Industrials

ALS launches $100m buyback

Mon 25 Jul 22, 1:11pm (AEST)
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Key Points

  • The company is focused on value-enhancing acquisitions, particularly in the food and pharmaceutical market
  • ALS plans to buy back $100m worth of shares on-market over the next 12 months
  • ALS recently pitched an unsolicited, non-binding indicative offer to acquire 100% of its smallcap rival’s HRL Holdings for virtually double the pre-offer closing price of 8.2 cents

ALS Ltd (ASX: ALQ) was down -1.44% heading into lunch after the Industrial testing and monitoring systems business announced plans to buy back $100m worth of shares on-market over the next 12 months.

Funded by existing cash balances, the buyback – pegged to commence 9 August - represents 1.9% of the S&P/ASX100 company’s shares on issue, based on Friday’s closing share price of $11.14.

The dividend reinvestment plan (DRP) will be suspended in the meantime.

Efficient capital management

Management believes an on-market share buy-back program provides the most efficient and balanced capital management option within its capital management framework.

Commenting on today’s announcement, CEO Raj Naran noted:

“The buy-back program reflects our disciplined and efficient capital management program, the strong balance sheet and focus on returning excess capital to our shareholders."

Value-enhancing acquisitions

Naran reminded investors that the company’s balance sheet retains significant capacity for organic growth, including expansions previously announced for FY23, and a solid pipeline of opportunities.

The company will continue to evaluate all strategic growth opportunities as they arise, and is also focused on value-enhancing acquisitions, particularly in the food and pharmaceutical markets, targeting opportunities that fit with existing capabilities or attractive adjacent markets.

Recent activity

Late June ALS pitched an unsolicited, non-binding indicative offer to acquire 100% of its smallcap rival’s HRL Holdings (ASX: HRL) shares for 16 cents cash per share (CPS), which was virtually double (95.1%) the pre-offer closing price of 8.2 cents.

At the full year FY22 the company delivered underlying net profit (NPAT) of $264.2m, up 42% year-on-year and achieved the top end of previously upgraded market guidance.

FY22 also marks the end of the company’s most recent five-year strategic plan, delivering revenue growth of 73% and underlying earnings (EBIT) growth of 113%.

The company declared a final dividend of 17.0 cps, partially franked to 30%.

Consensus on ALS is Moderate Buy.

Based on Morningstar’s fair value of $9.48 the stock appears to be overvalued.

Based in the six brokers covering ALS (as reported on by FN Arena) the stock is trading with 23.4% upside to the target price of $13.56.

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ALS share price: A 12 month snapshot.

 

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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