Cost-outs drive profit growth at Cleanaway

Morgans Financial Limited
EBITDA for Cleanaway Waste Management increased 22% and beat our forecast by 3%. Underlying revenue growth of +1.5% was 0.5% slower than forecast. A strong cost-out performance (albeit $9m from lower fuel costs) drove a 350bps increase in underlying EBITDA margin to 21.3%. Capex of $154m was less than forecast but explained by guidance of CapEx less than D&A. High-quality management is evident in the result. The key negative was the $11m decrease in the landfill remediation provision after $45m of remediation spend in FY16. We have made material upgrades to our forecasts, reflecting the 2H16 and reinforced by the outlook statement. Our group growth forecasts for FY17-19 are 3% pa underlying revenue, 5.7% pa EBITDA, 15% pa EBIT, and 19% pa EPS over FY17-19. We forecast double-digit DPS growth, albeit yield is not a key part of our forecast investment return. Get more detail on Cleanaway, including a changed analyst rating: (VIEW LINK)
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Morgans is Australia's largest national full-service retail stockbroking and wealth management network with over 240,000 client accounts, 500 authorised representatives and 950 employees operating from offices in all states and territories.

Morgans is Australia's largest national full-service retail stockbroking and wealth management network with over 240,000 client accounts, 500 authorised representatives and 950 employees operating from offices in all states and territories.