Testing Group ALS Cuts Dividend As Profit Halves

By Glenn Dyer | More Articles by Glenn Dyer

Testing and inspection business ALS has chopped interim dividend by a quarter after its first-half result produced lower revenue and earnings, with more of the same to come.

The company yesterday told the ASX that thanks to COVID-19 related disruptions, statutory net profit dropped 48% to $70.3 million in the first half of 2020-21.

This large drop also comes after the profitable sale of its China business in the same period in 2019-20.

Revenue from continuing operations fell 8.7% to $838.8 million due to the impact of COVID-19 pandemic. The company said the September quarter saw a smaller fall of 7.8% than the 9.7% slide in the three months to June.

On an underlying basis, profits were down 17.9% to $80.6 million.

As a result the company will pay an interim dividend of 8.5 cents a share, down from 11.5 cents a share a year ago.

Directors said the cut reflected “the prudent capital management strategy and demonstrating the strong liquidity position.”

That dividend cut is despite the company saying it was seeing an improvement in current conditions.

“The first quarter of FY21 is expected to be the most challenging for the Group in this financial year due to economic shutdowns related to the COVID-19 pandemic. The sustained increase in global economic activity during the second quarter resulted in a significant improvement in performance across the Group.

“This trend has continued into early Q3,“ directors added.

But directors know that thanks to the pandemic and the continuing surge of cases in many parts of the world, the outlook is uncertain and a strong cash position is more prudent than handing it to shareholders and then possibly having to ask for it back via a capital raising if economies turn down again.

The Brisbane-based global giant saw revenues across all its divisions drop.

Its industrials unit was hit hardest with a 17.1% drop, while Life sciences testing was the best performer, with revenues down just 3.5% for the half-year.

ALS Chairman, Bruce Phillips said in yesterday’s release “This performance demonstrates the resiliency of the Group in the midst of the ongoing COVID-19 pandemic. Our management team and staff have adapted quickly to the challenging operating environment while maintaining high standards of service delivery and demonstrating the value of the work we do for our clients”.

And CEO, Raj Naran added “We believe that the first quarter will be our most challenging of FY21 which is reflected in this result as our second quarter has delivered a significant improvement across the Group. We reacted quickly at the beginning of the COVID-19 pandemic to leverage our ‘hub and spoke’ model to align costs with client demand.

“Life Sciences was resilient during the first half delivering margin accretion which is especially impressive in the current circumstances. The Commodities division, particularly Geochemistry, demonstrated a significant improvement in performance late in the second quarter which continued into the third quarter of FY21.”

The shares fell 2.8% to $9.50.

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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