Waste disposal giant Renewi has branded the UK “unpredictable” as it offloaded its loss-leading British municipal division to competitor Biffa alongside a set of full year results in which the firm slid to into the red.
The UK-listed firm, which primarily operates in the Benelux region, paid Biffa £125m to take the business off its hands, having announced a strategic review into its UK operations late last year.
Renewi had labelled its legacy UK operations as “onerous” in previous financial statements. Its five bespoke contracts in the country, which are signed with individual local councils, span geographically disparate locations in England and Scotland.
The firm said its British portfolio had remained a “significant drag” on the group, costing it €28m (£23.8m) in the last 24 months. It added that the deal should improve free cash flow generation by €15-20m (£12.8m-£17m) a year.
Renewi said the deal: “Significantly de-risks the Group’s balance sheet as unpredictable UK Municipal liabilities, Onerous Contract Provisions (OCPs), will be replaced by conventional and competitively priced debt financing, enabling increased visibility on future capital outflows.”
Renewi’s CEO, Otto de Bont noted: “The sale of UK Municipal to Biffa is a transformational milestone which marks the beginning of a new chapter for Renewi. The exit of UK Municipal will immediately improve our cashflow and profit margins, and enable us to drive sustainable growth.”
The news of the sale was issued alongside the firm’s full year results, which saw the firm slide to a loss, due largely to its deal with Biffa.
It made a statutory loss of €30.9m (£26.3m), down from a profit of €25m (£21.2m) in 2023. It attributed this to falling revenue, which dropped from €1.7bn (£1.45bn) to €1.68bn (£1.4bn), and the cost of the divestment Biffa.
Its free cash flow dropped €20.9m (£178m) to €25.3m (£21.5m), but its net debt also fell to 2.1x earnings before interest, tax, deprecation and amortisation (EBITDA).
De Bont added: “We made three important commitments to our shareholders at the Capital Markets Day in October 2023: optimise our portfolio, build a stronger platform with improved margins and shareholder returns, and drive organic growth. Despite a challenging market environment in commercial waste, we made solid progress on these commitments.”
Renewi has shaken off previous interest from Australian investment giant Macquarie.