Consolidated Statement of Other Comprehensive (Loss)/ Income

 

	Notes		52 weeks ended 24 March 2017 £m		52 weeks ended  25 March 2016 £m
Loss for the period			(10.9)		(5.1)
Other comprehensive(loss)/ income
Items from continuing operations that will not be reclassified subsequently to profit or loss:
Actuarial (loss)/ gain on defined benefit pension scheme	28		(17.6)		60.4
Tax relating to items that will not be reclassified subsequently to profit or loss	9		3.4		(12.2)
			(14.2)		48.2
Items from continuing operations that may be reclassified subsequently to profit or loss:
Net gains on cash flow hedge	18		0.3		-
Tax relating to items that may be reclassified subsequently to profit or loss	9		-		-
Other comprehensive (loss)/income for the period, net of income tax			(13.9)		48.2
Total comprehensive (loss)/profit for the period			(24.8)		43.1
Attributable to shareholders of the parent company			(24.8)		43.1

 

 Consolidated Statement of Financial Position

 

	Notes		As at 24 March 2017 £m		As at 25 March 2016 £m
Assets
Non-current assets
Goodwill	12		70.4		64.4
Other intangible assets	13		219.9		224.9
Property, plant and equipment	14		327.8		292.9
Long term receivables	16		75.6		8.0
Deferred tax assets	21		28.5		16.9
Retirement benefit surplus	28		15.4		29.5
			737.6		636.6
Current assets
Inventories	15		9.1		8.2
Trade and other receivables	16		177.7		179.3
Financial assets	18		10.7		17.5
Derivative financial instruments	18		0.3		-
Cash and cash equivalents	17		56.4		106.0
			254.2		311.0
Current liabilities
Borrowings	18		(30.8)		(107.6)
Derivative financial liabilities	18		-		(2.1)
Trade and other payables	19		(230.8)		(230.0)
Current tax liabilities			(0.9)		(2.0)
Provisions	20		(10.3)		(11.6)
Total current liabilities			(272.8)		(353.3)
Net current liabilities			(18.6)		(42.3)
Non-current liabilities
Borrowings	18		(315.5)		(504.3)
Trade and other payables	19		(13.1)		(0.1)
Non-current provisions	20		(98.8)		(86.5)
Total non-current liabilities			(427.4)		(590.9)
Net assets			291.6		3.4
Equity
Called up share capital	23		2.5		-
Share premium	23		235.5		-
Hedging reserves			0.3		-
Merger reserve	23		74.4		-
Retained (deficit)/earnings	24		(21.1)		3.4
Total equityattributable to shareholders			291.6		3.4

 

 

The financial statements were approved by the Board of Directors and authorised for issue on 13 June 2017. They were signed on its behalf by:

Director

Company number: 10336040

 

Consolidated Statement of Changes in Equity

 

	Notes	Called up share  capital                £m	Share premium £m	Merger reserve £m	Hedging and  other reserves                £m	Retained earnings/ (deficit) £m	Total equity                £m
As at 27 March 2015			-	-	-	(39.7)	(39.7)
Loss for the period		-	-	-	-	(5.1)	(5.1)
Other comprehensive income for the period		-	-	-	-	48.2	48.2
Total comprehensive income for the period		-	-	-	-	43.1	43.1
As at 25 March 2016		-	-	-	-	3.4	3.4
Loss for the period		-	-	-	-	(10.9)	(10.9)
Issue of share capital	23	2.5	261.0	-	-	-	263.5
Share issue costs			(25.5)				(25.5)
Cashflow hedges	18	-	-	-	0.3	-	0.3
Value of employee service in respect of share option schemes	23	-	-	-	-	0.6	0.6
Recognition of merger reserve		-	-	74.4	-	-	74.4
Other comprehensive loss		-	-	-	-	(14.2)	(14.2)
Total comprehensive income/(loss) for the period		2.5	235.5	74.4	0.3	(24.5)	288.2
As at 24 March 2017		2.5	235.5	74.4	0.3	(21.1)	291.6

 

 

Consolidated Statement of Cash Flows

			52 weeks ended 24 March 2017 £m		52 weeks ended 25 March 2016 £m
Cash flows from operating activities
Cash generated from operations	25		73.3		120.0
Restructuring and exceptional costs			(34.9)		(5.7)
Net cash from operating activities			38.4		114.3
Cash flows from investing activities
Purchases of property, plant and equipment			(39.4)		(37.8)
Purchases of intangible assets			(6.8)		(4.6)
Acquisitions	11		(14.8)		(8.7)
Proceeds from the sale of property, plant and equipment			2.4		7.1
Interest received			0.3		4.0
Net cash used in investing activities			(58.3)		(40.0)
Cash flows from financing activities
Interest paid			(28.8)		(31.5)
Repayment of borrowings			(420.5)		-
Finance lease principal payments			(28.9)		(26.3)
Drawdown of new borrowings			245.0		-
Proceeds from issue of share capital			212.6		-
Cost of issue of share capital			(5.4)		-
Deposits made in respect of long term bonds			(3.7)		-
Net cash flow used in financing activities			(29.7)		(57.8)
Net (decrease)/increase in cash and cash equivalents			(49.6)		16.5
Cash and cash equivalents at the beginning of the period			106.0		89.5
Cash and cash equivalents at the end of the period	17		56.4		106.0

 

 Notes to the Consolidated Financial Statements

 

1. Accounting policies

Basis of preparation

The consolidated financial statements have been prepared in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) and related interpretations issued by the IASB and the European Union (IFRS as adopted by EU). They are prepared on the basis of all IFRS accounting standards and interpretations that are mandatory for the periods ending 24 March 2017 and in accordance with the Companies Act 2006 applicable to Companies reporting under IFRS and Article 4 of the EU IAS regulations. The comparative information has been prepared on the same basis.

The consolidated financial statements have been prepared on a historic cost basis, except for the recording of pensions assets and liabilities and the revaluation of certain derivative financial liabilities instruments.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in the Annual Report and Accounts 2017.

Reorganisation

On 20 October 2016, the Group completed the initial public offering (IPO) of its Ordinary Shares, was admitted to the premium listing segment of the Official List of the Financial Conduct Authority and is trading on the London Stock Exchange.

The Company was initially incorporated on 18 August 2016, with its registered office situated in the United Kingdom.

Prior to listing, the Company became the holding company of the Group through the acquisition of the full share capital of Wasteholdco 1 Limited and its subsidiaries (the Existing Group). Shares in Wasteholdco 1 Limited, an entity formerly owned primarily by GL Europe Luxembourg S.à.r.l, Botticelli LLC and Sankaty European Investments S.à.r.l, the former equity sponsors and principal shareholders, were exchanged for 104,194,841 shares in the Company. These shares were issued and credited as fully paid of £0.01 each.

The transaction does not meet the definition of a business combination under IFRS 3 Business Combinations and as such, falls outside the scope of that standard. As a consequence, following guidance from IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, the integration of the Company has been prepared under merger accounting principles. This policy, which does not conflict with IFRS, reflects the economic substance of the transaction.

Under these principles, the Group has presented its Financial Statements of the Group as though the current Group structure had always been in place. Accordingly, the results of the combined entities for both the current and prior period are presented as if the Group had been in existence throughout the periods presented, rather than from the restructuring date.

Going concern

The Group's business together with the factors likely to affect its future development, performance and position are set out in the business review. The financial position of the company, its cashflows, liquidity position and borrowing facilities are described in the Financial Review.

The Group meets its day-to-day working capital requirements through its bank facilities. The current economic and political conditions create uncertainty, however, the Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the current level of its facilities. The Group has made a loss after tax in the reported period however having assessed the principal risks and other matters discussed in connection with the viability statement, the Directors consider it appropriate to adopt the going concern basis in preparing the consolidated financial statements.

