U.S. Markets closed

Edited Transcript of BIN.AX earnings conference call or presentation 22-Aug-19 12:01am GMT

Full Year 2019 Bingo Industries Ltd Earnings Call

AUBURN Aug 26, 2019 (Thomson StreetEvents) -- Edited Transcript of Bingo Industries Ltd earnings conference call or presentation Thursday, August 22, 2019 at 12:01:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Anthony Francis Story

Bingo Industries Limited - CFO

* Chris Jeffrey

Bingo Industries Limited - Chief Development Officer

* Daniel Tartak

Bingo Industries Limited - MD, CEO & Executive Director

================================================================================

Conference Call Participants

================================================================================

* Cameron McDonald

Evans & Partners Pty. Ltd., Research Division - Head of Research

* Michael Peet

Goldman Sachs Group Inc., Research Division - Executive Director

* Nathan Lead

Morgans Financial Limited, Research Division - Senior Analyst

* Peter Steyn

Macquarie Research - Analyst

* Raju Ahmed

CCZ Equities Pty Limited, Research Division - Equities Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for standing by, and welcome to the Bingo Industry (sic) [Bingo Industries] FY '19 Full Year Results Webcast Conference Call. (Operator Instructions) Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, the Managing Director and CEO, Daniel Tartak. Please go ahead.

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [2]

--------------------------------------------------------------------------------

Thank you, and good morning, all, and welcome to Bingo's Full Year Results Presentation for Financial Year 2019. I will start by giving you an overview of the highlights for FY '19, before handing over to our Chief Financial Officer, Anthony Story, who will provide some more detail on the financials.

Our Chief Development Officer, Chris Jeffrey, will then provide you with an update on the integration of Dial A Dump and outline how our strategy and the market in general has evolved over the past year.

Chris will also give you an update on our development program and network reconfiguration. I'll then summarize our safety and sustainability performance and finish with an overview of the outlook for the business.

Before I jump into the highlights of FY '19, I'd like to briefly touch on our safety performance. Nothing has a higher value in our business then the safety of our people. As an organization, we strive for a zero harm workplace, and we know we have further work to do to achieve and maintain this goal. Two tragic incidents during the year were a stark reminder that we must be relentless in our pursuit of zero harm. We are committed to doing everything we can to ensure that our dedicated workforce goes home safely every day. This is nonnegotiable. To achieve this, we are looking to continuously improve our systems and processes and communicate effectively with our employees to shift behaviors and positively influence our culture. Given the maturity of our systems and processes, which are also certified, our initial focus has been on communication with our employees.

Our aim is to ensure the safety message resonates with every employee every day. We are targeting new communication channels and bringing more meaning to existing safety messages to embed ownership of safety across every level of the business. This focus on safety will remain an absolute priority at Bingo going forward.

As we've said for some time, FY '19 was always going to be a transitional year for Bingo, in preparation for a transformational year in FY '20. It's been an extremely busy and productive period for the company, and we're now well positioned to capitalize on the hard work of the team over the last 24 months. Our performance for the year was in line with guidance. We delivered underlying EBITDA of $106.1 million, an increase of 13.2% on FY '18.

This included $92.5 million from the Bingo business, excluding DADI and the 16 -- sorry, a $13.6 million contribution from DADI. Pleasingly, we achieved a material increase in our operating cash flow with a cash conversion rate of 110%. These continue to be key measures for the business, and we will have the same rigor and process applied to them in FY '20.

Our extensive development program was largely completed during the year, with both our West Melbourne and Patons Lane facilities now online and operational. The new Materials processing center MPC 2 at Eastern Creek and the redevelopment of our Mortdale facility are now also well underway. We exceeded our network capacity target of 3.4 million tonnes per annum during the year and expect to increase our network capacity to 4.4 million tonnes per annum in FY '20. We have also made significant progress on our network reconfiguration, which will return approximately $80 million to the business through the sale of noncore assets and our Banksmeadow facility. We've made strong progress integrating DADI into the business.

We expect integration activities to be largely complete by the end of June 2020, and we are on track to deliver annual cost synergies of $15 million equally over 2 years from FY '20. Other revenue synergies have also been identified.

As noted at the first half results, we did not implement a price rise in New South Wales in FY '19, due to the timing of the introduction of the Queensland levy. We have now introduced a significant price rise in July this year, and we expect our margins to benefit from this during FY '20. Turning to Slide 5. You'll see our net revenue for FY '19 was up 32.4% to $402.2 million, and underlying EBITDA grew by 13.2% to $106.1 million. Our underlying EBITDA margin was down from 30.8% in the prior corresponding period to 26.4%. The reduced margin was a result of a number of factors, including headwinds in the multi-dwelling residential markets, the ramp-up of EBITDA margins from our Victorian operations, a number of our sites being offline as part of our network reconfiguration and the impact of the delayed annual price rise due to the Queensland waste levy. While these margins remain sector-leading, they are below our stated group target of 30% and will be a focus in FY '20.

Overall, we saw margins expand in the second half of the year as we began to see the benefits of internalization from the DADI business and a strong performance from our Post-Collections and infrastructure assets, which now accounts for 63% of our EBITDA. This is a deliberate strategy to continue to diversify our earnings stream and grow the defensive infrastructure asset base. We expect this margin expansion to continue in FY '20.

