Cleanaway has announced a Statutory Net Profit of $79.4m for the six months ended 31 December 2020, which is up 75.3 per cent on the prior corresponding period.
Net Revenue of $1,070.2m was marginally higher than the pcp 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.
Underlying EBITDA of $263.8m was 2.9 per cent higher than the pcp reflecting higher EBITDA and margin expansion contributions from each of the business segments, with the Group EBITDA margin 60bps higher at 24.6 per cent. Underlying EBIT of $132.2m was 3.9 per cent higher than the pcp reflecting higher Underlying EBITDA and steady depreciation and amortisation expenses. EBIT margin was a record at 12.4 per cent representing 50bps expansion on the pcp.
Underling NPAT of $79.0m was 6.5 per cent higher than the pcp.
Underlying earnings per share attributable to ordinary equity holders of 3.8 cents per share was 2.7 per cent higher than the pcp.
The Board has declared an interim dividend of 2.25 cps fully franked, 12.5 per cen t higher than the pcp.
“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% to 2.25 cents per share. This builds on the record full year underlying NPAT delivered in FY20. Since FY15 shareholders have enjoyed a 22.7% compound annual growth in NPAT and have been rewarded with similar growth rates in EPS and dividends,” said departing chief executive officer and managing director of Cleanaway, Vik Bansal.
“During the half we 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 we acquired in late 2019. We also commenced building a PET plastic pelletising plant in Albury NSW and completed the exhibition stage of the Environmental Impact Statement for our 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.
“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.”
The Board declared an interim dividend of 2.25 cents per share representing an increase of 12.5 per cent on the interim dividend paid in the pcp. The dividend will be fully franked and paid on 7 April 2021 to shareholders on the register on 3 March 2021.
The Dividend Reinvestment Plan (DRP) will be in operation for this dividend. Shareholders residing in Australia or New Zealand may elect to participate in the DRP. The DRP election date is 4 March 2021. Under the DRP, Cleanaway shares will be issued at the average of the daily Volume Weighted Average Price (VWAP) of all shares sold on ASX over the period from 5 to 11 March 2021. No discount will be applied to shares issued under the DRP.
Underlying Segment Performance
Solids Waste Services reported increased net revenue and earnings. Net Revenue of $713.2m was 2.1 per cent higher than the pcp due to contributions from new assets and municipal contracts partially offset by the continuing impacts of COVID-19 related restrictions.
Underlying EBITDA of $198.4m was 2.8 per cent higher than the pcp due to higher EBITDA and cost management. Underlying EBIT of $108.3m was 3.7 per cent higher than the pcp reflecting higher underlying EBITDA and steady depreciation and amortisation expenses. EBITDA margins increased 20 basis points to 27.8 per cent and EBIT margins increased to 15.2 per cent.
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.
Contribution from the recently acquired Grasshopper Environmental (NSW C&D collections) and Statewide Recycling and Stawell landfill (regional Victorian collections and post collections) businesses, and the Victorian Commingled Resource Recovery business (the former SKM assets) also benefited the segment.
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.
During the period Cleanaway won several national and large mid-market accounts. We also secured a landfill height extension at Erskine Park in Sydney that will extend the life of that asset. Cleanaway also successfully tendered for the Blacktown City Council recycling processing services, a contract that will support the development of a ~115kt p.a. MRF.
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 pcp and 2.7 per cent higher than the prior six months. The negative variance to pcp 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.
Underlying EBITDA of $23.8m was 3.0 per cent higher and underlying EBITDA margin was 180 bps higher than the pcp reflecting the successful execution of the strategy of exiting low value workstreams. Underlying EBIT of $11.9m was 10.2 per cent higher and underlying EBIT margin was 130 bps higher than the pcp reflecting higher underlying EBITDA and lower depreciation and amortisation expenses.
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.
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 pcp due to the lingering effects of COVID-19 related restrictions. Underlying EBITDA of $55.1m was 4.4 per cent higher than the pcp from the first full half following the completion of the Toxfree integration, with the EBITDA margin 140 basis points higher at 21.8 per cent.
Underlying EBIT of $34.2m was 5.2 percent higher than the pcp reflecting higher underlying EBITDA and steady depreciation and amortisation expenses.
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. 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.