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The waste-to-recycling business is recovering from earlier issues and will soon have a new boss
Thursday 21 Jun 2018 Author: Daniel Coatsworth

Biffa (BIFF) 248.5p

Loss to date: 1.9%

Original entry price: Buy at 253.38p, 21 December 2017

Well-received full year results on 13 June mean we’ve nearly recovered all the lost ground since Biffa’s shares took a wobble in March.

Central to previous share price weakness was a restriction on the export of certain recyclables to China, wiping out a valuable source of income for Biffa.

The company reckons China isn’t going to change its mind and so Biffa has had to adapt its business, such as finding alternative markets, altering operations to cater for more source-separated material rather than pre-blended, and increased prices as contracts are re-tendered.

Fortunately the biggest part of its business, industrial and commercial, remains in good health with 24.9% growth in 2017 underlying operating profit.

It looks like two energy-from-waste projects are very close to getting the green light, requiring Biffa to invest between £35m to £50m per facility with a targeted mid-teens equity return.

Chief financial officer Michael Topham – who will shortly take over as chief executive – expects to fund this out of the company’s debt facilities.

It could push up group leverage from 1.9 to 2.5 times net debt-to-EBITDA (earnings before interest, tax, depreciation and amortisation). Topham says any future small bolt-on acquisitions can be funded from free cash flow.


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