Underlying NPATA was up 22.2%, while we saw strong growth in operating free cash flow to $116.5 million, up 31%. Statutory NPAT was down 41.4% to $22.3 million. This was driven by $18.9 million of transaction and integration cost and a further $14.8 million of Stamp duty, which was expensed in FY '19 rather than capitalized. Our cash conversion was 110%, thanks to our focus on cash management. As expected, our net debt peaked in July of 2019. We have a clear plan in place to ensure this returns to our target range by the end of FY '20, driven by a full year of earnings from assets coming online, and we'll still retain significant headroom in our existing debt facilities.

The Board has declared a final dividend of $0.02 per share, taking the dividend for the year to $0.0372 per share, in line with last year's dividend.

On Slide 6, you can see how our earnings split has changed over the year. For the first time, we have seen Post-Collections, overtake collections in both revenue and EBITDA. Post-Collections infrastructure delivered 50% of the group's revenue for the year and 63% of the EBITDA. Our internal and external customer split of 30-70 is expected to be maintained in FY '20. Turning to Slide 7. You can see our operating footprint, including the DADI business. Our capacity is now 3.8 million tonnes per annum, and we have close to 1,000 employees, and our truck fleet has grown to 350. We are a significantly bigger business than we were 12 months ago, and we expect this growth to continue. This growth is in line with our 5-year strategy outlined at the time of the IPO and provides a footprint to deliver sustainable growth going forward.

On Slide 8, we've included a list of some of our key B&D and C&I projects we've secured during FY '19. We maintained our strong relationships and secured new building and infrastructure work with most of the major construction contractors. Importantly, we maintained our momentum in the C&I sector, securing work with Blue chip companies, including Investor, Charter Hall, Cromwell and JLL.

On Slide 9, in addition to our healthy level of work in hand, we're seeing a strong pipeline of new work prospects across both B&D and C&I in New South Wales and Victoria. We are still an emerging player in the C&I sector, and regardless of the economic outlook can grow through increasing our existing market share.

In B&D, we have secured supply agreements for around 20% of our B&D collections revenue, up from 10% to 15% at IPO. We've also identified about $750 million of potential revenue from B&D projects based on continued investment in major transport and social infrastructure projects across both states.

In C&I, we've achieved a contract renewal rate of around 90% over the past year, our win rates for C&I for new contracts is a healthy 35%. This was due to a significant ramp-up in bidding activity. We've invested heavily in our C&I team and have appointed a new GM responsible for C&I activities nationally. Our C&I pipeline has grown by $130 million in the second half of FY '19, as a result, and we are committed to growing this business organically.

Turning to Slide 10. We're aiming to grow our C&I business to around 40% of our expanded collections revenue over 4 years. The C&I sector offers tremendous growth opportunities for us as we currently hold only a small market share in both New South Wales and Victoria. Over the past 3 years, we have achieved a C&I revenue CAGR of 22% in New South Wales and almost 59% in Victoria. Our C&I team has grown to over 100, and we now have more than 60 trucks in our C&I fleet. We will continue to increase our tendering activity in this sector, targeting opportunities, mainly with non [protestable] waste volumes. I'll now hand over to Anthony to provide some further details on our financial performance.

--------------------------------------------------------------------------------

Anthony Francis Story, Bingo Industries Limited - CFO [3]

--------------------------------------------------------------------------------

Thanks, Daniel. Before I go into details of our financials. I'll start by noting that we were not satisfied with the overall financial performance of the business for the year. That said, I believe we've set the business up well for sustained financial growth going forward and have a clear strategy to improve our returns.

On Slide 12, you can see, as Daniel has already mentioned, net revenue has increased by 32% to $402.2 million with the CAGR since IPO of over 38%. Underlying EBITDA increased in line with guidance to $106.1 million, up 13.2%, with a CAGR of 28.7% since IPO. Whilst underlying NPATA increased by 22.2% to $58.9 million, and operating free cash flow increased by 31% to $116.5 million.

Turning to Slide 13. We've outlined here DADI's contribution to the business was in line with our expectations. DADI contributed underlying revenue of $47.5 million and underlying EBITDA of $13.6 million. For the full 12-month period, DADI achieved revenue of approximately $180 million and EBITDA of approximately $54 million. 85% of DADI's annualized revenue comes from Post-Collections, which was boosted by greater internalization of Bingo's volume, with 15% coming from DADI's collections fleet. DADI's collection fleet as [weeping] goes was also impacted by the same headwinds. The Eastern Creek metal asset continues to benefit from infrastructure investment in Western Sydney.

The asset receives a higher-margin waste mix, including [radioactive] contaminated soils and highly recyclable infrastructure waste, which results in increased recovery rates. DADI has also expanded the breadth and quality of our recycled product range, and we expect this to become an increasingly important element of our business going forward. As DADI is being fully integrated into the business, DADI's earnings will be consolidated into Bingo's existing collections and Post-Collections segments going forward. Organic revenue from the underlying business grew by 26% to $332.8 million, and organic EBITDA increased by 2.3% to $88.4 million. We expect this to improve further as we benefit from the cash flow from our development program, which is now largely complete.

On Slide 15, you can see that Post-Collections is now our largest contributor to revenue, up 41% to $243.8 million, while DADI was a key contributor to this growth, it was achieved despite several of our key sites being offline during the year. Collections revenue was up 20.7% to $213.5 million, despite contributing a reduced portion of overall revenue.

Post-Collections was also the largest contributor to earnings, with an EBITDA of $67.2 million, being up 37.9% on prior year and making up 63% of our underlying EBITDA. Post-Collections EBITDA margin was largely maintained at around 28%. Our group EBITDA margin has stabilized at 26.4% and is an improvement on the group margin at the first half of 25.5% and is expected to improve further in FY '20.

