Tight rein on costs keeps ALS buoyant

Optimism that the laboratory testing group ALS, the former Campbell Bros, will weather the downturn in the resources sector better than others helped push its shares higher on Monday, even though earnings were squeezed in the year to March.

Earnings a share rose slightly, to 66.44¢ from 65.90¢, with the net profit ahead to $230.5 million from $224.7 million. 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 slump in the second half.

However, aggressive cost cutting limited the profit impact, with staff in the metallurgy and geochemical units cut by 29 per cent to below 4000 full-time equivalent 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 to lift the shares on Monday was confirmation that the shift in its earnings mix had helped to maintain earnings, brokers said.

This reflected the contribution from the life sciences unit and the fact that the latest downturn in the mining sector has been slower in coming, which has given management more time to move in to reduce costs.

The company was upbeat on this score, while recent acquisitions will buoy revenue in the year ahead.

"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," the chairwoman, Nerolie Withnall, said.

"This has reduced our exposure to the cyclical downturn in the minerals sector."

The group's core coal business is Australian-based, where the industry "is under considerable cost pressures".

"Conditions are not expected to improve in the near future and the focus ... is on ... 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.