Big Blue: Meet the CEO who’s thinking laterally
A small buyout of a Perth operator has big global implications for Cleanaway, a company better known for collecting household waste for councils.
SA Business
Don't miss out on the headlines from SA Business. Followed categories will be added to My News.
From collecting rubbish to cleaning up after oil and gas, Mark Schubert is thinking laterally as he searches for the next leg of growth for his big blue waste machine.
That’s the motivation behind Cleanaway’s relatively small, but significant, $377m buyout of Perth’s Contract Resources.
Little-known Contract is a highly specialised operator that decontaminates and cleans up disused oil and gas platforms. It plays in a space known as decommissioning, decontamination and remediation, which the industry’s shorthand has dubbed the DD&R sector.
It also keeps the pipes and specialist processing equipment clean so production can continue at refineries and gas processing plants like Viva’s Geelong plant, Australia’s LNG fields off the Northwest Shelf as well as through the Middle East.
This is a big adjacent step for Cleanaway, Australia’s biggest waste operator that operates hundreds of trucks and dozens of rubbish depots around the country.
However, Schubert, who previously worked for Shell including running the Geelong refinery, says Contract’s business is firmly within Cleanaway’s capability.
Cleanaway already processes toxic or dangerous liquids, making them safe for disposal. It specialises in medical waste, as well as the collection and sorting of rubbish from most council collections.
The buyout, funded by debt, pushes Cleanaway further up the value chain with higher margins in hi-tech engineering services and into a sector that has decades ahead of it – not only in decommissioning but also ongoing technical work.
The move comes with Cleanaway already facing the limits of growth across its conventional businesses. It counts most councils in Australia as customers, while collecting waste from big commercial clients like Coles or miners is hotly contested.
Schubert already has a multi-year plan under way to grow Cleanaway from the inside, improve efficiency, upgrade its fleet and boost margins to squeeze more from the cash machine it has come to represent. He has an ambition to hit $450m in annual earnings by next year, and he is already on to this.
Contract hasn’t come out of the blue for Cleanaway. The waste player has been running a file on it for more than a decade.
In that time, Contract has been picked up by private equity Affinity Capital and then on-sold to a consortium led by Viburnum Funds, backed by Perth’s Craig Coleman. Schubert says the time to strike was now.
“When we look at the DD&R opportunity, we think this is a big, big wave that’s coming,” he says.
What he liked was Contract’s long client list with names like Shell, Ampol, Santos, Woodside and Chevron which were all two decades-plus customers.
“Through DD&R, in oil and gas incumbency is key because if you’re not involved from the start, or you miss the wave and you don’t get the experience, then the wave passes over – it’s very difficult to catch up and get the experience,” he says.
With forecast earnings at just over $50m this year, the price tag represents a very digestible 7.3 times earnings. However, the business does come with the risk of high capital intensity, particularly in growth cycles.
Schubert personally undertook his diligence on the business. He went to the Middle East, looking at Contract’s operations and spoke with customers in the UAE and Qatar. This region, including Kuwait and Oman, represents the growth engine. That tour came on the back of six months’ diligence in Australia, where Contract generates 75 per cent of sales.
“I know how hard it is to replicate an oil and gas standard industrial services business that a company like a Shell is prepared to deal with daily,” he says.
What does that mean for Cleanaway? For Schubert, that translates into a $43bn market in Australia alone over the next five decades, or about $650m of addressable spend each year for the next few years.
“We should now get our fair slice because of this fantastic incumbency position,” he says.
eric.johnston@news.com.au
Originally published as Big Blue: Meet the CEO who’s thinking laterally
Demand for supermarkets to fix shrinkflation
Woolworths and Coles could soon be forced to issue shrinkflation warnings on all products to alert shoppers when items have been reduced but not dropped in price.
ACCC probe snubs Dutton’s supermarket call
A landmark probe into Australia’s supermarket giants made 20 recommendations to improve competition, but that did not include the Coalition’s big call.