ALS Shares Shoot Higher On “Pleasing Result”

By Glenn Dyer | More Articles by Glenn Dyer

Brisbane-based multinational testing group, ALS saw its shares buck what was a very, very weak market yesterday after reporting better than forecast half-year earnings, a higher dividend and an upbeat earnings forecast for the year to next March.

Directors said all businesses and regions contributed to the better than forecast result.

The company told the ASX that underlying net profit after tax (NPAT) from continuing operations rose 5.3% to $98.2 million topping the guidance range of $90 million to $95 million provided to the market at the AGM in July.

The interim dividend was lifted 4.5% to 11.5 cents a share (partially franked to 30%).

And the directors said they expect underlying net profit after tax to be in the range of $185 million to $195 million, compared with the $181 million earned in 2018-19.

The shares ended the day up 12% at $9.06 on a day when the wider market slumped more than 90 points or well over 1.4%.

Directors said the better than forecast earnings performance “was primarily driven by strong organic growth across all regions in the Life Sciences and Industrial divisions combined with some acquisition growth, including an initial contribution from ARJ, a Mexico-based pharmaceutical laboratory-acquired in August 2019.

ALS Chairman, Bruce Phillips said in yesterday’s results release “This is a pleasing result, particular given the level of global macroeconomic uncertainty. The Group has exceeded guidance for the first half and is well-positioned for the full year, allowing the Board to declare an interim dividend increase of 4.5%.”

Managing Director and CEO, Raj Naran said in the statement “This strong organic performance in the Life Sciences business demonstrates our continuing drive towards our 2022 strategy of growing non-cyclical earnings to 50% of our underlying EBIT.”

“The additional margin expansion in the half is especially pleasing as we have grown in our key markets, focused on innovation and maintained strict cost control measures.

“We continue to focus on the food and pharmaceutical markets to support our organic and acquisitive growth.

“As previously flagged, we saw some global macroeconomic uncertainty impact the Geochemistry business in H1 FY20. We have seen good growth in other parts of the Commodities division which should see a low single-digit revenue increase in FY20.”

The Life Sciences division delivered 15.4% revenue growth to $468.6 million. The division achieved organic revenue growth of 10.2%. Underlying EBIT grew by 20.9% to $74.0 million while the margin continued to expand to 15.8% (pre-AASB16 impact), an improvement of 73 bps compared to H1 FY19.

All regions contributed to this result which was driven by investment in greenfield opportunities combined with a focus on business development, productivity and client service improvements leading to growth in market share. The USA, under a new management team, continued to drive productivity improvements, new business wins and saw underlying EBIT margin expansion of 700 bps compared to PCP.

Environmental saw revenue increase by 15.6% driven by strong growth in the USA, Latin America as well as in Australia due to infrastructure programs and a stable mining sector.

The Commodities division increased revenue by 1.9% to $319.9 million. There was a reduction in underlying EBIT (pre-AASB16 impact) of 2.9%, with subdued equity funding for junior miners in the period impacting Geochemistry.

The Industrial division delivered a 23% increase in revenue and 27% increase in underlying EBIT (pre-AASB16 impact) at a margin of 12.2% (+38 bps).

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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