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ALS (ASX:ALQ) share price jumps on HY21 results

The ALS Ltd (ASX: ALQ) share price jumped nearly 8% today after the company released its HY21 results.

ALS is one of the world’s largest providers of laboratory testing, inspection, certification and verification solutions.

ALS’ HY21 result

ALS reported an 8.9% fall in revenue, which came in at $838.8 million. The company noted an improvement in the second quarter, with revenue declining 7.8% compared to a 9.7% decline in Q1.

Earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 9.3% to $197.9 million.

The company’s Life Sciences division held up the best on an EBITDA basis, falling 0.2%. EBITDA of the Commodities, Industrial and Other divisions fell 12.7%, 16.4% and 23.6%, respectively.

More positively, cost-cutting and a focus on cash collection resulted in EBITDA margin expansion across the company’s three core divisions of Life Sciences, Commodities and Industrial.

Managing director and CEO Raj Naran commented: “We believe that the first quarter will be our most challenging of FY21 which is reflected in this result as our second quarter has delivered a significant improvement across the Group.”

“We reacted quickly at the beginning of the COVID-19 pandemic to leverage our ‘hub and spoke’ model to align costs with client demand,” he added.

ALS dividend

The ALS board has declared a fully franked interim dividend of 8.5 cents per share (cps). The ex-dividend date is 26 November 2020 and the payment date will be 16 December 2020. The 8.5 cps interim dividend is down 26% from the 11.5 cps interim dividend paid last year.

This represents a payout ratio of 51%, which management believes “reflects the prudent capital management strategy and also demonstrates the Group’s strong liquidity position”.

Buy, hold or sell?

The ALS share price is up more than 50% in the past six months, despite being financially impacted by the COVID-19 pandemic.

I believe the market has already factored in much of ALS’s announced Q2 recovery and that there may be better investment opportunities right now.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned
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