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COMPANY REGISTRATION No: 03525188
MERCIA WASTE MANAGEMENT LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
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MERCIA WASTE MANAGEMENT LIMITED
COMPANY INFORMATION
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FCC Waste Management Limited (resigned 29 October 2025)
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FCC Environment Services (UK) Limited (resigned 29 October 2025)
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MERCIA WASTE MANAGEMENT LIMITED
CONTENTS
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Independent auditors' report
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Statement of comprehensive income
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Statement of changes in equity
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Notes to the financial statements
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MERCIA WASTE MANAGEMENT LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2025
The Directors present their strategic report on the affairs of Mercia Waste Management Limited ("the Company") for the year ended 31 December 2025.
The Company is an indirect subsidiary of FCC Environment (UK) Limited (“FCC E UK”) and of Fomento de Construcciones y Contratas, S.A. (“FCC”). FCC is a significant multi-national business listed on the Madrid stock exchange with operations in Europe, America, Africa, and the Middle East. FCC is among the top global players that deliver Environmental Services (including water and waste management), and has implemented a balanced business model, combining other activities such as Construction, Cement and Real Estate.
FCC’s financial capacity and depth of experience in the European waste infrastructure sector is backed by over 100 years of experience in operating municipal services contracts. This complements both the position of the Company and FCC E UK’s other subsidiaries (together the “Group” or “FCC E UK group”) as a leading waste management, recycling and energy business, and the Group’s ambition to maintain its position as a significant player in establishing the next generation of waste treatment infrastructure in the UK. The core services provided by the Group are fully aligned with FCC’s strategic growth plans. The Group is ideally placed to take advantage of local opportunities to provide the services and infrastructure required by the UK, to meet existing legislative framework and emerging proposals to promote circular economy infrastructure, by recognising the true value of the materials we handle. The Board continues to look forward to the opportunities that are presented to the Group and its employees by virtue of FCC’s plans to expand and embed its operations in the UK.
We help local authorities and businesses minimise the amount of waste that goes to landfill by transforming it into valuable resources. We focus on retrieving the full value of the resources we collect and process, so that they can be used again as materials. Waste that cannot be recycled is transformed into energy.
The principal activities of the Company during the year ended 31 December 2025 were the operation of an EfW facility, and the handling, recycling and disposal of waste materials.
Mercia's contract with the councils, the County of Herefordshire District Council and Worcestershire County Council (the Councils), which was due to expire in January 2024, was extended in December 2022 and now runs until January 2029 having commenced in December 1998.
Severn Waste Services Limited (‘Severn’), a fellow FCC subsidiary company, operates the Company’s waste management installations under the terms of an Operation and Maintenance Services Agreement (‘OMA’). Severn is responsible for performing the obligations of the Company, for which it receives reimbursements of operating costs and a management fee.
The activities, strategies and risks affecting the Company are inextricably similar to, and dependent on, those of the Group, and consequently it is appropriate that the following narrative applies to the Group in its entirety.
The Group is a key player within the municipal waste management sector, with over 100 Local Authority clients across England, Wales and Scotland.
Page 1
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MERCIA WASTE MANAGEMENT LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2025
The Directors consider that the Company’s business performance was in line with expectations during the period.
Commentary on the Company's result is set out in the Results, dividends and key performance indicators section.
During the year, the Group successfully completed the integration of the UK operations of Urbaser, which were acquired during 2024, and in October 2025, FCC Environment (UK) Limited completed the acquisition of Cumbria Waste Group (“CWG”). CWG operates multiple sites covering materials recovery, composting, hazardous and liquid waste treatment, HWRCs and collections. The acquisition complements our existing offering, strengthening and expanding our core operations and enhancing the services we provide to customers.
The ongoing military conflicts in Ukraine and the Middle East continued to contribute to increased political instability and uncertainty across the world, but during the year, there were signs that fuel prices were becoming more stable and inflation was expected to return to lower, pre-conflict levels. Since the year end, conflict involving Iran, the United States and Israeli forces has increased tensions across the Gulf states and pushed fuel prices higher, exacerbating inflationary pressures and further continuing uncertainty.
