Could the ALS Ltd share price soar today?

The ALS Ltd (ASX: ALQ) share price could be in for a reasonable start to Wednesday after the company reported full-year results after the close of business yesterday, which came in broadly on target with the guidance announced in November.

The result caps off a strong second half for ALS, which rejected a $5.30 per share takeover offer in June 2016, before announcing a somewhat disappointing first-half result in November, and then the retirement of the CEO in February. The first half result was impacted by poor conditions in the group’s Oil and Gas Services business, which has been flagged for divestment.

The full-year result highlights were:

  • Revenue from continuing operations of $1,272 million (up 2.7%)
  • Underlying net profit after tax (NPAT) from continuing operations of $112.7 million (up 4%)
  • Final partly franked (40%) dividend for the year of 8.0 cents per share (full year 13.5 cents, flat on 2016)
  • A binding Sale and Purchase Agreement anticipated in the current quarter for the non-laboratory operations of the Oil & Gas business
  • Life Sciences business – Revenue up 1%, EBIT down 9%
  • Commodity business – Revenue up 6%, EBIT up 28%
  • Industrial business – Revenue up 4%, EBIT up 6%
  • Acquired EMICAL in Colombia, TECAM in Brazil, and BioCity in the UK

Is it time to invest?

ALS will provide its 2018 financial year guidance at its AGM in July and until then has explained that it’s happy with the outlook provided by analysts.

Until then, there was one slide in the results presentation that really stood out to me (see below):

One need only look at the trend to immediately suspect that ALS may not be the company it once was. The company’s share price reached nearly $13 in early 2012 as the commodities boom increased demand for the services of the commodities division, however it appears that ALS’ other divisions have been unable to compensate for the reduction in demand as the boom wore off.

If it were me, I’d look to invest in a company with a better track record of growing dividends, with less reliance on the oil, gas, manufacturing & mining sectors. ALS’ life sciences division looks promising, but the other divisions are either too small to greatly impact profits or aren’t performing right now.

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Motley Fool contributor Andrew Mudie has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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