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Amidst a mostly lacklustre performance of new listings on the ASX over the past two years, founder-led urban miner Close the Loop (ASX: CLG) is proving the exception with its circular economy business model generating a 70 per cent lift in earnings to $24.3 million for FY23.
CLG shares were up slightly in early trading today at 45 cents per share (cps), which is more than double its prospectus listing price of 20cps in December 2021.
Originally the world's largest take-back provider of ink and toner cartridges, Close the Loop merged with another Victorian business O F Packaging in conjunction with the listing, establishing an end-to-end powerhouse for hard-to-recycle materials that combines with product design and manufacturing.
From e-waste to cosmetics to soft plastics, the group has an extensive resource recovery operation spanning Australia, the USA and Europe, and a packaging arm that operates in both Australia and South Africa.
The group continued its acquisitive run earlier this year with the US$4 million ($5.8 million) purchase of US-based In-Plas Recycling in January, followed by its largest purchase to date of ISP Tek Services LLC and Captive Trade Corporation for up to US$66 million ($99.7 million).
But even without these acquisitions, group chief executive officer Joe Foster says existing businesses have demonstrated substantial growth, showcasing a 19 per cent increase in revenue.
Overall, sales have risen 52 per cent to $135.9 million, of which $74.3 million was from resource recovery and $61.6 million was from the packaging business.
"We are delighted to be reporting strong performance across the CTL group," says Foster, who co-founded O F Packaging alongside the group's chief operating officer Darren Brits.
"We have also continued to deliver on our inorganic global strategy and achieve the goals we set at the time of our IPO (initial public offering).
"We’re creating commercial success by doing what others really don't want to do, and that is really working with very difficult products."
Close the Loop says its significant increase in profit and earnings is the result of FY23 being the first full year of earnings for the merged packaging and recycling businesses, along with acquisitions from the prior financial year making a full-year contribution.
That said, the company is seeing strong demand for recyclable ready packaging and recycled content, 'which are products that are readily available through the various divisions'.
For FY24 the group is forecasting revenue to increase by at least 47 per cent to $200 million, and the rate of EBITDA growth to increase to at least 76.9 per cent with earnings to be $43 million as a minimum.
"We’ve got a great opportunity within the fragmented industry, with an ability to unlock synergies and certainly technologies and improvements throughout existing infrastructure for acquired businesses," says Foster.
"We’re integrated and embedded with global tier one customers who are prioritising ESG (environment, social and governance) and supply chain investment to deliver on the next generation strategic goals."
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