Slide 16 provides some more detail on the performance of our collections business. While revenue was up 20.7% on the back of DADI's contribution and a full year contribution from Victoria, our underlying EBITDA was down around 8% as a result of the softer residential market and competitive pricing pressure. Our Victorian business experienced strong growth during the year. And our C&I business grew by 19% year-on-year. We are targeting further growth in both of these parts of our business in FY '20. Turning to Slide 17. Our Post-Collections business continues to outperform, with revenue increasing by 41% to $243.8 million and underlying EBITDA up 38% to $67.2 million. And as mentioned previously, post-collection was the largest contributor by revenue and EBITDA, despite a number of our sites being offline for development during the year. The EBITDA margin has largely been maintained, despite a delay in the implementation of our annual price rise. And given the defensive nature of the assets, we expect this margin to be maintained.

Recycled product sales represent 5% of Post-Collections revenue and is expected to grow further with a full year contribution from DADI. Our Bin manufacturing business Toro continues to perform strongly and supported our collections business. Toro's revenue was up 11% and EBITDA are up 48% from FY '18. The performance of our other segment was impacted by higher corporate costs, which included higher insurance costs, [low] earnings from equipment rental, higher public company and corporate cost and the implementation of the long-term incentive program. Slide 19, shows we've maintained the strong balance sheet with net debt of $275.8 million and a leverage ratio of 2.6x. After allowing a full 12-month contribution from DADI, the leverage ratio would have been 2x.

Our net debt is in line with expectation. But by the end of FY '20, we expect gearing to be at the upper end of the target range of 1.5 to 2x, following free cash flow generated from DADI, Patons Lane and West Melbourne and the divestment of Banksmeadow and other assets.

On Slide 20, you can see that the business continues to generate strong cash flow to support our ongoing growth, the cash conversion of 110% was well above our long-term target of more than 90%, due to the continued focus on cash collections and in working capital.

Total CapEx during the year was $232 million, and this includes $84 million related to property acquisitions and $100 million for our development program. On a steady-state basis, I'd expect the underlying CapEx requirement for the business to be 8% to 10% of revenue.

Moving to Slide 21. We generated a return on capital employed of 9.2% after allowing for the landfill amortization, and this was down 21% in FY '18. This was due to the acquisition of Patons Lane and DADI assets, which have significant property assets and limited earnings in the period. While this was below our long-term target of 15%, we have a clear pathway to return it to a level in the medium term, as we start to reap the benefits from our development program, particularly West Melbourne and Patons Lane and a full year contribution from DADI. Going forward, we'll maintain our fiscal discipline with any future incremental redevelopment opportunities and capital allocation decisions having a ROCE hurdle of 20%.

I'll now hand over to Chris to provide an update on the DADI integration.

--------------------------------------------------------------------------------

Chris Jeffrey, Bingo Industries Limited - Chief Development Officer [4]

--------------------------------------------------------------------------------

Thanks, Anthony. Before I start, I'd like to draw your attention to Slide 22. Many of you will have seen this on our Investor Day in June, shows our recycled product chart at Eastern Creek. We've rebranded our expanded range of recycled products under the eco product banner, and we expect this to become a more significant part of our business as the government moved to closely mandate the use of recycled product in their projects.

Turning to Slide 23. Over the last 4 months, we've made great progress in integrating DADI into the business. We expect integration to be completed by the end of FY '20, and we are on track to deliver the $15 million per annum in cost synergies. We've inherited and experienced a knowledgeable team from DADI and appointed key DADI people to senior management positions across the business. At Eastern Creek, construction of MPC 2 recycling facility has commenced, and we started the master plan for our proposed recycling ecology Park. We've also applied for modifications to our license of the site to allow us to increase our landfill capacity to 1 million tonnes per annum and to extend our operating hours. We expect to receive a decision on this before the first half results for FY '20. We've also made the decision to move to a single Bingo brand, phasing out the DADI brand over time.

Slide 24, shows how we're progressing against our specific integration objectives. I won't go through these in detail, but you can see that we're, by and large, on track against the detailed integration plan.

Turning to Slide 25. We are well advanced in our pursuit of cost synergies of $15 million per annum. These are comprised of operational efficiencies, internalization and overhead reductions, we expect to achieve this equally over the next 2 years. There's also some potential revenue synergy upside from a few factors, including modifications to our license at Eastern Creek, revenue upside from the interaction of the Queensland Levy, the commencement of MPC 2 in FY '21 and an expanded recycled product offering. Slide 26 is Daniel's favorite, our proposed for Recycling Ecology Park at Eastern Creek, we've commenced the master plan for this exciting project, and we expect construction of MPC 2 to be completed in the first half of FY '21. We've committed $60 million in CapEx for MPC 2, which will be capable of processing both in B&D and C&I waste to deliver EBITDA in excess of $15 million, with a ROCE of 20%, will be one of the most sophisticated recycling facilities in the country.

Moving now to Slide 28. We continue to benefit from a favorable operating environment with positive economic and regulatory drivers supporting our business model. The [recent communication] from COAG regarding the banning of the export of certain waste types have further focus [for] spotlight on the waste and recycling industry. We continue to see both federal and state governments moving to establish both policy and regulatory environment that support a circular economy and are favorable to our business model.

Elections earlier this year have provided political stability and ensure that the infrastructure will be maintained for the foreseeable future. Both New South Wales and Victoria have committed to large-scale infrastructure investment with over $200 billion committed in total and a further $100 billion committed at the federal level. Whilst residential market is expected to be soft for the next 12 to 24 months. The overall construction market is expected to remain robust at approximately $130 billion in FY '20.

