Shares in Brisbane-based global testing group, ALS Ltd rose nearly 3% despite the group revealing a weak 2019-20 result and lower final dividend.
There was much made the underling earnings result in the press release – that showed a rise of 4.3% in “underlying profit after tax for the year to March, but the accounts revealed a 16.3% slide in statutory net profit.
The underlying result is merely an indicator of earnings less one-off items and ALS had $90 million of those in impairment write-downs against a couple of its business.
A 47% cut in final dividend to 6.5 cents from 11.5 cents meant a 22% drop in full-year payout to 17.6 cents a share from 23 cents. That told us more about how directors view the company’s position in the 2020-21 financial year with COVID-19 the dominant influence.
In fact ALS revealed that it saw a sharp slide in revenues in April to start the new financial year.
“Total revenue for the Group was down 9% in April 2020 compared to PCP, notwithstanding economic shutdowns in many markets making sample collection difficult, particularly in Life Sciences.
“In the last few weeks, several economies have started to relax restrictions although it is too early to tell the impact on sample volumes< the company said yesterday.
Despite that uncertainty, investors bid the shares up nearly 5% to $7.69, ignoring a large amount of uncertainty and the signal the near 50% cut in final dividend sends. But the run faded in the afternoon and the close d up just 0.3% at $6.72.
The COVID-19 pandemic makes the 2019-20 performance all a bit academic.
ALS Chairman, Bruce Phillips said in yesterday’s statement “Delivering within market guidance is a pleasing result given the impact of the COVID-19 pandemic in the last quarter.”
“The Group has demonstrated its adaptability and resilience in a very challenging market. Our most recent trading conditions, combined with the strength of our balance sheet, have given Directors the confidence to pay shareholders a final dividend of 6.1 cents per share.
“Whilst there will be a continuing focus on the many short-term challenges, we will not lose sight of our longer-term strategies,” he promised.
More important than what happened in the just-completed year was the confirmation that a cautious board had sought to boost liquidity, as the company had revealed in an update earlier this month.
“Given the current economic uncertainty due to the impact of the COVID-19 pandemic and in order to further increase capital liquidity, the Group agreed with its bank lenders to increase existing facilities by $200 million.
“Combined with remaining undrawn facilities and available, unencumbered cash, this is expected to give the Group approximately $650 million of available capital.
“In addition, the Group took the prudent and precautionary step of drawing down $245 million of bank facilities to meet the obligation of a tranche of US Private Placement (USPP) debt due for repayment in December 2020. ALS continues to monitor the USPP market for long-term financing opportunities.”
But despite that caution, the company has not suspended its buyback (like Qantas did) and said in Wednesday’s announcement that
“The share buy-back continued early in FY20 with an additional $22.0 million worth of shares acquired, bringing the total to $153.4 million for the entire program, at an average share price of $7.04. The programme remains in place until December this year and will be reviewed at that time.”
