CEO unscathed in ALS testing scandal
The coal-testing scandal at laboratory company ALS has cost managing director Raj Naran only a portion of his annual bonus.
The coal-testing scandal at laboratory company ALS has cost managing director Raj Naran only a portion of his annual bonus, despite an internal investigation finding about half the certificates it provided for export coal samples over the past decade were manually changed without an identifiable reason.
ALS released its annual results on Wednesday, declaring a 6.1c final dividend on a $127.8m net profit, down 16 per cent from the previous year.
The company took a $50m impairment on its South American health and medical research testing business, citing the impact of the coronavirus, and another $40m hit to its industrial division, which has been hurt by its reliance on the oil and gas sector.
But ALS said its underlying business held up well in the face of the global coronavirus crisis, with strong growth in its life sciences — where underlying earnings before interest and tax grew by 15.7 per cent to $143.9m in the year — and its industrials arm before the close of its financial year in March.
But the testing scandal, which has damaged the reputation of both ALS and the coal sector, cost Mr Najan a portion of his annual short-term incentive (STI) package.
“Strategic and health, safety and environment KPIs set by the board accounted for 30 per cent of the CEO’s STI assessment. The board concluded that the CEO had largely achieved these KPIs; however, it chose to exercise its discretion to reduce the award to reflect the disappointing outcomes of the Australian Coal Superintending investigation,” the company told shareholders on Wednesday.
“This resulted in an award of 22 per cent of the CEO’s ‘at target STI’ opportunity in relation to strategic and HSE outcomes,” the company’s annual shareholder report said.
Mr Naran was still paid 39.9 per cent of his total possible maximum short-term incentive package of $607,150 — down from just over $1m the previous financial year. He received total compensation worth $2.65m in the financial year, up from $2.56m the previous period.
The company said in April its investigation into allegations its staff had manually altered coal testing samples had revealed up to half of the assay results had been altered with no clear reason, going back to 2007.
“As of 31 March 2020, there was no material change in performance of the business deriving from this matter,” the company said.
It is understood that two substantial Korean utilities have since said they will not accept ALS as the testing centre for coal shipments from the Australian market.
ALS said its underlying net profit rose 4.3 per cent to $188.8m for the year, with revenue up 9.8 per cent to $1.84bn.
The company said total revenue in April was down 9 per cent compared to the same time in 2019. “It is too early to predict with any certainty how the demand for services across our industries and geographies will be impacted over the coming months,” ALS said.
“The group’s diversified portfolio of testing businesses across a range of markets and geographies has proved resilient during the operational and economic challenges created by the COVID-19 pandemic, with many deemed as ‘essential businesses’ that continue to operate.”
But ALS also drew down new bank loans worth $US125m ($187m) on May 22 to give it additional liquidity through the economic downturn across its global operations.
“The new facilities also include temporary relief to the group’s leverage covenant for the remainder of FY2021,” the company said.
ALS shares rose 14c to $7.19.
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