We know that one of the key outcomes from the COAG meeting on August 9 was the move to ban the export of waste products, including plastic, paper and glass, Bingo has supportive of this approach, we believe it will lead to a more robust recycling industry, helped develop a sustainable end market for recycled products and the adoption of waste-to-energy in this market. Levies are also increasing in South Australia in Queensland with Victoria expected to follow soon. We support this outcome to ensure the conversion from landfill is maximized. Further, Bingo supports the standardization of levies and policy across state boundaries.

Slide 29 outlines our performance against our 3 core strategic enablers. Our prior year focus was on geographical expansion and vertical integration. We were pleased to deliver the DADI acquisition and expand our Victorian footprint. We've maintained our market-leading position in B&D collections and Post-Collections. Achieved double-digit growth in C&I and delivered a significant uplift in our advance recycling processing capacity in both New South Wales and Victoria. We've also maintained our recovery rate in New South Wales at over 75% and are now internalizing close to 100% of our earth waste volumes in New South Wales. This year, we'll be focusing on the first of the 3 strategic enablers, protecting and optimizing the core. We are aiming to increase efficiencies to enable us to preserve and grow our EBITDA margin, grow our market share of the C&I market and increase our recovery rate for further investment in advanced recycling equipment. We intend to work hard to maintain our key points of difference in the market, our superior customer service, our focus on technology and our recycling led approach.

We now have the asset base to ensure that this occurs organically in FY '20. At this stage, we expect it in Queensland in FY '21.

Turning to Slide 31. We made great progress on our development program during the year, and the announced program is now largely complete. Our new West Melbourne facility opened in April, and this will enable us to enhance our margin expansion in Victoria. Our Patons Lane recycling in landfill side is also open and has been configured to complement the combined Bingo DADI network. This facility was delivered end-to-end in approximately 18 months, at the same time that West Melbourne became operational. This is a testament to the hard work of our internal development team. We've completely reconfigured our network to deliver enhanced operational outcomes under the reconfiguration, sites have been rationalized to maximize our return on assets, reduce operating costs and optimize our network capacity.

Slide 32 provides some more color on our network reconfiguration. As you can see, our capacity has grown from 1 million tonnes per annum in IPO to an expected 4.4 million tonnes by the end of FY '20. Eastern Creek provides us with 2 million tonnes of capacity. MPC 2 will enable us to fully utilize this capacity and increase our recovery rates. Our overall goal was a capacity of 3.4 million tonnes, which was exceeded with the DADI acquisition, providing scope for asset divestment to improve returns. We expect to divest a few of our sites and return approximately $80 million of capital back to the business.

I'll now hand back to Daniel to provide a review of our sustainability performance.

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [5]

--------------------------------------------------------------------------------

Thank you, Chris. Slides 34 to 37 outlined our sustainability performance in FY '19, including safety. Sustainability's at the core of our business, and it's exciting to be leading the young company that can shape its social obligations in a way that leads to positive outcomes, whilst also improving the bottom line. I'm proud to advise that ACSI in its latest assessment of ASG on reporting practices has raised our sustainability disclosure in 2018 at a leading level in the first year, we've been rated. This is a great achievement and recognition of the time and effort we have spent making sustainability a point of difference for Bingo. We've aligned our sustainability targets for the UN sustainable development goals that we believe we can have the most positive impact on. These are reflected in the long-term sustainability commitments.

Over the last [time] 12 months, several factors have elevated waste to a strategic and material issue for both organizations and governments. This provides us with an opportunity to possibly address the emerging challenges facing the waste industry. Our business is built on the voting rights from landfill. And for the third consecutive year, we [volatilely] ordered our recovery rates.

This year, we expanded the order to include the Eastern Creek facility. For FY '19, we achieved an average recovery rate of 77%, in line with our target of greater than 75%. We are encouraging government to make these audits mandatory for all industry participants to improve the integrity of resource recovery data. As a business, we have the opportunity to significantly enhance environmental outcomes through increasing diversion rates and transforming recycling and disposal in New South Wales through our vision to create a Recycling Ecology Park at Eastern Creek in Western Sydney's growth precincts. The diversity of our team of GOgetters is the strength of our business and something of which I am very proud. Diversity is important, but it is only through inclusion that we really tap into the potential of our differences. Over the next 18 to 24 months, we will focus our inclusion efforts on groups who were traditionally disadvantaged and/or underrepresented, including Aboriginal and Torres Strait Islander peoples, those with disabilities and women.

Each member of my executive leadership team has undertaken to be champions of one of these focus areas to drive awareness and change throughout the organization. The importance of diversity also extends to our Board, who are actively seeking to add an additional female to achieved our goal of 30% female directors. As I mentioned earlier, we have a strong focus on safety to ensure we achieve our zero harm objective. To support this focus, a comprehensive new safety training and communication plan has been rolled out across the business to ensure our safety messages resonate with all our people on a personal level through a number of initiatives, including the launch of our new communication channels and engagement protocols, the relaunch of our Think Safe, Be Safe, Home Safe messaging. The launch of the Bingo Zero Harm rules, an increase in the scope function size and reach of our employee safety committee, which we've renamed the Zero Harm committee.

Slide 39 provides an outline of some of the headwinds and tailwinds facing our business, most of which we have outlined in previous slides. As we've flagged in February, the economic environment remains challenging. The residential market is still subdued, particularly the multi drilling residential markets. We've also seen pricing pressure from competition in B&D collections across residential, small projects and individuals. We've had to absorb higher cost related to regulatory compliance, and we've seen a time delay between the announcement of major infrastructure projects and their commencement.

