REG-Renewi plc Renewi plc: Half-year report
10/11/2022 07:15
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Renewi plc (RWI)
Renewi plc: Half-year report
10-Nov-2022 / 07:00 GMT/BST
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10 November 2022
strong first half PERFORMANCE, WITH good STRATEGIC progress
Renewi plc (LSE: RWI), the leading European waste-to-product business, announces its
results for the six months ended 30 September 2022.
Financial Highlights
• Underlying EBIT1 increased 16% to €75.2m (2021: €64.7m), on revenue up 4% to €952m
(2021: €916m)
• EBIT margin increased to 7.9% (2021: 7.1%) supported by good margins in the
Commercial and Specialities divisions
• Underlying EBITDA1 increased to €131.9m (2021: €126.6m)
• Statutory profit of €53.4m (2021: €36.5m) as a result of increased EBIT and a net
exceptional profit* of €10m
• Core net debt# increased to €388m (March 2022: €303m), reflecting the initial debt
impact of €66m for the Paro acquisition and €16m of innovation capital investments.
Net debt to EBITDA of 1.7x (March 2022: 1.4x) in line with expectations
• Main drivers of first half result included strong operational performance, balancing
volume pressure with cost control, and margin management by passing inflation
through to customers. Higher recyclate prices in Q1 and certain favourable one-off
items supported the performance
Strategic Highlights
• Commercial Netherlands completed the acquisition of the Paro C&D business in
Amsterdam in August. Site rationalisation and integration are now underway
• Renewi’s first advanced sorting line in Ghent has been built and is expected to be
commissioned in H2 FY23, to allow our customers to be compliant with Vlarema 8
legislation which bans recyclable materials from being incinerated
• Good progress on committed €100m+ circular innovation investments with €45m deployed
to date
• Both regulation and societal pressure continue to increase demand for recycled
materials and to divert more waste from landfill and incineration to recycling
• Recycling rate increased to 68.4% (March 2022: 67.2%)
• Renewi 2.0 programme and Mineralz & Water recovery plan remain on track
Outlook
• We are mindful of the current challenging macroeconomic outlook with continuing
inflationary cost pressures, the movement of recyclate prices to normalised levels
and ongoing pressure on volumes in the near-term. Accordingly, management’s
expectations for the full year are unchanged despite a stronger than anticipated
first half performance
• In the medium-term we are committed to protecting our margins, offsetting inflation
with price, countering volume pressure with strong cost control and benefitting from
the Group’s proven resilience. We remain on track to deliver the remaining €40m+
from the identified value drivers
• In the longer-term we remain confident that, with regulation driving increasing
demand for recycled materials, Renewi is well positioned for growth in its markets
and to serve customers profitably as the circular economy develops and the market
for low carbon secondary materials evolves
1The definition and rationale for the use of non-IFRS measures are included in note 18.
*Including discount rate changes following central bank rate increases and inflationary
impacts on long-term contracts.
#Core net debt used for banking leverage calculations excludes the impact of IFRS 16
lease liabilities and UK PPP net debt.
Otto de Bont, Chief Executive Officer, said:
“We delivered a strong performance in the first half of FY23, ahead of our expectations.
Our focus on pricing and cost control, together with high demand for recyclates,
resulted in good profitability. Revenue was up 4% as a result of price increases more
than offsetting lower volumes for inbound waste.
“Our strategy to grow our leading position as a waste-to-product company is proving to
be increasingly relevant with a significant number of attractive investment
opportunities. Strategy execution is progressing well across our three value drivers. We
increased our market share with the completion of our acquisition of Paro. We recycled
more of our incoming waste with the continued investment in circular innovations, we
progressed on our journey to digitise our company with the Renewi 2.0 programme, and our
Mineralz & Water recovery continues. Together these programmes will deliver an
additional €10m of EBIT this year and are on track to deliver their full potential.
“While the Board remains suitably cautious about the challenging macroeconomic outlook
in the short term, we are confident the fundamentals of our business will allow us to
grow in the medium and longer term. Waste volumes have historically been resilient
through cycles and the ongoing transition to increased recycling, driven by legislation,
societal pressure and innovation, will continue to support our business model.
Results
Sep 22 Sep 21# % change
UNDERLYING NON-STATUTORY
Revenue €952.0m €915.6m +4%
Underlying EBITDA1 €131.9m €126.6m +4%
Underlying EBIT1 €75.2m €64.7m +16%
Underlying profit before tax1 €61.6m €51.3m +20%
Underlying EPS1 (cents per share) 56c 48c +17%
Adjusted free cash flow1 €21.8m €27.6m
Free cash flow1 €4.1m €15.9m
Core net debt* €387.7m €336.0m
STATUTORY
Revenue €952.0m €915.6m
Operating profit €83.6m €57.4m
Profit before tax €71.6m €43.9m
Profit for the period €53.4m €36.5m
Basic EPS (cents per share) 66c 45c
Cash flow from operating activities €82.3m €73.8m
Total net debt* €696.4m €648.4m
1 The definition and rationale for the use of non-IFRS measures are included in note 18.
# Certain September 2021 values have been adjusted to reflect a prior year adjustment as
referred to in note 2.
* Core net debt used for banking leverage calculations excludes the impact of IFRS 16
lease liabilities and UK PPP net debt.
For further information:
Paternoster Communications Renewi plc
+44 20 3012 0241 +44 7976 321 540
Tom Buchanan Adam Richford, Head of Investor Relations
+44 20 3012 0241 +31 6 21 16 35 37
Sean Canty Marieke van Wichen, Communications Director
Notes:
1. A copy of this announcement is available at 1 www.renewi.com
2. Renewi will hold an analyst presentation at 9.30 a.m. GMT / 10.30 a.m. CET today.
Webcast 2 link
Today’s results presentation will also be available on the website
Chief Executive Officer’s Statement
Overview
Renewi delivered a strong performance in the first half of FY23, ahead of our
expectations. Our focus on pricing and cost control, together with high demand for
recyclates, resulted in good profitability. Revenue increased 4% as a result of price
increases, more than offsetting lower volumes for inbound waste.
Our three value drivers – our innovation pipeline, the recovery of earnings at Mineralz
& Water and the Renewi 2.0 programme – will deliver significant additional earnings over
the next two years and beyond.
Our business model is essential to enable advanced economies to transition towards
circularity and consequently achieve carbon reduction targets. We continue to see
positive structural growth drivers, as Dutch and Belgian regional governments
progressively tax carbon emitters, incentivise recycling over incineration, and promote
the use of secondary materials. We therefore expect to see long-term accretive growth
opportunities across our markets as we continue to assist our customers both to recycle
more and to use our high-quality secondary materials.
Group financial performance
Group Summary Revenue Underlying EBIT
Sep 22 Sep 21 Variance Sep 22 Sep 21 Variance
€m €m % €m €m %
Commercial Waste 694.4 670.6 4% 68.4 64.7 6%
Mineralz & Water 93.3 93.6 0% 2.6 4.0 -35%
Specialities 186.3 168.0 11% 11.3 1.7 >100%
Group central services - - (7.1) (5.7) -25%
Inter-segment revenue (22.0) (16.6) - -
Total 952.0 915.6 4% 75.2 64.7 16%
The underlying figures above are reconciled to statutory measures in note 3 in the
consolidated financial statements. September 2021 underlying EBIT for Group central
services has been adjusted to reflect a prior year adjustment as referred to in note 2.
Group revenue was up by 4% to €952m and underlying EBIT increased by 16% to €75.2m.
Underlying EBIT grew despite lower volumes, supported by ongoing cost initiatives, net
price gains which offset inflation and favourable one-off items in the current year
relative to adverse items in the prior year. Underlying profit before tax increased by
20% to €61.6m. Underlying earnings per share increased by 17% to 56 cents (2021: 48
cents). The Group statutory profit after tax, including all non-trading and exceptional
items was €53.4m.
The business delivered a positive adjusted free cash flow of €21.8m (2021: €27.6m).
There was a total cash outflow of €80.5m (2021: €1.9m) driven by the Paro acquisition.
As anticipated, core net debt to EBITDA increased to 1.7x at 30 September 2022, an
increase from 1.4x at the end of March 2022 following investment in acquisitions and the
innovation portfolio.
Commercial Waste Revenue Underlying EBITDA Underlying EBIT
Sep 22 Sep 21 Sep 22 Sep 21 Sep 22 Sep 21
Netherlands Commercial 459.7 442.3 65.7 71.1 40.3 43.2
Belgium Commercial 236.3 228.9 42.8 38.1 28.1 21.5
Intra-segment revenue (1.6) (0.6) - - - -
Total (€m) 694.4 670.6 108.5 109.2 68.4 64.7
Period on period variance %
Netherlands Commercial 4% -8% -7%
Belgium Commercial 3% 12% 31%
Total 4% -1% 6%
Return on Underlying Underlying
operating assets EBITDA margin EBIT margin
Sep 22 Sep 21 Sep 22 Sep 21 Sep 22 Sep 21
Netherlands Commercial 25.5% 22.6% 14.3% 16.1% 8.8% 9.8%
Belgium Commercial 51.8% 38.5% 18.1% 16.6% 11.9% 9.4%
Total 31.1% 26.0% 15.6% 16.3% 9.9% 9.6%
The return on operating assets for Belgium excludes all landfill related provisions. The
underlying figures above are reconciled to statutory measures in notes 3 and 18 in the
consolidated financial statements.
The Commercial Division increased revenues by 4% to €694m and underlying EBIT by 6% to
€68.4m, representing an EBIT margin of 9.9%. Return on operating assets remained
strongly accretive at 31%.
In the Netherlands, revenue increased by 4% to €459.7m with underlying EBIT declining by
7% to €40.3m. Volumes were 7% lower than the prior year, with higher commercial volumes
offset by lower volumes in C&D, bulky and green waste. Inbound revenues were relatively
flat and outbound revenues increased by 22%, reflecting the strength of recyclate
prices, particularly in the first quarter. Since then, paper/cardboard and ferrous metal
prices have reduced, whilst wood prices have significantly increased. Inflationary
increases have been mitigated by the annual price increases and the increased benefits
from recyclates in the first half. The Paro acquisition was completed in August and
integration is ongoing to ensure common ways of working, best practice safety standards
and realisation of the synergy savings.
In Belgium, revenue increased by 3% to €236.3m and underlying EBIT by 31% to €28.1m.
Volumes declined by 13% compared to the prior year. Inbound revenues were 2% ahead of
the prior year as a result of pricing and outbound revenues increased by 10%. Given high
energy prices and overcapacity in regional incinerators, volumes have been diverted by
customers from recycling to incineration. Despite this, in Belgium we have been able to
pass through cost increases and offset lower volumes with additional pricing.
Mineralz & Water Sep 22 Sep 21 Variance
€m €m %
Revenue 93.3 93.6 0%
Underlying EBITDA 11.6 11.0 5%
Underlying EBITDA margin 12.4% 11.8%
Underlying EBIT 2.6 4.0 -35%
Underlying EBIT margin 2.8% 4.3%
Return on operating assets 7.3% 4.6%
The return on operating assets excludes all landfill related provisions. The underlying
figures above are reconciled to statutory measures in notes 3 and 18 in the consolidated
financial statements.
The Mineralz & Water Division saw revenues flat at €93.3m and underlying EBIT decrease
to €2.6m. Whilst EBITDA increased by 5%, additional depreciation from replacement
capital investments made in late 2021 impacted EBIT. The waterside business operated at
capacity in the first half, with strong demand from customers leading to good pricing.
As expected contaminated soil throughput was 35% (2021: 55%) of the kiln capacity,
producing over 100k tonnes of gravel, sand and filler for the concrete and asphalt
industries. The historical inventory of thermally clean soil remains at 0.6m tonnes with
future disposal outlets under negotiation.
Specialities Sep 22 Sep 21 Variance
€m €m %
Revenue 186.3 168.0 11%
Underlying EBITDA 14.3 7.9 81%
Underlying EBITDA margin 7.7% 4.7%
Underlying EBIT 11.3 1.7 >100%
Underlying EBIT margin 6.1% 1.0%
Return on operating assets 35.8% 17.9%
Underlying EBIT includes utilisation of €4.2m (2021: €0.5m) from onerous contract
provisions. The return on operating assets excludes the UK Municipal business. The
underlying figures above are reconciled to statutory measures in notes 3 and 18 in the
consolidated financial statements.
The Specialities Division grew revenues by 11% to €186m and delivered an underlying EBIT
of €11.3m, driven by non-recurring items relating to Municipal, as well as improvements
in Coolrec and Maltha. Coolrec has continued to perform well following the installation
of advanced plastic sorting processes in August 2021 leading to increased product
quality and stronger commercial offtake opportunities including the recent agreement
with Playmobil. Maltha is focused on performance improvement under new management and
saw revenue growth and further margin improvement in the first half.
Markets and strategy
Sustainability is at the heart of what we do
Our purpose, our vision and our business strategy are all about supporting climate
change mitigation and reducing total carbon emissions through reuse. In keeping with our
purpose, our business and sustainability strategies are inextricably linked and mutually
supportive. Starting from the UN Sustainable Development Goals, Renewi is focused on its
three key objectives: Enable the circular economy; Reduce carbon emissions; and Care for
people.
In addition to the transition to green energy, the creation of circular economies is
essential to limiting global warming. The transition to circular economies globally is
still in its early stages, as illustrated by the Circularity Gap Report which calculates
that the world is currently only 8.6% circular. Europe is leading the way in the
circular economy transition and, within Europe, the Netherlands and Belgium are leading
with national policies moving faster than EU policy generally.
In November 2021, COP26 set out the necessary steps to avoid catastrophic increases in
global temperatures by the end of the century. Production of more secondary materials to
reduce virgin material use and the associated carbon emissions is a key requirement to
meet these goals. Becoming more circular and cutting virgin material use by 28% within
nine years could lead to a reduction in global greenhouse gas emissions by 39% according
to the 3 Circularity Gap Report.
Supply of materials for recycling is stimulated by disincentivising landfill and
incineration through fiscal policy and prohibitions thus creating an environment where
sorting and processing to produce recyclates is economically competitive. This is
already in place in the Netherlands and Belgium. The move towards recycling has been
further strengthened by progressive increases to incineration taxes in both countries.
Increases in recycling will be driven by new legislation in Flanders which comes into
effect in January 2023. The most recent amendment to Vlarema 8 introduces the mandatory
pre-sorting of waste to remove recyclates before residues are incinerated, and this
legislation is the key driver of our decision to invest in three large state-of-the-art
sorting lines in Flanders. It is our expectation that the Walloon and Dutch governments
will follow Flanders’ lead in due course, also requiring the recovery of recyclates by
sorting of residual waste before allowing the residue to be incinerated.
