WasteCo Group - Results Announcement FY24

Results announcement
(for Equity Security issuer/Equity and Debt Security issuer)


Results for announcement to the market
Name of issuer WasteCo Group Limited
Reporting Period 12 months to 31 March 2024
Previous Reporting Period 12 months to 31 March 2023
Currency NZD (New Zealand Dollars)
Amount (000s) Percentage change
Revenue from continuing
operations
$48,233 [40.2]%
Total Revenue
$48,233
[40.2]%
Net profit/(loss) from
continuing operations
$(2,788)
[-280.0]%
Total net profit/(loss)
$(4,135)
[115.4]%
Interim/Final Dividend
Amount per Quoted Equity
Security
The Company does not propose to pay a dividend at this time.
Imputed amount per Quoted
Equity Security
Not applicable
Record Date Not applicable
Dividend Payment Date Not applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$0.0121 $0.0142
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Refer to the market release and audited financial statements for
the year ended 31 March 2024 that accompany this
announcement.
Authority for this announcement
Name of person

authorised
to make this announcement
Shane Edmond
Contact person for this
announcement
Shane Edmond
Contact phone number 021 995 519
Contact email address shane@wasteco.co.nz
Date of release through MAP

30 May 2024

Audited financial statements accompany this announcement.

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WasteCo Group Limited
Notes to the Consolidated Financial Statements
For the year ended 31 March 2024
29. Events subsequent to reporting date
On 6 May 2024 WasteCo NZ Limited entered into a new funding arrangement with Kiwibank Limited
('Kiwibank') comprising:
•
a $17 million Kiwi Asset Finance KiwiPlus facility with principal and interest payable over a term of
48 months;
•
a $15.45 million Kiwi Asset Finance KiwiPlus facility with interest only payable over a term of 24
months;
•
a $3 million Kiwibank Overdraft facility to fund working capital
The new funding facilities were used to refinance existing Kiwibank and Kiwi Asset Finance facilities, and
all existing non-bank facilities.
The facilities are secured by:
•
a first ranking and exclusive General Security Agreement over WasteCo NZ Limited and the entities
within the Group, including WasteCo Group Limited;
•
an unlimited cross guarantee between each Group entity; and
•
a specific Security Agreement over each individual asset of Wasteco NZ Limited with a value greater
than $50,000.
40

Independent Auditor’s Report
To the Shareholders of WasteCo Group Limited
Opinion
Basis for opinion
Audit materiality
Key audit matters
We have audited the consolidated financial statements of WasteCo Group Limited and its
subsidiaries (the ‘Group’), which comprise the consolidated sta tement of f inancial position as at
31 March 2024, and the consolidated statement of profit or l oss and other comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended, and notes to
the consolidated financial statements, including material accounting policy information.
In our opinion, the accompanying consolidated financial statements, on pages
2 to 40, present fairly,
in all material respects, the consolidated financial position of the Group as at 31 March 2024, and its
consolidated financial performance and cash flows for the year then ended in accordance with New
Zealand Equivalents to IFRS Accounting Standards (‘NZ
IFRS’) as issued by the External Reporting
Board and IFRS Accounting Standards (‘IFRS’) as iss ued by the International Accounting Standards
Board.
We conducted our audit in accordance with International Standards on Auditing (‘ISAs’) and
International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated
Financial Statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis
for our opinion.
We are independent of t he Group in accordance with Professional and Ethical Standard 1
International Code of Ethics for Assurance Practitioners (including International Independence
Standards)
(New Zealand) issued by the New Zealand Auditing and Assurance Standards Board and
the International Ethics Standards Board for Accountants’ International Code of Ethics for
Professional
Accountants (including International Independence Standards), and we have fulfilled
our other ethical responsibilities in accordance with these requirements.
Other than in our capacity as auditor, we have no relationship with or interests in the Company or
any of i ts subsidiaries, except that partners and employees of our firm deal wit h the Company and
its subsidiaries on normal terms within the ordinary course of t rading activities of the business of the
Company and its subsidiaries.
We consider materiality primarily in terms of t he magnitude of misstatement in the financial
statements of the Group that in our judgement would make it probable that the economic decisions
of
a reasonably knowledgeable person would be changed or influenced (the ‘quantitative’
materiality). In addition, we also assess whether other matters that come to our attention during
the audit would in our judgement change or influence the decisions of such a person (the
‘qualitative’ materiality). We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
We determined materialit
y for the Group financial statements as a whole to be $500,000.
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of t he consolidated financial statements of the current period. These matters were
addressed in the context of our audit of t he consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters.
41

