Biffa may have to wait to buy as landfill business takes virus hit

Waste management company Biffa will have to wait to add more strings to its bow as the coronavirus pandemic puts any acquisitions on hold.

The normally acquisitive company had already bought five small companies in the year before Covid-19 hit the country.

The crisis is starting to ease, but analysts said that the company might have to wait longer to start buying again.

“The Covid-19 downturn will last into next year and without an equity raise (which is not needed from a covenant point of view but which, amongst other options, is being considered), there is effectively no room for the bolt-on acquisitions that are the most likely boost to value,” said Peel Hunt’s Andrew Shepherd-Barron.

His comments came as the company revealed that its landfill business had taken a beating from the crisis.

The section, and its industrial and commercial arm, lost 50% of their revenues to begin with. This has since recovered somewhat.

Biffa, which has also suspended dividends, said underlying profit before tax rose 12% to £71.7 million, on revenue of nearly £1.2 billion in the 12 months ending in March, a 6.6% rise.

“Events since March have, for obvious reasons, completely overshadowed what was otherwise a very successful year for Biffa,” said chief executive Michael Topham.

He added: “We were admitted to the FTSE 250 Index in March 2020 and I’m proud of what we have achieved in the year, and even more so by our response to the Covid-19 crisis.”

James Beard, a Numis analyst, said: “In the near-term… focus is on the severe disruption brought about by Covid-19 and the UK lockdown.

“We think that Biffa has navigated these challenges well to date, and the group continues to have a robust liquidity position in our view.”

The business has stopped mergers and acquisitions, reduced its operating costs and capital expenditure, slashed pay and bonuses and used the Government’s furlough scheme.

Chairman Ken Lever said: “Biffa’s management reacted swiftly to the changing economic circumstances and the significant reduction in demand that the business has experienced since the year end, especially in the Industrial and Commercial (I&C) Collections and landfill operations businesses.

“One of the highlights of the year for me was attending the official opening of the first phase of Biffa’s new 57kt PET recycling facility in Seaham, County Durham, in January 2020.

“This is progressing well despite the Covid-19 outbreak and we still see significant opportunity for further investment in our Polymers plastics business over the next few years.”