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FY21 report: Is the Cleanaway (ASX:CWY) share price trash or treasure?

The Cleanaway Waste Management Ltd (ASX: CWY) share price is rising after the company released its FY21 report.

What did Cleanaway reveal in FY21?

Cleanaway highlighted its underlying numbers as a better indicator of performance.

Net revenue rose by 4.7% to $2.2 billion over the year. Underlying EBITDA (EBITDA explained) increased by 3.8% to $535.1 million.

Underlying net profit after tax (NPAT) increased by 2.1% to $153.2 million. Operating cashflow rose 5.7% to $2.2 billion.

Statutory net profit after tax rose by 31.2% to $147.7 million.

Cleanaway noted that the net underlying adjustments totalled $5.5 million after tax largely made up of costs associated with acquisition and integration, write offs and the CEO transition. These were partially offset by the unwinding of a prior period provision and net finance related adjustments.

Greenfield developments and acquisitions

Cleanaway has been busy with growth initiatives. The biggest one is that it has entered into an agreement to acquire two landfills and five transfer stations in Sydney from Suez with completion targeted for the middle of FY22.

Construction of the PET plastic pelletising facility is progressing ahead of time and on budget. It is progressing the energy from waste project in Sydney, which is currently being assessed by the NSW department of planning, industry and environment.

It has progressed the value chain extension development projects in plastics and glass re-processing.

Cleanaway has also acquired the Grasshopper Environmental, Stawell Landful, Oilwise and Pinkenba CDS businesses.

Cleanaway dividend

The board of Cleanaway decided to grow the final dividend by 11.9% to 2.35 cents per share. That brings the total dividend per share for FY21 to 4.6 cents, an increase of 12.2%.

Outlook for Cleanaway and the share price

Cleanaway said that there was strong underlying momentum heading into FY22 and it expected to grow earnings had COVID impacts been broadly similar to FY21.

But the NSW lockdowns and potential medium-term implications on economic activity is more severe than FY21. Its diversification of revenue streams and ability to lower costs can partially offset these things.

However, under the current policy settings in NSW, it’s seeing a negative $4 million EBITDA monthly hit, primarily as a result of a lot of the NSW container deposit scheme, restrictions on construction activity and weakness in the C&I market.

Cleanaway does have an attractive long-term tailwind of the shift to a circular economy (recycling and so on).

Using statutory profit, it is valued at 36 times the earnings for FY21. It’s defensive, but the current growth is being challenged. There are other ASX growth shares which could be better value picks that aren’t seeing so much disruption.

If you’re looking to learn how to do your own ASX company valuations, take our free share valuation course, which takes you through 6 common share valuation techniques, step by step. Or try our Beginner Shares Course if you’re just starting out. Both are free.

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At the time of publishing, Jaz does not have a financial or commercial interest in any of the companies mentioned.
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