Investment in technology is critical to achieving the circular economy, allowing the
industry to achieve better recovery of more materials for reuse, to address ever more
difficult waste streams and to produce better quality low carbon secondary materials
that can compete with virgin materials. This requires collaboration and partnerships
between manufacturers and waste management companies to enable our low carbon materials
to be incorporated into production processes and to change existing production to
facilitate the eventual recycling of products used.
Several of Renewi’s circular innovation investments are examples of technology and close
collaboration with partners, such as the collaboration with Shell and Nordsol to build
and produce bio-LNG from out-of-date food waste and our collaboration with Ikea and
Ikano to recycle mattresses and to recover polyurethane to put back into reuse.
Legislators in Renewi’s European markets are considering further action, including
carbon taxes on incineration by including them in the EU emissions trading schemes,
minimum recycled content levels and producer responsibility for the management of closed
loops. All these measures will increase demand for secondary materials and accelerate
recycling rates.
During the first half we have made good progress with our strategic sustainability
objectives, including the following highlights:
Enable the circular economy
• Increased recycling rate to 68.4% an increase of +1.2% points since March 2022, with
positive progress in particular from the Commercial and Specialities Divisions
• Renewi’s first advanced sorting line in Ghent has been built and is expected to be
commissioned in the second half, to allow our customers to be compliant with Vlarema
8 legislation
Reduce carbon emissions
• We are executing on our commitment to reduce our own footprint by a minimum of 50%
by 2030
• We continue to increase the use of renewable electricity and the use of
self-produced renewable electricity including site based solar panels and windmills.
At Ghent construction of a windmill is underway and expected to complete in early
2023
• An additional 5 zero emission trucks have been ordered
Care for people
• We improved our safety performance with a 25% reduction in our lost time incident
rate
• We had no major fires or environmental incidents in the first half having made
significant investments in prevention and detection
• We continued improvements in SHEQ culture. For example we tripled the number of
truck driver tours which promote dialogue with operations and doubled the number of
site tours and SHEQ awards
• We hosted country-wide employee celebration events bringing our people together post
covid
• Our diversity & inclusion committee has a programme of activity aimed at making
Renewi an even more rewarding and inclusive place to work. We have further improved
Board gender diversity to 38% with the appointments of Annemieke den Otter and
Katleen Vandeweyer
Our strategy for long-term profitable growth
We have a clear and consistent business strategy to deliver long-term growth in both
margins and volumes. To date, our strategy has been focused on margin expansion through
increased recycling rates and the production of higher quality materials. While this
focus continues, we are now also seeking to expand our market share both domestically
and internationally. Our strategy is based on three pillars:
1. Leader in recycling: increase our recycling rate. Our ambitious goal, launched as
“Mission75”, is to increase our recycling rate to 75% from the current 68.4%, which
we believe is already the highest in the industry
2. Leader in secondary material production: Enhance the quality and value of the
products we produce. For production companies currently using primary raw materials,
the easiest way to convert is by using high quality secondary raw materials that
they can “drop-in” to their existing production processes. Accordingly, we are
investing in advanced processing facilities to deliver materials of the necessary
quality to achieve this
3. Selectively gain market share. Our aim is to achieve this through delivering organic
growth, and by taking advantage of the consolidation opportunities in our sector
both within our core markets and potentially in new territories that are suited to
our waste-to-product model
Capital deployment for growth
To grow market share, we have three areas of focus:
1. Organic circular innovation investment opportunities at attractive returns of
greater than 16% (pre-tax) return on operating assets within our innovation
pipeline. These include the committed >€100m of investments and further
opportunities that are being validated
2. M&A within the Benelux. These investments provide an opportunity to enhance our
market position in attractive segments and to consolidate our position in the market
such as the recent Paro transaction
3. M&A outside of the Benelux. These investments will take our expertise and
waste-to-product model learnt in Europe’s most advanced circular economies of the
Netherlands and Belgium into other European jurisdictions. In the immediate term
there are opportunities to expand in niche waste segments where collection is not a
requirement of the business model: glass, white goods and mattresses being good
examples. Longer term, we believe our model can be replicated in other advanced
circular economies following the Netherlands and Belgium approach driven by EU
legislation
Collectively across these three focus areas, we have committed over €175m over the last
two years, including the >€100m of investment in circular innovations and €66m for the
acquisition of Paro. These investments are being funded by the Group’s cash flow and the
Group’s borrowing capacity. In each case, they provide attractive returns on investment
and earnings accretion, whilst maintaining the Group leverage below 2.0x as per the
Board’s policy. The Board is keeping the dividend under review, taking into account the
Group’s ongoing investments in growth projects, current trading and longer-term outlook.
Update on the Group’s value drivers
We have three specific areas of activity to grow underlying profitability in the period
to FY26. These are our ongoing investments in circular innovations, the recovery of our
Mineralz & Water business at ATM, and Renewi 2.0 efficiency programme. Each driver is
expected to contribute €20m EBIT and €60m in total by FY26 and all are on track to
achieve this.
Committed circular innovation investments
We are investing in innovative solutions to increase recycling rates and product
quality, the first two pillars of our strategy to deliver an additional EBIT of €20m by
FY26. Last year we announced over €100m of investments across four key areas
encompassing plastics recycling, deriving value from organic waste, building materials
production and advanced sorting processes in Flanders. These investments are being
deployed over three years, with 40% (€45m) currently deployed. Each project will exceed
our threshold for pre-tax return on operating assets of 16% as the facilities are
commissioned. We have a pipeline of potential innovation projects for future
investments.
Renewi 2.0 programme
We are well underway with our Renewi 2.0 programme which is focused on making the
company simpler, more customer-focused, more efficient and a better place to work. As
previously indicated, the programme is expected to deliver a minimum of €20m of annual
cost benefits on a run-rate basis from FY24 for a total cash cost of €40m, of which €23m
has now been deployed. Activated accounts on the MyRenewi customer platform have grown
to over 80,000 albeit adoption is tracking around 20% below our target levels. Over
13,000 orders a month are now being placed electronically delivering accurate straight
through processing towards the objective of reducing customer complaints, which remain
at elevated levels pending the full delivery of Renewi 2.0 initiatives. We remain
confident that we will achieve the targeted savings on schedule.
Mineralz & Water recovery
Recovery at ATM, our major site that cleans contaminated soil and water, is ongoing
despite uncertainty by regulators on the adequacy of the current environmental regime
leading to both reduced intake of contaminated soil, and difficulty obtaining necessary
permits to dispose of TGG. This situation is expected to be resolved when proposed
amendments to current legislation are brought forward and should bring much-needed
clarity to this part of our business.
The team at Moerdijk are actively working to restore the previous profitability of the
activity across several critical workstreams. Investments have been completed to
transition the output production from TGG to gravel, sand and filler including the
in-line sieve, gravel sorting line and the dust silos. Good progress has been made
selling historical production of TGG which is down to 0.6m tonnes with a further 0.2m
tonnes under negotiation for shipment during FY23. Lower historic TGG stocks are also
expected to have a positive impact on soil import licencing, which is necessary to
increase processing volumes. Activity is ongoing towards additional quality
certifications and the target “end of waste” status for both sand and filler products to
increase end markets and pricing. There is a growing interest in these secondary
building materials from concrete and asphalt producers as the construction industry is
converting to circularity.
ATM’s profit improvement is also supported by growth in water treatment where we have
potential to expand our treatment capacity. We therefore anticipate that as the
regulatory environment for soil becomes clearer, as our building materials achieve their
certification, and as we expand our water treatment, ATM will be able to restore margins
and EBIT to €20m.
Resilience & managing macroeconomic pressure
Like all businesses, we are impacted by macroeconomic pressures. It is now clear the war
in Ukraine has had profound effects on the global economy through the impact on energy
markets, causing surging inflation, central bank rate increases, consumer demand falling
and the real prospect of economic downturn across Europe. These macro changes also
impact the value of recyclates. While reprocessing is less energy-intensive and
therefore less costly, the value of recyclates is also impacted by global demand for
materials. As a result, we anticipate lower recyclate pricing in the second half and
lower than the prior year.
Waste volumes are typically resilient to economic cycles. In our Commercial Division,
the breadth of our customer base supporting 150,000 commercial and industrial customers
includes all sectors of the economy, several of which – such as utilities, healthcare
and the public sector – are resilient to economic cycles. In addition, significant
segments within Renewi’s operations are focused on resilient waste streams with lower
exposure to economic cycles such as glass, soil, water, UK municipal and electrical
goods accounting for around 40% of our total Group volume. We have limited exposure to
sectors, such as construction and demolition which accounts for around 6% of total Group
volumes, or business to consumer sectors whose demand is affected by the cost-of-living
squeeze, such as hospitality and leisure or discretionary retail.
There are continuing inflationary cost pressures across the business in the near term,
However, we are more resilient than most to these macroeconomic pressures because our
business model allows us to manage the headwinds of recyclate prices, energy costs, wage
inflation and price inflation. We provide an essential service to our commercial and
industrial customer base, who must have their waste processed and this allows us to
recover appropriate inflation costs from our customers. Our larger customers are on
multi-year contracts with inflation provisions and our smaller customers have an annual
price rise in their contracts which replace the temporary surcharges that are already in
place to reflect the higher costs of collection. We actively hedge fuel and energy
costs. For diesel requirements 75% is hedged for at least 6 months and 50% for 12
months. Around 80% of our c. 260 GWh energy requirement is now fixed for 2023 calendar
year, and in addition we have an offsetting production of 57 GWh from our sites. Payroll
costs in Belgium are mandated by government to rise in line with annual inflation and in
the Netherlands will rise according to our collective labour agreements which slightly
delays the impact of inflation.
We anticipate reversion of several recyclate prices towards long term levels and our
forecasts reflect this. We have dynamic pricing on contracts for major recyclate groups
including metals, paper and cardboard, wood and plastics which enables us to pass
through pricing changes to our customers. Typically, these average around 60% of these
materials.
Outlook
We are mindful of the current challenging macroeconomic outlook with continuing
inflationary cost pressures, the movement of recyclate prices to normalised levels and
ongoing pressure on volumes in the near-term. Accordingly, management’s expectations for
the full year are unchanged despite a stronger than anticipated first half performance.
In the medium term we are committed to protecting our margins, offsetting inflation with
price, countering volume pressure with strong cost control, and benefitting from the
Group’s proven resilience. We remain on track to deliver the remaining €40m+ from the
identified value drivers.
In the longer term we remain confident that, with regulation driving increasing demand
for recycled materials, Renewi is well positioned for growth in its markets and to serve
customers profitably as the circular economy develops and the market for low carbon
secondary materials evolves.
FINANCE REVIEW
Financial Performance Sep 22 Sep 21 Variance
€m €m %
Revenue 952.0 915.6 4%
Underlying EBITDA 131.9 126.6 4%
Underlying EBIT 75.2 64.7 16%
Operating profit 83.6 57.4 46%
Underlying profit before tax 61.6 51.3 20%
Non-trading & exceptional items 10.0 (7.4)
Profit before tax 71.6 43.9
Total tax charge for the period (18.2) (7.4)
Profit for the period 53.4 36.5
The underlying figures above are reconciled to statutory measures in notes 3 and 18 in
the consolidated financial statements. September 2021 underlying EBIT has been adjusted
to reflect a prior year adjustment as referred to in note 2.
Renewi delivered a good performance in the first half of FY23, with revenues and
underlying EBIT up 4% and 16% respectively. Underlying EBIT was €10.5m higher than the
prior half year despite the €11.3m impact of lower volumes. Ongoing cost initiatives,
including Renewi 2.0 contributed €4.2m. Favourable one-off items in the current year of
€10.7m (2021: €7.5m adverse impact from one-off items) resulted from settlements with
incinerators, property disposals, IAS 37 amendment implementation and other items.
Underlying EBITDA increased by 4%, whereas underlying EBIT increased by 16% as the
depreciation charge remained stable period-on-period and a number of impairments in the
prior year were not repeated in FY23. Interest charges and share of results from
associates and joint ventures were comparable to last year. The level of exceptional and
non-trading items in the current year was a credit of €10m as described below, resulting
in a statutory profit for the period of €53.4m compared to €36.5m last year.
As reported with the FY22 results, we reviewed our accounting policy with regard to the
treatment of costs associated with the configuration and customisation incurred in cloud
computing or Software as a Service (SaaS) arrangements. In line with the March 2022
assessment, €1.7m of costs capitalised in the six-month period to September 2021 have
been recorded as a prior year restatement as they no longer met the criteria for
recognition as an asset. Further details are provided in note 2 to the consolidated
interim financial statements.
The amendment to IAS 37 Onerous Contracts – Costs of Fulfilling a Contract, effective
from 1 April 2022, clarifies that the costs of fulfilling a contract should include an
allocation of other costs that relate directly to fulfilling the contract in addition to
the incremental costs. The Group assessed the impact of this amendment which resulted in
an increase to the onerous contract provisions of €53.2m. The cumulative effect of
initially applying the amendment has been recognised as an adjustment to the opening
balance of retained earnings as at 1 April 2022. The impact has resulted in annual costs
of €5m now being utilised against the provision rather than recorded as part of
underlying EBIT. As permitted by the amendment, the Group has not restated the
comparative information.
Non-trading and exceptional items excluded from pre-tax underlying profits
To enable a better understanding of underlying performance, certain items are excluded
from underlying EBIT and underlying profit before tax due to their size, nature or
incidence. Total non-trading and exceptional items excluding tax were a credit of €10.0m
in the period (2021: charge €7.4m as adjusted for the change in accounting policy
restatement). As previously reported, we have accounted for the cost of the Renewi 2.0
programme as exceptional due to its size and nature. The cost of the programme is still
expected to be €40m and is forecast to deliver cost benefits at an annualised run rate
of €20m once completed. Benefits of €4.6m were secured in the half with cash spend of
€2.0m which was slightly lower than expected. Following on from recent developments in
Government bond yields, discount rates used for long-term landfill and onerous contract
provisions have been increased, resulting in a non-cash credit of €15.3m. Given the
current high inflationary environment the assumptions on inflation in the UK Municipal
onerous contract provisions for the next two years have been reassessed resulting in a
€8.9m increase in provisions. Both of these items are recorded as non-trading and
exceptional due to size and nature in line with our policy. Further details are provided
in note 5 to the consolidated interim financial statements.