In addition see the Group's viability statement set out in the Annual Report and Accounts 2017.

Basis of consolidation

The Group financial statements consolidate the financial statements of the Company and all of its subsidiaries. Subsidiaries are all entities over which the Group has the power to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to its ability to govern. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date on which control ceases.

All intra-group transactions are eliminated as part of the consolidation process. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Changes in accounting policies and disclosures

The following standards have been adopted by the Group for the first time for the financial year beginning on or after 26 March 2016:

·     Annual improvements to IFRS 2012

·     Annual improvement to IFRS 2014

·     Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation

·     Amendments to IAS 1 Presentation of Financial Statements

·     Amendments to IFRS 11 Joint Arrangements

Adoption of the above has not led to any changes in accounting policies or had any material impact on the financial statements.

At the date of authorisation of these financial statements, The Group has not applied the following new and revised IFRSs which have been issued but are not yet effective:

IFRS 9                          Financial Instruments

IFRS 15                        Revenue from Contracts with Customers

IFRS 16                        Leases

IFRS 2 (amendments)    Classification and Measurement of Share-based Payment Transactions

IAS 7 (amendments)      Disclosure Initiative

IAS 12 (amendments)     Recognition of Deferred Tax Assets for Unrealised Losses

IAS 40 (amendments)     Investment Property

IFRIC 22                        Foreign Currency Transactions and Advance Consideration

Annual improvements to IFRS Standard 2014-2016 cycle

None of these are expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below:

IFRS 9, 'Financial instruments', addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010 and endorsed by the EU in November 2016. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments and is effective for periods commencing 1 January 2018.

IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity's business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the fair value change due to an entity's own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch.

At this time the Group does not expect IFRS 9 will have a significant impact on its existing accounting policies for financial instruments, because the new rules have a more direct impact on the accounting treatment of financial assets to which the Group has limited exposure except for trade receivables. The key area of impact for the Group will be as a result of the introduction of the forward looking expected credit loss model.

Similarly the way that the Group currently deals with its hedge accounting transactions will not be significantly impacted by the move to IFRS 9. However it is likely that disclosures around the entity's risk management strategy and the impact of hedge accounting on the financial statements will be increased.

As outlined above, the key area of impact for the Group will be as a result of the introduction of the forward looking expected credit loss model. During 2017 the Board will complete its detailed assessment of the impact of IFRS 9 ahead of adopting the standard from 31 March 2018.

IFRS 15, 'Revenue from contracts with customers' deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cashflows arising from an entity's contracts with customers.

Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 'Revenue' and IAS 11 'Construction contracts' and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2018 and earlier application is permitted subject to EU endorsement. The Board is still in the process of reviewing the full impact of implementation but at this time the Group does not expect there to be any significant impact of the standard on revenue recognition within the Group which will continue to recognise revenue in line with current reporting. The standard includes detailed application guidance which will be considered across all business lines as part of the Group's detailed review and implementation plan ahead of the implementation of the standard from 1 January 2018.

In January 2016 IFRS 16 - 'Leases' was issued. The Board is still in the process of reviewing the impact of IFRS 16 on the Group's accounting policies. The Group currently leases both properties and plant and equipment under a series of operating leases which will be impacted by the new standard and these types of leases may need to be brought onto the Group's statement of financial position from the date of the adoption of the new standard. As a consequence of this there is likely to be an impact on the Group's statement of profit and loss where operating lease rentals are likely to be replaced by a depreciation charge and related interest charge. There will also be an increase to fixed assets and finance leases creditors on statement of financial position. The Board has not yet reached a decision whether the modified retrospective approach, whereby comparatives will not be restated on adoption of the new standards but instead a cumulative adjustment is reflected in retained earnings will be adopted or whether the prior year comparatives will be restated.

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

Business combinations

The Group accounts for acquisitions of businesses using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred to the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:

·       deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 'Income taxes' and IAS 19 'Employee benefits' respectively;

·          liabilities or equity measurements related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date;

·            assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' are measured in accordance with that Standard.

Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition date amounts of the identifiable assets and acquired and the liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.

When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the 'measurement period' (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the amounts recognised at that date.

Goodwill

Goodwill is initially recognised and measured as set out above.

Goodwill is tested annually for impairment or if there is an indication of impairment. Gains and losses on the disposal of a cash generating unit include the carrying amount of goodwill relating to that cash generating unit.

For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit.

Gains and losses on the disposal of a cash generating unit include the carrying amount of goodwill relating to that cash generating unit.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (CODM). The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments has been identified as the Group Executive Team.

The Group's internal reporting structure is aligned on the same basis and segmental information is presented on a basis consistent with this reporting structure.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for value added taxes and trade discounts. Landfill tax is included within both revenue and cost of sales.

When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognised by reference to the stage of completion of the transaction at the end of the reporting period.

Municipal collection and environmental services revenue is recognised in accordance with quantities specified in the agreed customer contracts.

Other collection revenue is recognised on collection of waste from customer sites.

Revenue from waste processing, treatment and landfill facilities is recognised when waste is physically received at the Group sites.

Energy generation revenue is recognised at the point that power is supplied to the customer based on the quantity of units supplied.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are initially recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group's general policy on borrowing costs.

Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Foreign currencies

In preparing the financial information of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:

·     exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are recognised as an adjustment to interest costs on those foreign currency borrowings;

·     exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.

·     For the purposes of presenting these consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into sterling using the exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Government grants

Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.

Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the consolidated statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets.

Employee benefits

Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions.

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at the end of each annual reporting period. Remeasurement, comprising actuarial gains and losses and the return on plan assets (excluding interest), is reflected immediately in the statement of financial position with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurement recognised in other comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorised as follows:

·             service cost (including current service cost, past service cost as well as gains and losses on curtailments and settlements);

·             net interest expense or income; and

·             remeasurement.

The Group presents service costs in operating costs and net interest expense or income is included in finance income. Curtailment gains and losses are accounted for as past service costs.

The retirement benefit obligation recognised in the consolidated statement of financial position represents the actual deficit or surplus in the Group's defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.

For defined contribution plans, the Group pays contributions to publicly or privately administered pension plans on a contractual or voluntary basis. The Group recognises contributions payable to these plans in exchange for employee services in employee benefit expense.

A liability for a termination benefit is recognised at the earlier of when the entity can no longer withdraw the offer of the termination benefit and when the entity recognises any related restructuring costs.

A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service.

Liabilities recognised in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

Share based payment plans

The Group's management awards employee share options, from time to time, on a discretionary basis which are subject to vesting conditions. The economic cost of awarding the share options to its employees is recognised as an employee benefit expense in the income statement equivalent to the fair value of the benefit awarded. The fair value is determined by reference to the schotastic pricing model. The charge is recognised over the vesting period of the award.

Exceptional items

Exceptional items are those that in the Directors' view are required to be separately disclosed by virtue of their size or incidence to enable a full understanding of the Group's performance.

Taxation

Income tax represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from 'profit before tax' as reported in the consolidated statement of profit or loss because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's current tax is calculated using rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial information and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit not the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current or deferred tax arises from the initial accounting of a business combination, the tax effect is included in accounting for the business combination.

Property, plant and equipment

Landfill sites are recorded at cost less accumulated depreciation and accumulated impairment losses. The cost of landfill sites includes the cost of acquiring, developing and engineering sites. There are no directly attributable borrowing costs. Property, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is recognised so as to write off the cost of assets less their residual value over their useful economic lives. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

In the year depreciation was recognised so as to write off the assets on the below basis:

·              Buildings - length of lease straight line method

·              Plant, vehicles and equipment - 4-15 years straight line method

·              Landfill sites - void consumed

Where the obligation to restore a landfill site is an integral part of its future economic benefits, a non-current asset within property, plant and equipment is recognised. The asset recognised is depreciated based on the usage of void space and energy production.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Intangible assets

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is recognised on a straight line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.