Results, dividends and key performance indicators
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The results for the year ended 31 December 2025 are set out on page 12. The profit for the financial year ended 31 December 2025 amounted to £8.9 million (2024: £15.5 million). The Company paid interim dividends during the year of £19.0 million (2024: £14.5 million). The Directors do not recommend the payment of a final dividend (2024: £nil).
FCC manages its operations on a divisional basis and information regarding financial and non-financial key performance indicators is included within the FCC annual report. For this reason, the Company’s Directors believe that the disclosure of further key performance indicators for the Company is not appropriate for an understanding of the development, performance, or position of the business. Copies of the FCC annual report can be obtained from the address in note 24.
The Directors expect the Company to continue to operate in line with its principal activities in future years.
The Directors consider that the climate agenda has become the climate crisis: public concern for the environment has never been greater, and government focus at all levels – internationally, nationally and locally – has shifted significantly. In particular, the UK has committed to Net Zero carbon emissions by 2050 (2045 in Scotland), and new regulations are taking shape under the Labour government elected in 2024, including the Great British Energy Act, which received Royal Assent in 2025 and the introduction of Simpler Recycling for households in 2026.
At FCC Environment, we wholeheartedly support the drive to more and better resource efficiency by reducing waste at
source wherever possible, reusing what we can and recycling valuable commodities. For waste that cannot be recycled or
reused, EfW is currently the best available and best proven technology to recover maximum value from end-of-life waste as
an alternative to landfill. In doing so, EfW is contributing to reductions in landfill emissions, while also producing
electricity – with the potential for heating local communities. We will continue our push towards the objectives set out in the
FCC Net Zero Strategy and Carbon Reduction Plan, including decarbonising the vehicle fleet, investing in Carbon Capture
and Storage for EfW plants, rolling out clean energy generation and developing district heating networks.
Page 2
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MERCIA WASTE MANAGEMENT LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2025
Principal risks and uncertainties
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Operating in the UK’s highly regulated waste management market provides a clear legal framework as well as presenting numerous risks and uncertainties to the Group. The Directors regard the following to be the principal risks and uncertainties affecting the Group and their approach to managing these risks and uncertainties is considered below:
∙Environmental risks: The Group’s environmental risks are tightly controlled under environmental legislation enforced principally by the Environment Agency (“EA”) and Scottish Environment Protection Agency (“SEPA”). Compliance with all environmental legislation pertinent to the Group’s activities is a minimum requirement. A dedicated in-house team prepare regular reports on environmental compliance at the Group’s sites for the Board’s review. Environmental objectives are reviewed annually and highlighted within the Group’s Safety Health Environment and Quality (SHEQ) Policy Statement. In addition to this, there are detailed environmental procedures to enable compliance with environmental legislation.
∙Health and safety: Health and safety is a key issue for the Group due to the nature of its operations, including the use of heavy plant equipment and difficult working conditions. The Group is continually improving in this area as a result of ongoing consultation with the relevant authorities and the monitoring of best practice initiatives. Whenever an area is highlighted for improvement, the Group seeks to implement such improvement expeditiously; through bulletins, on-line training courses and tool-box briefings. The Group’s Incident Review Panel meets as required, at which senior management review significant health and safety incidents that have occurred at Group sites to identify improvements and lessons for the business. All employees undertake a rigorous health and safety training programme, which is underpinned by the latest UK legislation, detailed policies, and procedures. The Group’s executive management receive regular, detailed reports on health and safety performance affecting the Group’s operations and it employs a dedicated team, led by the Group Safety, Health, Environment and Quality Manager, to monitor and promote high standards. All employees are expected to recognise their role in achieving acceptable standards of health and safety and to exhibit such understanding through their approach and attitude to work.
∙Business continuity: The Group, as part of its risk management programme, has developed business continuity planning for its operations. As part of this planning, the Group has developed a bespoke emergency plan for each operational facility (including the diversion of waste from single or multiple sites in the event of major disruption or disaster affecting a site or region). The Group’s IT systems are covered by an IT disaster recovery plan, to ensure business continuity.
∙Legislation: The Group monitors forthcoming and current legislation to ensure full compliance and to anticipate and assess the impact upon its operations, including the significant opportunities it can present. The waste management industry is subject to extensive government regulation which has a substantial impact on the Group’s business.
