH: | 252-253p | 12-MONTH HIGH: | 261p | LOW: 172p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 32 | |
| NET ASSET VALUE: | 148p* | NET DEBT: | 84%** | |
| 26 weeks to 27 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 549 | 23.7 | 7.60 | 2.30 |
| 2019 | 594 | 25.6 | 8.20 | 2.47 |
| % change | +8 | +8 | +8 | +7 |
| Ex-div: | 28 Nov | |||
| Payment: | 20 Dec | |||
| *Includes intangible assets of £338m, or 135p a share **Does not include IFRS16 lease liabilities of £139.5m | ||||
