Close the Loop Group says strong first half revenue and EBITDA growth means it is on track to beat its full year guidance, with the newly acquired ISP Tek business in particular performing ahead of expectations.
The company’s first half revenue of $106.2m means it is well placed to exceed FY24 guidance of $200m, while its EBITDA of $22.7m, has seen its guidance upgraded to between $44m and $46m.
The company says the first half was an “inflection point” for Close the Loop, as the first reporting period that included the full impact of ISP Tek Services, with the rationale for the acquisition proven.
In addition to funding the acquisition of ISP Tek the company saw an $11.8m reduction in net debt to $26.2m, and has $55.7m cash in the bank. Its revenue almost doubled from $58m to $103m thanks to ISP, with net profit after tax up by 20 per cent to $5m from $4m.
EBITDA attributable to the members of the parent entity for the half year ended 31 December is $22.7m, up from $9.5m in the prior corresponding period, which is a 139 per cent increase. The growth in the financial results for the period ending 31 December are a result of this being the first reporting period that includes the full impact of the ISP Tek Services, Alliance Paper and Close the Loop Plastic Recycling acquisitions.
The profit for the half year was impacted by the amortisation of intangible assets of $8.2m that occurs as a result of the company recognising customer relationships, brand names and internally generated software upon the business combinations accounting standard and that is required to be amortised over their useful lives.
Close the Loop Group generated $12.3m cash from operations for the half year that was invested into the upgraded TonerPlas manufacturing line that came on stream in Melbourne at the end of January; and working capital to fund the growth of the overall business.
The plastic recycling business increased its processing volumes during the period, introducing several new collection programmes, complementing its traditional imaging consumables business, and the half year inclusion of ISP Tek Services performance.
The recycling operations in Australia, United States and Europe have continued to grow and provide services across the respective geographies. New activity has been progressed with the installation of a new TonerPlas line in Melbourne, which will produce revenue in the second half.
O F Resource Recovery, which provides recycling, reuse, and waste services, for the paper, board and magazine industries in Australia has been impacted by its exposure to reducing commodity prices during the period.
The Packaging businesses have not achieved the expected growth, which the company says is due to some “challenging” economic conditions, namely inflation, shipping issues, industry demand and pricing impacts. It says these conditions have improved as it enters the second half. Despite the challenges, the Packaging division delivered similar EBITDA to previous period after adjusting costs to meet the market.
Close the Loop says the Packaging division continues to have strong demand for its specialised range of sustainable packaging. The future forecasts see a return to planned growth. The South African operations have performed exceptionally well during the period.
Joe Foster, CEO of Close the Loop Group said, “The ISP Tek Services acquisition has strategically positioned Close the Loop as a global leader in the circular economy, where we have broadened and deepened our OEM relationships, which has provided the company with geographic expansion opportunities.
“The global tailwinds for the circular economy are building strongly, with many major OEMs making public commitments regarding product circularity, reuse, and recycling. Close the Loop’s leadership in the IT recovery space and our trusted relationship with the world’s largest OEM, provides the company with an opportunity to expand its Recovery Division globally.
“We are only at the beginning of this circular economy journey, and with a coalition of entrepreneurial founders and management strongly aligned with shareholders, we are confident that our Recovery businesses’ first-mover advantage in the global circular economy will be rewarded.
“Close the Loop’s Packaging Division has delivered strong free cash flow for the period and new growth opportunities have been uncovered. While the second quarter of 1H’24 presented several challenges for Packaging, including disruptions to shipping lines, volatility in commodity pricing, and dampened sales volumes due to deteriorating economic conditions, we are pleased to report that Packaging maintained its EBITDA profitability. Conditions have improved post the reporting period, and management has actively addressed areas of underperformance in Packaging.”
With locations across the United States, Australia, South Africa and Europe, Close the Loop collects and repurposes products through takeback programs across its Recovery Division; and provides sustainable packaging products through its Packaging Division, which allow for greater recoverability and recyclability. The company’s overall premise is ‘Zero Waste to Landfill’. From recovering a wide range of electronic products, print consumables, cosmetics, plastics, paper and cartons, through to the reusing of toner and post-consumer soft plastics for an asphalt additive, the company is a global leader in the fast-growing circular economy with a focus on global expansion and sustainability.