Key audit matter How our audit addressed the key audit matter
Business Acquisitions
As disclosed in note 23, WasteCo Group Limited acquired the
Cleanways business and Bond Contracts Limited in the current
year, and Central Suction Cleaners Limited in the previous year.
The accounting for Central Suction Cleaners Limited was
previously recorded on a provisional basis in the 31 March 2023
financial statements. The Group recognised goodwill amounting
to $1.28m relating to the the Cleanways business a cquisition
and a gain on bargain purchase of $0.76m for the Bond
Contracts Limited acquisition.
The acquisitions are significant and complex due to:
•the consideration of whether the acquisition is an asset
acquisition or a business combination in terms of the
requirements under NZ IFRS 3 Business Combinations;
•the acquisitions resulting in intangible assets being
recognised;
•the pur
chase price of the acquisitions including non-cash
components; and
•the j
udgements and estimates involved in identifying
and determining the fair value of the assets and
liabilities acquired.
Gi
ven the significance of the acquisitions in the current year and
the previous year acquisition which was finalised, this has
increased the level of audit effort required to recognise the
acquisition.
Our procedures included:
-Reviewed and challenged management expert’s
opinion on the valuation and accounting treatment of
the acquisitions. This included challenging any
assumptions in the
valuations of assets which underpin
the acquisition and consideration of whether the
acquisition is an asset acquisition or a business
combination;
-Obtained and analysed the sale and purchase
agreements relating to the acquisitions to understand
key terms and conditions of the transactions;
-Inspected evidence for the purchase price that was
paid for the acquisition including any non-cash
consideration;
-Assessed the mathematical accuracy of the purchase
price accounting calculation including recalculating
the
goodwill or gain on bargain purchase to be recognised
on acquisition (if any);
-Considered the completeness of the underlying assets
acquired including the identification of intangible
assets;
-Assessed the competence, capabilities, objectivity and
expertise of management’s external valuation and
accounting expert and the appropriateness of their
work
as audit evidence;
-Engaged our own internal valuation specialist to assist
in reviewing the valuation methodology, reviewing the
ma
thematical accuracy of the models and assessing
the reasonableness of the discount rates used; and
-Evaluated the adequacy of disclosures relating to the
acquisitions in the consolidated financial statements.
Other matter
The financial statements of the Group for the year ended 31 March 2023 were audited by another
auditor who expressed an unmodified opinion on those statements on 30 June 2023.
Other information The directors are responsible on behalf of the Group for the other information. The other
information comprises the information in the Annual Report that accompanies the consolidated
financial statements and the audit report. The Annual Report is expected to be made available to us
after the date of this auditor's report.
Our opinion on the consolidated financial statements does not cover the other information and we
will not express any form of assurance conclusion thereon.
Our responsibility is to read the other information identified above when it becomes available and
consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
When we read the other information in the Annual Report, if we conclude that there is a material
misstatement therein, we are required to communicate the matter to the directors and consider
further appropriate actions.
42

Directors’ responsibilities for the
consolidated financial statements
The directors are responsible on behalf of the Group for the preparation and fair presentation of the
consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control
as the directors determine is necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible on behalf of the
Group for assessing the Group’s ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities for the
audit of the consolidated financial
statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in accordance with ISAs and ISAs (NZ) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
A further description of our responsibilities for the audit of the consolidated financial statements is
located on the External Reporting Board’s website at:
https://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-
report-1
This description forms part of our auditor’s report.
Restriction on use This report is made solely to the Company’s shareholders, as a body. Our audit has been undertaken
so that we might state to the Company’s shareholders those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the Company’s shareholders as a body, for
our audit work, for this report, or for the opinions we have formed.
Ant
hony Smith, Partner
for Deloitte Limited
Christchurch, New Zealand
30 May 2024
43