Operating profit after taking account of all non-trading and exceptional items was
€83.6m (2021: €57.4m as adjusted for the change in accounting policy restatement).
Net finance costs
Net finance costs excluding exceptional items decreased €0.1m to €13.6m (2021: €13.7m),
with savings on core borrowings due to lower rates net of increased costs for discount
unwind given the 1 April IAS 37 amendment which increased onerous contract provisions by
€53.2m. Further details are provided in note 6 to the consolidated interim financial
statements.
Taxation
Total taxation for the period was a charge of €18.2m (2021: €7.4m as adjusted for the
change in accounting policy restatement). The effective tax rate on underlying profits
at 26.5% is based on the estimate of the full year effective tax rate. A tax charge of
€1.9m is attributable to the non-trading and exceptional items of €10.0m as a number of
items are not subject to tax.
The Group statutory profit after tax, including all non-trading and exceptional items,
was €53.4m (2021: €36.5m as adjusted for the change in accounting policy restatement).
Earnings per share (EPS)
Underlying EPS excluding non-trading and exceptional items was 56 cents per share, an
increase of 8 cents. Basic EPS was 66 cents per share compared to 45 cents per share in
the prior year.
CASH FLOW PERFORMANCE
The funds flow performance table is derived from the statutory cash flow statement and
reconciliations are included in note 18 in the consolidated financial statements.
The table shows the cash flows from an adjusted free cash flow to total cash flow. The
adjusted free cash flow measure focuses on the cash generation excluding the impact of
historic liabilities relating to Covid-19 tax deferrals, settlement of ATM soil
liabilities and spend relating to the UK PPP onerous contracts.
Funds flow performance Sep 22 Sep 21
€m €m
EBITDA 131.9 126.6
Working capital movement (26.0) (36.0)
Movement in provisions and other (3.9) (0.2)
Net replacement capital expenditure (35.0) (28.0)
Repayments of obligations under lease liabilities (23.2) (21.9)
Interest, loan fees and tax (22.0) (12.9)
Adjusted free cash flow 21.8 27.6
Deferred Covid taxes (9.9) (0.4)
Offtake of ATM soil (1.1) (3.4)
UK Municipal contracts (6.7) (7.9)
Free cash flow 4.1 15.9
Growth capital expenditure (16.0) (7.5)
Renewi 2.0 and other exceptional spend (2.3) (7.7)
Acquisitions net of disposals (60.1) -
Other (6.2) (2.6)
Total cash flow (80.5) (1.9)
Free cash flow conversion 5% 25%
Free cash flow conversion is free cash flow as a percentage of underlying EBIT. The
non-IFRS measures above are reconciled to statutory measures in note 18 in the
consolidated financial statements. Certain September 2021 values have been adjusted to
reflect a prior year adjustment as referred to in note 2.
Adjusted free cash flow was lower at €21.8m despite the EBITDA improvement. The outflow
on working capital in the period was mostly driven by a further reduction in payables
together with limited increases in inventory and receivables. Days sales outstanding
have increased slightly since March but still remain lower than the pre-Covid averages.
Replacement capital spend at €35.0m was ahead of last year in line with expectations and
including catch-up from the prior two years. In addition, €16.7m of new leases have been
entered into which are reported as right-of-use assets with a corresponding lease
liability. These leases include the continuation of the truck replacement programme,
property lease renewals or extensions and other assets. Growth capital spend of €16.0m
includes further spend on the Vlarema 8 advanced sorting investments in Belgium and
plastics sorting at Acht in the Netherlands.
Interest payments were higher this year due to annual payments for three retail bonds
following on from the July 2021 new issue. Tax payments were also €6.5m higher in the
current period as certain annual tax settlements fell into the second half last year and
some end of year settlements fell into April rather than March.
Looking at the three components that are shown below adjusted free cash flow, there has
been a further €9.9m repayment on Dutch Covid-19 tax deferrals as forecast. The
remaining balance of €40m will be settled over the next 24 months. Cash spend for
placement of TGG soil stocks was limited in the first six months. The balance of the
liability of €15m is expected to be placed in the market over the next 12 to 24 months.
Cash outflow on UK PPP contracts was €6.7m, slightly lower than the prior year.
The acquisitions net of disposals outflow is principally €60.5m for the Paro acquisition
representing the cash paid of €53.5m and the repayment of loans acquired. Further
details are provided in note 12 to the consolidated interim financial statements.
Other cash flows include the additional injection of €1.5m into the investment in
RetourMatras, funding for the closed UK defined benefit scheme and the funding of the
Renewi Employee Share trust net of sundry dividend income from other investments.
Net cash inflow from operating activities increased from €72.4m in the prior period to
€74.4m in the current year. A reconciliation to the underlying cash flow performance as
referred to above is included in note 18 in the consolidated interim financial
statements.
We continue to pay significant attention to cash, taking into account the future
investment needs of the business alongside the ongoing replacement capital and the
medium term repayment of the Covid taxes.
INVESTMENT PROJECTS
Expenditure in FY23
The Group’s long-term expectations for replacement capital expenditure remain around 80%
of depreciation. FY23 full year replacement capital spend is expected to be around €70m
which includes some catch-up from the prior two years and some one-offs for compliance
in Commercial, the Green Gas project and jetty and pyro improvements at ATM. In
addition, up to €40m of IFRS 16 lease investments are expected for the full year,
primarily in replacement trucks, although production delays are ongoing given supply
chain challenges.
Expenditure on the circular innovation pipeline will continue to increase as the
advanced sorting investments in Belgium for Vlarema 8 and expansion in plastics sorting
at Acht in the Netherlands progress through the construction phases. Timing of the
investment spend has slipped slightly with the FY23 full year spend now expected to be
around €45m.
Return on assets
The Group return on operating assets excluding debt, tax and goodwill increased to 44.7%
at September 2022 from 42.6% at March 2022. The Group post-tax return on capital
employed at September 2022 was 12.2% up from 11.6% at March 2022.
Treasury and cash management
Core net debt and leverage ratios
Core net debt excludes IFRS 16 lease liabilities and the net debt relating to the UK PPP
contracts which is non-recourse to the Group and secured over the assets of the special
purpose vehicles. Core net debt was in line with management expectations at €388m (March
2022: €303m) which resulted in a net debt to EBITDA ratio of 1.7x, comfortably within
our covenant limit of 3.50x. Liquidity headroom including core cash and undrawn
facilities remains strong at €247m, a reduction from March as a result of the repayment
of €100m retail bonds on maturity in addition to the increase in net debt.
Debt structure and strategy
Borrowings, excluding PPP non-recourse borrowings, are mainly long-term. In the year to
March 2022 the Group’s main banking facility was extended with most commitments now
maturing in May 2025. All our core borrowings of bonds and loans are green financed.
Debt Structure Sep 22 Mar 22 Variance
€m €m €m
€100m Belgian Green retail bonds - (100.0) 100.0
€75m Belgian Green retail bonds (75.0) (75.0) -
€125m Belgian Green retail bonds (125.0) (125.0) -
€400m Green RCF (192.5) (15.0) (177.5)
Green EUPP (25.0) (25.0) -
Gross borrowings before lease liabilities (417.5) (340.0) (77.5)
Historical IAS 17 lease liabilities and other (11.9) (8.7) (3.2)
Loan fees 2.5 3.2 (0.7)
Core cash and money market funds 39.2 42.5 (3.3)
Core net debt (as per covenant definitions) (387.7) (303.0) (84.7)
IFRS 16 lease liabilities (237.1) (221.9) (15.2)
Net debt excluding UK PPP net debt (624.8) (524.9) (99.9)
UK PPP restricted cash balances 19.7 21.1 (1.4)
UK PPP non-recourse debt (91.3) (100.2) 8.9
Total net debt (696.4) (604.0) (92.4)
In November 2022, the Group signed new fixed rate facilities totalling €55m in addition
to the existing €200m of fixed rate bonds. The new borrowings include a €45m 7-year
European Private Placement at 4.676%, and a €10m 5-year loan at 4.22%.
The Group operates a committed invoice discounting programme. The cash received for
invoices sold at September 2022 was €80m (March 2022: €81m).
The introduction of IFRS 16 on 1 April 2019 brought additional lease liabilities onto
the balance sheet with an associated increase in assets. Covenants on our main bank
facilities remain on a frozen GAAP basis and exclude IFRS 16 lease liabilities.
Debt borrowed in the special purpose vehicles (SPVs) created for the financing of UK PPP
programmes is separate from the Group core debt and is secured over the assets of the
SPVs with no recourse to the Group as a whole. Interest rates on PPP borrowings were
fixed by means of interest rate swaps at contract inception. At September 2022 this net
debt amounted to €72m (March 2022: €79m).
PROVISIONS AND CONTINGENT LIABILITIES
Around 85% of the Group’s provisions are long-term in nature, with the onerous contract
provisions against the PPP contracts being utilised over 20 years and landfill
provisions for many decades longer. As noted previously, the application of the
amendment to IAS 37, Onerous Contracts – Costs of Fulfilling a Contract has resulted in
a 1 April 2022 increase of €53m to the onerous contract provisions. The provisions
balance classified as due within one year amounts to €40m, including €2m for
restructuring, €12m for onerous contracts, €13m for landfill related spend and €13m for
environmental, legal and others. Further details are provided in note 13 to the
consolidated interim financial statements.
The position on the alleged Belgian State Aid claim remains unchanged since March, with
a gross potential liability of €63m against which we have provided for €15m. We expect a
ruling from the European Commission during FY23 but no monies would likely become
payable until FY24. Details of contingent liabilities are set out in note 16 of the
financial statements.
Retirement benefits
The Group has a defined benefit pension scheme for certain UK employees which has been
closed to new entrants since September 2002 and was closed to future benefit accrual
from December 2019. At September 2022, the scheme remained in surplus at €4.5m (March
2022: €8.6m). The movement in the period was due to an increase in discount rate
assumption on scheme liabilities net of lower asset returns. There are also several
defined benefit pension schemes for employees in the Netherlands and Belgium which had a
retirement benefit deficit of €4.6m at September 2022, a reduction from €6.3m at March
2022 as a result of increased discount rate assumptions on scheme liabilities.
PRINCIPAL RISKS AND UNCERTAINTIES
Renewi operates a risk management framework to identify, assess and control the most
serious risks facing the Group. The 2022 Annual Report (pages 90 to 99) provides a
discussion of the Group’s principal risks and uncertainties. The Board believes that the
key risks and associated mitigation strategies have not changed in the period.
Renewi continues to monitor inflationary pressures including energy costs, cost of
labour, recyclate prices and the risk of recession driven in part by the disruptive
events in Ukraine. Cyber crime is an increasing risk for all businesses and we have been
investing to further strengthen our capabilities. All of these potential risks are
actively reviewed and managed at the Board and in our executive management teams.
GOING CONCERN
The Directors have adopted the going concern basis in preparing these consolidated
interim financial statements after assessing the Group's principal risks. Further
details of the modelling and scenarios prepared are set out in note 2 of the financial
statements. Having considered all the elements of the financial projections and applying
appropriate sensitivities, the Directors confirm they have a reasonable expectation that
the Group has adequate resources to continue in operational existence for the
foreseeable future and to meet its covenants.
STATEMENT OF THE DIRECTORS’ RESPONSIBILITIES
The Directors confirm that these condensed consolidated interim financial statements
have been prepared in accordance with International Accounting Standard 34 Interim
Financial Reporting as adopted for use in the UK, and that the interim management report
includes a fair review of the information required by DTR 4.2.7 R and DTR 4.2.8 R,
namely:
• an indication of important events that have occurred during the first six months and
their impact on the condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of the financial
year; and
• material related-party transactions in the first six months and any material changes
in the related-party transactions described in the last Annual Report.
A list of current Directors is maintained on the Renewi plc website: www.renewi.com.
By order of the Board
Otto de Bont Annemieke den Otter
Chief Executive Officer Chief Financial Officer
9 November 2022 9 November 2022
Forward-looking statements
Certain statements in this announcement constitute “forward-looking statements”.
Forward-looking statements may sometimes, but not always, be identified by words such as
“will”, “may”, “should”, “continue”, “believes”, “expects”, “intends” or similar
expressions. These forward-looking statements are subject to risks, uncertainties and
other factors which, as a result, could cause Renewi plc’s actual future financial
condition, performance and results to differ materially from the plans, goals and
expectations set out in the forward-looking statements. Such statements are made only as
at the date of this announcement and, except to the extent legally required, Renewi plc
undertakes no obligation to revise or update such forward-looking statements.
