ALS (ASX: ALQ) falls after annoucning First Half FY21 results
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ALS falls on First Half FY21 results

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  • ALS (ASX: ALQ) second-quarter FY21 reflects a recovery from the first quarter of the financial year
  • The company operates across 18 industries the worst performing of which was Industrials which saw revenues fall 17.2 per cent
  • ALS fell over three per cent because of falling revenues and net profits after tax (NPAT)

ALS Limited has delivered strong results in the first half FY21 results, though it did not meet investor expectations as the stock slid 3.37 per cent within the first 2 hours of trading on the 18th of November 2020. ALS’s share price has had a strong rebound in 2020 and has supported this with resilient results rising from what the company describes as a “diverse portfolio of business and geographic and flexible ‘hub and spoke’ model.”

ALS does operate across one of the most diverse scopes on any listed company in Australia currently participating in 18 different industries. These include Aerospace & Defence, Agriculture, Civil infrastructure, Commodity trading, Construction, Consumer products, Environmental testing, Food, Marine, Mining & exploration, Oil & Gas, Petrochemicals, Pharmaceutical, Power Generation, Pulp & paper, Smelting & refining, Transportation and Water. Within these industries, the company provides a variety of testing, inspection, certification, and verification services across 65 countries in total.

In the first half of FY21, ALS recorded an 8.7 per cent drop in revenues from continuing operations to $838.8 million. Life sciences, commodities and Industrial revenues fell 3.5, 13 and 17.1 per cent respectively. This resulted in a Statutory NPAT of $70.3 million. This figure was almost halved falling 65.3 million as a result of the sale of its China Business during the first half of FY21.

The company did note an improvement in business conditions in the second quarter, as a result of economies reopening in recent months.

Managing director and Chief Executive Officer, Raj Naran stated how “We believe that the first quarter will be our most challenging of FY21,” which is most definitely reflected in the ASX announcement.

The company’s strong performance to date was attributed to ‘reacting quickly at the beginning of COVID-19 to leverage our hub and spoke model to align costs with client demand.’  The company also cut its Capital Expenditure by 30 per cent, reduced corporate costs and increased bank facilities by $175 million.

The company’s management of its balance sheet was described as “prudent” with a strengthen gearing ratio at 29 per cent and a leverage ratio of 1.9 times as of the 30th of September 2020. Further, ALS also completed a placement of $281 millions with an average maturity of 5 years.

Together these metrics will allow ALS to continue its value-enhancing acquisition opportunities and pay an interim dividend. The company’s directors declared an interim dividend of 8.5 cents per share, a 51 per cent payout ratio.

As of the 18th of November 2020 (12:00 pm), ALS is trading at $9.50 a 118 per cent recovery since March. Despite this, the company is trading 7 per cent off its year to date highs at $10.20.

Caroline Wong

Caroline Wong is a Research Analyst at KOSEC – Kodari Securities. She writes on markets and focuses on ASX Top 300 companies. Email Caroline at c.wong@kosec.com.au.

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