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1

NZX RELEASE
30 May 2024

WasteCo achieves $48 million sales revenue for 12 months to 31
March 2024 during transformative year
WasteCo Group Ltd (NZX:WCO) today announces its audited financial results for the 12 months to 31
March 2024 (FY24).
Highlights for the 12 months to 31 March 2024
• Sales revenue increased 40% to $48 million compared to the same period last year (FY23).

• Achieved operating EBITDA of $4.09 million for the second half of FY24 before non-recurring
items, in line with guidance.

• Successfully integrated Cleanways, Bond Contracts and Central Suction Cleaners businesses
into our operations. These businesses are performing well.

• The business successfully transitioned to a new financial reporting and accounting platform that
adds scale, and greatly improves analysis and visibility across and within divisions.

• A net $6.5 million increase in equity share capital, of which $2.2 million related to shares taken up
by the vendor of Cleanways.

• New CEO David Peterson commenced in February 2024. He is focused on improving profitability
and organic growth from existing operations and earnings accretive ambitious growth through
acquisition of established waste management companies.

• Restructuring initiatives in the first half of the year had a material impact on improving operating
performance in the second half.

• Overall loss of $4.14 million. The loss reflected costs largely incurred in the first half, and non-
cash accounting treatment of adjustments of $1.5 million in the second half.
Financial performance summary
RESULTS OVERVIEW

20242023
NZ$000NZ$000
Revenue$48,233$34,392
Profit/(loss) from operations$(2,788)$1,549
Gain on bargain purchase$762
Acquisition costs$(639)
Finance costs$(3,078)$(2,063)
Reverse acquisition - share based payment$(1,239)
Reverse acquisition - listing expenses$(403)
Loss before income tax$(5,743)$(2,156)
Income tax benefit$1,608$236
Loss for the year$(4,135)$(1,920)

2

A combination of organic business growth and acquisition growth during FY24 means the size and
scale of WasteCo’s operations grew revenue by 40% from $34 million in FY23 to $48 million in FY24.
This significant increase results in an annualised revenue run rate of $55 million based on the last six
months of trading.

The total overall loss for the year was $4.14 million, which was higher than FY23 $1.92 million.

The business recorded a net gain of $762,000 on the acquisition of the Bond Contracts business after
deducting a deferred tax liability of $1.52 million.

Notwithstanding the pleasing revenue growth, the underlying financial performance of the existing
business operations in the first half was disappointing and has been addressed by the company.

As the economy slowed, external conditions that impacted WasteCo included:
• increased interest rates impacting our customers’ own activities, notably within the construction
sector;
• cost of debt; and
• increased labour and fuel costs.

Internal, one-off costs included:
• the three acquisitions completed and restructuring costs; and
• significant investment in assets, systems and organisational structures to position the business for
future growth.

During the year, issues within WasteCo’s control that suppressed EBITDA and NPAT performance
were addressed aggressively and are reflected in the increased performance of the the business
during the second six months of trading. Management has identified additional initiatives that are
expected to see further significant gains in the next financial year.

WasteCo achieved an EBITDA of $4.09 million for the second half of the financial year (1 October
2023 to 31 March 2024), in line with the earnings guidance range communicated in the half-year
commentary on 29 November 2023. This equates to an annualised run rate of $8.18 million.
WasteCo reported a loss from operations of $2.79 million in FY24. This is the first full-year operational
result for the company since the reverse listing transaction in December 2022, and compares with a
profit of $1.55 million in FY23. There was a loss before income tax of $5.74 million compared with a
loss before income tax of $2.16 million in FY23.