The following useful lives have been applied to the intangible assets during the period:

·              Customer contracts - 3-20 years

·              IT development - 3-5 years

·              Landfill gas rights - Length of projected profitable gas extraction based on landfill site content degradation

An internally generated intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following have been demonstrated:

·              the technical feasibility of completing the intangible asset so that it will be available for use of sale;

·              the intention to complete the intangible asset and use or sell it;

·              the ability to use or sell the intangible asset;

·              how the intangible asset will generate probable future economic benefits;

·              the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and

·              the ability to measure reliably the expenditure attributable to the intangible asset during its development.

The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the criteria listed above. When no internally generated intangible asset can be recognised, development expenditure is recognised in profit or loss in the period in which it is incurred. Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses on the same basis as intangible assets that are acquired separately.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognised in profit or loss when the asset is derecognised.

Pre-contract costs

Pre-contract costs are expensed as incurred until the group is appointed preferred bidder. Preferred bidder status provides sufficient confidence that the conclusion of the contract is probable, the outcome can be measured reliably and is expected to generate sufficient net cash inflows to enable recovery.

Pre-contract costs incurred subsequent to appointment as preferred bidder are capitalised onto the statement of financial position. The capitalised balance is expensed to the statement of profit or loss over the period of the contract. Costs, which have been expensed, are not subsequently reinstated when a contract award is achieved.

Impairment of tangible and intangible assets other than goodwill

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.

Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

Inventories

Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in-first-out basis. Net realisable value represents the estimated selling price for inventories less estimated costs of completion and costs necessary to make the sale. Full provision is made for obsolete or defective stock.

Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material). The effects of inflation and unwinding of the discount element on existing provisions are reflected in the financial statements as a finance charge.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Provisions for the cost of restoring landfill sites and aftercare costs are made as the obligation to restore the site arises. Costs are charged to the profit or loss over the operational life on the basis of the usage of void space for each landfill site. The restoration obligation is typically fulfilled within 2 years of the landfill site being closed to waste.

Provisions for aftercare costs are made as the aftercare liability arises. Costs are charged to the profit or loss over the operational life of each landfill site on the basis of usage of void space. When the obligation recognised as a provision gives access to future economic benefits, an asset in property, plant and equipment is recognised. The asset is depreciated over the period of gas generation. Aftercare costs are provided for based on the Directors' expectation that the obligation will have been fulfilled 60 years post closure of the site.

Onerous contracts

Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received from the contract.

Financial Instruments

Financial assets and financial liabilities are recognised when a group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in profit or loss.

Derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date the entity becomes party to the contractual provisions of the instrument and are subsequently remeasured at their fair value at each balance sheet date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and the nature of the item being hedged.

The Group designates certain derivatives as either a) fair value hedge (hedges of the fair value of recognised assets or liabilities; or b) cash flow hedge (hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction); or c) net investment hedge (hedges of net investments in foreign operations).

The Group documents the transaction relationship between the hedging instruments and hedged items at inception. At inception and at each reporting date the Group assesses whether the derivatives used have been highly effective in offsetting changes in the fair value of hedged items.

The fair values of derivative instruments used for hedging are shown in note 18. Movements in the hedging reserve are shown in the statement of changes in equity.

At the reporting date the Group has no fair value hedges or net investment hedges.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated as cash flow hedges are recognised in equity. The Group's cash flow hedges in respect of forward foreign exchange contracts result in recognition in either profit and loss or in the hedging reserve.

When a hedging instrument expires or is sold, or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction occurs. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity will be transferred to the statement of profit or loss.

Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in the statement of profit or loss.

Financial assets

All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets with the timeframe established by regulation or convention in the marketplace.

Financial assets are classified into the following specified categories: financial assets at 'fair value through profit or loss' (FVTPL) and 'loans and receivables'.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

Income is recognised on an effective interest basis for debt instruments other than those financial assets classified as at FVTPL.

Financial assets at FVTPL

Financial assets are classified as at FVTPL when the financial asset is either held for trading or it is designated as at FVTPL.

A financial asset is held for trading if:

·      it has been acquired principally for the purpose of selling it in the near term; or

·     on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or

·      it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as FVTPL upon initial recognition if:

·      such designation eliminates or significantly reduces a

·      measurement or recognition inconsistency that would otherwise arise; or

·     the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or

·     it forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire combined contract to be designated as FVTPL.

Financial assets at FVTPL are stated at fair value, with any gains or losses arising on re-measurement recognised in profit or loss.

Trade and other receivables

Trade receivables are recognised initially at fair value less any provision for impairment. They are subsequently held at amortised cost less provision for impairment. A provision for impairment is established when there is objective evidence that amounts due will not be recoverable. When a trade receivable is considered uncollectible, it is written off and recognised in the statement of profit or loss.

Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

For certain categories of financial assets, such as trade receivables, assets are assessed for impairment on a collective basis even if they were assessed not to be impaired individually. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period, as well as observable changes in national or local economic conditions that correlate with default on receivables.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

Derecognition of financial assets

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

On derecognition of a financial asset, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

Financial liabilities and equity instruments

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Any difference between the amount initially recognised (net of transaction costs) and the redemption value is recognised in the statement of profit or loss over the period of the borrowings using the effective interest method.

Commitment and borrowing fees are capitalised as part of the loan and amortised over the life of the relevant agreement. All other borrowing costs are recognised in the statement of profit or loss in the period in which they are incurred.

Borrowings are classified as non-current liabilities where the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group's obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by a group entity are recognised as the proceeds received, net of direct issue costs.

Debt and equity instruments issued by a group entity are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Other financial liabilities (including borrowings and trade and other payables) are subsequently measured at amortised cost using the effective interest method.

Share capital

Ordinary shares are classified as equity and recorded at par value of proceeds received. Where shares are issued above par value, the proceeds in excess of par value are recorded in the share premium account net of direct issue costs.

Dividend distribution

Final dividend distribution to the Company's shareholders is recognised as a liability in the financial statements in the period in which the dividends are approved. Interim dividends are recognised when paid.

Critical accounting judgements and key sources of estimation uncertainty

The Group does not have any critical judgements in the process of applying the Group's accounting policies.

The Group's valuation of goodwill in the Energy division is supported by the valuation of the operating segment assets which is based on derived market valuations and projected EBITDA. The valuation is sensitive to both changes in the market conditions and changes in the estimates used in calculating budgeted EBITDA. Budgets comprise forecasts of revenue, staff costs and overheads based on current and anticipated market conditions that have been considered and approved by the Board. The valuation is sensitive to changes in these assumptions which could cause a material adjustment to the carrying amount of segmental assets and liabilities within the next year.

The Group is required to make annual estimates and assumptions in relation to the discount rate, inflation rate and life expectancy for defined benefit schemes. See note 28.

The Group activities result in commitments for environmental and aftercare costs and accordingly the Group is required to make estimates for provisions. These estimates depend upon the outcome of future events and may need to be revised if circumstances change.

2.   Segmental information

The Group is managed by type of business and is organised into four operating divisions. These divisions represent the business segments in which the Group reports its primary segment information and are consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Group Executive Team. The activities of the divisions are detailed in the Annual Report and Accounts 2017. The Group's segmental results are as follows:

Revenue within segments is eliminated on consolidation.