∙Economic: The Group has exposure to reduced economic activity. We recognise shorter term uncertainty as a result of the Ukraine and Middle Eastern conflicts, which created inflationary pressures. This could result in higher borrowing costs generally. We have reviewed the potential impacts and consider that we have sufficient mitigations in place. The Group’s strategy is focused on growing through further investment in EfW infrastructure projects.
∙Litigation: The Group could be subject to litigation from time to time. The outcome of legal action is always uncertain and there is a risk that it may prove more costly and time consuming than expected. There is also a risk that litigation could be instigated in the future that could materially impact the Group. In some liability cases legal expenses are covered by the Group’s liability insurance. This risk is mitigated through continued monitoring and employing an experienced and dedicated in-house legal team.
∙Competitive risk: The Group operates in highly competitive markets in which competitors’ service offerings may react faster to legislative and market dynamics than those of the Group. To mitigate this risk, the Group ensures that its asset, cost, and capital base is regularly reviewed and flexed to meet changes in customers’ demands and to maximise cash generation.
Page 3
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MERCIA WASTE MANAGEMENT LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2025
Principal risks and uncertainties (continued)
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∙Employees: The Group does not directly employ any staff. Services are provided by wider FCC Group companies through operations and maintenance (“O&M”) contracts. There is a risk of losing experienced management personnel in those O&M contracts which could have a materially adverse effect on the business. To manage this risk, the Group engages with the wider FCC Group in respect of succession planning for senior positions within the FCC Group.
∙Technology: The Group relies on a variety of information technology platforms for the efficient delivery of its services and has therefore employed a structured IT support team, using internal and external resources. In addition, as there are a wide variety of technologies available to the waste management industry, there is a risk that the technologies employed by the Group might fail to deliver expected performance levels or end products for its customers and so the Group has made a significant investment into establishing a dedicated technical and development team. This team review and assess the available technologies before any are adopted to ensure they will meet the needs of the business and those of its customers.
Financial risk management objectives and policies
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The Company is exposed to financial risk through its financial assets and liabilities. The most important components of financial risk are interest rate risk, credit risk and liquidity risk. Due to the nature of the Company’s activities and the assets contained within the Company’s balance sheet, the only financial risks the Directors consider relevant to the Company are credit and liquidity risk.
Liquidity and credit risk
Credit risk arises from the risk of having credit exposures to customers, including outstanding receivables. Liquidity risk is the risk that the Company does not have sufficient cash resources to meet its commitments. As the Company’s income is derived from its contract with the Councils, and Severn Waste Services Limited operates the Company’s waste management installations under the OMA, the risk to the Company is viewed as minimal. Additionally, the Company prepares and reviews cash flow forecasts frequently to ensure that it has sufficient resources to meet its cash flow commitments.
The directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore, they continue to adopt the going concern basis in preparing the annual financial statements.
Further details regarding the adoption of the going concern basis can be found in Note 2 to the financial statements.
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MERCIA WASTE MANAGEMENT LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2025
Section 172 of the Companies Act 2006 requires each director to act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole, and in doing so have regard, amongst other matters, to:
∙the likely consequences of any decision in the long term;
∙the interests of the Company’s employees;
∙the need to foster the Company’s business relationships with suppliers, customers and others;
∙the impact of the Company’s operations on the community and the environment;
∙the Company’s reputation for high standards of business conduct; and
∙the need to act fairly between members of the Company.
The Board of directors have complied with these requirements. Details of the Board’s decisions over the year to promote long-term success, and how it engaged with stakeholders and considered their interests when making those decisions, can be found throughout this Strategic report and in the Directors’ report.
Details of our strategy are set out in the Strategic report. The Strategic report highlights performance in the year against that strategy together with future trends and developments.
The Company’s main stakeholders are its members, employees, suppliers, customers and others. Details of how the Company has engaged with its stakeholders are set out in the Directors’ report.
The Group is also subject to the Code of Ethics issued by FCC which sets out guidelines for conduct including in relation to corruption and bribery.
