Here’s why Bingo (ASX:BIN) shares are dropping today

The Bingo (ASX: BIN) share price is falling today on the back of the company’s earnings report. Here are all the details.

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The Bingo Industries Ltd (ASX: BIN) share price is having a bleary day today. At the time of writing, its shares are trading for $3.14 apiece, a drop of 1.72%.

The Bingo share price opened at $3.19 this morning and rose as high as $3.21 before sharply dropping off around 11 am.

That drop appears to be a late response to the earnings report Bingo delivered to investors this morning. This earnings report covers the first half of FY2021 (the 6 months ending 31 December 2020).

What is Bingo?

Think bins, not meat trays here. Bingo, along with its rival Cleanaway Waste Management Ltd (ASX: CWY), is one of the largest waste collections and processing companies on the ASX.

Bingo is known for its commercial and industrial waste collections business, including the ‘Dial-a-Dump’ business that it acquired back in 2018.

What did the company report today?

Bingo’s earnings reflect a tough 6 months for the company. Revenues came in at $241.1 million, down 3.1% from the corresponding period in FY2020 (1H20). Bingo’s revenue sectors went backwards over the period, except for ‘post-collections revenue’, which rose 5% to $170.9 million.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was $65.2 million, down 20.5% from 1H20’s $82 million. That dragged net profits after tax down 41.2% to $16.7 million, from 1H20’s $28.4 million. Operating free cash flow also fell, down 8.9% from 1H20’s $70.4 million to $64.2 million. Pleasingly for Bingo investors, net debt for the company fell 1.2% from H120’s $321.1 million to $317.4 million.

Bingo has announced an interim dividend for shareholders of 1.5 cents per share, fully franked. That represents a payout ratio of 62%. That’s down 32% from last year’s interim dividend of 2.2 cents per share, but flat with Bingo’s 2020 final dividend. On current pricing, that would give Bingo an annualised dividend yield of 0.95%.

Bingo describes the earnings results as a “solid financial performance despite challenging market conditions”. The company blames the COVID-19 pandemic, especially in Victoria, for a “softening” of its total addressable market, as well as for higher labour costs.

Looking forward, Bingo’s management is anticipation that the company is “well-positioned for market recovery”. It notes that the near-term outlook for the company is now “better than previously anticipated”.

Management told investors to expect margins to continue to decline for the rest of FY2021. However, it has also told investors that it sees the potential for “significant upside in FY2022 and beyond as the company’s addressable markets expand.

About the Bingo share price

The Bingo share price has had a wild and woolly 12 months. At the current share price, it is more or less where it was 12 months ago. But Bingo shares took a dive in March last year (along with the rest of the market), falling all the way to $1.47.

The Bingo share price has recovered strongly since of course, and is up more than 100% since then. On the current price, the company has a market capitalisation of $2.04 billion.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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