Cleanaway has reaffirmed FY27 underlying EBIT guidance of $500 million to $530 million as its proposed EQT Infrastructure takeover moves into the approval process. The AGM also disclosed a second strike against the remuneration report, alongside sharply reduced executive incentive outcomes and continued scrutiny of safety and cash conversion.
- FY26 underlying EBIT rose 14.2% to $470.2 million
- FY27 underlying EBIT guidance reaffirmed at $500 million to $530 million
- EQT scheme proposes total cash consideration of $3.095 per share
- Remuneration report faces a second strike based on proxy votes received
- FY26 executive STI outcome fell to 17.5% of target
EQT Deal Moves Into Approval Phase
Cleanaway Waste Management Limited (ASX:CWY) has used its annual meeting to reaffirm FY27 earnings guidance while acknowledging that its proposed takeover by EQT Infrastructure remains conditional on a series of approvals. The proposed scheme would give shareholders total cash consideration of $3.095 per share, reflecting the indicative $3.13 offer price less the 3.5 cents per share FY26 final dividend already paid.
The AGM came days after the binding EQT scheme deed was signed for EQT to acquire the waste services group. Cleanaway said the transaction remains subject to shareholder, regulatory and Court approvals, an Independent Expert concluding that the scheme is in shareholders’ best interests, and other conditions. The company may also pay dividends ranging from 14.5 cents to as much as 19.0 cents per share, potentially including a fully franked special dividend.
FY27 Guidance Holds Despite Uneven Portfolio
Management reaffirmed its forecast for FY27 underlying EBIT of $500 million to $530 million. The plan relies on organic growth in Solid Waste Services, pricing, higher volumes and productivity, alongside recovery in Health Services, Oils & Technical Services and Industrial Services.
That target follows FY26 underlying EBIT of $470.2 million, up 14.2%, on approximately $3.7 billion of net revenue, which rose 13.1%. Free cash flow increased about 64% to $213.8 million, while return on capital employed improved to 9.7% and underlying earnings per share reached 10.0 cents. Cleanaway said Solid Waste Services and Contract Resources performed strongly, but parts of the portfolio delivered below expectations and the quality of earnings remained a concern.
Second Remuneration Strike Raises Governance Pressure
Shareholder dissatisfaction was more pointed at the AGM. Cleanaway said the remuneration report had received a second strike based on proxies received, following last year’s first strike. The concerns raised with the Board included the use of underlying adjustments, cash conversion, the level of stretch in incentive targets and the relationship between executive pay and shareholder experience.
The Board responded by withholding the underlying EBIT component, worth 60% of the FY26 short-term incentive, and forfeiting the safety component after the safety gateway was not met. The resulting FY26 STI outcome for the CEO and executive key management personnel was 17.5% of target, equal to 10% of the maximum opportunity, while the FY24 to FY26 long-term incentive vested at 37.6%.
For FY27, free cash flow will account for 35% of the STI scorecard and underlying EBIT for another 35%, with STI deferral increased to 40%. The changes are intended to put more weight on converting earnings into cash and keeping a greater portion of remuneration exposed to future performance, although the second strike shows that shareholder confidence remains unsettled.
Safety Review Follows Two Fatalities
Safety remains a serious operational issue despite improvements in reported injury rates. Cleanaway disclosed two fatalities at sites it operated during FY26, one involving a contractor and the other a customer undertaking activities outside the company’s direct operational control.
An independent review found the company had a credible health, safety and environment strategy, but identified scope to improve frontline execution and feedback mechanisms. Cleanaway said all recommendations had been accepted and were being implemented under a Board-approved action plan. The Serious Injury Frequency Rate improved 57.1% to 0.3 and the Total Recordable Injury Frequency Rate improved 21.3% to 3.7, but the Board said those gains did not lessen the seriousness of the fatalities.
Bottom Line?
The immediate test is whether Cleanaway can deliver the reaffirmed FY27 earnings range and stronger cash conversion while shareholders decide whether the EQT scheme offers sufficient value and certainty.
Questions in the middle?
- Will the Independent Expert endorse the proposed EQT scheme and how will shareholders respond?
- Can the underperforming business divisions recover without further pressure on cash conversion?
- Will the revised remuneration framework prevent a third strike by aligning executive outcomes more clearly with shareholder returns and safety performance?