But we also have several tailwinds in our favor. Continued population growth and growing waste generation are favorable to our business. We're still seeing strong infrastructure investment, and we have scope to grow strongly in the C&I sector, regardless of the near-term economic outlook. Importantly, federal and state governments continue to provide a supportive regulatory environment for recycling and for our business model. In our view, these potential tailwinds outweigh the potential headwinds and create a favorable operating environment for Bingo going forward.

So turning to Slide 40. And our outlook for FY '20. As I've said for some time, FY '19 was a transitional year as we prepare for transformational year in FY '20. This still remains the case. In the coming year, we expect to see solid year-on-year growth as we benefit from a full year contribution from Patons Lane, West Melbourne and DADI, we'll also benefit from increased volumes resulting from the introduction of the Queensland Waste Levy and the pricing increase we implemented in July. Despite some headwinds in the multi drilling residential market, the overall market outlook remains positive.

The continued strength of the infrastructure market and opportunity in the C&I sector will ensure Bingo remains resilient. Our FY '20 strategy is focused on protecting and optimizing the cause. Central to this is the completion of the DADI integration and the consolidation of our Victorian business in order to grow our EBITDA margin and maximize our ROCE. We'll be providing an FY '20 guidance at our AGM on the 13th of November this year. That marks the end of the slide presentation. Please note we provided additional slides in the appendices for your information. Thank you for listening. I'll now invite you all to ask questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) The first question comes from the line of Peter Steyn from Macquarie.

--------------------------------------------------------------------------------

Peter Steyn, Macquarie Research - Analyst [2]

--------------------------------------------------------------------------------

A quick question, re: price. Could you give us a bit of a sense of how much of your price increases are sticking, particularly on the collection side of the business? And perhaps if you can comment on the price collection side of it as well?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [3]

--------------------------------------------------------------------------------

Thanks, Pete. Yes, so we are comfortable with where price is at the moment, it is relatively early in the scheme of things. But no, we're comfortable that the market has shifted. The market pricing has moved up as we expected to recover all the costs that have been incurred by the industry. So middle of August, we're quite comfortable with where collections and Post-Collections are -- is sitting.

--------------------------------------------------------------------------------

Peter Steyn, Macquarie Research - Analyst [4]

--------------------------------------------------------------------------------

Okay. So you've not seen any degradation at all or some price increases that you may have sought that haven't necessarily held?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [5]

--------------------------------------------------------------------------------

No. So on average, we're comfortable with where things are at. And as you know, there's -- we increased pricing to cover cost. And there is some negotiation between some of our customers and ourselves. But no, on average, we're quite comfortable with where pricing is landing.

--------------------------------------------------------------------------------

Peter Steyn, Macquarie Research - Analyst [6]

--------------------------------------------------------------------------------

Okay. And then just wanted to ask you a little bit of detail on the Page 14 slide. So your organic and inorganic EBITDA growth, in particular, would I be doing the correct thing to say that the $17.7 million dollars' worth of incremental EBITDA that you had in FY '19 from -- by DADI and the prior acquired. If I reverse the DADI contribution, then you have $4.1 million [vested] coming out of the Victorian, NRG, and Has-a-Bin businesses. Is that correct? And then how does that sort of wash up against the 7.3% in the prior year? And is there any detail behind that for us?

--------------------------------------------------------------------------------

Anthony Francis Story, Bingo Industries Limited - CFO [7]

--------------------------------------------------------------------------------

Yes. Peter, your analysis there is correct that the $17.7 million includes the DADI's and the Victorian contribution. So the way we look at organic and inorganic is -- it is inorganic for 12 months and then it goes into the organic button -- bucket. So for Victoria, we had 9 months contribution last year. And this year, it's 3 months contribution in that $17.7 million.

--------------------------------------------------------------------------------

Peter Steyn, Macquarie Research - Analyst [8]

--------------------------------------------------------------------------------

Okay. Perfect. So it's that 3-month period, that's the offsetting factor. And then Anthony, while I've got you. Just a quick question, re: tax, if you could give us a bit of a sense -- it's been difficult to get through all the detail thus far, but it seems like your tax charge was relatively low. Could you just perhaps comment on that?

--------------------------------------------------------------------------------

Anthony Francis Story, Bingo Industries Limited - CFO [9]

--------------------------------------------------------------------------------

Yes. Yes, Peter. So the tax, as we called out, we have written off the stamp duty this year, relating to the DADI acquisition. So that is a nondeductible tax item. But we've also recognized a DTA, which credits to our tax expense of about $7.5 million because of the divestment of -- or potential divestment of the Banksmeadow that's happening. So we -- there's a one-off win, if you like. So our tax rate is lower than previous years.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

The next question comes from the line of Michael Peet from Goldman Sachs.

--------------------------------------------------------------------------------

Michael Peet, Goldman Sachs Group Inc., Research Division - Executive Director [11]

--------------------------------------------------------------------------------

Just around the -- on the pricing side, I guess, but related more to, I guess, to volume: What are you seeing? Or any indication of what's happening with volumes that were going to Queensland? Any sort of early indications of what might be staying? I know all of yours are staying -- but in the market generally?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [12]

--------------------------------------------------------------------------------

Yes, Mike. Yes. So definitely our volumes are staying in the Sydney market. Most of the transfer and recycling facilities that compete with our business is still going to Queensland, and the majority of the landfills that [worked] hard into Queensland pre-July are now keeping their waste in Sydney. So there is a mixture. I believe it's probably 50% of the waste is still going there, pretty much in line with where we predicted.