Operating within the UK’s highly regulated waste management market, the Board’s regard to the environment as well as the health and safety of all persons entering its sites is of paramount importance. How the Group addresses environmental, and health and safety risk is set out on pages 3 to 4.
This report was approved by the board and signed on its behalf.
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MERCIA WASTE MANAGEMENT LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2025
The Directors present their report and the financial statements for the year ended 31 December 2025.
Matters covered in the Strategic Report
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Information on the Company's going concern status, financial risk management policies, results and dividends and future
developments are disclosed in the Strategic report.
The Directors who served during the year were:
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FCC Waste Management Limited (resigned 29 October 2025)
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FCC Environment Services (UK) Limited (resigned 29 October 2025)
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During the financial year, qualifying third party indemnity provisions for the benefit of all Directors of the Company were in force and continue to be in force at the date of this report. Such provisions were made by FCC.
Engagement with employees
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The professionalism and commitment shown by the Group’s employees over the past years during and since the pandemic and the challenges it brought was exceptional and continues to be a major contribution to its operations. The Board would again like to thank all employees for their hard work, dedication, and loyalty during the year.
FCC E UK continues to be committed to ensuring that its policies and practices reflect human resource best practice. The Group’s policy of equal opportunity gives all employees the same chance to succeed, irrespective of age, race, nationality, ethnic origin, disability, membership of a trade union, sex or marital status.
The Board is dedicated to maintaining the highest standards of honesty, openness and accountability and recognise that employees have an important part to play in achieving this goal. All employees are encouraged to report any concerns they may have over wrongdoing at work via an independent confidential reporting (whistleblowing) service that employees can access should they feel uncomfortable in approaching management.
Training continues to be a high priority for the Group, and it recognises that it is vital that its employees have the relevant skills to take up the new and exciting roles that are being created as the industry, and therefore the business, evolves. We had to make adaptations to the way we provided training with much delivery moved to online provision. We have continued to pay particular attention to succession planning in the business and developing our future leaders and bringing new talent into the business by way of apprenticeships and graduate programmes.
We believe our employee value proposition is one that makes us a go to company to work for and this is reflected in higher rates of engagement by our employees.
Page 6
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MERCIA WASTE MANAGEMENT LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2025
Engagement with suppliers, customers and others
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In fulfilling their duties, the directors are committed to promoting accountability and transparency with all stakeholders. In addition to this, fostering effective stakeholder relationships and meaningful engagement, having regard to the long term consequences of their decisions.
We wish to build honest and enduring relationships and seek to work with others who share our ethics in compliance, and our commitments to the safety and wellbeing of our employees. This also helps us overcome current challenges and understand future requirements, provide advice and develop innovative and cohesive solutions that meet these future challenges by using both our local and industry knowledge.
The impact of the Company’s operations on the environment and local communities is a key consideration for the Board. Through targeted community investment, reuse and recycling initiatives, environmental stewardship and educational programs, the Company seeks to deliver positive social and environmental outcomes while supporting the transition to a circular economy.
Disclosure of information to auditors
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Each of the persons who are Directors at the time when this Directors' Report is approved has confirmed that:
∙so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware, and
∙the Director has taken all the steps that ought to have been taken as a Director in order to be aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
Page 7
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MERCIA WASTE MANAGEMENT LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2025
Directors' responsibilities statement
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The Directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
This report was approved by the board and signed on its behalf.
Page 8
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MERCIA WASTE MANAGEMENT LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF MERCIA WASTE MANAGEMENT LIMITED
Opinion
We have audited the financial statements of Mercia Waste Management Limited for the year ended 31 December 2025 which comprise the Statement of comprehensive income, the Balance Sheet, the Statement of changes in equity and the related notes 1 to 24, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards including FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
∙give a true and fair view of the company’s affairs as at 31 December 2025 and of its profit for the year then ended;
∙have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
∙have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company’s ability to continue as a going concern for the period ending 31 August 2027 from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the company’s ability to continue as a going concern.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
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MERCIA WASTE MANAGEMENT LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF MERCIA WASTE MANAGEMENT LIMITED
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
∙the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
∙adequate accounting records have not been kept or returns adequate for our audit have not been received from branches not visited by us; or
∙the financial statements are not in agreement with the accounting records and returns; or
∙certain disclosures of directors’ remuneration specified by law are not made; or
∙we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 8, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Page 10
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MERCIA WASTE MANAGEMENT LIMITED
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF MERCIA WASTE MANAGEMENT LIMITED
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
∙We obtained an understanding of the legal and regulatory frameworks that are applicable to the company and determined that the most significant are those that relate to the reporting framework including FRS 102 and the relevant direct and indirect tax compliance regulations in the UK. In addition, the Company has to comply with laws and regulations relating to its operations, including health and safety and General Data Protection Regulations (‘GDPR’).
