TIDMBIFF
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
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END
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