TIDMRWI
RNS Number : 3268H
Renewi PLC
09 March 2018
9 March 2018
This announcement replaces the announcement made at 7.00 am this
morning. The only change from the earlier announcement relates to
the description of the Waste (Scotland) Regulations in the
paragraph on Dumfries & Galloway (D&G).
Renewi plc
("Renewi", the "Company" or, together with its subsidiaries, the
"Group")
Update on UK Municipal Division
Further to the announcement on 12 February 2018, Renewi plc
(LSE: RWI), the international waste-to-product business, today
announces the conclusions of the review of contracts in the UK
Municipal Division and actions being taken to manage the Group's
portfolio of UK assets that will collectively result in additional
impairments and provisions.
Overview
-- Increased onerous contract provisions in respect of Barnsley,
Doncaster and Rotherham ("BDR") and Wakefield PFI operating
contracts, reflecting prudent recognition of expected future losses
over the remaining lives of the contracts
-- Decisive action taken to exit loss-making PFI operating
contract at Dumfries & Galloway ("D&G") and the facility at
Westcott Park, simplifying and de-risking the UK Municipal
portfolio
-- Exceptional credits of GBP8m realised in relation to costs
recovered at Wakefield and an improved position at Cumbria as a
result of the Group's operational actions
-- No material impact from provisions on the Group's cash flow or banking covenants
-- Outlook for the year ending 31 March 2018 remains unchanged
with regard to underlying profit and cash performance
Summary of Impairments and Provisions
Non cash Onerous
impairment Contracts
GBP'm of assets Provisions Other TOTAL
----------- ------------ ------------ ------ ------
BDR - (27) - (27)
Wakefield - (30) 3 (27)
Cumbria - 4 1 5
D&G (1) (8) - (9)
Westcott (8) - (8) (16)
Other - - 1 1
Total (9) (61) (3) (73)
----------- ------------ ------------ ------ ------
Exceptional credits of GBP8m relating to Wakefield and Cumbria
contracts is shown in Onerous Contracts Provisions column (GBP4m)
and Other column (GBP4m).
These provisions primarily relate to very long term contracts,
hence the cash liabilities will be realised gradually between now
and 2040 with no material impact on the Group's annual cash
performance.
BDR and Wakefield
While the contracts at BDR and Wakefield both date back to 2011,
the current financial year is the first full year of operation for
both. Accordingly, given the financial and operational performance
of these assets this year and specifically the material
underperformance in organic throughput, subsidies and off-take
pricing compared with the original contractual assumptions made
many years ago, the Board has concluded that additional onerous
contract provisions of GBP27m and GBP30m respectively are now
required. These provisions will be accounted for in the Group's
results for the year ending 31 March 2018 using a prudent discount
rate. While these long term contracts may be subject to material
changes in conditions over their remaining lives of up to 22 years,
the Board does not anticipate any further provisions, assuming no
material and lasting change in market conditions for off-take. We
will also be recognising an exceptional GBP3m credit for the year
ending 31 March 2018 relating to settlement of a claim with a
guarantor to the Wakefield construction contract.
The recognition of Wakefield as an onerous contract in the
financial year ending 31 March 2019 is expected to increase
operating profit in the income statement by approximately GBP3.7m
per annum, partially offset by the related increase in interest
cost of GBP1.5m due to the discount unwind on the onerous contract
provisions.
Cumbria
Following successful management action to resolve operational
and compliance issues in Cumbria, the Group will release up to
GBP5m of provisions that are no longer required in the year ending
31 March 2018.
D&G
Renewi is in discussions with D&G Council and other
stakeholders to initiate the termination of its PFI operating
contract that has made a loss of approximately GBP3m in the year
ending 31 March 2018. It was signed almost 15 years ago and is
unable to address the needs of the Waste (Scotland) Regulations
that set demanding new requirements regarding landfill diversion
and recycling from 2021. We currently expect the proposed
termination of the operating contract to become effective in the
next financial year and we will accordingly take an additional
onerous contract provision of approximately GBP8m and a non-cash
impairment of GBP1m in the year ending 31 March 2018 in respect of
this.
Westcott Park
The Board has also decided to exit its loss-making anaerobic
digestion facility at Westcott Park in Buckinghamshire. A
combination of excess treatment-capacity in the anaerobic digestion
("AD") market, coupled with limited action to increase the
segregation of organic food waste in England, has resulted in
ongoing losses, which will amount to approximately GBP1.7m in the
year ending 31 March 2018. Accordingly, the site will be exited in
the first half of the next financial year. In the year ending 31
March 2018, a provision of GBP8m relating to the exit will be
recognised together with a non-cash write-down of the site
investment of GBP8m.
Conclusion
The actions announced today reflect our strategy to actively
manage the Group's portfolio of assets to generate better long term
shareholder returns.
Further to the trading update on 12 February 2018, underlying
trading in the Municipal Division is on track for the current
financial year. Good operational progress is being made against the
recovery plans, except for the slower future recovery in respect of
the Wakefield contract for the reasons outlined above. The overall
impact of the actions announced today will underpin the expected
recovery in the UK Municipal Division for the year ending 31 March
2019.
The Board remains confident that the Group will deliver a
trading performance for the year ending 31 March 2018 in line with
its expectations.
Looking forward, based on current market conditions and the
delivery of our ongoing recovery plans, no further exceptional
charges are anticipated in respect of the UK Municipal assets.
The Board will provide a pre-close trading update on 4 April
2018.
For further information:
Brunswick Group Renewi plc
+44 207 404 5959 www.renewiplc.com
+44 1908 650582
Carole Cable Peter Dilnot
Fiona Micallef-Eynaud Toby Woolrych
----------------------- ------------------
About Renewi plc
Renewi, created in 2017 by the merger of Shanks Group plc and
Van Gansewinkel Groep B.V., is a leading waste-to-product business
ideally positioned to be part of the solution to some of the main
environmental problems facing society today: reducing waste,
avoiding pollution, and preventing the unnecessary use of finite
natural resources.
We are listed on the London Stock Exchange and are a constituent
of the FTSE250 index. With over 8,000 employees across nine
countries in Europe and North America, we have deep expertise and
an extensive breadth of waste management products and services.
For us, waste is a state of mind, an opportunity. When we take
away someone's waste, we then give it new life. We transform a wide
range of used materials into useful products and raw materials for
our customers, like recycled paper, metal, plastic and glass,
woodchips, compost, energy, fuel, and other products.
In the process we protect the world from contamination, preserve
finite natural resources, and enable customers to meet their
sustainability goals. With our deep international expertise we also
provide our customers with an extensive product range, combined
with local service and attention.
Above all, our team is committed and passionate about our
mission: waste no more. Renewi operates across five divisions:
-- Netherlands Commercial - Collecting, sorting, treating and
recycling commercial and household waste in the Netherlands
-- Belgium Commercial - Collecting, sorting, treating and
recycling commercial and household waste in Belgium
-- Hazardous Waste - Treating soil, water and packed chemical
waste at our flagship ATM facility and conducting specialist
industrial cleaning in the Netherlands
-- Monostreams - Managing a range of waste streams which focus
on specific end markets such as glass, electronic goods, organics
and minerals in Europe
-- Municipal - Operating long-term waste management contracts
with local authorities in the UK and Canada
For more information, please visit: www.renewiplc.com
Images are available to download at:
www.renewiplc.com/imagelibrary
This information is provided by RNS
The company news service from the London Stock Exchange
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