∙We understood how Mercia Waste Management Limited is complying with those frameworks by making enquiries of management to understand how the company maintains and communicates its policies and procedures in these areas. We corroborated this by reviewing supporting documentation to validate that the company has a process for monitoring legal requirements and has a process for reporting matters of non-compliance and taking appropriate action.
∙We assessed the susceptibility of the company’s financial statements to material misstatement, including how fraud might occur by considering the risk of management override and by assuming revenue to be a fraud risk. We tested manual journals on areas involving significant estimation and judgement, which were identified through our data analytics techniques based on risk criteria tailored to identify journals most susceptible to fraud. We also tested a sample of revenue transactions back to supporting documentation.
∙Based on this understanding we designed our audit procedures to identify noncompliance with such laws and regulations. Our procedures involved making enquiries of management, review of Board minutes and journal entry testing as set out above. We also considered the results of our substantive procedures on other areas of the audit that may indicate non-compliance with such laws and regulations.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://www.frc.org.uk /auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Chris Robson (Senior statutory auditor)
For and on behalf of Ernst & Young LLP, Statutory Auditor
Leeds
28 August 2026
Page 11
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MERCIA WASTE MANAGEMENT LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2025
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Changes in inventories of spare parts
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Depreciation and amortisation
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Gain on disposal of assets
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Profit for the year being total comprehensive income
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There was no other comprehensive income for 2025 (2024: £nil).
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The notes on pages 15 to 27 form part of these financial statements.
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Page 12
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MERCIA WASTE MANAGEMENT LIMITED
REGISTERED NUMBER: 03525188
BALANCE SHEET
AS AT 31 DECEMBER 2025
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Property, plant and equipment
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Investments in subsidiary undertakings
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Trade and other receivables
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Cash and cash equivalents
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Total assets less current liabilities
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Provisions for liabilities
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The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 15 to 27 form part of these financial statements.
Page 13
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MERCIA WASTE MANAGEMENT LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2025
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Profit for the year and total comprehensive income
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Profit for the year and total comprehensive income
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The notes on pages 15 to 27 form part of these financial statements.
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Page 14
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
Mercia Waste Management Limited is a company limited by shares incorporated in the United Kingdom under the Companies Act 2006, registered in England and Wales. The address of the registered office is given on the company information page before the contents. The nature of the Company's operations and its principal activities are set out in the Strategic report.
2.Accounting policies
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General information and basis of accounting
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The financial statements have been prepared under the historical cost convention, modified by the revaluation of freehold and leasehold properties, and in accordance with Financial Reporting Standard 102 (“FRS 102”) issued by the Financial Reporting Council.
The functional and presentational currency of Mercia Waste Management Limited is considered to be pounds sterling because that is the currency of the primary economic environment in which the Company operates.
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Exemptions for qualifying entities under FRS 102
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Mercia Waste Management Limited meets the definition of a qualifying entity under FRS 102 and has therefore taken advantage of the disclosure exemptions available to it in respect of its financial statements. Exemptions have been taken in relation to presentation of a cash-flow statement, related party transactions, financial instruments, remuneration of key management personnel and the reconciliation of shares outstanding at the beginning and end of the year. The Company is a member of the FCC group and relevant full disclosures are made in the consolidated FCC annual report, copies of which can be obtained from the address in note 24.
The Company has claimed exemption from the preparation of consolidated financial statements under section 400 of the Companies Act 2006 as it is a subsidiary of a group which has prepared publicly available consolidated financial statements. Accordingly, these financial statements present information about the Company, and not the Group of which it is part.
