Brighter outlook helps shore up confidence in ALS future
Optimism that laboratory testing group ALS, the former Campbell Bros, will weather the downturn in the resources sector better than others helped push the shares higher on Monday, even though earnings to March were squeezed.
Earnings a share rose slightly for the year, to 66.44¢ from 65.90¢, with net profit ahead to $230.5million from $224.7million. After taking into account foreign exchange movements, profit fell to $200.1 million from $217.6 million.
Investor sentiment was buoyed by optimism that the downturn in the minerals sectors on earnings has been contained. The flow of samples to its geochemical laboratories slipped just 2 per cent for the full year, although this masked an 18 per cent second-half slump.
But aggressive cost cutting limited the impact, with staff in metallurgy and geochemical units cut by 29 per cent to below 4000 full-time positions. Even so, margins were squeezed, with the pre-tax profit margin dropping to 34.7 per cent from 36.3 per cent a year earlier.
Helping lift the shares was confirmation that the shift in its earnings mix had helped maintain earnings, brokers said.
This reflected the contribution from the life sciences unit and the fact that the latest downturn in mining has been slower in coming.
"In more recent years the focus for the company's growth and diversification has been into new testing markets, including industrial testing, food and pharmaceuticals, as well as geographical growth of our environmental businesses," chairwoman Nerolie Withnall said. "This has reduced our exposure to the cyclical downturn in the minerals sector."
The group's core coal business is predominantly Australian-based where the industry "is under considerable cost pressures", with a sharp reduction in both exploration and pre-production drilling being experienced.
"Conditions are not expected to improve in the near future and the focus ... is on laboratory rationalisation, cost cutting, and productivity improvements to ensure [profit] margins are maintained above 20 per cent," managing director Greg Kilmister said.
The final dividend was raised 1¢ to 27¢ a share, franked to 50 per cent.