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Revenue - continuing operations
Industrial and Commercial		522.1		479.2
Municipal		182.2		161.1
Resource Recovery and Treatment		198.9		198.4
Energy		87.2		88.8
		990.4		927.5

 

Sales between operating divisions are carried out at arms-length.

 

All trading activity and operations are in the United Kingdom and there is therefore no secondary reporting format by geographical segment. There is no single customer that accounts for more than 10% of Group revenue (2016: none).

 

 

 

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Underlying EBITDA
Industrial and Commercial		65.5		50.1
Municipal		23.8		21.4
Resource Recovery and Treatment		29.5		21.4
Energy		35.5		40.9
Group costs		(16.6)		(11.5)
Underlying EBITDA		137.7		122.3
Depreciation and amortisation		(63.9)		(59.8)
Underlying Operating Profit		73.8		62.5
Exceptional items (note 3)		(29.2)		(3.5)
Amortisation of acquisition intangibles		(14.6)		(14.8)
Impact of real discount rate changes to landfill provisions		(17.9)		-
Operating Profit		12.1		44.2
Finance income		8.1		5.3
Finance charges		(38.9)		(46.6)
(Loss)/profit before taxation		(18.7)		2.9

 

Group costs represent those components of shared services and corporate costs (including inter-alia, board and corporate costs, finance, HR, IT, legal and insurance, external affairs and SHEQ) that cannot be meaningfully allocated to the operating segments.

 

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Underlying operating profit
Industrial and Commercial		38.5		27.3
Municipal		11.0		9.0
Resource Recovery and Treatment		11.6		5.4
Energy		29.9		34.5
Group costs		(17.2)		(13.7)
		73.8		62.5

Underlying EBITDA represents the underlying profit earned by each segment without allocation of the share of depreciation and amortisation, exceptional items, finance costs, material impacts of changes in real discount rate applied to the Group's long term landfill provisions and income tax expense. Underlying operating profit recognises the impact of depreciation and amortisation excluding the amortisation of acquisition intangibles. These measures are both reported to the Group Executive Team for the purpose of resource allocation and assessment of segment performance.

The exceptional costs of £29.2 million (2016: £3.5 million) are disclosed in note 3.

 

		Net book value as at 24 March    2017 £m		Net book value as at 25 March 2016 £m
Tangible and intangible assets
Industrial and Commercial		151.0		128.7
Municipal		70.0		49.8
Resource Recovery and Treatment		89.1		79.1
Energy		192.4		203.7
Shared services and corporate		45.2		56.5
		547.7		517.8

 

 

 

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Capital expenditure
Industrial and Commercial		49.3		36.9
Municipal		23.7		17.8
Resource Recovery and Treatment		25.0		18.8
Energy		3.5		3.6
Shared services and corporate		8.2		6.1
		109.7		83.2

Capital expenditure comprises additions to intangible assets and property, plant and equipment including leased assets.

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Depreciation and amortisation
Industrial and Commercial		27.0		22.8
Municipal		12.8		12.4
Resource Recovery and Treatment		17.9		16.0
Energy		5.6		6.4
Shared services and corporate		0.6		2.2
		63.9		59.8
Amortisation of acquisition intangibles		14.6		14.8
Total		78.5		74.6

 

Depreciation and amortisation relates to the write down of both intangible and tangible fixed assets over their estimated useful economic lives. Amortisation of acquisition intangibles is disclosed separately in line with the segmental underlying operating profit.

3.   Other items

The Group's financial performance is analysed into two components; underlying performance (which excludes other items), and other items. Underlying performance is used by management to monitor financial performance as it is considered it aids comparability of the reported financial performance year to year.

Other items includes exceptional items, amortisation of acquisition intangibles and the impact of real discount rate changes in landfill provisions.

Management utilises an exceptional item framework that has been approved by the Board. This follows a three step process which considers the nature of the event, the financial materiality involved and the particular facts and circumstances. Items of income and expense that are considered by management for designation as exceptional items include items such as significant corporate restructuring costs, acquisition related costs, write downs or impairments of non-current assets, movements on onerous contract provisions and strategy related costs including the implementation of Project Fusion.

 

 

 

Included within operating profit:		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Exceptional items:
Acquisition related costs		1.2		0.4
Corporate restructuring costs		29.1		5.1
Onerous contracts		(2.4)		(3.5)
Strategy related costs		1.3		1.5
		29.2		3.5
Amortisation of acquisition intangibles		14.6		14.8
Impact of real discount rate changes to landfill provisions		17.9		-
		61.7		18.3
Corporate restructuring costs included within finance costs:
Finance charges		2.6		-
Finance income		(4.7)		-
Taxation impact of other items		17.1		3.0

 

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Segmental exceptional items:
Industrial and Commercial		0.5		0.3
Municipal		(0.8)		(1.0)
Resource Recovery and Treatment		(1.0)		(1.5)
Energy		0.1		0.7
Group costs		30.4		5.0
		29.2		3.5

 

Acquisition related costs

The £1.2 million of acquisition related expenditure in the 52 weeks ended 24 March 2017 relates to professional fees and other costs which are directly attributable to acquisitions. This includes £0.8m in relation to the acquisition of 100% of the issued share capital of Cory Environmental Municipal Services Limited.

 

The £0.4 million of acquisition related expenditure in the 52 weeks ended 25 March 2016 includes £0.3 million in relation to the acquisition of PHS Chemical Waste Limited and the trading assets of Enviroco Limited's Sheffield-based hazardous waste business.

 

Corporate restructuring costs

Corporate restructuring costs are largely professional fees directly related to the admission of the Group's share capital to the London Stock Exchange including amounts relating to the ongoing EVP case.

 

Finance charges and income were incurred on the early repayment of the pre-IPO borrowing facilities as part of the corporate restructuring.

 

Onerous contracts

Onerous contract costs reflect all movement on onerous service contract provisions.

 

Strategy related costs

Strategy related costs relate to discontinued operations, any major business turnaround and Project Fusion.

Strategy related costs in the 52 weeks ended 24 March 2017 primarily relate to the Group's system replacement programme Project Fusion (£0.5 million in the 52 weeks ended 25 March 2016).

 

Amortisation of acquisition intangibles

Amortisation of acquisition intangibles represents the amount amortised by the Group in each period in respect of intangibles from prior acquisitions, which amounts are reported separately from the Group's depreciation and amortisation charges.

 

Impact of real discount rate changes to landfill provisions

Impact of real discount rate changes to landfill provisions reflects the impact on provisions which arises wholly due to the change in discount rate on landfill provisions as this is not reflective of operational performance.

 

The tax impact of other items is calculated as 20% (2016: 20%) of the expenses allowable in calculating the taxable profit.