At 31 December 2025 the Company had net assets of £18.1 million and net current assets of £20.4 million.
The directors have at the time of approving the financial statements, a reasonable expectation that the Company has adequate resources to continue in operational existence through the going concern period to 31 August 2027. The directors have prepared forecasts which demonstrate the company should remain profitable in the period ending 31 August 2027 with cash generation. The directors have also prepared a downside scenario to ensure that it can continue to operate with reduced levels of activity and unexpected increases in costs. The directors have also prepared a reverse stress test to ensure that before taking any mitigating factors it is in a position to continue for the going concern assessment period to 31 August 2027.
The Directors therefore continue to adopt the going concern basis in preparing the Annual report and financial statements.
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
2.Accounting policies (continued)
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Property, plant and equipment
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Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Freehold buildings 22 years
Long leasehold land 25 years
Freehold land landfill site As utilised
Cell preparation and Restoration assets As utilised
Short leasehold land and buildings 7-23 years
Long leasehold buildings 25 years
Plant, vehicles and equipment 3-15 years
No depreciation is provided for freehold land and assets under construction.
In respect of the EfW Plant, the residual value is determined by reference to a contracted payment, to be received on termination of the Waste Management Service Contract in January 2029 when the ownership of the Plant will transfer to the Councils.
The landfill site is depreciated over its useful life by reference to the volume of waste deposited during the year, the directors’ assessment of the total capacity of the site and other factors relevant to the likely closure date of the site.
Cell preparation and restoration costs are capitalised and depreciated on the basis of waste deposited.
Decommissioning assets (and provisions) are created on commencement of operation at a site and depreciated as for the landfill site above. Capping assets (and provisions) are created in a similar way when new cell construction commences, and capping assets are depreciated based on expected cell life.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount. The recoverable amount of property, plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognised in the income statement.
An impairment loss is reversed when there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Page 16
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
2.Accounting policies (continued)
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Property, plant and equipment (continued)
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An item of property, plant and equipment is de-recognised 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 de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item is de-recognised.
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Trade and other receivables
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Trade and other receivables are recognised initially at fair value. Subsequent to initial recognition, they are measured at amortised cost less any allowance for doubtful debts.
Amounts owed by group undertakings, trade and other receivables are classified as basic financial assets under Section 11 “Basic Financial Instruments” of FRS 102. They are recognised when the Company becomes party to the contractual provisions of the instrument and are initially measured at transaction price and subsequently carried at amortised cost, less any provision for impairment. Discounting is omitted where the effect of discounting is immaterial.
Trade and other receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identified.
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Impairment of financial assets
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At the end of each reporting period, financial assets measured at amortised cost are assessed for objective evidence of impairment.
If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of estimated future cash flows, discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
The carrying amount of a financial asset is reduced directly or through the use of an allowance account. Financial assets are written off when the Company has no reasonable expectation of recovery, although they may still be subject to enforcement activity in line with the Company’s procedures for recovery of amounts due.
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Cash and cash equivalents
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Cash and cash equivalents include cash-in-hand, deposits held at call with banks and other short-term investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
Cash and cash equivalents are classified as basic financial assets under Section 11 “Basic Financial Instruments” of FRS 102. They are recognised when the Company becomes party to the contractual provisions of the instrument and are carried in the Balance Sheet at cost.
Bank overdrafts, where applicable, are shown within creditors: amounts falling due within one year.
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
2.Accounting policies (continued)
Trade and other payables are recognised initially at fair value. Subsequent to initial recognition, they are measured at amortised cost.
Amounts owed to group undertakings, trade and other payables, other creditors and accruals are classified as basic financial liabilities under Section 11 “Basic Financial Instruments” of FRS 102. They are recognised when the Company becomes party to the contractual provisions of the instrument and are initially measured at transaction price and subsequently measured at amortised cost. Discounting is omitted where the effect of discounting is immaterial.
Trade creditors are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers.
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Derecognition of financial instruments
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Financial assets are derecognised when the Company’s contractual rights to the cash flows from the asset expire, are settled, or when substantially all the risks and rewards of ownership of the asset are transferred to another party.
Financial liabilities are derecognised when the Company’s contractual obligations expire, are discharged or cancelled.
