The market continued its appreciation of the solid annual result from Brisbane-based Campbell Brothers yesterday.
And so did analysts, with reaction to the record result mostly positive.
The company met the guidance (lowered earlier in the year thanks to the downturn in the mining sector).
The shares jumped more than $1, or over 6%, to close at $17.45 yesterday.
They had risen a more sedate 15c on Tuesday and the same on Monday ahead of the release of the result.
The company reported a 49% rise in "underlying net profit after tax" to $106.21 million for the year ended March 31, from the $71.27 million achieved in the 2008 year.
The result was struck on a 19.2% rise in revenue to $920 million, from the $772 million in 2008.
The result was in line with updated guidance provided to the market on February 24.
Chairman Geoff McGrath said the net profit increase was due to the strong performance of the ALS laboratory services business which experienced growth from buoyant market conditions during the first half of the year and demonstrated the benefits of the scalability of the business and its global footprint.
Directors have declared a final partly franked (50%) dividend for the year of 50c a share (60c last year partly franked) bringing the total partly franked (50%) dividend for the year to $1.00 (2008: 95c partly franked).
Mr McGrath said although the Group achieved record financial results for the year, the current downturn affecting economies around the world manifested itself in a slower final quarter for the Group.
"Markets for the Group’s services remain uncertain, being affected by seasonal changes as well as the financial downturn.
"However, the Board is confident that the Group’s business model will allow an effective scaling of its operations in line with expected market conditions", he added.
The Managing Director of Campbell Brothers, Greg Kilmister, said the Group has undertaken cost cutting measures across all its businesses, reducing capital expenditure and downsizing personnel in some operational areas.
"Because of the diversity of its business segments and strong financial position, the Group is confident of emerging from the current economic downturn in a strong state, ready to take advantage of the expected recovery of the economy", he said.
He said that once again, the ALS Laboratory Group delivered record performance in both revenue (up 34%) and profit contribution (up 38%) during the year.
Factors contributing to the result were increased capacity (arising from capital investment and business acquisitions over the past two years), strong market growth, and an emphasis on diversity of service offerings reinforced by the restructuring of the global business along divisional lines in April 2008.
All service categories within ALS experienced growth in sales and contribution when compared with the previous year.
Whilst the minerals division of ALS saw some weakening in demand from October 2008 onwards, the minerals division achieved a 26% increase in revenues for the full year when compared to the previous year.
The company was also very pleased with the performance of the other major division of ALS, its environmental division, which achieved a 25% increase in revenue for the year and continues to grow in the current economic environment.
The smaller divisions of Coal, Tribology and Food also posted very strong revenue growth.
In a note to clients yesterday Merrill Lynch said:
"Campbell Brothers (CPB) has reported a FY09A profit of $106.2m, in line with company guidance and our estimates.
“CPB’s bellwether ALS analytical laboratory group produced a strong result with EBIT of $155.8m on revenue of $628.9m (representing 93% of group EBIT and 68% of group revenue).
“Considering 2H09A in isolation, ALS delivered $319.3m of revenue, producing $68.0m of EBIT – a margin of 21.3% after allowing for a number of one-off items taken above the line.
"However, we have lowered earnings by c. 10% for FY10E, with the bulk of earnings changes attributable to two items: (i) the improvement in the Australian currency over the past three months and (ii) a significantly higher expected D&A charge, rising from $36m to c. $45m in FY10.
"These changes reduce FY10E by 9.7% to $87.5m and FY11E by 6.8% to $98.4m. Given the non-cash nature of D&A and reduced capex going forward, our DCF declines marginally to $27.38.
"We believe Minerals has found a sustainable level and, combined with an expectation of strong performance in other categories, we believe that the ALS business can continue to deliver margins above 20%.
“While declines in Mineral volumes may exceed 35% in FY10E, increased volumes in other divisions are likely to keep revenue slippage to c. 15%.
"We remain confident in management’s capability to execute, such that the ALS business can deliver sustainable EBIT margins above 20%, confirming business scalability in both directions.
“In our opinion, confirmation of this scalability is the crucial element in earnings delivery and the stock being afforded a premium rating to the market. We reiterate our Buy recommendation and $27.00 price objective."
And JP Morgan had this to say:
"Whisper it quietly, but CPB believes it may have seen the bottom of the slump of global minerals testing volumes.
“With signs of a stabilisation in minerals demand, and ongoing positive growth in the number of samples in the environmental testing business, we are less concerned than before ab