4.   Finance income and charges

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Finance charges
Interest on bank overdrafts, bonds and loans		(24.4)		(34.2)
Interest on obligations under finance leases		(7.0)		(6.1)
Interest unwind on discounted provisions		(2.5)		(3.3)
Interest on swaps		(2.4)		(2.1)
Other interest payable		-		(0.9)
Total finance charges		(36.3)		(46.6)
Change in fair value arising from derivative items not in a  hedging relationship		2.1		1.3
Interest income		3.4		4.0
Finance income		5.5		5.3
Net finance charges		(30.8)		(41.3)

 

 

Recognised in other items (note 3)

 

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Finance charges
Interest on bank overdrafts, bonds and loans		(2.7)		-
Total finance charges		(2.7)		-
Interest income		0.6		-
Finance income recognised in other items		0.6		-
Net finance charges recognised in other items		(2.1)		-

 

5.   Financial instrument gains and losses

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
At fair value through profit or loss
Change in fair value arising from derivative items not in a hedge relationship		2.1		1.3
Loans and receivables
Interest income at amortised cost		3.4		4.0
Other financial liabilities
Interest expense at amortised cost		(36.3)		(46.6)

 

 

 

6.   Profit/(loss) before taxation

	52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
The following items have been included in arriving at the pre-tax profit/(loss)
Staff costs (note 7)	247.1		218.7
Depreciation of property, plant and equipment
-     owned assets	41.0		39.9
-     assets held under finance leases	22.1		19.1
Amortisation of intangible assets
-     acquisition intangibles	14.6		14.8
-     other intangibles	0.8		0.8
Operating lease charges:
-     plant and machinery	1.8		2.8
-     other	11.0		10.3
Exceptional items (note 3)	29.2		3.5
Profit/(loss) on disposal of property, plant and equipment	0.9		2.3

 

Operating costs have been split into administration and distribution costs as detailed below:

			52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Operating costs
Distribution costs			19.1		17.0
Administrative expenses			31.5		36.3
			50.6		53.3

 

7.   Employees and Directors

The average monthly number of persons (including Executive Directors) employed by reporting segment, by the Group during the period was:

		52 weeks ended  24 March 2017		52 weeks ended  25 March 2016
By segment
Industrial and Commercial		2,733		2,650
Municipal		3,335		2,754
Resource Recovery and Treatment		599		576
Energy		150		149
Shared services and corporate		359		331
		7,176		6,460

 

 

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Their aggregate remuneration comprised
Wages and salaries		221.1		195.4
Social security costs		17.3		15.6
Other pension costs		7.6		6.6
Redundancy and termination payments		1.1		1.1
		247.1		218.7

 

The remuneration of the Directors is set out within the Directors' Report on Remuneration

.

Key management compensation

 

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Their aggregate remuneration comprised
Wages and salaries		1.7		1.6
Social security costs		1.3		0.4
Other pension costs		0.2		0.2
Short term incentives		1.3		1.3
Long term incentives		6.6		-
		11.1		3.5

Key management personnel have been defined as the Group Executive Team.

 

8.   Auditor's remuneration

The analysis of the Company and Biffa Group's auditor's remuneration is as follows:

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Fees payable to the Company's auditor for the audit of the Company's consolidated annual financial statements		0.3		0.1
Fees payable to the Company's auditor for the audit of the Company's subsidiaries		0.4		0.3
Total audit fees		0.7		0.4
Audit-related assurance services		0.2		-
Other taxation advisory services		0.1		0.3
Other assurance services		0.1		-
Corporate finance services		1.3		0.8
Total audit and non-audit fees		2.4		1.5

 

Audit fees in the year represent fee for the audit of the consolidated financial statements for the period ended 24 March 2017 and 25 March 2016 and for the 6 month period ended 23 September 2016.

Non- audit fees relate to due diligence and advisory services in relation to the IPO completed in October 2016.

9.   Income tax recognised in profit or loss

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Current tax
In respect of the current year		-		1.1
Adjustment in respect of prior years		(0.5)		(0.7)
		(0.5)		0.4
Deferred tax
Losses recognised in respect of the current year		(11.0)		(0.1)
Adjustment in respect of prior years		1.2		6.0
Adjustment attributable to changes in tax rates and laws		2.5		1.7
		(7.3)		7.6
Total tax (credit)/charge		(7.8)		8.0

 

 

Corporation tax is calculated at 20% (2016: 20%) of the estimated assessable (loss)/profit for the period. The (credit)/charge for the period can be reconciled to the (loss)/profit per the consolidated statement of profit or loss and other comprehensive income as follows:

 

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
(Loss)/profit before tax		(18.7)		2.9
(Loss)/profit on ordinary activities multiplied by the standard rate of corporation tax in UK of 20% (2016: 20%)		(3.7)		0.6
Effects of:
Under provision in respect of prior years		0.7		5.4
Expenses not deductible for tax purposes		6.6		0.6
Non-taxable income		(0.2)		(0.3)
Utilisation of unrecognised tax losses		(1.2)		-
Recognition of deferred tax on previously unrecognised losses		(12.5)		-
Effect of change in tax rate		2.5		1.7
Total taxation		(7.8)		8.0

In addition to the amount credited to the consolidated statement of other comprehensive income, the following amounts have been credited/(charged) directly to equity:

		52 weeks ended  24 March 2017 £m		52 weeks ended  25 March 2016 £m
Deferred tax credit/(charge) arising on actuarial losses		3.4		(12.2)

 

Finance (No.2) Act 2016, which provides for reductions in the main rate of corporation tax from 20% to 19% effective from 1 April 2017 and to 17% effective from 1 April 2020, was enacted on 15 September 2016. As deferred tax assets and liabilities are measured at the rates that are expected to apply in the periods of the reversal, deferred tax balances at the balance sheet date have been calculated at the rate at which the relevant balance is expected to be recovered or settled.

 

Continuing focus on tax reform during 2016/17 specifically the OECD's Base Erosion and Profit Shifting (BEPS) project to address mismatches in international rules resulted in draft legislation on areas such as interest deductibility being issues during the year. We will continue to monitor developments and assess the potential impact for Biffa of these and any further initiatives.

 

Whilst the UK remains part of the EU the evolution of the application of EU tax competition regulations continues to create uncertainty over tax legislations and at this stage it is not possible to quantify the impact on the financial statements.

 

As the Group's presence is mainly in the UK we do not envisage a significant impact on the Group following the decision of the UK government to invoke Article 50 to leave the EU.

10.  Earnings per share

Basic earnings per ordinary share are based on the Group profit for the year and a weighted average of 121,889,489 (2016: 27,038,437) Ordinary Shares in issue during the year.

An adjusted earnings per ordinary share figure has been presented to eliminate the effects of exceptional items, amortisation of acquisition intangibles and the impact of the change in the real discount rate to long term provisions. The presentation shows the trend in earnings per ordinary share that is attributable to the underlying trading activities of the Group.

 

The reconciliation between the basic and adjusted figures for the Group is as follows:

 

 

	52 weeks to 24 March 2017				52 weeks to 25 March 2016
	£m		Earnings per share pence		£m		Earnings per share pence
Profit attributable to owners of parent company for basic earnings per share calculation	(10.9)		(9.0)		(5.1)		(18.9)
Other items (note 3)	46.7		38.3		15.3		56.6
Adjusted earnings	35.8		29.3		10.2		37.7

At 24 March 2017 the Company has 1,112,278 weighted potential Ordinary Shares in the Company which underlie the Company's share option awards and may dilute earnings per share in the future. No dilution per share was calculated in the period or in the prior period with the reported loss as they are anti-dilutive.

11.  Acquisitions

 

52 weeks ended 25 March 2016

On 29 September 2015, Biffa Waste Services Limited, a 100% owned subsidiary of Wasteholdco 1 Limited, acquired 100% of the share capital of PHS Chemical Waste Limited owned by PHS Group Limited.

 

Assets with a fair value of £0.3million and liabilities of £1.1 million were acquired for consideration of £3.1million, resulting in goodwill of £3.9 million recognised. Since acquisition the PHS Chemical Waste business has generated revenue of £4.6 million and profit before tax of £0.6 million. If the acquisition of PHS Chemical Waste had been completed on the first day of the financial year, Group revenues for the period would have increased by £9.2 million to £936.7 million and loss before tax would have increased by £1.2 million to £4.1 million.

 

On 1 November 2015, Biffa Waste Services Limited acquired 100% of the share capital of Commercial Waste Limited.

 

Assets with a fair value of £1.4m and liabilities of £1.2m were acquired for consideration of £2.0m, resulting in goodwill of £1.8m recognised. Since acquisition the Commercial Waste business has generated revenue of £1.8 million and profit before tax of £0.3 million. If the acquisition of Commercial Waste Limited had been completed on the first day of the financial year, Group revenues for the period would have increased by £4.7 million to £932.2 million and profit before tax would have increased by £0.7 million to £3.6 million.

