Industrials

ALS delivers FY22 net profit at top-end of guidance: FY payout up 42%

Wed 25 May 22, 3:35pm (AEST)
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Key Points

  • FY22 underlying net profit after tax up 42%
  • Metallurgy activity continues to be strong with coal and Inspection trading in-line with FY22 levels
  • The company is benefitting from strong demand for commodities and energy metals

Given the upgrade to guidance provided by ALS (ASX: ALQ) 1 March, today’s revelations that the site testing, and inspection company’s FY22 underlying net profit after tax was up 42% to $264.2m - at the top-end of the guidance – shouldn’t have been a big surprise to the market.

Nevertheless, the share price was up 2.50% after lunch with the market clearly happy with the group’s decision to pay a final dividend of 17c per share, partially franked, on July 4 – boosting the full year payout by 42% to 32.8c.

Highlights of today’s FY22 result for the 12 months to the end of March included:

  • 12% jump in full year after-tax profit to $190.5m

  • Revenue jumped 24% to $2.2bn

  • Underlying earnings per share of 54.7 cents per share (cps), up 42.1%

  • Life Sciences underlying EBIT margin of 16.9%, up 68 basis points (bps)

The company also ended the year with a strong balance sheet with 1.9x leverage ratio and around $432m of available liquidity and 15.3x interest coverage with weighted average debt maturity of 4.9 years.

The weighted average debt maturity increases to 6.9 years following the refinancing of US Private Placement debt to be funded in July 2022.

Increasingly global enterprise

Management attributed much of the result to a strong performance from the company’s life sciences and commodities divisions, which saw double-digit growth compared to the previous period.

ALS chairman Bruce Phillips described the FY22 result as "another very strong performance by our increasingly global enterprise".

“FY22 also marks the end of our most recent five-year strategic plan. Despite some ambitious objectives, the management team has exceeded expectations, delivering revenue growth of 73% and underlying EBIT growth of 113%,” Phillips noted.

Outlook

The company is experiencing strong volumes across the life sciences and commodities divisions.

Management notes that while the environment remains volatile, price increases and procurement practices have allowed the division to manage inflationary pressure to date.

The company has committed to achieving carbon neutrality in FY231, a 6% reduction in carbon intensity, and 90%-plus reliance on renewable electricity across ALS global operations.

Management also notes that the commodities division, particularly geochemistry and metallurgy, are continuing to benefit from strong demand for commodities and energy metals.

Strong volume, price increases and increased capacity in geochemistry are also driving further volume growth and margin accretion in the first months of FY23.

Meantime, metallurgy activity continues to be strong with coal and Inspection trading in-line with FY22 levels.

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ALS: A 12 month share price snapshot.

What brokers think

The share price has fallen from a year to date high of $13.60 early April to $12.04 but is up 10.14% over 12 months.

Consensus on ALS is Moderate Buy.

Based on Morningstar’s fair value of $9.75, the stock appears to be overvalued.

Based on the brokers that cover ALS (as reported on by FN Arena) the stock is currently trading with 13.90% upside to the target price of $13.77.

Macquarie expects the company to continue to benefit from the increased capacity and price environment through to the end of the year, and retains an Outperform rating, with the target price increasing to $14.70 from $14.00. (30/03/22).

After marking-to-market the company versus global peers, UBS reaches a $13.30 target price, down from $13.50, and retains a Neutral rating. (02/03/22).

With a market cap of $5.8bn, ALS sits well inside the S&P/ASX 200 and as such will always command strong market attention.

Written By

Mark Story

Editor

Mark is an investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics and a diploma in journalism. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content. Email Mark at [email protected].

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