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Bingo grows up in the time of COVID

The waste management operator Bingo Industries has delivered an extraordinary profit result, moving from a $22.3 million profit in FY1 9 to $66 million in FY20, a 196 per cent increase.

The company’s results were released yesterday revealing the impact of the COVID crises on the business and the mitigation strategy which shored up the positive results.

Government restrictions on shopping centres, offices and hospitality most impacted Bingo which saw C&I revenue decline 20 per cent in April/May against the first three quarters of FY20. However, the company saw a rebound of 35 per cent in June 2020 with the overall decline at 13 per cent.

Bingo CEO Daniel Tartak said the 30 per cent fall in revenues from the C&I sector since the Victorian government imposed the Stage 4 restriction had been less than expected and that the company had anticipated a deeper 50 per cent drop.

COVID mitigation strategy

Bingo management began to implement proactive initiatives from March onwards and in its report stated that these ensured the business continued to operate with limited disruption.

These measures included:

  • All non-essential capex suspended in Q4 and reduced opex by ~$8 million in Q4;
  • Pro-active labour saving initiatives implemented from 1 April 2020 which included: – 20% reduction in corporate overhead costs to 30 June 20 – Reduction in driver and site overtime – 20% reduction in directors’ fees for balance of FY20;
  • Cash Focus Enhanced – increased resourcing and reporting delivering strong cash collections and cash conversion in excess of 125% in 2H FY20;
  • Continued focus on maximising revenues through protecting volumes and managing expenses, particularly labour costs;
  • Full year re-forecast and sensitivity analysis completed in March to calibrate operational settings;
  • Continual assessment of potential opportunities for fiscal support with support for capital investment expected to be up to $6 million;
  • Bingo’s COVID-19 response group continues to monitor the environment on a daily basis while Business Continuity Plans are in place across all business units;
  • Bad debt provisions increased from $1.4 million to $4.2.

Meanwhile, Bingo remains optimistic for the next quarter anticipating further recovery post relaxation of State restrictions. It said that much of this stems from construction activity which is considered an essential public service and existing projects are continuing relatively unabated.

The company also noted that while volumes remained solid in Q4 FY20, however, pricing pressure has occurred. It said that further impacts are expected in FY21 while and $55 million less than FY20 in Victoria. Additionally, the COVID-19 cases detected at its West Melbourne facility in July effectively managed.

Strong momentum in Post-Collections volumes

While it is unusual for companies to drill down to specific time frames in in annual reports, Bingo stated that since June 2020 it had seen strong momentum in post-collections volumes.

Its observations since the onset of COVID-19 and into early FY21 include:

─ Average daily Collections volumes initially declined by up to 10% and subsequently improved to June 30, with August also being stable;

─ C&I volumes have rebounded post the lifting of restrictions in NSW. VIC C&I business continues to be impacted by government enforced restrictions;

─ Post-Collections volumes have remained very strong. We have seen an increase in volumes in a softening market;

─ Post-Collections volumes have increased in July and August versus Q4 FY20 run-rate with July being its largest ever completed month;

─ Pricing declines seen in March and April across Collections and PostCollections. Relatively stable from May onwards.

Optimistic outlook

Bingo said that its outlook is confident, based on the commitments by NSW and VIC state governments to a combined $125 billion to infrastructure projects over four years (representing 68% of total infrastructure funding). Other positive signs include:

  • Federal and state governments considering opportunities to fasttrack spending on infrastructure to support the economy;
  • NSW government fast-tracking of 96 projects worth $41 billion. VIC government has announced circa $4 billion in additional stimulus for social infrastructure and mixed-use development;
  • Australia’s previous fiscal response to the GFC highlights how infrastructure funding is used as an important stimulus tool and is the key driver post the initial stimulus response.