Cleanaway boss aiming to eclipse newly articulated profit target

Cleanaway managing director Mark Schubert has made it clear that a target for a 50 per cent profit uplift should not be seen as the extent of their ambitions.

Cleanaway is looking to grow its business solidly over the next few years.

Cleanaway managing director Mark Schubert says it will be “crystal clear’’ to his team that a new target to grow earnings by at least half is just the start of the story.

The waste management company on Thursday delivered a result seen as “solid” by analysts, however of more interest is the turnaround story.

The waste company’s underlying EBIT, at $302.2m was in line with guidance given this time last year and was 17.5 per cent higher than the previous financial year.

But Cleanaway is looking to grow this figure to about $450m in FY26, as part of its Blueprint 2030 reset program.

Mr Schubert told The Australian on Thursday that remuneration incentives were being set which pegged the $450m figure at the 50 per cent point for long term incentives and the like.

Once the company released its notice of meeting for the upcoming AGM, analysts would be able to divine more closely what the company’s true ambitions were.

“Just be clear, we are aiming for north of that number,’’ Mr Schubert said.

“The lead teams are crystal clear that that number’s not $450m.

“That number is well north of that, and they will all be gunning for their individual part.’’

Mr Schubert said once the details of the incentive plan was released, and the vision became clearer, “I think hopefully people look at that and say, ‘Oh, that’s quite exciting’.’’

On the incentive front, Mr Schubert said there would need to be “significant outperformance needed to achieve full vesting’’.

Mr Schubert said Cleanaway was moving from a recovery to an execution phase, and on the staff front was looking to build culture among its new recruits as opposed to looking to rebuild, which was the prospect facing Cleanaway a year or so ago.

“It’s more about labour productivity, it’s about retention, it’s about culture,’’ he said.

“It’s the more positive aspects of it rather than just trying to find people to do the work, which is where we were in that period, September-October last year.’’

Mr Schubert said it seemed like the company was also over the hump with issues such as interest rate increases, labour availability and inflationary pressures.

“We saw over the last 18 months or so huge increases in fuel, in gas prices, in labour availability and interest rates as well.

“They were all headwinds for Cleanaway. Now it doesn’t feel like it’s getting worse. If anything, we’ve seen gas prices come off, fuel’s come off its highs - labour availability, we think has improved, but also we’ve gotten better at it.’’

The waste company’s underlying net profit, reported on Thursday, crept just 2.5 per cent higher to $148.6m for the full year, while flood impacts and a write off related to a failed appeal to increase the height of the New Chum landfill in Queensland helped push the statutory result 70.8 per cent lower to $23.5m.

Net revenue for the year increased 13.9 per cent to $2.97bn.

The profit report flagged that inflation and interest rate pressures had been an issue over the past year, with net finance costs increasing by $43.1m, or 81.3 per cent, due to higher interest rates, “which largely eroded the operating profit increase’’.

“We have been successful in addressing some of the inflationary pressures through the strong contractual mechanisms that allow us to recoup rising costs over time together with more frequent price increases and fuel surcharges applied to our SME segment, however there is a temporary impact on margins while inflation remains elevated,’’ Mr Schubert said.

Earnings in the second half were stronger, with EBIT coming in at $163.9m, 18.5 per cent higher than the first half.

“Importantly, the actions taken during FY23 to address key challenges delivered in the second half and built strong momentum into FY24,’’ the company said.

One of the one-off issues related to Cleanaway earlier this year losing an appeal against a decision by the Ipswich City Council to refuse a height increase at the New Chum site.

The company and flagged in June that the total impairment related to the issue would likely run to about $70m.

Cleanaway’s full year report shows the company increased its remediation provision at New Chum by $23.2m, which factored into the decrease in the statutory result.

Other one off impacts included $62.2m in flood impacts and $22.3m in costs related to a fire at a Victorian medical waste processing facility.

UBS said the Cleanaway result was “solid” and in line with guidance, while RBC said the numbers were generally in line with expectations and the EBIT growth target was “positive’’.

Cleanaway declared a final unfranked dividend of 2.45c per share, in line with the previous corresponding period.

Cleanaway shares were 2.8 per cent lower at $2.58.