Consolidated Interim Income Statement (unaudited)
First half ended 30 September 2022
First half 2022/23 First half 2021/22
Restated*
Non-trading
Non-trading
& Restated*
Note Underlying exceptional & Restated*
items Total Underlying exceptional
€m items Total
€m €m €m
€m €m
Revenue 3,4 952.0 - 952.0 915.6 - 915.6
Cost of sales 5 (766.2) 4.9 (761.3) (740.0) (1.8) (741.8)
Gross profit 185.8 4.9 190.7 175.6 (1.8) 173.8
(loss)
Administrative 5 (110.6) 3.5 (107.1) (110.9) (5.5) (116.4)
expenses
Operating 3 75.2 8.4 83.6 64.7 (7.3) 57.4
profit (loss)
Finance income 5,6 4.9 1.6 6.5 4.7 - 4.7
Finance charges 5,6 (18.5) - (18.5) (18.4) (0.1) (18.5)
Share of
results from - - - 0.3 - 0.3
associates and
joint ventures
Profit (loss) 3 61.6 10.0 71.6 51.3 (7.4) 43.9
before taxation
Taxation 5,7 (16.3) (1.9) (18.2) (12.8) 5.4 (7.4)
Profit (loss) 45.3 8.1 53.4 38.5 (2.0) 36.5
for the period
Attributable
to:
Owners of the 44.3 8.1 52.4 38.0 (2.0) 36.0
parent
Non-controlling 1.0 - 1.0 0.5 - 0.5
interests
45.3 8.1 53.4 38.5 (2.0) 36.5
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Restated*
First half
First half
Earnings per share Note 2022/23
2021/22
cents
cents
Basic 8 66 45
Diluted 8 66 45
Underlying basic 8 56 48
Underlying diluted 8 56 48
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Consolidated Interim Statement of Comprehensive Income (unaudited)
First half ended 30 September 2022
Restated*
First half 2022/23
First half 2021/22
€m
€m
Items that may be reclassified subsequently to
profit or loss:
Exchange differences on translation of foreign 2.4 0.5
subsidiaries
Fair value movement on cash flow hedges 13.4 5.3
Deferred tax on fair value movement on cash flow (1.8) (0.3)
hedges
Share of other comprehensive income of investments 0.4 0.3
accounted for using the equity method
14.4 5.8
Items that will not be reclassified to profit or
loss:
Actuarial (loss) gain on defined benefit pension (4.0) 8.0
schemes
Deferred tax on actuarial (loss) gain on defined 1.0 (1.8)
benefit pension schemes
(3.0) 6.2
Other comprehensive income for the period, net of 11.4 12.0
tax
Profit for the period 53.4 36.5
Total comprehensive income for the period 64.8 48.5
Attributable to:
Owners of the parent 63.8 48.0
Non-controlling interests 1.0 0.5
Total comprehensive income for the period 64.8 48.5
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Consolidated Interim Balance Sheet (unaudited)
As at 30 September 2022
Restated*
30 September 31 March
30 September
Note 2022 2022
2021
€m €m
€m
Assets
Non-current assets
Goodwill and intangible assets 10 635.3 595.1 592.8
Property, plant and equipment 10 580.1 546.9 553.6
Right-of-use assets 10 232.9 227.0 213.8
Investments 15.5 14.7 14.3
Loans to associates and joint ventures 0.2 - -
Financial assets relating to PPP contracts 127.2 137.3 135.7
Derivative financial instruments 15 4.4 0.2 0.4
Defined benefit pension scheme surplus 14 4.5 5.9 8.6
Other receivables 4.3 4.0 5.1
Deferred tax assets 35.0 48.3 41.6
1,639.4 1,579.4 1,565.9
Current assets
Inventories 26.7 22.5 22.5
Investments 10.7 11.5 11.1
Loans to associates and joint ventures 0.6 0.9 0.9
Financial assets relating to PPP contracts 7.7 7.1 7.7
Trade and other receivables 290.0 253.4 269.3
Derivative financial instruments 15 4.3 3.4 6.6
Current tax receivable 0.9 1.6 0.9
Cash and cash equivalents – including 11 58.9 100.3 63.6
restricted cash
399.8 400.7 382.6
Assets classified as held for sale 10 1.5 - 3.3
401.3 400.7 385.9
Total assets 2,040.7 1,980.1 1,951.8
Liabilities
Non-current liabilities
Borrowings 11 (705.3) (600.9) (518.7)
Derivative financial instruments 15 (0.3) (22.3) (14.6)
Other non-current liabilities (25.3) (44.4) (36.2)
Defined benefit pension schemes deficit 14 (4.6) (7.4) (6.3)
Provisions 13 (282.9) (254.4) (258.1)
Deferred tax liabilities (46.4) (48.6) (47.0)
(1,064.8) (978.0) (880.9)
Current liabilities
Borrowings 11 (50.0) (147.8) (148.9)
Derivative financial instruments 15 (0.6) - (0.1)
Trade and other payables (507.3) (509.8) (528.4)
Current tax payable (31.5) (22.3) (24.2)
Provisions 13 (39.6) (34.9) (31.1)
(629.0) (714.8) (732.7)
Total liabilities (1,693.8) (1,692.8) (1,613.6)
Net assets 346.9 287.3 338.2
Issued capital and reserves attributable to
the owners of the parent
Share capital 99.5 99.5 99.5
Share premium 473.8 473.6 473.8
Exchange reserve (12.4) (14.3) (15.0)
Retained earnings (222.0) (278.1) (227.1)
338.9 280.7 331.2
Non-controlling interests 8.0 6.6 7.0
Total equity 346.9 287.3 338.2
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Consolidated Interim Statement of Changes in Equity (unaudited)
First half ended 30 September 2022
Restated* Restated*
Share Share Exchange Non-controlling
reserve Retained Total
capital premium interests
€m earnings equity
€m €m €m
€m €m
Balance at 31 March 2022 99.5 473.8 (15.0) (227.1) 7.0 338.2
Impact of adopting
amendments to IAS 37 (note - - 0.2 (53.4) - (53.2)
2)
Balance at 1 April 2022 99.5 473.8 (14.8) (280.5) 7.0 285.0
Profit for the period - - - 52.4 1.0 53.4
Other comprehensive income:
Exchange gain on
translation of foreign - - 2.4 - - 2.4
subsidiaries
Fair value movement on cash - - - 13.4 - 13.4
flow hedges
Actuarial loss on defined - - - (4.0) - (4.0)
benefit pension schemes
Tax in respect of other - - - (0.8) - (0.8)
comprehensive income items
Share of other
comprehensive income of - - - 0.4 - 0.4
investments accounted for
using the equity method
Total comprehensive income - - 2.4 61.4 1.0 64.8
for the period
Share-based compensation - - - 1.2 - 1.2
Movement on tax arising on - - - (0.6) - (0.6)
share-based compensation
Own shares purchased by the - - - (3.5) - (3.5)
Employee Share Trust
Balance as at 30 September 99.5 473.8 (12.4) (222.0) 8.0 346.9
2022
Balance at 1 April 2021 – 99.5 473.6 (14.8) (326.8) 6.1 237.6
restated*
Profit for the year - - - 74.5 0.9 75.4
Other comprehensive (loss)
income:
Exchange loss on
translation of foreign - - (0.2) - - (0.2)
subsidiaries
Fair value movement on cash - - - 16.5 - 16.5
flow hedges
Actuarial gain on defined - - - 10.5 - 10.5
benefit pension schemes
Tax in respect of other - - - (4.3) - (4.3)
comprehensive income items
Share of other
comprehensive income of - - - 0.5 - 0.5
investments accounted for
using the equity method
Total comprehensive (loss) - - (0.2) 97.7 0.9 98.4
income for the year
Share-based compensation - - - 2.5 - 2.5
Movement on tax arising on - - - 1.3 - 1.3
share-based compensation
Proceeds from exercise of - 0.2 - - - 0.2
employee options
Own shares purchased by the - - - (1.8) - (1.8)
Employee Share Trust
Balance as at 31 March 2022 99.5 473.8 (15.0) (227.1) 7.0 338.2
Balance at 1 April 2021 – 99.5 473.6 (14.8) (326.8) 6.1 237.6
restated*
Profit for the period – - - - 36.0 0.5 36.5
restated*
Other comprehensive income:
Exchange gain on
translation of foreign - - 0.5 - - 0.5
subsidiaries
Fair value movement on cash - - - 5.3 - 5.3
flow hedges
Actuarial gain on defined - - - 8.0 - 8.0
benefit pension schemes
Tax in respect of other - - - (2.1) - (2.1)
comprehensive income items
Share of other
comprehensive income of - - - 0.3 - 0.3
investments accounted for
using the equity method
Total comprehensive income - - 0.5 47.5 0.5 48.5
for the period
Share-based compensation - - - 0.8 - 0.8
Movement on tax arising on - - - 0.4 - 0.4
share-based compensation
Balance as at 30 September 99.5 473.6 (14.3) (278.1) 6.6 287.3
2021 – restated*
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Consolidated Interim Statement of Cash Flows (unaudited)
First half ended 30 September 2022
Restated*
First half
First half
2022/23
2021/22
€m
€m
Profit before tax 71.6 43.9
Finance income (6.5) (4.7)
Finance charges 18.5 18.5
Share of results from associates and joint ventures - (0.3)
Operating profit 83.6 57.4
Amortisation and impairment of intangible assets 4.0 3.9
Depreciation and impairment of property, plant and equipment 34.1 35.5
Depreciation and impairment of right-of-use assets 23.3 22.8
Impairment of investment in associate - 1.9
Net gain on disposal of property, plant and equipment, (2.6) (0.6)
intangible assets and subsidiaries
Net decrease in provisions (10.8) (4.4)
Portfolio management and provision non-trading and exceptional (11.9) -
items
Payment related to committed funding of the defined benefit (1.8) (1.8)
pension schemes
Share-based compensation 1.2 0.8
Operating cash flows before movement in working capital 119.1 115.5
Increase in inventories (4.0) (1.9)
Increase in receivables (11.7) (6.0)
Decrease in payables (21.1) (33.8)
Cash flows from operating activities 82.3 73.8
Income tax paid (7.9) (1.4)
Net cash inflow from operating activities 74.4 72.4
Investing activities
Purchases of intangible assets (6.1) (4.9)
Purchases of property, plant and equipment (49.6) (32.7)
Proceeds from disposals of property, plant and equipment 4.7 2.1
Acquisition of subsidiary, net of cash acquired (53.5) -
Disposals of subsidiary and business assets net of acquisition 0.4 0.2
of business assets
Net movements in associates and joint ventures (1.0) 1.2
Purchase of other short-term investments - (2.2)
Outflows in respect of PPP arrangements under the financial 2.9 2.8
asset model net of capital received
Finance income 5.3 5.0
Net cash outflow from investing activities (96.9) (28.5)
Financing activities
Finance charges and loan fees paid (19.4) (16.5)
Investment in own shares by the Employee Share Trust (3.5) -
Proceeds from retail bonds - 125.0
Repayment of retail bonds (100.0) -
Proceeds from bank borrowings 303.2 126.6
Repayment of bank borrowings (132.6) (228.9)
Settlement of cross-currency interest rate swaps - 6.4
Repayment of PPP debt (5.4) (3.5)
Repayment of obligations under lease liabilities (23.2) (21.9)
Net cash inflow (outflow) from financing activities 19.1 (12.8)
Net (decrease) increase in cash and cash equivalents (3.4) 31.1
Effect of foreign exchange rate changes (1.3) 0.4
Cash and cash equivalents at the beginning of the period 63.6 68.8
Cash and cash equivalents at the end of the period 58.9 100.3
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Notes to the Consolidated Financial Statements
1. General information
Renewi plc is a public limited company listed on the London Stock Exchange with a
secondary listing on Euronext Amsterdam. Renewi plc is incorporated and domiciled in
Scotland under the Companies Act 2006, registered number SC077438. The address of the
registered office is 16 Charlotte Square, Edinburgh, EH2 4DF. The nature of the Group’s
operations and its principal activities are set out in note 3.
2. Basis of preparation
This condensed set of consolidated interim financial statements for the six months ended
30 September 2022 has been prepared in accordance with the Disclosure and Transparency
Rules of the United Kingdom Financial Conduct Authority and with IAS 34 Interim
Financial Reporting as adopted for use in the UK. They should be read in conjunction
with the 2022 Annual Report and Accounts, which have been prepared in accordance with UK
adopted accounting standards in conformity with the requirements of the Companies Act
2006. The 2022 Annual Report and Accounts are available from the Company’s website
www.renewi.com.
These primary statements and selected notes comprise the unaudited consolidated interim
financial statements of the Group for the six months ended 30 September 2022 and 2021,
together with the audited results for the year ended 31 March 2022. These interim
financial results do not comprise statutory accounts within the meaning of Section 434
of the Companies Act 2006. The comparative figures as at 31 March 2022 have been
extracted from the Group’s statutory Annual Report and Accounts for that financial year,
but do not constitute those accounts. Those statutory accounts for the year ended 31
March 2022 were approved by the Board of Directors on 24 May 2022 and delivered to the
Registrar of Companies. The report of the auditors on those accounts was unqualified,
did not contain an emphasis of matter paragraph and did not contain any statement under
Section 498 of the Companies Act 2006.
The Board of Directors approved, on 9 November 2022, these consolidated interim
financial statements which have been reviewed by BDO LLP but not been audited.
Going concern
The Directors have adopted the going concern basis in preparing these consolidated
interim financial statements after assessing the Group's principal risks including an
assessment of the impact of the ongoing high inflationary environment and economic
uncertainty arising from the invasion of Ukraine.
The Directors have carried out a comprehensive assessment of the Group’s ability to
continue as a going concern. This assessment has involved the review of medium-term cash
flow and covenant modelling over an 18-month period to 31 March 2024. This includes
expectations on the future economic environment as well as other principal risks
associated with the Group’s ongoing operations. The assessment includes a base case
scenario setting out the Directors’ current expectations of future trading and a
plausible but severe downside scenario after applying mitigating actions to assess the
potential impact on the Group’s future financial performance. The key judgement in both
scenarios is the level of economic disruption primarily caused by recent geopolitical
events.
The downside scenario includes significantly weaker macroeconomic conditions leading to
a volume decline below the forecast economic outlook in all our territories in the
remaining months of FY23 and FY24. Other downsides include a significant decline in
recyclate prices from the current levels to well below long-term averages and a
settlement of the provision arising from the European Commission investigation into
alleged state aid in Belgium. These factors reduce FY24 EBIT by 29% compared to the base
case. Appropriate cash mitigating actions such as deferral of uncommitted capital
expenditure and other working capital actions have been applied to our downside
modelling to arrive at a plausible and mitigated downside position.
In the base case and plausible downside scenarios the Group has sufficient liquidity and
headroom in its existing facilities and no covenants are breached at any of the forecast
testing dates.
In addition, a reverse stress test calculation has been undertaken to consider the
points at which the covenants may be breached. Underlying EBIT in FY24 would need to
reduce by 48% compared to the base case without considering any mitigating cost actions.
In the opinion of the Directors there is no plausible scenario or combination of
scenarios that we consider to be remotely likely that would generate this result.
Having considered all the elements of the financial projections, sensitivities and
mitigating actions, the Directors confirm they have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the foreseeable
future and to meet all banking covenants.
2. Basis of preparation – continued
Restatement following the change in accounting policy in relation to configuration or
customisation costs in cloud computing, Software as a Service (SaaS) arrangements
In the second half of the year ended 31 March 2022 the Group revised its accounting
policy in relation to Software as a Service (SaaS) arrangements and related
configuration and customisation costs following the publication in April 2021 of an IFRS
Interpretations Committee (IFRIC) agenda item which clarified the accounting. As a
result of the revised accounting policy we identified costs incurred and capitalised as
software intangible assets which no longer met the criteria for recognition under IAS 38
Intangible assets. The change in accounting policy was applied retrospectively in
accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
resulting in a restatement of prior year financial statements. In the six month period
to 30 September 2021 €1.7m of costs were capitalised and €0.9m of amortisation was
charged in relation to intangibles which did not meet the criteria under the revised
accounting policy. The €1.7m intangible cost net of related tax credit is considered to
be a non-trading and exceptional administrative item consistent with the treatment in
March 2022. The €0.9m amortisation charge net of tax was an adjustment to underlying
profit. The prior period Income Statement, Balance Sheet, Statement of Cash Flows and
earnings per share as at 30 September 2021 have been restated with the details shown
below. The 31 March 2021 restatements were disclosed in the March 2022 Annual Report and
Accounts.