--------------------------------------------------------------------------------

Michael Peet, Goldman Sachs Group Inc., Research Division - Executive Director [13]

--------------------------------------------------------------------------------

Okay. Good. And just on the macro side, looking at maybe the last quarter of fiscal '19 but also into the early parts of this year, you've highlighted, obviously, resi's going to be a headwind. But just wondering, even with infrastructure, are you seeing -- we saw some comments from SUEZ saying that some completions here in the Sydney market have impacted infrastructure volumes here. Can you just make a comment on the macro, how you're seeing it at the moment?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [14]

--------------------------------------------------------------------------------

So in terms of infrastructure volumes, there has been a bit of a lull between the end of jobs and the start of new jobs, but the pipeline of infrastructure work in FY '20 looks very positive for our business and we have definitely secured quite a lot of that volume. So we expect the decline in resi, which we've flagged a few times prior to this, to be more than offset from the infrastructure volumes, particularly the fact that, obviously, we now have the Eastern Creek asset and those infrastructure volumes really do complement that asset.

--------------------------------------------------------------------------------

Michael Peet, Goldman Sachs Group Inc., Research Division - Executive Director [15]

--------------------------------------------------------------------------------

And then if you overlay that, sort of roughly [50] of volume that might be staying, where does that leave the total market? Just trying to get at -- would that be up slightly, do you think? Or at least flat with where it was 1 year ago?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [16]

--------------------------------------------------------------------------------

I think we believe it's probably flat with what market is -- sorry, what volume has come out of the market with what's coming to the market. There is still decent opportunity later on to target more of the volume going to Queensland. At this stage, we don't see a need for it. We are quite comfortable with the volumes that we are seeing currently and that we will see through the course of FY '20.

--------------------------------------------------------------------------------

Michael Peet, Goldman Sachs Group Inc., Research Division - Executive Director [17]

--------------------------------------------------------------------------------

And just with the expansion of potentially 1 million tonnes in the landfill at Eastern Creek, do you think you would utilize that straight-off the bat, given the current macro -- but do you think you would ramp it up to 1 million as quick as possible?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [18]

--------------------------------------------------------------------------------

Yes, we would. Due to the fact that we are now leaving our own landfill volume in Sydney, yes, we believe that we could definitely fill that 1 million tonne per annum with our own volume and with the jobs that we believe we've -- what we've secured, and we believe we'll continue to win.

--------------------------------------------------------------------------------

Michael Peet, Goldman Sachs Group Inc., Research Division - Executive Director [19]

--------------------------------------------------------------------------------

And just last one on MPC 2, you've called out that hurdle, which you've had a good track record of sort of meeting or beating, I guess. But where do you see MPC 2 sitting versus, say, some of the other projects that you've done in the past?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [20]

--------------------------------------------------------------------------------

In terms of financial hurdles?

--------------------------------------------------------------------------------

Michael Peet, Goldman Sachs Group Inc., Research Division - Executive Director [21]

--------------------------------------------------------------------------------

Yes, in terms of that hurdle. Is it in line or are particular aspects of it that might be more attractive?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [22]

--------------------------------------------------------------------------------

No, I think this asset is definitely going to meet our 20% ROCE hurdle. Hopefully more. But I think it's probably on the higher end in terms of a financial benefit, this project -- due to the size and scale of the project and the fact that it is integrated at Eastern Creek, we believe it will give more of a positive benefit compared to other projects.

--------------------------------------------------------------------------------

Operator [23]

--------------------------------------------------------------------------------

The next question comes from the line of Cameron McDonald from Evans & Partners.

--------------------------------------------------------------------------------

Cameron McDonald, Evans & Partners Pty. Ltd., Research Division - Head of Research [24]

--------------------------------------------------------------------------------

You made a comment regarding Patons Lane providing a full year contribution. I think at the site, too, recently, you sort of indicated that it potentially would take a bit of time to ramp up. So do you actually think that you -- once it's fully operational, you'll make up that sort of slow -- that ramp up profile to be a full year contribution?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [25]

--------------------------------------------------------------------------------

Yes, Cameron. We sure do. So we now -- we are accepting waste into the recycling facility from early July. We now are landfilling into that facility. And as you know, the facility has a yearly limit of 450,000 tonnes. So we do have the next 10.5 months to make up this -- I guess the slow start in July and early August. So still very comfortable that we'll get the full earnings contribution at that site by ramping the volumes up.

--------------------------------------------------------------------------------

Cameron McDonald, Evans & Partners Pty. Ltd., Research Division - Head of Research [26]

--------------------------------------------------------------------------------

Okay, great. And then with the license approval to gather 1 million tonnes at Eastern Creek. What's the timing of that?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [27]

--------------------------------------------------------------------------------

So we estimate the timing to be, hopefully, just before our half year results in February of 2020.

--------------------------------------------------------------------------------

Cameron McDonald, Evans & Partners Pty. Ltd., Research Division - Head of Research [28]

--------------------------------------------------------------------------------

Okay. And when do you expect -- and do you expect that approval would allow you to start straight away? Or do you -- would there be a time lag from the approval to actually ramping it up?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [29]

--------------------------------------------------------------------------------

No, we expect it to start straight away. Once you get the approvals and you amend your licensing with EPA, we expect to start straight away.