Tax on the profit or loss for the year comprises current and deferred tax.
Current tax is the expected tax payable on the taxable surplus for the year using average tax rates in place during the financial year, and any adjustments in respect of previous periods. Income tax relating to items recognised directly in equity is recognised in equity and not in the income statement.
Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax is recognised for all temporary differences:
∙except where the deferred income tax liability arises from the initial recognition of goodwill, non-tax deductible goodwill amortisation or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit or loss nor taxable profit or loss; and
∙in respect of taxable temporary differences associated with investments in subsidiaries except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
∙Deferred income tax assets are recognised for all deductible temporary differences and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
2.Accounting policies (continued)
Revenue represents sales of goods and services including landfill tax but excluding value added tax. Revenue is recognised when the recognition conditions within FRS 102 have been satisfied. For waste disposal services this is when the waste has been received and disposed of.
Inventories are stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell.
At each balance sheet date, inventories are assessed for impairment. If inventory is impaired, the carrying amount is reduced to its selling price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.
Interest income is recognised in profit or loss using the effective interest method.
Finance costs are charged to profit or loss over the term of the debt using the effective interest method so that the amount charged is at a constant rate on the carrying amount. Issue costs are initially recognised as a reduction in the proceeds of the associated capital instrument.
Borrowing costs are recognised as an expense when incurred unless they are directly attributable to the acquisition, construction, or production of qualifying assets. In this case they are capitalised as part of the cost of the qualifying asset.
Exceptional items are transactions that fall within the ordinary activities of the Company but are presented separately due to their size or incidence.
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.
If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
The Company’s provisions relate to aftercare, restoration, decommissioning and other environmental obligations associated with its landfill sites.
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
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Judgements in applying accounting policies and key sources of estimation uncertainty
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In the application of the Company’s accounting policies, which are described in note 2, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
Provisions – Under environmental legislation and through regulation and planning consents, the Company is obliged to decommission and restore landfill sites to a prescribed standard. The elements included in the decommissioning provision are those projected costs which will be required to close down any given site in compliance with its environmental permit, planning conditions, and contractual and lease requirements. The provision is limited to costs incurred in the immediate closure and decommissioning period.
As well as decommissioning a site, the Company is obliged under its environmental permits and planning permission to manage a site for a period of up to 60 years or until it becomes inactive. As a result, in addition to provisions for decommissioning, the Company also establishes provisions for aftercare. Elements included in the provision are those projected costs which are required to ensure that a landfill site is properly managed in compliance with its environmental permit, planning conditions and lease terms during its closed phase.
In addition to the decommissioning and aftercare provisions, the Company makes provision for other costs relating to regulatory and environmental compliance to be incurred on items such as capping and leachate disposal.
These provisions are based principally on measurement and survey data and some engineering estimates, including cost assumptions. Estimating provisions over long time periods requires a number of assumptions and judgements to be made. Significant reductions in the estimates of the remaining site lives of the landfill sites or significant increases in estimates of decommissioning costs or aftercare costs due to changes in regulatory requirements or estimates could have a substantial impact on the value of the provisions.
An annual inflation rate of 2% has been assumed over the period to which the provision costs relate and the provisions have been discounted at 4.1%.
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All revenue, including landfill tax, was generated in the United Kingdom from the handling, recycling and disposal of waste materials.
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Auditors’ fees in respect of the statutory audit of the Company’s annual financial statements totalled £42,000 (2024: £42,000).
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The Company had no employees during the year ended 31 December 2025 or the preceding financial year.
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Page 20
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
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Directors' remuneration and transactions
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FCC Environment Services (UK) Limited and FCC Waste Management Limited received remuneration by way of management fees from the Company for their services during the current and preceding years.
None of the Directors received any remuneration or other benefits through the Company during the year ended 31 December 2025 or the previous financial year.
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Interest receivable and similar income
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Other loan interest payable
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Unwinding of discount relating to provisions (note 18)
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Current tax on profits for the year
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Adjustments in respect of previous periods
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Origination and reversal of timing differences
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Adjustment in respect of prior years
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Taxation on profit on ordinary activities
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Deferred tax assets and liabilities are offset where the Company has a legally enforceable right to do so.
