Cleanaway earnings growth delivers record profit

Cleanaway earnings growth delivers record profit

In his final set of financial and operational results, departing CEO, Vik Bansal announced Cleanaway’s statutory net profit of $79.4 million for the first half of the financial year, up 75 per cent on the half year prior.

Chief Executive Officer and Managing Director of Cleanaway, Vik Bansal, said Cleanaway has reported “record outcomes achieved again across all key metrics” in its FY21 half year results.

Net Revenue of $1,070.2m was marginally higher than the prior corresponding period with higher revenue in the Solid Waste Services segment being partially offset by lower revenue in the Industrial & Waste Services and Liquid Waste & Health segments.

“I am proud of the performances that we have delivered, and I will miss the Cleanaway management and operations teams across the country that have helped deliver those results,” Bansal said.

Statutory Net Profit was $0.4m higher than Underlying Net Profit with costs related to the Perth MRF fire, acquisitions and integration offset by a benefit to net finance costs from the modification of a debt facility.

Source: Cleanaway

“Notwithstanding the impact of COVID-19 we have reported record underlying EBITDA ($263.8m), EBIT ($132.2m), NPAT ($79.0m) and Earnings Per Share (3.8 cents), and further increased our interim dividend to shareholders by 12.5 per cent to 2.25 cents per share,” Bansal said.

“This builds on the record full year underlying NPAT delivered in FY20. Since FY15 shareholders have enjoyed a 22.7 per cent compound annual growth in NPAT and have been rewarded with similar growth rates in EPS and dividends.”

Bansal credits the successes of prior years and said that Cleanaway always pursues “accretive growth while ensuring acquisitions are carefully integrated to deliver optimal value and alignment with Our Cleanaway Way”.

“The performance that we have achieved in our businesses over the past five years and strategies that we have implemented have delivered significant value for all our stakeholders through strategic acquisitions, organic growth, and operational and capital discipline,” he said.

SEGMENT PERFORMANCE

Solid Waste Services

Solids Waste Services reported increased net revenue and earnings. Net Revenue of $713.2m was 2.1 per cent higher than the prior corresponding period due to contributions from new assets and municipal contracts partially offset by the continuing impacts of COVID-19 related restrictions.

The segment benefited from the commencement of the City of Casey (Melbourne’s largest municipality) and the South Australian Council Solutions contracts, partially offset by COVID-19 affected activity across Melbourne together with lower SME activity in Queensland and Sydney CBD.

During the period Cleanaway won several national and large mid-market accounts.

“The rebuild of the Perth MRF was well advanced at the end of the period, with operations expected to recommence in the fourth quarter. This facility will deliver a high-quality recycling service in the Perth market,” Cleanaway reported in the half year results.

Industrial & Waste Services

Industrial & Waste Services reported lower net revenue and higher earnings. Net Revenue of $151.7m was 8.4 per cent lower than the prior corresponding period and 2.7 per cent higher than the prior six months.

Cleanaway reported that the negative variance reflects the completion of the “strategic exit from lower value contracts, while the positive variance to the prior six months illustrates that we have reached that turning point and have begun to grow with a focus on higher quality contracts”.

The segment has performed well by securing new business and offsetting the headwinds of lower discretionary spending by many customers and in particular infrastructure related activity in the Brisbane market, services related to the aviation market, and the oil and gas segment more broadly.

“We are targeting more opportunities in Government, marine and ports and mining. Recent contract wins include Southern Ports and Australian Submarine Corp,” Cleanaway stated.

Liquid Waste & Health Services

Liquid Waste & Health Services reported increased net revenue and earnings.

Net Revenue of $252.6m was 2.3 per cent lower than the prior corresponding period due to the lingering effects of COVID-19 related restrictions.

Oil recycling COVID-19 relief payments provided an offset to lower benchmark oil prices in the Hydrocarbons business. Lower collection and waste volumes in COVID-19 impacted regions were offset by improved pricing, service improvements and efficiency initiatives.

The Health business improved earnings through a significant increase in waste from hospitals and aged care facilities due to the second wave of COVID in Victoria, driving both higher revenue and related treatment and disposal costs. This offset the downturn in elective surgeries and quarantine work from cruise ships and airlines.

The Liquids & Technical Services business saw lower volumes in states with significant tourism (particularly Queensland), hospitality (grease traps), cruise ships and automotive sectors because of COVID-19.

Cleanaway stated that the consolidation of the LTS business and structural adjustments have increased the focus on the quality of our revenue and improved earnings.

“We secured several key contracts that are forecast to commence in the second half particularly around the remediation of certain Victorian sites.”

FY21 OUTLOOK

Uncertainty in the trading environment continues, more so in some regions and industries than others,” Cleanaway stated in the results.

“Despite that and as stated at the AGM, Cleanaway remains confident that full year FY21 Underlying EBITDA will be moderately higher than FY20.”

Bansal said that during the half, Cleanaway completed the acquisition of the Grasshopper Environmental collections business in NSW and the Stawell Landfill in western Victoria, which will complement the Statewide collections business that the company acquired in late 2019.

Cleanaway also commenced building a PET plastic pelletising plant in Albury NSW and completed the exhibition stage of the Environmental Impact Statement for its proposed Energy from Waste facility in Western Sydney.

“We successfully tendered for the commingled recycling contract with Blacktown Council that allowed us to commit to developing a MRF in Western Sydney, and we expect to reopen our Perth MRF in the coming months,” he said.

“We were also successful in obtaining grant funding for our proposed HDPE and PP plastic pelletising and glass beneficiation facilities in Victoria, and for a plastic flaking facility in Western Australia.”

However he said that the safety of everyone at Cleanaway is the number one priority and is one of the most pleasing improvements in performance that he has overseen in his time at Cleanaway.

“We have reduced the Total Recordable Injury Frequency Rate (TRIFR) from 10.8 in FY16 to 4.1 as at the end of 2020, representing more than 60 per cent improvement. There remains more we can do, and I am confident that we have the plans in place to ensure our target of Goal Zero will remain a priority,” he said.

Vik Bansal will step down from the active role of CEO and as a Director of the company after the half year results investor road show.

Cleanaway expects to be eligible to participate in the Commonwealth Government’s Instant Asset Write Off Scheme, which is forecast to reduce tax payments made by the Group in FY22 and FY23.

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