The impact of the above restatement on the Interim Consolidated Income Statement for the
period ended 30 September 2021 is as follows:
30 September Restatement
30 September
2021 (previously 6 months to 30
Income statement extract 2021 (restated)
reported) September 2021
€m
€m €m
Underlying operating profit 63.8 0.9 64.7
Non-trading and exceptional items (5.6) (1.7) (7.3)
Operating profit 58.2 (0.8) 57.4
Profit before taxation 44.7 (0.8) 43.9
Taxation (7.6) 0.2 (7.4)
Profit for the period 37.1 (0.6) 36.5
The impact of the above restatement on the Interim Consolidated Balance Sheet as at 30
September 2021 is as follows:
30 September Restatement
Restatement 30 September
2021 12 months to 30
Balance Sheet extract (previously 6 months to 30 2021
March 2021 September 2021 (restated)
reported)
€m €m €m
€m
Goodwill and intangible assets 603.2 (7.3) (0.8) 595.1
Deferred tax assets 46.3 1.8 0.2 48.3
Non-current assets 1,585.5 (5.5) (0.6) 1,579.4
Current assets 400.7 - - 400.7
Total assets 1,986.2 (5.5) (0.6) 1,980.1
Non-current liabilities (978.0) - - (978.0)
Current liabilities (714.8) - - (714.8)
Total liabilities (1,692.8) - - (1,692.8)
Net assets 293.4 (5.5) (0.6) 287.3
Issued capital and reserves
attributable to the owners of
the parent
Retained earnings (272.0) (5.5) (0.6) (278.1)
Other equity 558.8 - - 558.8
286.8 (5.5) (0.6) 280.7
Non-controlling interests 6.6 - - 6.6
Total equity 293.4 (5.5) (0.6) 287.3
The impact of the above restatement on the Interim Consolidated Statement of Cash Flows
for the period ended 30 September 2021 is as follows:
30 September Restatement
30 September
2021 (previously 6 months to 30
Statement of Cash Flows extract 2021 (restated)
reported) September 2021
€m
€m €m
Net cash flows from operating activities 74.1 (1.7) 72.4
Net cash flows from investing activities (30.2) 1.7 (28.5)
Net cash flows from financing activities (12.8) - (12.8)
Net increase in cash and cash 31.1 - 31.1
equivalents
Effect of foreign exchange rate changes 0.4 - 0.4
Cash and cash equivalents at 30 68.8 - 68.8
September 2020
Cash and cash equivalents at 30 100.3 - 100.3
September 2021
2. Basis of preparation – continued
The impact of the above restatement on basic and diluted earnings per share for the
period ended 30 September 2021 is as follows:
30 September Restatement
30 September
2021 (previously 6 months to 30
2021 (restated)
reported) September 2021
cents
cents cents
Basic 46 (1) 45
Diluted 46 (1) 45
Underlying basic 47 1 48
Underlying diluted 47 1 48
Adoption of new and revised accounting standards
The amendment to IAS 37 Onerous Contracts – Costs of Fulfilling a Contract, effective
from 1 April 2022, clarifies that the costs of fulfilling a contract should include an
allocation of other costs that relate directly to fulfilling the contract in addition to
the incremental costs. As required by the pre-amended IAS 37, the Group’s accounting
policy previously only included incremental direct costs when measuring the costs to
fulfil a contract. The Group assessed the impact of this amendment which resulted in an
increase to the onerous contract provisions of €53.2m. A deferred tax asset has not been
recognised on the increase in the provision due to the uncertainty of future profit
streams in the UK. The cumulative effect of initially applying the amendment has been
recognised as an adjustment to the opening balance of retained earnings as at 1 April
2022 as shown in the Statement of Changes in Equity. As permitted by the amendment, the
Group has not restated the comparative information.
No other accounting standards, amendments or revisions to existing standards or
interpretations have been effective which had a significant impact on the Group’s
condensed consolidated financial statements.
New standards and interpretations not yet adopted
Standards and interpretations issued by the International Accounting Standards Board
(IASB) are only applicable if endorsed by the UK Endorsement Board (UKEB). At the date
of approval of these financial statements there were no new IFRSs or IFRS Interpretation
Committee interpretations which were early adopted by the Group.
There are a number of new standards and amendments effective for the period beginning 1
April 2023 however the Group does not expect a significant impact.
Exchange Rates
In addition to the Group’s presentational currency of Euros, the most significant
currency for the Group is Sterling with the closing rate on 30 September 2022 of
€1:£0.877 (30 September 2021: €1:£0.859) and an average rate for the period ended 30
September 2022 of €1:£0.852 (30 September 2021: €1:£0.858).
Consideration of climate change
As set out in the Task Force on Climate-related Financial Disclosures (TCFD) on pages 66
to 73 of the Annual Report and Accounts 2022, the Group has considered the impact of
climate change. A TCFD roadmap which will lead to quantifying the business impact of
material climate related risks and opportunities is underway. Physical climate change
poses risk to our operations and supply chain however mitigation measures are either
already in place or are in the process of being further developed therefore no
medium-term impact is expected from climate change. As a waste-to-product company,
Renewi is in the business of sustainability. Waste management is an essential component
of climate change mitigation through the creation of circular economies, with
significant opportunities as well as risks associated with climate change itself. In
preparing these condensed consolidated financial statements, the Directors have
continued to consider the impact of climate change. There have been no material impacts
identified on the financial reporting judgements and estimates in line with the year
ended 31 March 2022.
2. Basis of preparation – continued
Critical accounting judgements and estimates
The preparation of financial statements in accordance with IFRS requires management to
make judgements, estimates and assumptions that affect the application of policies and
reported amounts of assets and liabilities, income and expenditure. In preparing these
condensed consolidated interim financial statements, management have reviewed the nature
of the significant judgements in applying the Group’s accounting policies and the key
sources of estimation uncertainty, as set out on pages 179 to 181 of the 2022 Annual
Report and Accounts. It has been determined that there have been no significant changes
in methodology in relation to these key estimates. In light of recent macroeconomic
events we have undertaken an assessment of all key inputs relating to onerous contract
and landfill related provisions as explained below.
• Onerous contract provisions – These principally relate to UK Municipal PPP
contracts. The nominal discount rate applied has been assessed and increased by 1%
in line with recent movements in Government bond yields. We have also considered the
impact of the current high inflationary environment. All anticipated inflationary
increases are not expected to be recovered by permitted contractual price increases
resulting in an increase to the provision. As set out in note 13 the combined impact
of both discount rate and inflationary changes is a net increase of €0.6m.
• Landfill related provisions – These are principally located in the Netherlands and
Belgium. The nominal discount rate applied has been assessed and increased by 0.5%
in line with recent movements in Government bond yields in those territories. We
have undertaken a review of the future cash flows in light of the current high
inflationary environment. We have determined that due to the nature of the costs
which are principally for capping and covering of the landfill and mineral
extraction sites there is no requirement to increase the provision at this time. As
set out in note 13 the impact of the discount rate change is a decrease of €7.0m.
New source of estimation
On 1 August 2022 the Group acquired 100% of the share capital of GMP Exploitatie B.V.
and its subsidiaries (subsequently renamed Renewi Westpoort Holding B.V.). Details of
the acquisition are set out in note 12. The accounting for the acquisition is in
accordance with IFRS 3 Business Combinations and the key estimations relate to
identifying and determining the fair values of the balance sheet items. At 30 September
2022 the opening balance sheet is considered provisional as permitted by IFRS 3 and
external specialists have been engaged to assist with determining the final position.
3. Segmental reporting
The Group’s chief operating decision maker is considered to be the Board of Directors.
The Group’s reportable segments are determined with reference to the information
provided to the Board of Directors, in order for it to allocate the Group’s resources
and to monitor the performance of the Group. These segments are unchanged from March
2022 and are set out below:
Commercial Waste Collection and treatment of commercial waste in the Netherlands
and Belgium.
Decontamination, stabilisation and re-use of highly contaminated
Mineralz & Water materials to produce certified secondary products for the
construction industry in the Netherlands and Belgium.
Processing plants focusing on recycling and diverting specific
Specialities waste streams. The operations are in the UK, the Netherlands,
Belgium, France and Portugal.
Group central services Head office corporate function.
The profit measure the Board of Directors uses to evaluate performance is underlying
EBIT. The Group accounts for inter-segment trading on an arm’s length basis.
The Commercial Waste reportable segment includes the Netherlands Commercial Waste and
Belgium Commercial Waste operating segments which have been aggregated and reported as
one reportable segment as they operate in similar markets in relation to the nature of
the products, services, processes and type of customer. Those entities acquired with the
acquisition of GMP Exploitatie B.V, as detailed in note 12, are included within the
Netherlands Commercial Waste operating segment.
First half First half
Revenue 2022/23 2021/22
€m €m
Netherlands Commercial Waste 459.7 442.3
Belgium Commercial Waste 236.3 228.9
Intra-segment (1.6) (0.6)
Commercial Waste 694.4 670.6
Mineralz & Water 93.3 93.6
Specialities 186.3 168.0
Inter-segment revenue (22.0) (16.6)
Revenue 952.0 915.6
3. Segmental reporting - continued
Restated*
First half
First half
Results 2022/23
2021/22
€m
€m
Netherlands Commercial Waste 40.3 43.2
Belgium Commercial Waste 28.1 21.5
Commercial Waste 68.4 64.7
Mineralz & Water 2.6 4.0
Specialities 11.3 1.7
Group central services (7.1) (5.7)
Underlying EBIT 75.2 64.7
Non-trading and exceptional items (note 5) 8.4 (7.3)
Operating profit 83.6 57.4
Finance income 4.9 4.7
Finance charges (18.5) (18.4)
Finance income – non trading and exceptional items 1.6 -
Finance charges – non trading and exceptional items - (0.1)
Share of results from associates and joint ventures - 0.3
Profit before taxation 71.6 43.9
*The comparatives for Group central services underlying EBIT and non-trading and
exceptional items have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Commercial Mineralz & Group Tax, net debt and
Waste Specialities central derivatives Total
Net assets Water services
€m €m €m €m
€m €m
30 September
2022
Gross
non-current 1,106.0 252.7 207.5 33.8 39.4 1,639.4
assets
Gross current 207.9 35.5 79.0 14.8 64.1 401.3
assets
Gross (368.6) (197.6) (222.8) (70.7) (834.1) (1,693.8)
liabilities
Net assets 945.3 90.6 63.7 (22.1) (730.6) 346.9
(liabilities)
31 March 2022
Gross
non-current 1,010.8 257.5 219.3 36.3 42.0 1,565.9
assets
Gross current 192.0 37.9 67.7 17.2 71.1 385.9
assets
Gross (399.3) (206.4) (174.7) (79.7) (753.5) (1,613.6)
liabilities
Net assets 803.5 89.0 112.3 (26.2) (640.4) 338.2
(liabilities)
4. Revenue
The following tables show the Group’s revenue by type of service delivered and by
primary geographical market.
Mineralz &
Commercial Waste Specialities Inter-segment Total
By type of service Water
€m €m €m €m
€m
30 September 2022
Inbound 538.4 77.6 118.3 (20.2) 714.1
Outbound 115.3 15.7 67.2 (1.7) 196.5
On-Site 31.6 - - (0.1) 31.5
Other 9.1 - 0.8 - 9.9
Total revenue 694.4 93.3 186.3 (22.0) 952.0
30 September 2021
Inbound 535.6 70.0 111.8 (14.9) 702.5
Outbound 97.8 23.6 55.7 (1.6) 175.5
On-Site 25.7 - - (0.1) 25.6
Other 11.5 - 0.5 - 12.0
Total revenue 670.6 93.6 168.0 (16.6) 915.6
Mineralz &
Commercial Waste Specialities Inter-segment Total
By geographical market Water
€m €m €m €m
€m
30 September 2022
Netherlands 459.3 79.7 31.7 (20.9) 549.8
Belgium 235.1 13.6 23.1 (1.1) 270.7
UK - - 110.0 - 110.0
France - - 13.5 - 13.5
Other - - 8.0 - 8.0
Total revenue 694.4 93.3 186.3 (22.0) 952.0
30 September 2021
Netherlands 442.0 73.1 22.6 (15.7) 522.0
Belgium 228.6 20.5 16.2 (0.9) 264.4
UK - - 113.2 - 113.2
France - - 10.9 - 10.9
Other - - 5.1 - 5.1
Total revenue 670.6 93.6 168.0 (16.6) 915.6
Revenue recognised at a point in time amounted to €841.1m (2021/22: €861.7m) with the
remainder recognised over time. The majority of the Commercial Waste and Specialities
revenue is recognised at a point in time, whereas for Mineralz & Water 65% of revenue
(2021/22: 61%) is recognised over time.
5. Non-trading and exceptional items
To improve the understanding of the Group’s financial performance, items which are not
considered to reflect the underlying performance are presented in non-trading and
exceptional items.
Restated*
First half
First half
2022/23
2021/22
€m
€m
Renewi 2.0 improvement programme 2.0 4.0
Portfolio management activity:
Prior year disposals (1.7) -
Disposal of business assets in the Mineralz & Water division (3.8) -
(5.5) -
Other items:
Inflationary increase reassessment in UK Municipal onerous 8.9 -
contract provisions
Changes in long-term provisions due to increase in discount rates (15.3) -
Configuration or customisation costs in cloud computing, Software - 1.7
as a Service arrangements
(6.4) 1.7
Amortisation of acquisition intangibles 1.5 1.6
Ineffectiveness and impact of termination of cash flow hedges (1.6) 0.1
Non-trading and exceptional items in profit before tax (10.0) 7.4
Tax on non-trading and exceptional items 1.9 (1.7)
Exceptional tax credit - (3.7)
Total non-trading and exceptional items in profit after tax (8.1) 2.0
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Renewi 2.0 improvement programme
Renewi 2.0 improvement programme is a significant one-off business improvement project
with expected capital and one-off costs of €40m over a three-year period and as a result
is considered to be exceptional. Following the transformational merger five years ago,
the goal of the Renewi 2.0 programme is to make the Group more streamlined and more
efficient and improve customer experience and increase employee engagement. This is the
third year of the programme with total costs of €2.0m (2021/22: €4.0m) of which €nil
(2021/22: €0.2m) are recorded in cost of sales and €2.0m (2021/22: €3.8m) are recorded
in administrative expenses.
