Domestic waste management heavyweight Bingo Industries (ASX: BIN), fell to the bottom of the ASX200 on the opening session for the new trading week after the release of an updated market guidance for the 2019 financial year. The report highlighted key corrections in the expected performance in the coming 6 months, negatively adjusting the underlying EBITDA by $16 million. The revised EBITDA forecast can be attributed to the following developments.
The first six months of FY19 has seen a faster than anticipated cooling in the multi-dwelling residential construction across NSW and Victoria (key markets that Bingo operates). Coupling this with the increased competition has resulted in downward pricing pressure and trimming margins. Bingo’s Building & Demolition (B&D) collections business has grown relative to the previous corresponding period but it has failed to meet initial growth forecasts. This has led Bingo to downwardly revise its original estimates on the underlying EBITDA from its B&D segment by $6 million for FY19.
Further, Bingo has postponed its annual pricing increase to FY20, to coincide as the Queensland waste levy (which in itself has been delayed). Implementing such would enable Bingo to avoid a double price increase for consumers within the single financial year. As the company bears the associated tipping and transportation costs, Bingo projects to expects a $4 million hit to underlying EBITDA.
Bingo has also made adjustments to its development projects; focusing on the reconfiguration of its current network with facilities in NSW and Victoria offline for the redevelopment of its network expansion program. A revision of this plan was made based on the pending acquisition of Dial A Dump Industries (DADI) and a number of regulatory reforms. Bingo projects a reduction of $25 – $30 million in the capital program (a 15-20% saving in the budget) and enhanced operational efficiencies to result from the aforementioned configuration. To achieve this, Bingo has revised its timeline, pushing back the reopening of its Mortdale facility to FY20. (its Minto facility is under review whilst the Patons Lane redevelopment is on track). This is expected to have a $4 million reduction on the underlying EBITDA guidance for FY19.
Overall, Bingo has downwardly revised its underlying EBITDA guidance for the 2019 full financial year to $92-96 million, as compared to initial projected for $108 – $112 million (EBITDA will broadly be in line with FY18 in contrast to the initially forecasted 15-20% growth). The market update from Bingo Industries was disappointing, with the company falling to the bottom of the index through Monday’s session. Interesting times do lie ahead, particularly with the company’s full financial result release on 26th February in addition to the ACCC’s final decision in relation to its proposed acquisition of Dial-a-Dump on 28th February.