Comprehensive Financial Analysis of BINGO Industries (1H19)

This assignment analyzes the financial performance of BINGO Industries. It begins with an overview of the company's business model and key strategies. The assignment then summarizes key issues affecting BINGO's profits in the six months ending December 31, 2018, highlighting favorable and adver...Read More

Q.No. 1
1. Business Model of Bingo
Answer:
Bingo Industries is one of the ASX Listed company and it operates its business since 2017.
Followed by this company operates as a residential and commercial waste services, recycling
services and bin manufacturing.
For the waste collection service the company operates in a strategy of diversion of waste from
landfill which will be through a recycling led solution and the after the recycling the amount so
generated will be a source of investment in technology and continuous innovation to enhance
sustainability outcomes and maximize returns. (Annual report, Bingo
industries.com, 2018)
So, on the above strategy intent the enablers are:
a. Protect and optimize the core by means of ensuring the adequacy of business system,
develop a customer centric model which will ensure that a reliable and high quality
service is been provided to the customer and taking the feedback.
b. Expansion of Geographic expansion in across Australia so that the company should
concentrate on the market from where to optimize their business operations.
c. Once the market has settled then it enhance their vertical integration by means of
Alternate Waste Treatment for putrescible waste, solution for Refuse derived Fuel and
build scale in C&I business to capture efficiencies.
2. Summarise what key issues (both favourable and adverse) have been affecting BINGO profits
in the 6 months to 31 December 2018.
Answer:
As per the financial year ending june, 2018, the revenue for the year has been increased 32%
from the year 2017 and so the net profit has been increased to $38,003,000 which is increased by
91% form last year.
And for the First half year to 2019, the figures of revenue and profit has also been increased by
24% in compare to last 6 months of 2018. The reason for such increase in revenue and profit
during the 6 month from the annual report are:
Favourable:
- There was contribution from the victorian business initially at lower margins in terms of
material in post collection;
- The operating free cash flow of the company has been increased by 33% which also help
to increase the cash conversion to 103%, so the turnover cycle impressed the profitability
of the company.

- NSW network reconfiguration plan is ongoing and the operational efficiencies makes the
difference in increase in profitability of the company.
Adverse:
- Headwinds in the multi-dwelling residential construction market in NSW and VIC has
been impacted and due to which the EBITDA margin was been underlying during the 6
months.
- Carrying cost for the operating business has been increased for the period and due to
which the annual price rise has been delayed for the company.
- The facility cost from the banks were also on the higher side.
(F19 Report, 2018)
Q.no. 2
Calculate (provide workings) and verify the following financial items for BINGO for in respect
of the 6 month half year period ending 31 December 2018 (i.e. 1H19):
A. Equity market capitalisation of BINGO at period end 31 December 2018 (3 marks)
Answer:
The market capitalization of the company is $1,249 million. (Reuters.com, dec 2018)
Calculation: No. of shares * Current Market Price
= 748137000*1.67
= $1,249,388,790
B. Enterprise Value of BINGO at period end 31 December 2018 (4 marks)
Answer:
Enterprise value of the company = Market Capitalization + Total Debt – Cash or cash equivalent
= 1249388790+97779000-140308000
= 1,206,859,790
C. Annualised Return on Equity (ROE) for 1H19 (4 marks)
Answer:
ROE = Net income / Average shareholders equity
= 13359/706193
= 1.89%
D. Statutory EBITDA for 1H19 (4 marks)

Answer:
Net Profit : 13,359
+ Tax income 7,657
+Interest cost: 1,536
+ Depreciation and amortization : 14,081
EBDITA = $36,633 ('000)
E. Underlying EBITDA (5 marks)
Answer: $43.8 million
F. Net Debt at 31 December 2018 (4 marks)
Answer:
Current liabilities : 97,313
Total non-current liabilities: 466
Total Debt of the company = $97,779,000
G. Net tangible assets per share at 31 December 2018 (4 marks)
Answer:
Total Tangible assets: 577,368
Total shares :748137
Net tangible assets per share = $0.77 per share

Q.no. 3 Determine a forecast EBITDA in FY20 for BINGO on standalone basis for FY20
excluding the impact of the acquisition of DADI.
Answer;
After taking the FY 18 as the base year, the standalone EBITDA for FY20 has been calculated
below:
Particulars FY 2018 FY 2019 FY 2020
Revenue 300,203 372,252 472,759.68
Other income 3,555 2,986 717
Total income 303,758 375,238 473,476
Tipping and transport cost (112,679) (118,313) (124,229)
Employee benefits
expenses (76,164) (81,495) (87,200)
Depreciation (21,875) (22,313) (22,759)
Trucks and machinery
costs (9,691) (10,466) (11,304)
Net finance cost (6,713) (6,377) (6,058)
Acquisition costs (2,313) (2,544) (2,799)
Rent and outgoings (2,093) (2,135) (2,178)
Capital raising costs (813) (610) (457)
Other expenses (16,191) (17,001) (17,851)
Total Expenses (248,532) (261,254) (274,834)
Profit before income tax 55,226 113,984 198,643
Income tax 17,223 35,335 61,579
Profit for the year 38,003 78,649 137,063
EBIDTA 83,814 142,674 227,460
(Annual report, 2018)

Assumptions:
 Revenue for FY 19 increase by 24%, as half year financial suggest and for FY 20
increase by 27%
 Employee cost increase by 7% in both the years
 Depreciation is usually increase by 2%
 Trucks and machinery cost increase by 8%
 Finance cost reduce by 5%
 Renting cost increase by 2%
 EBDITA is calculated by taking adding the value of tax, interest and depreciation to the
net profit.
4. Forecast the pro forma EBITDA for the whole BINGO consolidated group entity on a pro
forma basis for FY20 (i.e. for the fiscal year ending 30 June 2020) INCLUDING your estimate
of the impact of the acquisition of DADI to be finalised in the next few months now that ACCC
approval has been granted on 28 Feb 2019. Note that material information re DADI was
provided in the presentation dated 21st August 2018.
Answer:
After taking the effect the
DADI information not available
Appendix:
1. Market Research, 2018, Reuters.com, Available from :
https://www.reuters.com/finance/stocks/overview/BIN.AX
2.