Biffa PLC cut to ‘sell’ as Citi warns of M&A pause and possible

() has been downgraded to ‘sell’ from ‘neutral’ by analysts at Citi, who warned that with tight covenant constraints the company could pause merger and acquisition (M&A) activity in its industrial & commercial (I&C) business, a “key investment attraction” to the group.

In a note on Tuesday, the bank also said the company could face possible equity dilution to raise funds and retained their 210p price target, adding that the believed the shares “may be overvalued” following a rise of over 50% from their lows in April.

READ: Biffa sees mixed bag across its services but industrial & commercial takes hardest hit

“This seems an unwarranted premium”, Citi said.

The bank also warned that the company’s profits from its Landfill Gas business “could disappear in 2027” following the expiration of subsidies.

Citi’s more negative assessment followed a gloomy set of results for Biffa last week, when the group reported that revenues had dropped 30% during the lockdown, with the I&C division particularly affected by lack of demand, pushing revenues down 50%.

Landfill services were also halved due to reduced volumes, while municipal services were still in demand but had to operate with less staff.

Shares in Biffa fell 3% to 240p in mid-morning trading.