On the face of it, the interim figures from Bingo Industries, the Sydney-based waste removal company do not explain last week’s explosive near 50% slump.
Investors thought the same way sending the shares up almost 6% in a market that sagged badly as the session went. Bingo shares ended at $1.355.
Revenue for the half was up 25% to $178.7 million.
Bingo shares fell close on 50% a week ago Monday to $1.17, which below the listing price, after revealing a sharp slowdown in second half earnings expectations.
The company said in last Monday’s statement underlying earnings were expected to be “broadly in line with the previous year” It had previously forecast underlying earnings growth of between 15% and 20%.
On Tuesday morning it revealed underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 4.1% to $45.6 million and said it will maintain a dividend of 1.72 cents per share, but has suspended its dividend reinvestment plan.
“We have a solid forward order book, and we have good visibility of future revenue through our opportunities pipeline,” chief executive Daniel Tartak said in yesterday’s statement.
“Our aim is to use this runway to continue to diversify our earnings, by securing long-term commercial and industrial contracts to provide more annuity-style defensive earnings”.
Bingo says it expects a new Queensland waste levy to be positive and will increase prices in early 2019-20 – but not in 2018-19.
But the problems emerged on an “underlying basis with the company revealing:
“EBITDA margin (earnings before interest, tax, depreciation, and amortisation) was lower at 25.5%, a further 200 basis points below forecast, and was impacted by a number of sites being offline for redevelopment, initial impact of lower margins in the Victorian business, increased volumes of lower-margin material in post-collection, and an increase in corporate costs.
“Statutory net profit after tax (NPAT) was $13.4 million, down 24.9% due to the inclusion of transaction and integration costs associated with recent and pending acquisitions.”
That told the story of the half year as profit margins collapsed.
“The Company continued to generate strong free cash flow, with operating cash flow up 33% against the previous corresponding period to $47.2 million. A strong focus on cash collection resulted in cash conversion of 103%, and the Company ended the period with net cash of $140 million.
That cash pile (the company had no bank debt at December 31) will help the company through what could be a tough period ahead.