 

Biffa Waste Services Limited acquired the business and assets of six further businesses during the 52 weeks ended 25 March 2016. Tangible assets with a fair value of £1.9 million were acquired for consideration of £3.6 million, resulting in goodwill of £1.7 million recognised. If the acquisition of these six businesses had been completed on the first day of the financial year, Group revenues for the period would have increased by £12.9 million to £940.4 million and profit before tax would have increased by £1.4 million to £4.3million.

 

The goodwill recognised on acquisition of £7.4 million represents future opportunities in the UK integrated waste management sector. None of the goodwill is expected to be deductible for corporation tax purposes.

 

52 weeks ended 24 March 2017

On 8 June 2016, the Group acquired 100% of the issued share capital of Cory Environmental Municipal Services Limited. Cory Environmental Municipal Services Limited is a waste management business servicing commercial customers in the South East and South West of England and municipal customers in Cornwall, Lincoln, Rutland and Tunbridge Wells. Cory Environmental Municipal Services Limited was acquired in order to extend the Group's commercial and municipal customer base.

During the year, the Group acquired the trade waste collection business of McGrath Bros Waste Control Limited on 1 June 2016, the business of Blakeley's Recycling Limited on 1 November 2016, the trade waste collection business of Orion Support Services Limited on 1 December 2016 and the trade and assets of Yorwaste Limited on 6 March 2017. Tangible assets of £1.7 million were acquired for cash consideration of £3.4 million resulting in goodwill of £1.4m being recognised.  If these acquisitions had been completed on the first day of the financial year, group revenues for the period would have increased by £5.9m and group profit would have increased by £0.1 million.

The preliminary amounts recognised in respect of the identifiable assets acquired and liabilities assumed are as set out in the table below.

		Cory Environmental Municipal Services Limited	Other acquisitions	Total Preliminary
		£m	£m	£m
Property, plant and equipment		9.7	1.8	11.5
Intangible assets		3.7	-	3.7
Inventory		0.2	-	0.2
Debtors		4.2	-	4.2
Cash and cash equivalents		2.0	-	2.0
Deferred tax asset		0.9	-	0.9
Creditors		(3.2)	-	(3.2)
Borrowings		(8.2)	-	(8.2)
Provisions		(0.4)	-	(0.4)
Total net assets		8.9	1.8	10.7
Goodwill		4.6	1.5	6.1
Total consideration		13.5	3.3	16.8
Satisfied by:
Cash		13.5	3.3	16.8
Total consideration transferred		13.5	3.3	16.8
Net cash outflow arising on acquisition:
Cash consideration		13.5	3.3	16.8
Less: cash and cash equivalent balances acquired		(2.0)	-	(2.0)
		11.5	3.3	14.8

The fair value of the debtors includes receivables due from trade debtors with a fair value of £1.4 million and a gross contractual value of £1.6 million. The best estimate at acquisition date of the contractual cash flows not to be collected is £0.2 million.

No contingent liabilities were identified at the acquisition date.

Acquisition-related costs included in exceptional costs amount to £0.8 million.

Cory Environmental Municipal Services Limited contributed £26.3 million revenue and £1.1 million to the Group's profit before tax for the period between the date of acquisition and the balance sheet date.

If the acquisition of Cory Environmental Municipal Services Limited had been completed on the first day of the financial year, group revenues for the period would have increased by £31.6 million and group profit would have increased by £1.3 million.

The preliminary total goodwill of £6.1 million arising from these acquisitions represents the increase in Industrial & Commercial business and the Group's strategy to become the leading UK based integrated waste management business. None of the goodwill is expected to be deductible for income tax purposes.

 

 

12. 

12.  Goodwill

		Total £m
Cost:
As at 27 March 2015		57.5
Additions		7.4
As at 25 March 2016		64.9
Additions		6.1
Disposal		(0.1)
As at 24 March 2017   Amortisation:		70.9
As at 27 March 2015		-
Impairment Charge		(0.5)
As at 25 March 2016		(0.5)
Impairment Charge		-
As at 24 March 2017		(0.5)
Net book amount:
As at 24 March 2017		70.4
As at 25 March 2016		64.4

 

		24 March 2017 £m		25 March 2016 £m
By segment
Industrial and Commercial		18.5		17.4
Municipal		16.2		11.3
Resource Recovery and Treatment		4.3		4.3
Energy		31.4		31.4
		70.4		64.4

The Group reviews at each reporting period whether there are any indicators of impairment in accordance with IAS 36 Impairment of assets. An annual impairment review is completed by comparing the carrying amount of the goodwill for each operating segment to its recoverable amount. The recoverable amount is the higher of its fair value less costs of disposal and its value in use. If the recoverable amount is less than the carrying amount, an impairment loss is allocated first to reduce the carrying amount of the goodwill and then to the assets of each cash generating unit. In the current year the Energy division has been valued on the basis of fair value less costs of disposal rather than value in use on the basis that it is the higher of the two valuations. This is a different method to the prior period.

The key assumptions when calculating the value in use are forecast revenue and costs. Management's calculation of value in use has been developed from forecast five year cash flows which are prepared on the basis of past performance, expectation of future performance and market information. The value in use has been calculated on the basis of up to 20 years discounted future cashflow. The final year growth rate assumption used beyond the 5 year plan period based on market trends, after adjusting for assumed inflation is 2.0% (2016: 2.0%). This is considered appropriate based on the long term nature of the business. A pre-tax discount rate of 7.5% (2016: 7.0%) was applied across all CGUs as the inherent risks have been included in the segmental cash flow forecasts. No reasonably foreseeable change in the assumptions used in the value in use calculations would cause an impairment.

The cash generating unit recoverable amount for the Energy division has been based on operating segment in accordance with IAS 36 as this is the level at which the chief operating decision maker is provided with internal reporting for the purpose of allocating resources and assessing performance. For the purpose of calculating the fair value less costs of disposal the segment has been split into key components that have been identified as the AD business, landfill gas business and the West Sussex contract. The calculation of fair value less costs of disposal utilises a price to earnings multiple approach based on the most recent Board approved budget for the landfill gas and AD businesses. The price to earnings multiple is derived from market observable data for a broadly comparable business. The West Sussex contract has been valued on the basis of the present value of the cashflows over the remaining life of the contract. The determination of the fair value less costs of disposal uses Level 3 valuation techniques.

The valuation of goodwill allocated to the Energy CGU group is most sensitive to the achievement of the 2017/18 budget. Budgets comprise forecasts of revenue, staff costs and overheads based on current and anticipated market conditions that have been considered and approved by the Board. The Group has the ability to manage staff costs, direct costs and overheads, but the revenue projections are inherently uncertain due to market conditions.

As at 24 March 2017 the recoverable amount exceeds the carrying amount by £13.7 million. A change to the key assumptions could potentially lead to a material misstatement in the future.

13.  Other intangible assets

		Gas Rights £m		IT development £m		Brand £m		Customer contracts £m		Total £m
Cost:
As at 27 March 2015		190.2		1.9		33.3		39.8		265.2
Additions		-		2.6		-		2.5		5.1
Reclassification		-		3.0		-		-		3.0
As at 25 March 2016		190.2		7.5		33.3		42.3		273.3
Additions		-		4.8		-		5.7		10.5
Disposals		-		(0.2)		-		-		(0.2)
Reclassification		-		(1.0)		-		0.9		(0.1)
As at 24 March 2017		190.2		11.1		33.3		48.9		283.5
Accumulated amortisation:
As at 27 March 2015		(19.8)		(0.3)		-		(12.7)		(32.8)
Charge for the period		(9.1)		(0.7)		-		(5.8)		(15.6)
As at 25 March 2016		(28.9)		(1.0)		-		(18.5)		(48.4)
Charge for the period		(8.8)		(0.4)		-		(6.2)		(15.4)
Disposals		-		0.2		-		-		0.2
As at 24 March 2017		(37.7)		(1.2)		-		(24.7)		(63.6)
Net book amount:
As at 24 March 2017		152.5		9.9		33.3		24.2		219.9
As at 25 March 2016		161.3		6.5		33.3		23.8		224.9
As at 27 March 2015		170.4		1.6		33.3		27.1		232.4

 

All amortisation charges are recognised in profit or loss. The customer contract additions arose primarily as a result of the business combinations, detailed in note 11.