Portfolio management activity
The prior year disposals credit of €1.7m (2021/22: €nil) relates to ongoing insurance
claim recovery in relation to prior disposals and during the period certain business
assets in the Mineralz & Water division were sold generating a profit of €3.8m (2021/22:
€nil). The €5.5m credit is all recorded in administrative expenses.
Other items
The charge of €8.9m in relation to the reassessment of UK Municipal onerous contract
provisions is due to the expectation of increases in future costs as a result of the
current high inflationary environment. Full recovery of all anticipated inflationary
increases are not expected to be recovered by permitted price increases across the
already onerous contract provisions.
The credit for changes in long-term provisions of €15.3m relates to the increase in
discount rates as a result of increased Government bond yields which has impacted
landfill related and onerous contract provisions.
Configuration or customisation costs in cloud computing, Software as a Service (SaaS)
arrangements, relate to the Group updating its accounting policy on when software can be
capitalised following the IFRIC interpretation as documented in the 2022 Annual Report
and Accounts. This guidance clarified the criteria under IAS 38 Intangible assets in
relation to SaaS arrangements as explained in note 2 Basis of preparation. In line with
the March 2022 assessment, €1.7m of costs capitalised in the six month period to 30
September 2021 have been expensed as a prior year restatement as they do not meet the
criteria for recognition as an asset. The costs have been expensed as a non-trading and
exceptional item due to the size, nature and incidence as they are not reflective of
underlying performance which is in line with the approach taken in the year ended 31
March 2022 .
The total credit of €6.4m has been recorded in cost of sales and the 2021/2022 charge of
€1.7m was recorded in administrative expenses.
Amortisation of acquisition intangibles
Amortisation of intangible assets acquired in business combinations of €1.5m (2021/22:
€1.6m) is all recorded in cost of sales.
Items recorded in finance income and finance charges
The €1.6m credit (2021/22: €0.1m charge) relates to ineffectiveness of the Cumbria PPP
project interest rate swaps.
Exceptional tax credit
The prior year exceptional tax credit of €3.7m related to changes in UK tax rates.
6. Net finance charges
First half First half
2022/23 2021/22
€m €m
Finance charges
Interest payable on borrowings 5.8 6.5
Interest payable on PPP non-recourse debt 3.4 3.7
Lease liabilities interest 3.8 3.6
Unwinding of discount on provisions (note 13) 3.9 3.2
Interest charge on the defined benefit pension schemes - 0.1
Amortisation of loan fees 0.6 0.8
Other finance costs 1.0 0.5
Total finance charges before non-trading and exceptional items 18.5 18.4
Non-trading and exceptional finance charges:
Charge as a result of the termination of cash flow hedges - 0.1
Total finance charges 18.5 18.5
Finance income
Interest receivable on financial assets relating to PPP contracts (4.3) (4.5)
Unwinding of discount on deferred consideration receivable - (0.1)
Interest income on the defined benefit pension schemes (0.1) -
Other finance income (0.5) (0.1)
Total finance income before non-trading and exceptional items (4.9) (4.7)
Non-trading and exceptional finance income:
Ineffectiveness income on cash flow hedges (1.6) -
Total finance income (6.5) (4.7)
Net finance charges 12.0 13.8
7. Taxation
The tax charge based on the profit for the period is made up as follows:
Restated*
First half 2022/23
First half 2021/22
€m
€m
Current tax
UK corporation tax
- Current year 0.4 0.7
Overseas tax
- Current year 14.8 7.8
- Adjustment in respect of the prior year - 0.2
Total current tax charge 15.2 8.7
Deferred tax
- Origination and reversal of temporary 3.0 2.4
differences in the current period
- Exceptional tax credit - (3.7)
Total deferred tax charge (credit) 3.0 (1.3)
Total tax charge for the period 18.2 7.4
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Tax expense is recognised based on management’s best estimate of the full year effective
tax rate on expected full year profits to March 2023. The estimated average underlying
annual tax rate for the year to 31 March 2023 is 26.5% (2021/22: 25.0%).
In October 2021 the Dutch government announced an increase in the tax rate to 25.8% for
the period ending 31 March 2023 and subsequent periods which was enacted in December
2021. In addition, a tightening of the general interest deduction rule (also referred to
as the EBITDA rule) by lowering the 30% EBITDA threshold to 20% was also enacted. As a
result, Dutch deferred tax has been calculated at the substantively enacted rates
depending on when the timing differences are expected to reverse.
In the UK Chancellor’s Budget of 3 March 2021 it was announced that the UK corporation
tax rate would increase to 25% with effect from 1 April 2023. This measure was
substantively enacted on 24 May 2021. As a result, the UK deferred tax position has been
calculated based on the substantively enacted rates of 19% and 25% (2021/22: 19% and
25%). This resulted in an exceptional tax credit of €3.7m in the prior year.
8. Earnings per share
Underlying basic and diluted earnings per share excludes non-trading and exceptional
items net of related tax. Non-trading and exceptional items are those items that are
disclosed separately on the face of the Income Statement, because of their size or
incidence, to enable a better understanding of performance. The Directors believe that
adjusting earnings per share in this way enables comparison with historical data
calculated on the same basis to reflect the business performance in a consistent manner
and reflect how the business is managed and measured on a day to day basis.
First half 2022/23 First half 2021/22 restated*
Basic Dilutions Diluted Basic Dilutions Diluted
Weighted average number of shares 79.4 0.4 79.8 79.7 0.3 80.0
(million)
Profit after tax (€m) 53.4 - 53.4 36.5 - 36.5
Non-controlling interests (€m) (1.0) - (1.0) (0.5) - (0.5)
Profit after tax attributable to 52.4 - 52.4 36.0 - 36.0
ordinary shareholders (€m)
Basic earnings per share (cents) 66 - 66 45 - 45
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
The reconciliation between underlying earnings per share and basic earnings per share is
as follows:
First half 2022/23 First half 2021/22 restated*
Cents €m Cents €m
Underlying earnings per share/Underlying
profit after tax attributable to 56 44.3 48 38.0
ordinary shareholders
Adjustments:
Non-trading and exceptional items 13 10.0 (10) (7.4)
Tax on non-trading and exceptional items (3) (1.9) 2 1.7
Exceptional tax - - 5 3.7
Basic earnings per share/Earnings after
tax attributable to ordinary 66 52.4 45 36.0
shareholders
Diluted underlying earnings per
share/Underlying profit after tax 56 44.3 48 38.0
attributable to ordinary shareholders
Diluted basic earnings per
share/Earnings after tax attributable to 66 52.4 45 36.0
ordinary shareholders
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
The weighted average number of shares takes into account the movements in the Renewi
Employee Share Trust, The Trust owns 578,722 (2021/22: 315,851) £1 shares of the issued
share capital of the Company in trust for the benefit of employees of the Group. During
the period 426,468 £1 shares were purchased by the Trust at a cost of €3.5m and 380,447
£1 shares were transferred to individuals under the LTIP and DAB schemes.
9. Dividends
The Directors do not recommend an interim dividend for the current year (2021/22: nil
per share). The Directors did not recommend a final dividend for the year ended March
2022 (2021: nil per share).
10. Goodwill, intangible assets, property, plant and equipment, right-of-use assets and
assets held for sale
Intangible Property, Right-of-use
Goodwill plant Total
Assets* assets
€m and equipment €m
€m €m
€m
Net book value at 1 April 2021 551.6 43.3 560.7 233.8 1,389.4
Additions/modifications - 9.3 73.3 27.1 109.7
Acquisitions through business - 0.3 0.2 - 0.5
combinations
Disposals - (0.2) (3.7) (1.6) (5.5)
Transferred to Assets held for - - (2.6) - (2.6)
sale
Reclassifications - (0.4) 0.4 - -
Amortisation and depreciation - (8.8) (69.3) (44.8) (122.9)
charge
Impairment charge - (2.3) (5.4) (0.7) (8.4)
Net book value at 31 March 2022 551.6 41.2 553.6 213.8 1,360.2
Additions/modifications - 4.5 44.3 16.6 65.4
Acquisitions through business 41.4 0.6 18.9 27.5 88.4
combinations
Disposals - - (3.4) (0.7) (4.1)
Transferred to Assets held for - - (0.2) - (0.2)
sale
Transfer from right-of-use
assets to property, plant and - - 1.0 (1.0) -
equipment
Amortisation and depreciation - (4.0) (34.1) (22.7) (60.8)
charge
Impairment charge - - - (0.6) (0.6)
Net book value at 30 September 593.0 42.3 580.1 232.9 1,448.3
2022
*The intangible assets at 1 April 2021 have been restated following the change in
accounting policy in relation to Software as a Service arrangements as explained in note
2 Basis of preparation.
The goodwill acquisition through business combinations of €41.4m is provisional as
permitted by IFRS 3 and includes amounts which may subsequently be reclassified to
either other acquisition assets or separately identified intangibles with further
details set out in note 12.
At 30 September 2022, the Group had property, plant and equipment commitments of €39.3m
(2021/22: €25.7m), right-of-use asset commitments of €31.9m (2021/22: €15.0m) and
intangible asset commitments of €1.7m (2021/22: €2.0m).
Assets held for sale
The Group had €1.5m assets classified as held for sale at 30 September 2022. The assets
include €0.6m land and buildings, €0.2m plant and machinery and €0.7m investment in a
joint venture in the Belgium Commercial Division. All these assets are expected to be
sold within the next 12 months.
11. Cash and borrowings
Cash and cash equivalents are analysed as follows:
30 September 30 September 31 March
2022 2021 2022
€m €m €m
Cash at bank and in hand - core 39.2 49.8 42.5
Money market funds - core - 29.4 -
Total core cash 39.2 79.2 42.5
Cash at bank - restricted relating to PPP contracts 19.7 21.1 21.1
Total cash and cash equivalents 58.9 100.3 63.6
11. Cash and borrowings continued
Borrowings are analysed as follows:
30 September 30 September 31 March
2022 2021 2022
€m €m €m
Non-current borrowings
Retail bonds 199.4 199.2 199.2
European private placements 24.9 24.8 24.8
Revolving credit facility and term loan 190.7 80.4 12.8
Lease liabilities 204.2 200.1 187.3
Bank loans - 0.6 -
PPP non-recourse debt 86.1 95.8 94.6
705.3 600.9 518.7
Current borrowings
Retail bonds - 99.9 100.0
Lease liabilities 43.4 41.5 42.0
Bank loans and overdrafts 1.4 1.5 1.3
PPP non-recourse debt 5.2 4.9 5.6
50.0 147.8 148.9
On 16 June 2022 the €100m green retail bonds with an annual gross coupon of 3.65% were
repaid on maturity.
Movement in total net debt
At 1 Other At 30
Acquired Exchange September
April Cash flows (Note 12) non-cash movements
changes 2022
2022 €m €m €m
€m €m
€m
Bank loans and overdrafts (14.1) (170.6) (7.0) (0.3) (0.1) (192.1)
European private placements (24.8) - - (0.1) - (24.9)
Retail bonds (299.2) 100.0 - (0.2) - (199.4)
Lease liabilities (229.3) 23.2 (26.1) (16.0) 0.6 (247.6)
Debt excluding PPP (567.4) (47.4) (33.1) (16.6) 0.5 (664.0)
non-recourse debt
PPP non-recourse debt (100.2) 5.4 - - 3.5 (91.3)
Total debt (667.6) (42.0) (33.1) (16.6) 4.0 (755.3)
Cash and cash equivalents – 42.5 (2.9) - - (0.4) 39.2
core
Cash and cash equivalents –
restricted relating to PPP 21.1 (0.5) - - (0.9) 19.7
contracts
Total net debt (604.0) (45.4) (33.1) (16.6) 2.7 (696.4)
Analysis of total net debt:
Net debt excluding PPP (524.9) (50.3) (33.1) (16.6) 0.1 (624.8)
non-recourse net debt
PPP non-recourse net debt (79.1) 4.9 - - 2.6 (71.6)
Total net debt (604.0) (45.4) (33.1) (16.6) 2.7 (696.4)
At 30 September 2022 the balance of interest accrued relating to borrowing was €2.0m
(2021/22: €2.6m) and was included in trade and other payables. This balance was after
finance charges of €13.5m (2021/2022: €14.3m) net of a cash outflow of €19.4m
(2021/2022: €16.5m) excluding loan fees.
Analysis of movement in total net debt
First half First half Full year
2022/23 2021/22 2021/22
€m €m €m
Net (decrease) increase in cash and cash equivalents (3.4) 31.1 (6.2)
Net (increase) decrease in borrowings and lease (42.0) 2.7 95.5
liabilities
Total cash flows in net debt (45.4) 33.8 89.3
Bank loans and lease liabilities acquired through a (33.1) - -
business combination
Lease liabilities entered into during the period (16.7) (16.5) (27.1)
Lease liabilities cancelled during the period 0.7 0.6 1.5
Capitalisation of loan fees - 0.5 1.6
Amortisation of loan fees (0.6) (0.8) (1.9)
Exchange gain 2.7 2.1 0.7
Movement in net debt (92.4) 19.7 64.1
Total net debt at beginning of period (604.0) (668.1) (668.1)
Total net debt at end of period (696.4) (648.4) (604.0)
12. Acquisitions and Disposals
Acquisitions
On 1 August 2022 the Group acquired 100% of the share capital of GMP Exploitatie B.V.
(“Paro”) and its subsidiaries (subsequently renamed Renewi Westpoort Holding B.V.) for a
cash consideration of €53.5m.
The business operates from a large and well permitted processing facility located in the
port area of Amsterdam. The site of 130,000m2 has excellent road and water access
operating two advanced sorting lines for processing mixed construction and demolition
waste as well as household waste. In addition, a minerals classification and washing
installation produces secondary construction materials from construction and demolition
waste. The acquisition will deliver synergies from site rationalisation, route and waste
flow optimisation and other operational benefits as part of the Group’s Netherlands
Commercial Waste division.
Given the short period of time since the completion of the transaction, the asset
identification and fair value allocation processes have not been completed and the table
below shows provisional values. External specialists have been engaged to assist with
determining the final balance sheet and specifically with regard to intangible assets
acquired. The Group expects to separately identify customer relationships and permits as
acquisition related intangibles but no value has yet been allocated. The goodwill
arising on the acquisition as noted below is attributable to management’s expectations
of synergies to be achieved post acquisition and will most likely reduce on completion
of the purchase price allocation. None of the goodwill on this acquisition is expected
to be deductible for tax, however there will be deferred tax recognised on acquisition
intangibles as required under IAS 12 Income Taxes and this will be determined as part of
the final purchase price allocation.
