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Results: Cleanaway shares trashed despite revenue growing 84%

Sebastian Bowen
waste management

The Cleanaway Waste Management Ltd (ASX: CWY) share price has been dumped today despite the company posting double-digit growth numbers in its FY19 full year results which were released this morning. CWY shares opened 14.7% lower this morning at $2.03.

What do Cleanaway’s numbers look like?

Cleanaway posted a strong set of numbers for FY19:

  • Gross revenue up 33.2% (from FY18) to $2.28 billion
  • Net revenue up 34.8% to $2.11 billion
  • EBITDA up 35.9% to $461.6 million
  • EBIT up 44.7% to $240.8 million
  • Net profit after tax up 43.1% to $140 million
  • Earnings per share up 40.2% to 6.9 cents per share
  • Free cash flow up 76.4% to $206.4 million
  • Final dividend up 35.7% to $1.9 cents per share
  • Total dividend up by 42% to 3.55 cents per share

Sector by Sector breakdown

Revenue from Solid Waste Services increased by 23% year-on-year (YoY) to $1.36 billion, with EBITDA coming in at $352 million, up 23.5% YoY.

Industrial & Waste Services had revenue increases of 84% YoY to $341.9 million and EBITDA increases of 146.6% to $46.6 million. Management noted that the acquisition of Toxfree “has increased scale in this segment and was a major factor in the growth achieved”

Liquid Waste & Health Services had increased revenue of 53.5% to $495 million and EBITDA increases of 60.3% to 486.9 million. Although hazardous and non-hazardous liquid waste volumes were down YOY, management noted the restructuring of this segment as a result of the Toxfree acquisition should improve performance in this area.

Outlook

Management expects “all our segments to deliver earnings growth in FY20 despite the outlook for general economic activity in Australia”. The company remains bullish on Cleanaway’s ‘Footprint 2025’ strategy due to the waste management industry’s insulation from the normal economic cycle and the opening of the new Western Sydney Waste Transfer station and Resource Recovery Centre.

Despite this, management has also noted the impacts that China’s ‘National Sword’ policy of not accepting foreign waste and recyclables has had on sorting costs and pricing of recyclable commodities. Cleanaway expects this will contribute to “underlying FY20 EBITDA growth to moderate slightly from current market expectations.”

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019