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Cleanaway share price sweeps up 17%

The Cleanaway Waste Management Ltd (ASX: CWY) share price swept up 17% today with investors loving what the company reported in its half-year result to 31 December 2019.

Cleanaway’s result wasn’t rubbish at all

Considering some of the negativity surround Cleanaway over the past year, its numbers were pleasing. Gross revenue increased 4.1% to $1.2 billion and net revenue rose by 0.5% to $1.07 billion.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 2.5% to $234.6 million, underlying earnings before interest and tax (EBIT) rose by 6.8%, underlying net profit after tax increased by 13.7% to $76.2 million and underlying earnings per share (EPS) went up 15.2%.

However, there were also adjustments totalling $28.9 million after tax with costs relating to acquisitions, the integration of Toxfree, the write-off of the Perth Material Recycling Facility (MRF) and other costs associated with the MRF fire. But, an additional insurance recovery from the MRF fire of around $14 million is expected in the second half.

Statutory EBIT fell 19.9% to $87.4 million, statutory net profit dropped 25.5% to $45.3 million and statutory EPS declined 23.3% to 2.3 cents.

Despite free cash flow reducing 25.8% (to $83.2 million), Cleanaway felt confident enough to grow the dividend by 21.2% to 2 cents per share.

It has been a period of action for Cleanaway with the acquisition of SKM’s recycling assets, the acquisition of a small solid waste collections business in western Victoria, announcing plants to develop an energy-from-waste facility in Western Sydney and finalising a memorandum of understanding to build a plastic pelletizing plant.

Outlook

On top of the pleasing underlying performance in the first half, Cleanaway said that it expects to deliver earnings in the second half of FY20 above the first half of FY20 and the second half of FY19.

There aren’t many businesses that are growing at a nice pace that are trading at an attractive valuation. It’s currently trading at 28x FY21’s estimated earnings. I’d be happy to buy a parcel of shares today, but it would obviously have been better to buy shares last week.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.