Another global Australian company is under takeover threat.
Three days after the release of poor annual results, laboratory testing outfit ALS is facing a possible takeover after the company yesterday sought the suspension of trading in its shares.
“The trading halt is requested pending an announcement by ALS relating to a potential change of control event,” it said in the request to the ASX.
Shares in the company were sold off hard on Monday and Tuesday following the weak March financial year results and weak outlook for 2016-17. They lost a total of 10% and traded at $4.05 early yesterday, up from Tuesday’s close of $3.80, before the suspension was granted.
The report indicated earnings have yet to bottom thanks to the continuing decline in its oil and gas unit in particular.
The net loss in the year to March totalled $239.7 million, significantly higher than the $172.7 million lost a year earlier on revenue of $1.36 billion, which was down from $1.42 billion a year earlier.
The main factor in the latest loss was the $314 million write-down of asset values in ALS’s minerals and energy businesses (announced earlier in the year) thanks to the downturn in the resources sector.
Underlying profit for the year was $99.5 million which was 27% down from the $135.4 million earned a year earlier.
Investors were unhappy with the company saying it will take at least another three months for its energy unit to return to break even, after group-wide losses for the past two years have topped $400 million.
Analysts cut their forecasts for the group’s outlook on its poor results, with Morningstar assessing the ‘fair value’ of ALS shares to be just $3.
Now some analysts and fund managers say ALS is vulnerable to a bid because it is at the bottom of the cycle and the benefits of the cost cuts have yet to appear – a bit like Treasury Wine Estates was in 2015.
Investors think ALS is a good business trying to transition itself from a mining-related testing company into the faster growing life sciences sector.
The company’s global listed peers include London-listed Intertek, Switzerland’s SGS and France’s Bureau Veritas.
ALS’s biggest shareholders include Harris Associates and Schroder Investment Management.
The halt comes only a day after ALS hosted an investor day, looking at its life sciences business which was singled out in the annual results by management as the future growth engine.