Provisional fair
value acquired
€m
Intangible assets – Computer software 0.3
Property, plant and equipment 17.9
Right-of-use assets 27.5
Trade and other receivables 9.4
Inventories 0.3
55.4
Trade and other payables (8.9)
Provisions (0.1)
Deferred tax liabilities (0.9)
Borrowings – Bank loan (7.0)
Borrowings – Lease liabilities (26.1)
(43.0)
Net identifiable assets acquired 12.4
Add: Goodwill arising on acquisition 41.1
Net assets acquired 53.5
Total
Purchase consideration
€m
Cash consideration 53.5
Less: Cash balances acquired -
Net cash outflow – investing activities 53.5
In the period from the acquisition to 30 September 2022 the business contributed €6.9m
to the Group’s revenue and a loss of €0.9m to the Group’s profit before tax. If the
acquisition had been completed on the first day of the financial year, the business
would have contributed €28.5m to the Group’s revenue and a loss of €0.9m to the Group’s
profit before tax.
In addition during September 2022 the Netherlands Commercial division completed a
business assets acquisition for cash consideration of €1.6m. The assets acquired were
€1.0m of plant and machinery with €0.3m allocated to an acquisition related intangible
for customer lists and the balance of €0.3m to goodwill.
Disposals
On 27 June 2022 the Mineralz & Water division disposed of net liabilities totalling
€3.6m in relation to its North Business for a cash consideration of €0.2m generating a
profit on sale of €3.8m which has been recorded as a non-trading and exceptional item in
line with the Group’s policy due to the significant value of the profit.
On 5 August 2022 the Specialities division sold its Maltha Hungary entity. Net
liabilities of €0.8m were sold for a cash consideration net of cash sold of €0.1m which
generated a profit on sale of €0.9m. The profit on sale which included the impact of a
recycled cumulative currency translation has been recorded in underlying EBIT.
13. Provisions
Site Onerous Legal and
restoration and contracts warranty Restructuring Other Total
aftercare
€m €m €m €m €m
€m
At 31 March 2022 156.9 79.9 23.1 4.0 25.3 289.2
Impact of adopting
amendments to IAS 37 - 53.2 - - - 53.2
(note 2)
At 1 April 2022 156.9 133.1 23.1 4.0 25.3 342.4
Acquisition through - - - - 0.1 0.1
business combinations
Provided in the period 0.2 - - 0.1 3.0 3.3
Released in the period - - - (0.8) (0.8) (1.6)
Disposed of in the period - - - - (1.8) (1.8)
Finance charges – 1.9 1.9 - - 0.1 3.9
unwinding of discount
Utilised in the period (3.0) (6.0) (0.7) (1.7) (1.1) (12.5)
Exceptional impact of
increase in discount
rates and reassessment of (7.0) 0.6 - - - (6.4)
UK Municipal contracts
(note 5)
Exchange rate changes (0.2) (4.6) (0.1) - - (4.9)
At 30 September 2022 148.8 125.0 22.3 1.6 24.8 322.5
Within one year 12.9 12.0 4.0 1.6 9.1 39.6
Between one and five 47.9 59.3 15.6 - 5.0 127.8
years
Between five and ten 43.2 37.1 0.5 - 3.4 84.2
years
Over ten years 44.8 16.6 2.2 - 7.3 70.9
At 30 September 2022 148.8 125.0 22.3 1.6 24.8 322.5
Within one year 5.7 9.2 4.7 4.0 7.5 31.1
Between one and five 49.3 23.4 15.6 - 5.4 93.7
years
Between five and ten 50.8 23.1 0.5 - 3.4 77.8
years
Over ten years 51.1 24.2 2.3 - 9.0 86.6
At 31 March 2022 156.9 79.9 23.1 4.0 25.3 289.2
Site restoration and aftercare
The site restoration provisions at 30 September 2022 relate to the cost of final capping
and covering of the landfill and mineral extraction sites. These site restoration costs
are expected to be paid over a period of up to 30 years from the balance sheet date.
Aftercare provisions cover post-closure costs of landfill sites which include such items
as monitoring, gas and leachate management and licensing. The dates of payments of these
aftercare costs are uncertain but are anticipated to be over a period of at least 30
years from closure of the relevant landfill site. All site restoration and aftercare
costs have been estimated by management based on current best practice and technology
available and may be impacted by a number of factors including changes in legislation
and technology.
Onerous contracts
Onerous contract provisions arise when the unavoidable costs of meeting contractual
obligations exceed the cash flows expected. They are provided for at the lower of the
net present value of either exiting the contracts or fulfilling our obligations under
the contracts. As a result of the amendment to IAS 37 for Onerous contracts, from 1
April 2022 provisions for onerous contracts have increased by €53.2m as the amendment
now requires that costs of fulfilling a contract consist of both the incremental cost of
fulfilling that contract and an allocation of other costs that related directly to
fulfilling contracts. Prior to this amendment the Group only included incremental direct
costs with an allocation of the central overheads now included. The provisions have been
calculated on the best estimate of likely future cash flows over the contract term based
on the latest expectations including assumptions on inflationary increases, tonnage
inputs, plant performance with efficiency improvements, off-take availability and
recyclates pricing. The provisions are to be utilised over the period of the contracts
to which they relate with the latest date being 2040.
Legal and warranty
Legal and warranty provisions relate to legal claims, warranties and indemnities. Under
the terms of the agreements for the disposal of certain businesses, the Group has given
a number of warranties and indemnities to the purchasers which may give rise to
payments. The Group has a liability until the end of the contractual terms in the
agreements. The Group considers each warranty provision based on the nature of the
business disposed of and the type of warranties provided with judgement used to
determine the most likely obligation.
On 6 February 2020 the European Commission announced its decision to initiate a formal
investigation in which it alleges that the Walloon Region of Belgium provided state aid
to the Group in relation to the Cetem landfill. An adverse judgement would require the
Walloon Region to seek repayment from the Group and a provision of €15.1m has been
recognised in both the current year and the prior year as non-current as timing of any
cash flow is expected to be after 12 months from the balance sheet date. The matter
remains ongoing and based on legal advice management consider this value to be their
best estimate of the potential exposure based on the most likely outcome. Further
contingent liability information is provided in note 16.
13. Provisions continued
Restructuring
The restructuring provision primarily relates to redundancy and related costs incurred
as a result of restructuring initiatives. As at 30 September 2022 the provision is
expected to be spent in the following twelve months as affected employees leave the
business.
Other
Other provisions includes dilapidations €7.2m (March 2022: €9.1m), long-service employee
awards €7.3m (March 2022: €7.0m) and other environmental liabilities €10.3m (March 2022:
€9.2m). The dilapidations provisions are determined on a site by site basis using
internal expertise and experience and are calculated as the most likely cash outflow at
the end of the contracted obligation. The provisions will be utilised over the period up
to 2071.
14. Defined benefit pension schemes
The Group has the legacy Shanks UK defined benefit scheme which provides pension
benefits for pensioners, deferred members and eligible UK employees which is closed to
new entrants and to future benefit accrual. In addition there are a number of defined
benefit pension schemes eligible for certain employees in both the Netherlands and
Belgium.
The amounts recognised in the Income Statement were as follows:
First half 2022/23 First half 2021/22
€m €m
Current service cost 0.9 0.7
Interest (income) expense on scheme net (0.1) 0.1
liabilities
Net defined benefit pension schemes charge 0.8 0.8
before tax
The amounts recognised in the balance sheet were as follows:
30 September 30 September 31 March
2022 2021 2022
€m €m €m
Present value of funded obligations (188.5) (296.6) (275.7)
Fair value of plan assets 188.4 295.1 278.0
Defined benefit pension schemes net (deficit) asset (0.1) (1.5) 2.3
Related deferred tax asset - 0.4 (0.5)
Net defined pension schemes (liability) asset (0.1) (1.1) 1.8
Classified as:
Defined benefit scheme surplus - included in 4.5 5.9 8.6
non-current assets
Defined benefit pension schemes deficit - included in (4.6) (7.4) (6.3)
non-current liabilities
Defined benefit pension schemes net (deficit) asset (0.1) (1.5) 2.3
The legacy Shanks UK defined benefit scheme moved by €4.1m from an asset of €8.6m at 31
March 2022 to an asset of €4.5m at 30 September 2022. This was due to an increase in the
discount rate assumption on scheme liabilities from 2.8% at 31 March 2022 to 5.2% at 30
September 2022 which was partially offset by asset returns which underperformed the
expected discount rate. The deficit for the overseas defined benefit schemes reduced by
€1.7m to €4.6m as a result of increased discount rate assumptions on scheme liabilities.
15. Financial instruments at fair value
The Group uses the following hierarchy of valuation techniques to determine the fair
value of financial instruments:
• Level 1: quoted (unadjusted) prices in active markets for identical assets or
liabilities
• Level 2: other techniques for which all inputs which have a significant effect on
the recorded fair value are observable, either directly or indirectly
• Level 3: techniques which use inputs which have a significant effect on the recorded
fair value that are not based on observable market data
During the period ended 30 September 2022, there were no transfers between level 1 and
level 2 fair value measurements and no transfers into or out of level 3.
Valuation techniques used to derive level 2 fair values:
• Unlisted non-current investments comprise unconsolidated companies where the fair
value approximates the book value
• Short-term investment valuations are provided by the fund manager
• Derivative financial instruments are determined by discounting the future cash flows
using the applicable period-end yield curve
• The fair value of the European private placements are determined by discounting the
future cash flows using the applicable period-end yield curve
• The fair value of retail bonds is based on indicative market pricing
The table below presents the Group’s assets and liabilities measured at fair values. The
Group considers that the fair value of all other financial assets and financial
liabilities are not materially different to their carrying value.
30 September 2022 30 September 2021 31 March 2022
Level 1 Level 2 Level 1 Level 2 Level 1 Level 2
€m €m €m €m €m €m
Assets
Money market funds - - 29.4 - - -
Unlisted non-current investments - 4.6 - 4.6 - 4.6
Short-term investments - 10.7 - 11.5 - 11.1
Derivative financial instruments - 8.7 - 3.6 - 7.0
- 24.0 29.4 19.7 - 22.7
Liabilities
Derivative financial instruments - 0.9 - 22.3 - 14.7
European private placements - 24.8 - 26.4 - 25.7
Retail bonds - 195.6 - 307.9 - 300.2
- 221.3 - 356.6 - 340.6
On 5 March 2021, the UK’s Financial Conduct Authority (FCA) formally announced the
cessation of all GBP London Interbank Offered Rate (LIBOR) benchmark settings published
by ICE Benchmark Administration (IBA) after 31 December 2021. In response, work has been
undertaken by the Group with the providers of the PPP non-recourse borrowings and
interest rate swaps to amend the benchmark rate referenced in the loan agreements and
derivative hedging instruments from GBP LIBOR to GBP SONIA (Sterling Overnight Index
Average) including a credit adjustment spread on the debt to compensate for the basis
differential between the two benchmarks. In the six months to 30 September 2022 all
amendments have been completed and the non-recourse borrowings and interest rate swaps
are now referenced to SONIA. This did not result in any accounting implications.
16. Contingent liabilities
As referenced in note 13, there is an ongoing investigation by the European Commission
in which it alleges the Walloon region of Belgium provided state aid to the Group in
relation to the Cetem landfill. An adverse judgement would require the Walloon region to
seek repayment from the Group. Both the Walloon Region and Renewi believe that no state
aid was offered and will defend their conduct vigorously. Renewi has provided €15m based
on legal advice which represents management’s best estimate of the most likely outcome.
It is noted that the potential maximum claim is €58m (excluding compound interest
currently amounting to €5m), and therefore there is a potential further liability should
the Group be wholly unsuccessful in its defence. A ruling from the European Commission
has not been received and is expected during FY23 but no monies would likely become
payable until FY24 should the European Commission conclude Renewi did receive state aid.
The criminal investigation into the production of thermally cleaned soil at ATM has been
closed without any prosecution. It is noted that there are discussions ongoing on the
application of thermally cleaned soil in certain areas in the Netherlands and it cannot
be ruled out that this could result in liability for damages resulting from third party
claims in the future.
Due to the nature of the industry in which the business operates, from time to time the
Group is made aware of claims or litigation arising in the ordinary course of the
Group’s business. Provision is made for the Directors’ best estimate of all known claims
and all such legal actions in progress. The Group takes legal advice as to the
likelihood of success of claims and actions and no provision is made where the Directors
consider, based on that advice, that the action is unlikely to succeed or a sufficiently
reliable estimate of the potential obligation cannot be made. None of these other
matters are expected to have a material impact.
Under the terms of sale agreements, the Group has given a number of indemnities and
warranties relating to businesses sold in prior periods. Different warranty periods are
in existence and it is assumed that these will expire within 15 years. Based on
management’s assessment of the most likely outcome appropriate warranty provisions are
held.
17. Related party transactions
The Group’s significant related parties remain as disclosed in note 8.2 of the 2022
Annual Report and Accounts. There were no material differences in related parties or
related party transactions in the period compared to the prior year.
18. Explanation of non-IFRS measures and reconciliations
The Directors use alternative performance measures as they believe these measures
provide additional useful information on the underlying trends, performance and position
of the Group. These measures are used for internal performance analysis. These terms are
not defined terms under IFRS and may therefore not be comparable with similarly titled
measures used by other companies. These measures are not intended to be a substitute
for, or superior to, IFRS measurements. The alternative performance measures used are
set out below and there have been no changes in approach in the period.
