ALS warns of slide in profit
The analytical services provider says timing of its entry into oil and gas “could not have been worse”.
Takeover target ALS has warned of a slide in first-half profit as it continues to see weakness in its oil and gas operations.
The testing and analytical services provider said its underlying half-year profit would likely come in a range of $50-$55 million, down from $61.9m last year.
“We are seeing growth in our environmental, food, pharmaceutical, geochemistry and tribology businesses,” incoming chairman Bruce Phillips said in a trading update at the group’s AGM.
“Profits from the coal and asset care business units remain flat, and unfortunately we have experienced further decline in our oil and gas operations.”
Mr Phillips added it was hard to provide guidance given the trying market conditions, but the board believes underlying profit for its fiscal year to March 31, 2017 should fall “broadly in line with analyst consensus”.
The group’s managing director Greg Kilmister admitted the timing of its entry into oil and gas “could not have been worse”, but he was hopeful a turnaround could be orchestrated if crude prices recovered.
“The business continues to make losses today but the executives in the business are working hard to stabilise revenues and reduce the cost base,” he said.
“They remain confident that if the oil price stabilises around $US50 per barrel, the businesses can be brought back to profitability.”
The commentary comes after the group declared an annual loss of $240.7m in May, which led to a $2.7 billion takeover approach from Bain Capital and Advent International.
The proposal was given short shrift by ALS, which declared it “opportunistic”.
In an update on the proposal today the group’s outgoing chair Nerolie Withnall said there had been no negotiations with its suitors since the rejection was made public on June 2.
“We have not had any further discussions with the consortium since advising them that we would not recommend their proposal. If anything further arises, we will advise you as soon as practical,” she told shareholders.
The Australian’s Data Room column this week revealed private equity firms were running the ruler over the company to see if a revised bid could be put forward.
KKR is seen as the most likely rival bidder to Bain and Advent should a new proposal surface.
Meanwhile, ALS could turn from prey to predator as it says it has around $200m available to spend on acquisitions.
“The group will continue to pursue growth opportunities in life sciences, particularly in the food sector where we are evaluating a select number of high quality bolt-on acquisition targets,” Mr Phillips said.
At 1.15pm (AEST), ALS shares had slid 2.3 per cent to $5.09, against a broader market fall of 0.2 per cent.
The rejected takeover offer was made at a valuation of $5.30 a share.
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