WasteCo Group Limited Analysis

Overview

On 5 December 2022 the company completed the acquisition of WasteCo Holdings NZ Limited, and a reverse listing as WasteCo Group Limited (trading as WCO) (WasteCo)

The WasteCo group was formed by Carl Storm and James Redmayne and commenced operations in 2013

WasteCo currently operates a diversified waste, refuse and industrial services business with operations in Christchurch, Ashburton, Timaru, Oamaru, Dunedin and Balclutha, through 6 subsidiaries.

Members of the WasteCo group own and operates a range of business activities associated with:

• Environmental services, which comprise the following operations:
• Waste collection via front load bins, hook bins, skip bins and wheelie bins from both commercial and private customers.
• A large gantry collection operation in Christchurch.
• Road sweeping for Councils and commercial customers. WasteCo operates an extensive sweeping operation in the South Island.
• Waste sorting and diversion. WasteCo operates a 3,600 square metre dedicated sorting facility in Christchurch with a strong focus on diversion from landfill. WasteCo is currently achieving global diversion in excess of 50% of waste away from the landfill.
• A new specialised facility for the collection and treatment of medical and quarantine waste, which has recently been implemented by WasteCo.
• Training services. WasteCo provides internal and external training courses, both to its own staff and to third party organisations.
• Industrial services, which comprise the following operations:
• High pressure water blasting, urgent spill response services, vacuum loading, septic tank cleaning and portaloos. These services are offered on a 24/7/365 basis. WasteCo is one of the largest providers of industrial services in the South Island.
• Port services. WasteCo provides maintenance, cleaning and auxiliary services to several ports and shipping companies in the South Island.

Performance

The following information was extracted from WasteCo Group Limited's full year results, released on 30 May 2024:

WasteCo achieves $48 million sales revenue for 12 months to 31 March 2024 during transformative year

WasteCo Group Ltd (NZX:WCO) today announces its audited financial results for the 12 months to 31 March 2024 (FY24).

Highlights for the 12 months to 31 March 2024

• Sales revenue increased 40% to $48 million compared to the same period last year (FY23).
• Achieved operating EBITDA of $4.09 million for the second half of FY24 before non-recurring items, in line with guidance.
• Successfully integrated Cleanways, Bond Contracts and Central Suction Cleaners businesses into our operations. These businesses are performing well.
• The business successfully transitioned to a new financial reporting and accounting platform that adds scale, and greatly improves analysis and visibility across and within divisions.
• A net $6.5 million increase in equity share capital, of which $2.2 million related to shares taken up by the vendor of Cleanways.
• New CEO David Peterson commenced in February 2024. He is focused on improving profitability and organic growth from existing operations and earnings accretive ambitious growth through acquisition of established waste management companies.
• Restructuring initiatives in the first half of the year had a material impact on improving operating performance in the second half.
• Overall loss of $4.14 million. The loss reflected costs largely incurred in the first half, and non-cash accounting treatment of adjustments of $1.5 million in the second half.

A combination of organic business growth and acquisition growth during FY24 means the size and scale of WasteCo’s operations grew revenue by 40% from $34 million in FY23 to $48 million in FY24. This significant increase results in an annualised revenue run rate of $55 million based on the last six months of trading.

The total overall loss for the year was $4.14 million, which was higher than FY23 $1.92 million.

The business recorded a net gain of $762,000 on the acquisition of the Bond Contracts business after deducting a deferred tax liability of $1.52 million.

Notwithstanding the pleasing revenue growth, the underlying financial performance of the existing business operations in the first half was disappointing and has been addressed by the company.