Shares in waste collection company Biffa (BIFF) gained 7% to 274.5p after the company upped its expectations for full year operating earnings materially above consensus.

The impact of the third lockdown has had a smaller impact than the board’s base case expectations with Industrial and Commercial (I&C) collections running at around 80% of prior year levels compared with 70%-to-75% expected.

In addition, strong management of receivables and cash collection has ‘materially’ reduced the need to provide for doubtful debts resulting in a final quarter write back.

Consequently, the board now expects earnings before interest (EBIT) for the year to 27 March 2021 to be between £42 million and £44 million compared with a company compiled analyst consensus of £33.8 million.

ANALYST UPGRADE

Numis analyst James Beard upgraded his EBIT forecasts by 37% this morning to £43.2 million and upped his pre-tax profit estimate by 112% to £22.2 million.

Beard commented, ‘We (very) cautiously make few underlying changes to FY22-23E.’

However, Biffa’s recent (25 February) acquisition of The Company Shop Group (CSG) has prompted Beard to upgrade pre-tax profit estimates out to 2023 by between 9%-to-12%.

LIQUIDITY HEADROOM

Biffa said it will exit 2021 with net debt of between £440 million-to-£460 million, well within its covenant headroom. This leaves the group with ‘significant’ balance sheet capacity to pursue pre-existing investment goals.

Biffa also announced a £13 million investment in its plastics recycling business to increase capacity at the Washington facility by 50% to 39,000 tonnes of input a year, equivalent to 1.6 million bottles.

The investment will create a further 50 jobs and is expected to come on-line during the second half of the next financial year.

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Issue Date: 03 Mar 2021