 

IFRS 3 requires that on acquisition, intangible assets are recorded at fair value. The Biffa brand was first created in the early 20^th century and has been used throughout the Group since then. It remains a highly recognisable brand. Given the longevity of the brand, the Directors consider the asset to have an indefinite life. The Directors reconsider the valuation of the brand at each reporting date. The brand and landfill gas rights initially arose during the fair value exercise undertaken following the acquisition of the Biffa Group by Wasteshareholderco 1 in 2008. The values were subsequently remeasured following the restructuring of the Group in 2013.

 

 

 

14.  Property, plant and equipment

		Land & Buildings £m		Landfill sites £m		Plant and equipment £m		Total £m
Cost:
As at 27 March 2015		75.3		51.2		244.4		370.9
Additions		5.2		8.3		64.7		78.2
Disposals		(8.4)		-		(54.9)		(63.3)
Reclassifications		-		1.6		(3.8)		(2.2)
As at 25 March 2016		72.1		61.1		250.4		383.6
Additions		3.3		9.4		86.5		99.2
Disposals		(6.2)		-		(64.8)		(71.0)
Reclassifications		0.4		2.6		(0.4)		2.6
As at 24 March 2017		69.6		73.1		271.7		414.4
Accumulated depreciation:
As at 27 March 2015		(14.9)		(18.4)		(55.0)		(88.3)
Charge for the period		(4.0)		(6.6)		(48.4)		(59.0)
Disposals		3.9		-		53.2		57.1
Reclassifications		(0.3)		(1.0)		0.8		(0.5)
As at 25 March 2016		(15.3)		(26.0)		(49.4)		(90.7)
Charge for the period		(3.8)		(6.9)		(52.4)		(63.1)
Disposals		5.1		-		62.7		67.8
Reclassifications		-		(0.6)		-		(0.6)
As at 24 March 2017		(14.0)		(33.5)		(39.1)		(86.6)
Net book amount:
As at 24 March 2017		55.6		39.6		232.6		327.8
As at 25 March 2016		56.8		35.1		201.0		292.9
As at 27 March 2015		60.4		32.8		189.4		282.6

Landfill assets includes £8.4 million (2016: £6.8 million) in relation to future economic benefit to be derived as a result of actively fulfilling aftercare obligations that results in gas generation.

The carrying amount of the Group's property, plant and equipment includes £107.5 million (2016: £84.0 million) in respect of assets held under finance leases, analysed as follows:

 

		As at  24 March 2017 £m		As at  25 March 2016 £m
Land and buildings		2.0		2.0
Landfill sites		2.5		2.6
Plant, vehicles and equipment		103.0		79.4
		107.5		84.0

 

No other assets have been pledged to secure borrowings.

 

Land and buildings and landfill sites at net book amount comprise:

 

		As at 24 March 2017				As at 25 March 2016
		Land and buildings £m		Landfill sites £m		Land and buildings £m		Landfill sites £m
Freehold		33.4		16.5		34.4		15.8
Long leasehold		13.9		17.5		14.5		15.4
Short leasehold		8.3		5.6		7.9		3.9
		55.6		39.6		56.8		35.1

As at 24 March 2017 the Group had entered into contractual commitments for the acquisition of plant, property and equipment amounting to £4.4 million (2016: £3.4 million).

 

15.  Inventories

		As at  24 March 2017 £m		As at  25 March 2016 £m
Raw materials and consumables		0.9		0.7
Finished goods		8.2		7.5
		9.1		8.2

Inventories consumed in the period ended 24 March 2017 were £37.5 million (2016: £57.1 million). Inventory written down in the period totalled £nil million (2016: £nil).

16.  Trade and other receivables

		As at  24 March 2017 £m		As at  25 March 2016 £m
Amounts falling due within one year
Trade receivables		116.7		120.0
Less provision for impairment of receivables		(1.7)		(4.5)
Trade receivables - net		115.0		115.5
Other debtors		11.8		6.6
Prepayments and accrued income		49.3		51.9
Prepaid landfill provision expenditure		1.6		5.3
		177.7		179.3

 

All amounts included within other debtors, prepayments and accrued income are due within one year. Trade receivables are non-interest bearing. Due to their short maturities, the fair value of trade and other receivables approximate their book value. The average credit period taken on invoices was 37.3 days (2016: 43.1 days).

 

Credit limits for new customers are assigned based on the potential customer's credit quality. An external credit scoring system is used before assigning any credit limit over £500. Management monitors the utilisation of credit limits regularly. The trade receivables balance consists of a large number of customer balances, represented largely by local account customers, and there is no significant concentration of credit risk.

 

Included in the Group's trade receivables balances are debts with a carrying amount of £18.9 million (2016: £31.3 million) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances.

 

		As at  24 March 2017 £m		As at  25 March 2016 £m
Ageing of past due but not impaired receivables (days)
1-30 days		14.3		16.8
31-60 days		1.7		3.6
61-90 days		2.0		1.8
Over 91 days		0.9		9.1
		18.9		31.3

 

The allowance for doubtful debts consists of individually impaired trade receivables which are in excess of 120 days overdue, in liquidation or are the subject of legal action. The impairment recognised represents the difference between the carrying amount of these trade receivables and the present value of any expected recoveries.

 

		As at  24 March 2017 £m		As at  25 March 2016 £m
Movement in the allowance for doubtful debts
Balance at the beginning of the period		4.5		5.7
Impairment losses recognised		(0.1)		(0.1)
Amounts recovered during the period		1.7		2.3
Amounts written off as uncollectable		(4.4)		(3.4)
		1.7		4.5

 

The Directors consider that the carrying amount of trade receivables approximates their fair value.

 

 

Long term receivables

 

		As at  24 March 2017 £m		As at  25 March 2016 £m
Amounts falling due after more than one year
Funds on long term deposit		12.0		8.0
Prepayment in respect of EVP dispute (note 32)		63.6		-
		75.6		8.0

 

The Group is engaged in a dispute with HMRC in relation to the landfill tax treatment of certain materials used in the engineering of landfill sites from September 2009 to May 2012. Prior to the IPO, the Group had hardship relief which meant payment was not required to be made to HMRC. Subsequent to the IPO the Group pre-paid the disputed amount to HMRC as disclosed in note 32.

 

17.  Cash and cash equivalents

		As at  24 March 2017 £m		As at  25 March 2016 £m
Cash at bank and in hand		50.0		105.3
Short term deposits		6.4		0.7
Balance at the end of the period		56.4		106.0

 

Deposits comprise £0.1 million (2016: £0.1 million) of funds on overnight deposit via a group cash pooling facility and an insurance deposit of £6.3 million (2016: £0.6 million) which represents cash held as security for self insurance obligations. Included within the total cash balance is £8.7 million (2016: £2.7 million) which cannot be accessed by the Group as it is held as collateral against insurance liabilities by Bray Insurance Company Limited. Bray Insurance Company Limited is the Group's captive insurance company.