Financial Measure How we define it Why we use it
Operating profit excluding non-trading
and exceptional items, amortisation of
intangible assets arising on acquisition
and the change in fair value
remeasurements of derivatives. Provides insight into
Underlying EBIT Amortisation on acquisition intangibles ongoing profit generation
is excluded to avoid double counting of and trends
costs in underlying EBIT as the Group
incurs costs each year in maintaining
intangible assets which include acquired
customer relationships, permits and
licences
Underlying EBIT Underlying EBIT as a percentage of Provides insight into
margin revenue margin development and
trends
Underlying EBIT before depreciation,
amortisation and impairment of plant,
property and equipment, intangible assets Measure of earnings and
Underlying EBITDA and investments, profit or loss on cash generation to assess
disposal of plant, property and operational performance
equipment, intangible assets and
subsidiaries
Underlying EBITDA Underlying EBITDA as a percentage of Provides insight into
margin revenue margin development and
trends
Profit before tax excluding non-trading
Underlying profit and exceptional items, amortisation of Facilitates underlying
before tax intangible assets arising on acquisition performance evaluation
and the change in fair value
remeasurements of derivatives
Earnings per share excluding non-trading
and exceptional items, amortisation of Facilitates underlying
Underlying EPS intangible assets arising on acquisition performance evaluation
and the change in fair value
remeasurements of derivatives
Underlying effective The effective tax rate on underlying Provides a more
tax rate profit before tax comparable basis to
analyse our tax rate
Last 12 months underlying EBIT divided by Provides a measure of the
a 13-month average of net assets return on assets across
Return on operating excluding core net debt, IFRS 16 lease the Divisions and the
assets liabilities, derivatives, tax balances, Group excluding goodwill
goodwill and acquisition intangibles and acquisition
intangible balances
18. Explanation of non-IFRS measures and reconciliations - continued
Financial Measure How we define it Why we use it
Last 12 months underlying EBIT as Provides a measure of the
adjusted by the Group effective tax Group return on assets
Post-tax return on rate divided by a 13-month average taking into account the
capital employed of net assets excluding core net goodwill and acquisition
debt, IFRS 16 lease liabilities and intangible balances
derivatives
Net cash generated from operating
activities including interest, tax
and replacement capital spend and Measure of cash generation
excluding cash flows from in the underlying business,
non-trading and exceptional items, including regular
Covid-19 tax deferral payments or replacement capital
receipts, settlement of ATM soil expenditure and excluding
liabilities and cash flows relating items of a historic nature,
to the UK PPP contracts. Payment to to fund growth capital
fund defined benefit pension schemes projects and invest in
Adjusted free cash flow are also excluded as these schemes acquisitions. We classify
are now closed to both new members our capital spend into
and ongoing accrual and as such general replacement
relate to historic liabilities. The expenditure and growth
Municipal contract cash flows are capital projects which
excluded because they principally include the innovation
relate to onerous contracts as portfolio and other large
reported in exceptional charges in strategic investments
the past and caused by adverse
market conditions not identified at
the inception of the contract
Net cash generated from operating Measure of cash available
activities principally excluding after regular replacement
Free cash flow non-trading and exceptional items capital expenditure to pay
and including interest, tax and dividends, fund growth
replacement capital spend capital projects and invest
in acquisitions
Free cash flow The ratio of free cash flow to Provides an understanding
conversion underlying EBIT of how our profits convert
into cash
Renewi 2.0 and other exceptional
Non-trading and cash flows are presented in cash Provides useful information
exceptional flows from operating activities and on non-trading and
cash flow items are included in the categories in exceptional cash flow spend
note 5, net of opening and closing
Balance Sheet positions
Total cash flow is the movement in
net debt excluding loan fee
capitalisation and amortisation,
exchange movements, settlement of Provides an understanding
Total cash flow cross-currency interest rate swaps, of total cash flow of the
movement in PPP cash and PPP Group
non-recourse debt, additions to IFRS
16 lease liabilities and lease
liabilities acquired through a
business combination
The cash relating to UK PPP
contracts is not freely
available to the Group and
Core cash excludes cash and cash is excluded from financial
Core cash equivalents relating to UK PPP covenant calculations of
contracts the main multicurrency
green finance facility
therefore excluding this
gives a suitable measure of
cash for the Group
The borrowings relating to
the UK PPP contracts are
non-recourse to the Group
and excluding these gives a
Core net debt includes core cash suitable measure of
Core net debt excludes debt relating to the UK PPP indebtedness for the Group
contracts and lease liabilities as a and IFRS 16 lease
result of IFRS 16 liabilities are excluded as
financial covenants on the
main multicurrency green
finance facility remain on
a frozen GAAP basis
Liquidity headroom includes core Provides an understanding
Liquidity cash, money market funds and undrawn of available headroom to
committed amounts on the the Group
multicurrency green finance facility
Adjusted net debt to a comparable
adjusted annualised underlying Commonly used measure of
Net debt to EBITDA in accordance with frozen financial leverage and
EBITDA/leverage ratio GAAP, excluding lease liabilities consistent with covenant
which are a result of IFRS 16, and definition
translated at an average rate of
exchange for the period
18. Explanation of non-IFRS measures and reconciliations – continued
Reconciliation of operating profit (loss) to underlying EBITDA
Netherlands Belgium Mineralz Group
Commercial Commercial & Water Specialities central Total
First half 2022/23 Waste Waste services
€m €m €m
€m €m €m
Operating profit (loss) 40.3 28.2 11.0 10.5 (6.4) 83.6
Non-trading and exceptional
items (excluding finance - (0.1) (8.4) 0.8 (0.7) (8.4)
items)
Underlying EBIT 40.3 28.1 2.6 11.3 (7.1) 75.2
Depreciation and impairment
of property, plant and 26.6 14.8 8.6 3.8 3.0 56.8
equipment and right-of-use
assets
Amortisation and impairment
of intangible assets 0.4 - 0.4 0.1 1.6 2.5
(excluding acquisition
intangibles)
Non-exceptional gain on
disposal of property, plant (1.6) (0.1) - (0.9) - (2.6)
and equipment, intangible
assets and subsidiaries
Underlying EBITDA 65.7 42.8 11.6 14.3 (2.5) 131.9
Restated*
Netherlands Belgium Restated*
Commercial Commercial Mineralz Specialities Group
First half 2021/22 Waste Waste & Water Total
€m central
€m €m €m services €m
€m
Operating profit (loss) 40.2 20.2 4.0 1.2 (8.2) 57.4
Non-trading and
exceptional items 3.0 1.3 - 0.5 2.5 7.3
(excluding finance
items)
Underlying EBIT 43.2 21.5 4.0 1.7 (5.7) 64.7
Depreciation and
impairment of property, 28.2 16.3 6.7 4.3 2.8 58.3
plant and equipment and
right-of-use assets
Amortisation of
intangible assets 0.4 - 0.3 0.2 1.4 2.3
(excluding acquisition
intangibles)
Impairment of - - - 1.9 - 1.9
investment in associate
Non-exceptional (gain)
loss on disposal of (0.7) 0.3 - (0.2) - (0.6)
property, plant and
equipment
Underlying EBITDA 71.1 38.1 11.0 7.9 (1.5) 126.6
*The comparatives for operating loss and non-trading and exceptional items in Group
central services have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Reconciliation of statutory profit before tax to underlying profit before tax
Restated*
First half 2022/23
First half 2021/22
€m
€m
Statutory profit before tax 71.6 43.9
Non-trading and exceptional items in operating (8.4) 7.3
profit
Non-trading and exceptional finance (income) (1.6) 0.1
charges
Underlying profit before tax 61.6 51.3
*The comparatives for statutory profit before tax and non-trading and exceptional items
in operating profit have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
18. Explanation of non-IFRS measures and reconciliations – continued
Reconciliation of adjusted free cash flow and free cash flow as presented in the Finance
review
Restated*
First half 2022/23
First half 2021/22
€m
€m
Net cash generated from operating activities 74.4 72.4
Exclude non-trading and exceptional provisions and 2.2 7.7
working capital
Exclude payments to fund defined benefit pension 1.8 1.8
schemes
Exclude deferred Covid taxes paid 9.9 0.4
Exclude offtake of ATM soil 1.1 3.4
Exclude UK Municipal contracts 6.7 7.9
Include finance charges and loan fees paid (19.4) (16.5)
Include finance income received 5.3 5.0
Include repayment of obligations under lease (23.2) (21.9)
liabilities
Include purchases of replacement items of (6.1) (4.9)
intangible assets
Include purchases of replacement items of (33.6) (25.2)
property, plant and equipment
Include proceeds from disposals of property, plant 4.7 2.1
& equipment
Include capital received in respect of PPP 2.9 2.8
financial asset net of outflows
Include repayment of UK Municipal contracts PPP (5.4) (3.5)
debt
Include movement in UK Municipal contracts PPP 0.5 (3.9)
cash
Adjusted free cash flow 21.8 27.6
Include deferred Covid taxes paid (9.9) (0.4)
Include offtake of ATM soil (1.1) (3.4)
Include UK Municipal contracts (6.7) (7.9)
Free cash flow 4.1 15.9
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Reconciliation of net capital spend in the Finance review to purchases and disposal
proceeds of property, plant and equipment and intangible assets within Investing
activities in the consolidated Statement of Cash Flows
Restated*
First half 2022/23
First half 2021/22
€m
€m
Purchases of intangible assets (6.1) (4.9)
Purchases of replacement property, plant and (33.6) (25.2)
equipment
Proceed from disposals of property, plant and 4.7 2.1
equipment
Net replacement capital expenditure (35.0) (28.0)
Growth capital expenditure (16.0) (7.5)
Total capital spend as shown in the cash flow in (51.0) (35.5)
the Finance review
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Restated*
First half 2022/23
First half 2021/22
€m
€m
Purchases of intangible assets (6.1) (4.9)
Purchases of property, plant and equipment (49.6) (32.7)
(replacement and growth)
Proceed from disposals of property, plant and 4.7 2.1
equipment
Purchases and disposal proceeds of property, plant
and equipment and intangible assets within (51.0) (35.5)
Investing activities in the consolidated Statement
of Cash Flows
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
18. Explanation of non-IFRS measures and reconciliations – continued
Reconciliation of property, plant and equipment additions to replacement capital
expenditure as presented in the Finance review
Restated*
First half 2022/23
First half 2021/22
€m
€m
Property, plant and equipment additions (note 10) (44.3) (23.2)
Intangible asset additions (note 10) (4.5) (4.1)
Proceeds from disposals of property, plant and 4.7 2.1
equipment
Movement in capital creditors (included in trade (6.9) (9.0)
and other payables)
Growth capital expenditure – as disclosed in the 16.0 7.5
Finance review
Government grant received in a prior period - (1.3)
transferred to property, plant and equipment
Replacement capital expenditure per Finance review (35.0) (28.0)
*The comparatives have been restated following the change in accounting policy in
relation to Software as a Service arrangements as explained in note 2 Basis of
preparation.
Reconciliation of total cash flow as presented in the Finance review to the movement in
total net debt
First half 2022/23 First half 2021/22
€m €m
Total cash flow (80.5) (1.9)
Additions to lease liabilities (16.0) (15.9)
Repayment of obligations under lease liabilities 23.2 21.9
Lease liabilities acquired though a business (26.1) -
combination
Movement in PPP non-recourse debt 5.4 3.5
Movement in PPP cash and cash equivalents (0.5) 3.9
Capitalisation of loan fees net of amortisation (0.6) (0.3)
Exchange movements 2.7 2.1
Settlement of cross-currency interest rate swaps - 6.4
Movement in total net debt (note 11) (92.4) 19.7
Reconciliation of total cash flow as presented in the Finance review to the movement in
cash
First half 2022/23 First half 2021/22
€m €m
Total cash flow (80.5) (1.9)
Proceeds from retail bonds - 125.0
Repayment of retail bonds (100.0) -
Proceeds from bank borrowings 303.2 126.6
Repayment of bank borrowings (132.6) (228.9)
Bank loan acquired through business combination 7.0 -
Movement in PPP cash and cash equivalents (0.5) 3.9
Exchange movements (1.3) 0.4
Settlement of cross-currency interest rate swaps - 6.4
Movement in total cash (4.7) 31.5
Reconciliation of total net debt to net debt under covenant definition
30 September 30 September 31 March
2022 2021 2022
€m €m €m
Total net debt (696.4) (648.4) (604.0)
Exclude PPP non-recourse debt 91.3 100.7 100.2
Exclude PPP cash and cash equivalents (19.7) (21.1) (21.1)
Exclude IFRS 16 lease liabilities 237.1 232.8 221.9
Net debt under covenant definition (387.7) (336.0) (303.0)
19. Events after the balance sheet date
In November 2022 the Group signed two additional fixed rate facilities totalling €55m
including a €45m 7 year European Private Placement at 4.676% and a €10m 5 year loan at
4.22%.
INDEPENDENT REVIEW REPORT TO RENEWI PLC
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that
the condensed set of financial statements in the half-yearly financial report for the
six months ended 30 September 2022 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and the Disclosure
Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
We have been engaged by the company to review the condensed set of financial statements
in the half-yearly financial report for the six months ended 30 September 2022 which
comprises the Consolidated Interim Income Statement, the Consolidated Interim Statement
of Comprehensive Income, the Consolidated Interim Balance Sheet, the Consolidated
Statement of Changes in Equity and the Consolidated Interim Statement of Cash Flows and
the related notes 1 to 19.
Basis for conclusion
We conducted our review in accordance with International Standard on Review Engagements
(UK) 2410, “Review of Interim Financial Information Performed by the Independent Auditor
of the Entity” (“ISRE (UK) 2410”). A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and accounting matters,
and applying analytical and other review procedures. A review is substantially less in
scope than an audit conducted in accordance with International Standards on Auditing
(UK) and consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly, we do not
express an audit opinion.
As disclosed in note 2, the annual financial statements of the group are prepared in
accordance with UK adopted international accounting standards. The condensed set of
financial statements included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34, “Interim Financial
Reporting”.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed in an
audit as described in the Basis for conclusion section of this report, nothing has come
to our attention to suggest that the directors have inappropriately adopted the going
concern basis of accounting or that the directors have identified material uncertainties
relating to going concern that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with ISRE (UK)
2410, however future events or conditions may cause the group to cease to continue as a
going concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly financial report in
accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom’s
Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible for
assessing the company’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the Company a
conclusion on the condensed set of financial statement in the half-yearly financial
report. Our conclusion, including our Conclusions Relating to Going Concern, are based
on procedures that are less extensive than audit procedures, as described in the Basis
for Conclusion paragraph of this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to assist
the Company in meeting the requirements of the Disclosure Guidance and Transparency
Rules of the United Kingdom’s Financial Conduct Authority and for no other purpose. No
person is entitled to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms of engagement or has
been expressly authorised to do so by our prior written consent. Save as above, we do
not accept responsibility for this report to any other person or for any other purpose
and we hereby expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
9 November 2022
BDO LLP is a limited liability partnership registered in England and Wales (with
registered number OC305127).
════════════════════════════════════════════════════════════════════════════════════════
ISIN: GB00BNR4T868
Category Code: IR
TIDM: RWI
LEI Code: 213800CNEIDZBL17KU22
OAM Categories: 1.2. Half yearly financial reports and audit
reports/limited reviews
3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 199998
EQS News ID: 1483201
End of Announcement EQS News Service
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