ASX 200 drops, ALS jumps, Fletcher Building rises

The S&P/ASX 200 Index (ASX:XJO) fell today. However, the ALS Ltd (ASX:ALQ) share price went up after reporting its FY21 result.

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The S&P/ASX 200 Index (ASX: XJO) fell by 0.3% to 7,093 points.

Here are some of the highlights from the ASX:

ALS Ltd (ASX: ALQ)

The ALS share price was the best performer in the ASX 200 today. It rose by around 13% in reaction to its FY21 result.

The testing, inspection and certification business revealed in its report that revenue from continuing operations from $1.76 billion – that was a decline of 5% due to the impact of COVID-19 in the first half.

Its statutory net profit after tax (NPAT) was $172.6 million, up $44.8 million, primarily due to impairment losses offset by the net effect of one-off gains in the first half of FY20 from the sale of the China business.

Underlying NPAT from continuing operations of $185.9 million was down 1.5%. But the earnings before interest, tax, depreciation and amortisation (EBITDA) margin expanded across all three divisions which demonstrated strong cost management in response to the pandemic and recovery in sample volumes.

ALS said that there are long-term structural drivers for key markets which remain strong and will continue to offer sustainable growth. Management said the diversified portfolio of operations and geographies combined with the flexibility of the ‘hub and spoke’ model positions the business well to take advantage of those growth opportunities.

Fletcher Building Limited (ASX: FBU)

Fletcher Building was another of the strong performers in the ASX 200. It went up around 4%.

It announced it was launching an on-market share buyback of up to NZ$300 million to return capital to shareholders. The business is able to do this because its balance sheet is in a strong position, with leverage expected to remain below its target range in the medium-term.

It also updated its guidance for FY21 earnings before interest and tax (EBIT) before significant items, which is expected to be in the range of $650 million to $665 million, which is the top of the previous guidance range.

The Fletcher Building CEO Ross Taylor said:

We are seeing a broadly stable market environment with trading conditions in the second half of FY21 largely consistent with the first. Despite some supply chain constraints and input cost pressures, we continue to see good margin performance from the business. Forward indicators for market activity are pointing to ongoing robust volumes in New Zealand and Australia, with our businesses focused on delivering above market growth and improved profitability in this environment.

Ramsay Health Care Limited (ASX: RHC)

Ramsay announced today an offer of 240 pence per share to acquire the UK-listed hospital group Spire Healthcare Group. It’s focused on the private patient market and leading providing of high-acuity care.

The offer values the business at $1.8 billion on a fully diluted basis and $3.7 billion on an enterprise value basis.

Spire’s board has unanimously recommended its shareholders vote in favour of the offer.

Ramsay said it’s going to create a leading private health care services in the UK when combined with it existing UK business. The acquisition diversifies Ramsay UK’s payor sources, and case mix, expanding the geographic reach of its capabilities and improving capacity utilisation.

The ASX 200 share said the acquisition will deliver scale to further invest in clinical research, development and innovation to improve patient outcomes.

Ramsay expects benefits of around £26 million per annum from procurement savings, improved capacity utilisation and cessation of UK listing costs. This will help deliver high single digit earnings per share (EPS) accretion in FY24.

However, Ramsay said it intends to engage with the UK competition and markets authority (CMA) about this transaction which may require divestments of certain hospitals and/or clinics.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Ramsay Health Care Limited. 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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