--------------------------------------------------------------------------------

Cameron McDonald, Evans & Partners Pty. Ltd., Research Division - Head of Research [30]

--------------------------------------------------------------------------------

And then you've just sort of mentioned some commentary, and you've appointed an executive to C&I. Can you just talk a little bit about the strategy there? And is there any -- particularly down in Victoria, we've obviously seen some disruption in the market more broadly. Is that providing you any opportunities or things that you can look at?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [31]

--------------------------------------------------------------------------------

Yes. So we've promoted one of our existing employees that's been with the company for 8 years to the GM of that division. As we said in February at the half, we wanted to put more of a focus on the C&I growth. So appointing this position was part of that plan. We are seeing definitely more opportunities in both New South Wales and Victoria, I guess, as a result of the recycling crisis that we keep hearing about. The fact that we are a big recycling company in both states is giving us a really good opportunity to continue winning our fair share of work.

--------------------------------------------------------------------------------

Operator [32]

--------------------------------------------------------------------------------

The next question comes from the line of Raju Ahmed from CCZ Equities.

--------------------------------------------------------------------------------

Raju Ahmed, CCZ Equities Pty Limited, Research Division - Equities Analyst [33]

--------------------------------------------------------------------------------

A couple of quick questions. On the C&I side, are you able to give us a sense of what EBITDA you're generating right now on a run rate basis or even an indicated margin?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [34]

--------------------------------------------------------------------------------

Raju, we don't split the C&I EBITDA in comparison to the B&D. The margin at the moment is tracking in line with the current collection -- with the current collections margin. And over the past years, as collections has grown in scale and size, our margin is improving.

--------------------------------------------------------------------------------

Anthony Francis Story, Bingo Industries Limited - CFO [35]

--------------------------------------------------------------------------------

And Raju, you can see we have called out in -- on Slide 16 that B&D's revenue was 76%. So you can see the contribution, if you want me to backfill the C&I contribution for you.

--------------------------------------------------------------------------------

Raju Ahmed, CCZ Equities Pty Limited, Research Division - Equities Analyst [36]

--------------------------------------------------------------------------------

Sure. Okay. The second question is around the Banksmeadow asset sale. You've sort of highlighted now that the collective, as in Banksmeadow plus a couple of the other assets will give you up to $80 million in, I suppose, sale value. What do you see is the Banksmeadow contribution to that?

--------------------------------------------------------------------------------

Anthony Francis Story, Bingo Industries Limited - CFO [37]

--------------------------------------------------------------------------------

Raju, given we're in the final stages of selling that asset, it's commercial in confidence. So I think you can appreciate we won't break out that $80 million number for the moment.

--------------------------------------------------------------------------------

Raju Ahmed, CCZ Equities Pty Limited, Research Division - Equities Analyst [38]

--------------------------------------------------------------------------------

Okay. Understood. Now just a couple of minor things. One of them -- on note 3, you've got equipment rental, other, that's gone up from $1.9 million in revenue for FY '18 to $4.1 million in FY '19. Is that revenue -- I know it's miniscule revenue. But does that materially contribute to the EBITDA?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [39]

--------------------------------------------------------------------------------

As you said, Raju, it's relatively minor. So it's just redundant equipment that we can rent out and hire out. So it's better use of our equipment when we don't need it, but it is relatively minor.

--------------------------------------------------------------------------------

Raju Ahmed, CCZ Equities Pty Limited, Research Division - Equities Analyst [40]

--------------------------------------------------------------------------------

But I suppose what I'm getting at is that the circa $2 million in uplift, is that all EBITDA, given what you just said?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [41]

--------------------------------------------------------------------------------

Yes. But in saying that, it's also, we've got the cost of the equipment as well. So there's not much profit in there.

--------------------------------------------------------------------------------

Raju Ahmed, CCZ Equities Pty Limited, Research Division - Equities Analyst [42]

--------------------------------------------------------------------------------

Okay. All right. I just wanted to clarify that. And look, the last one -- I won't take too much time -- is around the guidance. No formal guidance. I should say, no numerical guidance, and I can appreciate that. But look, just a very, I suppose, basic question is -- as it stands now, is it a case of you can't give guidance for -- because of the outlook being less visible? Or is it you just won't?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [43]

--------------------------------------------------------------------------------

Raju, I am very optimistic with FY '20; as I've said many times, it will be definitely a transformational year for us. We do think it's quite prudent for us to just be, I guess, take a bit more time before we give guidance to the market. There is -- a lot has happened in the waste market in the industry. As you know, Queensland levy, significant price rise, quite a few sites offline now coming online. But I am very optimistic with where FY '20 is heading.

--------------------------------------------------------------------------------

Operator [44]

--------------------------------------------------------------------------------

The next question comes from the line of Nathan Lead from Morgans Financial.

--------------------------------------------------------------------------------

Nathan Lead, Morgans Financial Limited, Research Division - Senior Analyst [45]

--------------------------------------------------------------------------------

Just a couple of detail ones, if I could. First up, the landfill levy. You haven't carved out that revenue within the numbers. Could you maybe give us a number of what that is for FY '19?

--------------------------------------------------------------------------------

Anthony Francis Story, Bingo Industries Limited - CFO [46]

--------------------------------------------------------------------------------

Yes, Nathan. So for the year, DADI's levy was about $88 million for the year.

--------------------------------------------------------------------------------

Nathan Lead, Morgans Financial Limited, Research Division - Senior Analyst [47]

--------------------------------------------------------------------------------

Okay. And then your...

--------------------------------------------------------------------------------

Anthony Francis Story, Bingo Industries Limited - CFO [48]

--------------------------------------------------------------------------------

That's for the full year, just to be clear. Not for the time that we've owned it.

--------------------------------------------------------------------------------

Nathan Lead, Morgans Financial Limited, Research Division - Senior Analyst [49]

--------------------------------------------------------------------------------

And what about for the time that you've owned it?

