Will record earnings will be enough to offset the leadership uncertainty hanging over the Cleanaway Waste Management Ltd (ASX: CWY) share price?
That's the question on shareholders' mind this morning after outgoing Cleanaway CEO Vik Bansal unveiled a 75.3% surge in statutory interim net profit to $79.4 million.
But before you get too excited about the big profit surge, the group's underlying profits in 1HFY21 grew more modestly.
Cleanaway delivers record results
Underlying net profit improved 6.5% to $79 million, while underlying earnings before interest, tax, depreciation and amortisation (EBITDA) expanded 2.9% to $263.8 million and net revenue was flat at $1.07 billion.
Not to take anything away from Bansal – the underlying net profit and EBITDA still marked a record for the group.
Not firing on all cylinders
Cleanaway's Solid Waste Services business performed solidly with revenue increasing 2.1% to $713.2 million.
This was offset by a decline in its Industrial and Waste Services division as management terminated lower value contracts. The Liquid Waste and Health Services division also detracted from top-line growth due to the lingering effects of COVID-19.
Key highlight are margins
But it's notable that margins across all the businesses expanded in the first half and Cleanaway increased its interim dividend by 12.5% to 2.25 cents a share.
Further, the group is expecting to break FY20's record underlying net profit this financial year.
There is perhaps an air of expectations that Bansal would deliver a good result, but herein lies the bigger issue.
Foolish takeaway
This is the last result he will be handing down as captain of the ship as he's being "transitioned" out of the business. His ungraceful exit comes amid a scandal where the astute boss is accused of creating a culture of workplace bullying.
Executive chairman Mark Chellew will be taking over and will be supported by chief operating officer Brendan Gill.
This will likely mean more volatility for the Cleanaway share price for two reasons. The market is forward looking, so the solid first half result in itself won't be enough to keep investors onside.
The market also hates uncertainty and a changeover of the guards usually creates unpredictability – especially when a well-regarded CEO exits the building.
Of course, when I say "well-regarded" I mean by the investment community, although it is hard to judge anyone from only one angle.
