The Cleanaway Waste Management Ltd (ASX: CWY) share price will be on watch today after reporting a high level of profit growth in its HY21 result.
Did Cleanaway announce trash or treasure in HY21?
Cleanaway’s top line didn’t demonstrate much growth, its revenue was essentially flat at $1.07 billion. There was higher revenue in the solid waste services segment, offset by lower revenue in the industrial & waste services and liquid waste & health segments.
In solid waste services, it 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 business activity in Queensland and the Sydney CBD.
But there was growth at the various profit lines.
Underlying EBITDA and EBIT (EBITDA and EBIT explained) went up by 2.9% and 3.9% to $263.8 million and $132.2 million respectively. The EBITDA margin improved by 60 basis points (0.60%) to 24.6% and the EBIT margin improved 50 basis points (0.50%) to 12.4%.
Underlying net profit after tax (NPAT) grew by 6.5% to $79 million, though underlying profit / earnings per share (EPS) only increased 2.7% to 3.8 cents.
Due to the fact that statutory profit was much lower last year, it showed much higher levels of growth to reach the numbers in this result.
Statutory net profit grew 75.3% to $79.4 million and statutory EPS went up 65.2% to 3.8 cents.
The operating cashflow grew strongly, going up 28.8% to $202.4 million.
Cleanaway dividend
The board of Cleanaway announced an interim dividend of 2.25 cents per share, representing an increase of 12.5% on the prior corresponding period.
Leadership transition
You may have seen over the past few months that the Cleanaway CEO Vik Bansal was making headlines for the wrong reasons and then he decided to resign last month.
Brendan Gill has commenced in the role of chief operating officer (COO) supporting Mark Chellew as Executive Chairman. Mr Bansal will step down after the half year results investor roadshow.
FY21 outlook
Cleanaway said that the uncertainty in the trading environment continues, with stronger disruption in some regions and industries than others.
However, the company is confident that FY21 underlying EBITDA will be moderately higher than FY20.
Summary thoughts
Cleanaway has produced a decent underlying result in what has been a strange six month period.
I think Cleanaway shares are ones to watch as a defensive idea over the long term because of the desire in Australia for there to be more recycling, which needs advanced facilities like Cleanaway’s to work efficiently.
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