 

18.  Financial instruments

		As at  24 March 2017 £m		As at  25 March 2016 £m
At fair value through profit and loss:
Loans and receivables:
Liquidity fund (i)		10.7		17.5
		10.7		17.5

 

(i)         Current investments held by Bray Insurance Company Limited, the Group's captive insurance company.

 

Derivative financial instruments

The derivatives that the Group has entered into during the year qualify for hedge designation as a cash flow hedge under IAS 39. The Group has entered into forward foreign exchange rate contracts which all mature within one year.

 

The forward foreign exchange contracts have resulted in the recognition of a derivative asset of £0.3 million. During the year a gain of £0.3 million has been recognised in the statement of other comprehensive income.

 

The fair value of forward foreign exchange contracts are calculated by discounting the contracted forward values and translating at the balance sheet rates. The fair value measurements are classified as Level 2 in the fair value hierarchy as defined by IFRS 13 'Fair value measurement', as the inputs are from observable quoted exchanges.

 

The fair value and the notional amounts are as follows:
 

		As at 24 March 2017				As at 25 March 2016
		Fair value £m		Notional £m		Fair value £m		Notional  £m
Forward foreign exchange contracts		0.3		19.8		-		-

 

Subsequent to the IPO, on settlement of its debt facilities the Group also settled its historic interest rate swap which did not qualify for hedge designation. The movement in the fair value of the derivative instrument of £2.1 million was recognised in the statement of profit or loss immediately.

 

Borrowings

		As at 24 March 2017				As at 25 March 2016
		Book value £m		Average interest rate  %		Book value £m		Average interest rate  %
Current
Obligations under finance leases		30.8		7.0%		20.5		7.4%
Bank Loans		-		0.0%		87.1		6.7%
		30.8				107.6
Non-current
Obligations under finance leases		78.1		7.0%		62.3		7.4%
Bank loans		193.6		3.8%		442.0		4.3%
EVP preference instrument		43.8		5.5%		-
		315.5				504.3
		346.3				611.9

 

 

		As at  24 March 2017 £m		As at  25 March 2016 £m
Bank borrowings including finance leases		302.5		611.9
EVP preference instrument		43.8		-
		346.3		611.9

 

 

On 20 October 2016, the Group's existing Senior and Super Senior debt were repaid in full and a new £200 million facility was drawn down. The new facility is repayable on 20 October 2021 and includes standard leverage and interest cover covenants for a facility of this type. The facility also includes an undrawn £100 million RCF.

 

The holders of the Junior Facility Agreement were issued with preference share capital in Wasteholdco1 Limited in exchange for settlement of the Junior Collapsible facility. In the event that the Group is successful in its EVP case (see note 32) with HMRC, the EVP preference shareholders will be entitled to certain funds recovered from HMRC by the Company. The Directors consider it likely that the Group will be successful in the case and accordingly have recognised a liability in respect of the EVP preference shares. In the event that the Group is unsuccessful in the EVP proceedings and does not recover the amount prepaid to HMRC the Group expects to release the majority of the associated EVP liability as disclosed in note 32.

 

All borrowings are measured at amortised cost.

All financial assets and financial liabilities have been categorised as level 2. Level 2 financial instruments have been valued using inputs other than quoted prices that are observable for the asset or liability either directly or indirectly.

 

 

 

Interest rates on borrowings

		As at 24 March 2017				As at 25 March 2016
		Principal £m		Average interest rate  %		Principal £m		Average interest rate  %
Term facility		200.0		3.8%
Super Senior Facility Agreement		-		-%		87.0		6.69%
Senior Facility Agreement		-		-%		247.0		6.17%
Senior Facility Agreement		-		-%		75.0		5.71%
Junior Facility Agreement		-		-%		120.0		1.11%
		200.0				529.0

 

Transaction costs of £6.4 million (2016: £0.9 million) incurred in the origination of these facilities have been netted against the carrying value of the loans. The EVP preference instrument is non-interest bearing however in accordance with IAS 39 Financial Instruments, an imputed interest charge of 5.5% is being recognised.

 

Fair value of financial assets and liabilities

		As at 24 March 2017				As at 25 March 2016
		Book value £m		Fair value £m		Book value £m		Fair value £m
Borrowings		(302.5)		(311.2)		(611.9)		(606.0)
EVP preference instrument		(43.8)		(43.8)		-		-
Trade and other payables (note 19)		(161.2)		(161.2)		(155.9)		(155.9)
Trade and other receivables (note 16)		115.0		115.0		115.5		115.5
Liquidity fund		10.7		10.7		17.5		17.5
Funds on long term deposit		12.0		4.8		8.0		3.7
Prepayment in respect of EVP dispute		63.6		59.2		-		-
Cash and cash equivalents (note 17)		56.4		56.4		106.0		106.0
Derivative financial instruments		0.3		0.3		(2.1)		(2.1)
		(249.5)		(269.8)		(522.9)		(521.3)

 

(i)         Trade and other receivables excludes prepayments, other debtors and accrued income.

(ii)         Trade and other payables excludes deferred income, taxation and social security and other non-financial liabilities.

 

The fair values of financial assets and liabilities are determined as follows:

 

Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates.

 

The fair value of non-derivative financial assets and liabilities are determined based on discounted cash flow analysis using current market rates for similar instruments.

 

Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including capital risk management, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management programmes focus on the unpredictability of financial markets and seek to minimise potential adverse effects on the Group's financial performance. Financial risk management in the above areas is carried out under a policy approved by the Board of Directors.
 

Capital risk management

The Group manages its capital structure using a number of measures and taking into account its future strategic plans. Such measures include its net interest cover, liquidity and leverage ratios. Total capital is calculated as 'equity' as shown in the consolidated statement of financial position plus net debt. Net debt is calculated as total borrowings (including 'current and non-current borrowings' as shown in the consolidated statement of financial position) less cash and cash equivalents. The Directors are satisfied that the current risk management strategy is appropriate and effective.

 

Cash flow interest rate risk

The Group's interest-bearing assets include cash and cash equivalents which earn interest at floating rates. The Group's income and operating cash flows are substantially independent of changes in market interest rates. The Group's interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Group policy is to maintain an appropriate proportion of its borrowings at fixed rate using interest rate swaps to achieve this when necessary.

 

The interest rate risk profile of the Group's financial assets and liabilities were as follows:

 

 

		As at  24 March 2017 £m		As at  25 March 2016 £m
Financial liabilities
Floating rate financial liabilities (excluding derivatives)		193.6		529.1
Floating rate financial liabilities (derivatives)		-		2.1
Fixed rate financial liabilities		108.9		82.8
Non-interest bearing financial liabilities		161.2		155.9
EVP preference instrument		43.8		-
Total financial liabilities		507.5		769.9

 

Fixed rate financial liabilities relate to obligations under finance leases.

Non-interest bearing financial liabilities comprise of trade payables.

 

 

		As at  24 March 2017 £m		As at  25 March 2016 £m
Financial assets
Floating rate financial assets (excluding derivatives)		75.6		8.0
Floating rate financial assets (cash and cash equivalents)		56.4		106.0
		132.0		114.0
Non-interest bearing assets
Liquidity fund		10.7		17.5
Non-interest bearing financial assets		115.0		115.5
		125.7		133.0
Total financial assets		257.7		247.0

 

(i)         The interest on fixed rate financial instruments is fixed until maturity of the investment. The interest on floating rate financial instruments is re-set at intervals of less than one year. The other financial assets and liabilities of the Group that are not included in the above tables are non-interest bearing and therefore not subject to interest rate risk.

(ii)         Fixed rate and non-interest bearing financial assets and liabilities are exposed to fair value interest rate risk and floating rate financial assets and liabilities to cash flow interest rate risk.