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Page 21
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
10.Taxation (continued)
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Factors affecting tax charge for the year
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The tax assessed for the year differs from the standard rate of corporation tax in the UK of 25% (2024: 25%). The differences are explained below:
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Profit on ordinary activities before tax
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Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 25% (2024: 25%)
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Other permanent differences
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Adjustments in respect of prior years
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Total tax charge for the year
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There were no factors that may affect future tax charges.
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Investments in subsidiary companies
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The Company owns 100% of the ordinary share capital of Beacon Waste Limited, a non-trading company registered in England and Wales. The registered office is the same as the Company.
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Page 22
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
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Plant,
vehicles and equipment
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Included in freehold property is £76,000 (2024 - £76,000) that has not been depreciated. Cumulative finance costs capitalised included in the cost of property, plant and equipment amount to £19.9million (2024 - £19.9million). The Company has agreed to sell the EfW Plant to the Councils on the expiry of the Waste Management Service Contract (WMSC) in January 2029 and in return the Company will receive a payment of cash. The transaction which was entered into in 2014 and was varied in 2022 accordingly defines the Company’s policy for depreciating the asset.
Included within plant, vehicles and equipment in the net book value of property, plant and equipment at 31 December 2025 are assets under construction totalling £nil (2024: £44,000). No depreciation has been provided on these assets.
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Page 23
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
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Trade and other receivables
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Prepayments and other debtors
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Accruals and deferred income
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Other taxation and social security
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Amounts owed to group undertakings
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Page 24
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
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Analysis of the maturity of loans is given below:
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Amounts falling due within one year
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Amounts falling due between 2-5 years
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The loan facility is repayable in instalments with a final repayment date of 11 January 2029. Interest of 6.31% per annum (2024: 6.31%) is calculated daily. The interest is repayable alongside the principal loan capital repayments.
The facility is secured via a suite of rights granted to the lender via the Senior Term Loan Facility Agreement (as varied in December 2022) and Waste Management Services Contract (1998) as varied in 2014 and extended in 2022. The net book value of the EnviRecover EfW Plant is £120.1million at 31 December 2025 (2024: £124.1million).
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Charged to statement of comprehensive income
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The provision for deferred taxation is made up as follows:
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Accelerated capital allowances
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Short-term timing differences
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Page 25
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
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Charged to profit or loss
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Allotted, called up and fully paid
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100,000 (2024: 100,000) Ordinary shares of £1.00 each
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Retained earnings
Retained earnings comprises cumulative profits or losses, including unrealised profits or losses recognised in the statement of comprehensive income, net of dividends.
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The Company paid an interim dividend of £190 per share (2024: £145)
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a)The Company must comply with the Environment Agency’s financial provisioning requirements for its landfill sites in England and Wales, which is satisfied by providing financial security bonds. The value of the bonds issued for this financial provisioning requirement at 31 December 2025 was £10.6million (2024: £10.3million).
b)At 31 December 2025, the Company was party to further performance bonds totalling £2million (2024: £2.0million) in favour of various municipal authorities and others.
Page 26
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MERCIA WASTE MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2025
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Related party transactions
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The Directors regard all subsidiaries of FCC as related parties. In the ordinary course of business, the Company has traded with fellow subsidiaries of FCC.
Under FRS 102, the company is exempt from disclosing related party transactions with other wholly owned subsidiaries of the FCC Group.
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The Company is jointly owned by FCC Waste Management Limited (formerly Urbaser Limited) and FCC Recycling (UK) Limited.
The Directors regard Control Empresarial de Capitales, S.A. de C.V., a company registered in Mexico, as the ultimate parent company and ultimate controlling party.
Fomento de Construcciones y Contratas, S.A. is the parent company of the largest group of which the Company is a member, and for which group financial statements are drawn up. FCC Environment (UK) Limited is the parent company of the smallest group of which the Company is a member, and for which group financial statements are drawn up. Copies of the financial statements of both FCC Environment (UK) Limited and Fomento de Construcciones y Contratas, S.A. are available from the Company Secretary, 3 Sidings Court, White Rose Way, Doncaster, DN4 5NU.
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