WasteCo continued to increase the level of equity in the company during the year with a combination
of new capital raised and $2.2 million in shares taken up by the vendors of Cleanways businesses
acquired during FY24. This resulted in the $6.5 million increase in equity.

EBITDA overview



OUTLOOK
2024
6 mths ended
30 Sept 2023
6 mths ended
31 March 2024
NZ$000NZ$000NZ$000
Revenue$48,233$20,778$27,455
Profit/(loss) from operation$(2,788)$(2,590)
(1)
$(198)
Add back non- recurring expenditure
Site and system infrastructure$415$288$127
Staff share based incentive accrual$275$0$275
Employee related and restructuring costs$341$0$341
Depreciation and amortisation expenses$6,192$2,648$3,544
Total$7,223$2,936$4,287
EBITDA before non-recurring expenditure$4,435$346$4,089
(1)
Excludes gain on business acquisition as classified in the interim consolidated financial
statements for the six months ended 30 September 2023

3
WasteCo’s focus for FY25 is optimising the financial performance of the leveraging initiatives taken by
existing businesses during the last year, and acquiring earnings accretive waste management
businesses. The company expects to at least maintain the EBITDA achieved in the second half of
FY24 while delivering sustainable and innovative solutions to customers and partners. Overall
emphasis will continue to be on people, asset utilisation, competitive pricing structures and further
debt reduction. WasteCo also continues to strengthen its reporting and financial processes.

A pricing restructure has already started to flow through to the bottom line and further improvements
are expected as this initiative cascades throughout the business. The company is reviewing key
supplier arrangements and terms to ensure it is utilising the benefits of considerable growth and
increased scale.

There is an immediate opportunity for the company to grow aggressively through a focused and
disciplined acquisition strategy. WasteCo is well positioned to be a market leader as a principal
aggregator of small and medium-sized enterprises in the waste, refuse and industrial services sector.
Consolidation opportunities offer WasteCo significant scalability and synergy value.

New CEO David Peterson is focused on executing a clear and ambitious growth strategy that
leverages the company’s strengths and capitalises on emerging opportunities. This will involve
operational improvements and efficiencies, acquisitions, upskilling management capability, health and
safety improvements, and new technologies.

WasteCo is at the forefront of the waste and sustainability journey of its customers and the
communities it serves – working closely with them to divert waste from landfill, and coming up with
innovative services to reduce their waste burden economically and sustainably.

WasteCo will likely face further cost pressure as the business continues to grow and incur further
increases in compliance costs. However, the diversity of its operations throughout the South Island is
its strength, together with the various revenue streams through the different waste management and
industrial solutions WasteCo provides its customers. In addition, the company is well positioned to
benefit at a corporate level from the leverage to the fixed cost nature of the NZX listing and
compliance costs.

The company’s earnings base is largely underpinned by the provision of essential waste services,
including a significant proportion secured by long-term contracts, with geographic and sector
diversification across councils, healthcare, infrastructure, commercial and industrial customers.

Post balance date, WasteCo consolidated all its asset finance facilities with its banker, Kiwibank. The
consolidation is a mix of principal and interest, and interest only facilities, to provide cash flow benefits
to WasteCo. WasteCo has undrawn facilities with Kiwibank.

Dividend Policy
The directors have not declared any dividend for the 2024 financial year. In the medium term, the
opportunities for growth in the business are expected to be the priority for any surplus funds. The
Board will review the dividend policy as revenue and cashflows allow.
About WasteCo
WasteCo is a leading South Island waste solution company, processing and diverting liquid and solid
waste from landfill. It provides comprehensive solutions for household, commercial, industrial and
local authority customers. WasteCo is New Zealand’s only diamond-certified Toitū Enviromark waste
solutions provider and delivers outcomes that ensure its customers are at the leading edge of the
sustainability frontier. The company provides waste and sorting options as well as waste remediation,
sweeping and industrial cleaning services – all delivered using leading-edge technology and highly
trained customer-focused staff. The Christchurch-based business was established in 2013.