Testing, inspection, certification, and verification services group ALS [ASX:ALQ] has reported a strong year for fiscal 2023 — proving its performance with a 23.4% increase in underlying net profit after tax (NPAT).
By lunchtime on Monday, ALS shares had dropped by 4% when they were trading for around $11.77 each.
The industrial services stock has plummeted by 10% in the past month and nearly 8% in the last 12 months.
In its sector, the group is also down by more than 12% and more than 8% below the market average:
Source: Market Index
ALS posts strong results for FY23
ALS has said that it has managed a 23.6% increase in underlying NPAT for FY2023.
Underlying continuing revenue of $2.4 billion increased 19.5% (18.3% in constant currency) which the group said was due to strong performance within the environmental, geochemistry and metallurgy businesses, and was further supported by acquisitions within the life sciences division.
Statutory NPAT had reached $291 million — which was again a significant jump of 52.9% — and which it said was supported by a reduction in one-off costs in the year.
The group maintained its operating margins, with underlying EBIT (earnings before interest and tax) from continuing operations of $491 million, an increase of 21.8%.
This was a reflection on the group’s margin of 20.3% — an expansion of 38 basis points — and followed a strategy of well-managed inflation across most of its businesses.
Overall, the group exceeded its guidance that was last provided in March by delivering an underlying continuing NPAT of $321 million. Furthermore, it executed 13 new acquisitions which contributed $115 million of revenue on a full-year run-rate basis.
ALS progressed with a solid cash conversion of 97% of underlying EBITDA, despite working capital increases in order to support its growth.
The group continues with underlying earnings per share (EPS) of 66.3 cents each — a rise of 23.3% — and statutory EPS of 60.2 cents per share — an increase of 52.7%.
Bruce Phillips, ALS Chairman commented:
‘This was another strong performance by our global business. Underlying continuing NPAT was up 23.4% YoY, exceeding the top end of our revised market guidance.
‘The company is continuing to demonstrate its resilience in operating through challenging periods of global instability, high inflation, and economic uncertainty.
‘Pleasingly, the company’s performance supports the declaration of a 21% increase YoY in dividends for our shareholders.’
By the end of the year, ALS’s board decided to declare a final dividend of 19.4 cents a share, which was partially franked by 10%.
This has taken the total fiscal year’s dividend to 39.7 cents a share — up 21% in comparison with the end of the 2022 financial year — and represents a payout ratio of 60% of FY23 underlying NPAT.
ALS believes the medium to long-term outlook across both life sciences and commodities remains supportive, particularly with life sciences. Additionally, the environmental business looks to continue performing well across all geographies, managing inflationary headwinds with success.
There may yet be some challenging market conditions ahead for geochemistry, however. Careful management of capacity, cost and pricing may mitigate impacts, and metallurgy is also expected to benefit from a strong pipeline of opportunities.
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Regards,
Mahlia Stewart
For The Daily Reckoning Australia