--------------------------------------------------------------------------------

Chris Jeffrey, Bingo Industries Limited - Chief Development Officer [50]

--------------------------------------------------------------------------------

We'll have to come back to you with an exact number on that. Sorry, Nathan.

--------------------------------------------------------------------------------

Nathan Lead, Morgans Financial Limited, Research Division - Senior Analyst [51]

--------------------------------------------------------------------------------

Okay. And when you guys talk about your margin targets, is that excluding the landfill levy revenue or is that inclusive of it?

--------------------------------------------------------------------------------

Chris Jeffrey, Bingo Industries Limited - Chief Development Officer [52]

--------------------------------------------------------------------------------

Nathan, the landfill levy is part of revenue. So we include the revenue and the levies come back at a -- at the cost. So our margins after allowing for the cost of the levy.

--------------------------------------------------------------------------------

Nathan Lead, Morgans Financial Limited, Research Division - Senior Analyst [53]

--------------------------------------------------------------------------------

Okay. So when I remove the levy out of it, you're actually targeting EBITDA margins quite a bit higher.

--------------------------------------------------------------------------------

Anthony Francis Story, Bingo Industries Limited - CFO [54]

--------------------------------------------------------------------------------

Significantly higher.

--------------------------------------------------------------------------------

Nathan Lead, Morgans Financial Limited, Research Division - Senior Analyst [55]

--------------------------------------------------------------------------------

Yes, okay. And look, I suppose, just for modeling purposes, can you give us an idea of what sort of volumes went through your Post-Collections network in New South Wales and Victoria, just excluding DADI in FY '19?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [56]

--------------------------------------------------------------------------------

So Nathan, it's Daniel. For DADI for the 12 months, they had about 1.3 million tonnes go through the Eastern Creek facility of their 2 million capacity. And for the BINGO network, we don't disclose the total amount of volume that goes through that network.

--------------------------------------------------------------------------------

Nathan Lead, Morgans Financial Limited, Research Division - Senior Analyst [57]

--------------------------------------------------------------------------------

Okay, that would be helpful for the modeling there. Okay. You're obviously pretty bullish on hitting that 15% ROCE target. What's the capital employed base that you're using for that? Is it around that sort of $1.2 billion number?

--------------------------------------------------------------------------------

Anthony Francis Story, Bingo Industries Limited - CFO [58]

--------------------------------------------------------------------------------

Yes. Roughly, you're about right, Nathan.

--------------------------------------------------------------------------------

Nathan Lead, Morgans Financial Limited, Research Division - Senior Analyst [59]

--------------------------------------------------------------------------------

Yes. Okay, so a pretty significant increase if you can hit that. Just this, the final one from me. Obviously, you announced the buyback some time ago but hasn't been much action on it. What's the current thinking there?

--------------------------------------------------------------------------------

Anthony Francis Story, Bingo Industries Limited - CFO [60]

--------------------------------------------------------------------------------

Yes. Obviously, it's still on the floor. We nibbled at the buyback early on when the share price was much lower, and we wanted to have the benefit of the Banksmeadow sale of asset before we did anything substantial. Obviously, in the interim, we've moved on to do MPC 2 and the share price has recovered, but that buyback remains on the floor, and we'll continue to look at it over the course of FY '20.

--------------------------------------------------------------------------------

Nathan Lead, Morgans Financial Limited, Research Division - Senior Analyst [61]

--------------------------------------------------------------------------------

Okay. And you also made the comment about how MPC 2 is going to end up fully utilizing the 2 million capacity for DADI. Throughput was 1.3 million. So does MPC 2 take that 1.3 million to 2 million?

--------------------------------------------------------------------------------

Daniel Tartak, Bingo Industries Limited - MD, CEO & Executive Director [62]

--------------------------------------------------------------------------------

The MPC 2 has the potential to take that difference. It all depends on the type of mix we get through that facility. But definitely, it's being built to cater for a very large amount of material, but also the 2 million caters for the 1 million -- the uplift from 700,000 tonnes into landfill to the 1 million tonnes into the landfill. So depending what type of waste we get, we either might choose to put more through the MPC or more into the landfill -- depends on the mix of waste that comes through our business. But with the increase of the 1 million tonnes limit and with MPC 2, we will be running at full capacity at Eastern Creek.

--------------------------------------------------------------------------------

Operator [63]

--------------------------------------------------------------------------------

(Operator Instructions) We have a follow-up question from the line of Peter Steyn from Macquarie.

--------------------------------------------------------------------------------

Peter Steyn, Macquarie Research - Analyst [64]

--------------------------------------------------------------------------------

Sorry, just a quick follow-up on Energy from Waste. You've previously spoken about your interest in Victoria; 2 fairly significant projects entering approval stages there now. Do you sort of feel like there's a risk of being crowded out if you don't move faster? How would you think about the opportunity there?

--------------------------------------------------------------------------------

Chris Jeffrey, Bingo Industries Limited - Chief Development Officer [65]

--------------------------------------------------------------------------------

No. Pete, we're really excited. We've been looking at, as you know, waste-to-energy for the last 18 months. We have a number of identified projects in both New South Wales and Victoria. The situation we're in is perfect from our position. Obviously, with the waste hierarchy, the people developing the projects need access to recycled material. We are sitting on a significant portion of it. We have projects that we're looking at in both states and are very comfortable that we won't be crowded out and even further from that perspective, we could develop a facility for our own materials. So we're comfortable we'll play a part in waste-to-energy in the near term.

--------------------------------------------------------------------------------

Operator [66]

--------------------------------------------------------------------------------

We have reached the end of question-and-answer session. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.