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ALS LIMITED — AGM Information 2021
Jul 27, 2021
64365_rns_2021-07-27_12ec63e3-d64e-443c-9af8-00f1218852b9.pdf
AGM Information
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ALS Limited 32 Shand Street Stafford QLD Australia 4053 T +61 7 3367 7900 ABN 92 009 657 489
Bruce Phillips Chairman ALS Limited
Annual General Meeting 10:00am on 28 July 2021
Ladies & gentlemen,
The last year has been challenging for every global citizen. People have lost family and friends, many have suffered serious illness, lost their livelihoods, and for some, much of their life savings. On behalf of the board and our shareholders, I wish all those affected by the pandemic a healthy, safe and speedy recovery.
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During the pandemic year, our primary focus has been on the safety and health of our employees and community stakeholders. Our laboratories were designated as essential services in most parts of the world, reflecting the importance of ALS to global communities. Our testing of COVID-19 in wastewater provided one of the only tools available for governments to proactively search for outbreaks. Our COVID surface-test kits were developed in Portugal and rolled out to many jurisdictions around the world to assist in keeping people safe.
It is an honour to chair a company that has risen to the challenges of an extraordinary, and often very dangerous external environment, to deliver an excellent outcome for our shareholders and the communities in which ALS operates.
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Strong FY21 performance demonstrates the resiliency of the Group
With respect to the Company’s FY21 results, revenue from continuing operations declined by 5.0% to $1.76 billion, although it was only down 0.1% on a constant currency basis. Underlying net profit after tax from continuing operations was down 1.5% to $186 million.
The FY21 results reflect the resiliency of the Group’s diverse portfolio of businesses, their widespread geographies, and the benefit of swift actions taken early in the pandemic. We emerged from FY21 with a strong balance sheet and well positioned to capitalise on growth opportunities as the global economy continues to recover.
Advancing strategic objectives
Despite the impact of the pandemic, we were also able to further progress our key strategic objectives.
We expanded the food and pharmaceutical network of our Life Sciences division with the acquisition of the USA and Brazil-based Investiga; we started expanding our global-leading Geochemistry business to meet growing client demand; we progressed our drive for margin improvements through efficiency gains and automation; we invested in global first-tier processes, systems and analytical capabilities; and we committed capital to reduce our carbon footprint.
And, as we announced today, we have acquired a 49% stake in Nuvisan, a pharmaceutical company based in Europe. This is a highly strategic acquisition for us as it grows our presence in the high-margin pharmaceutical market and expands the geographic reach of our Pharmaceutical business. Raj will provide more detail about Nuvisan in his address to you shortly.
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Capital management and dividend
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Capital management also remained a major focus for the board during FY21. Our continued approach is to maintain a strong balance sheet, to invest in our facilities and equipment, to fund growth by acquisition and green field investments, to pay sustainable dividends, and thereafter to return any excess capital to shareholders.
The strong FY21 performance resulted in us finishing the year in a very good financial position. We reduced debt by $186 million and refinanced shortterm bank facilities and US Private Placement debt. This saw the Group close FY21 with a leverage ratio of 1.6x, down from 2.1x compared to the previous year, which is the lowest level in our recent history.
The strength of the balance sheet and performance of the business, particularly during the second half of the year, gave the board confidence to declare a final dividend of 14.6 cents per share, partly franked to 70%. Added to the half year dividend of 8.5 cents per share, this represents a total annual dividend of 23.1 cents per share, a 31.3% increase over FY20.
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ESG vision
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Sustainability is core to our business. Last month we published our Sustainability Report which sets out our ESG vision and FY21 achievements. Our vision is focused on our impact on the environment and society, as well as upholding the highest standards of governance. We have added a fourth pillar which is people, aligning with our core values of ‘people development’ and ‘safety is a priority’. People are the core of our business and these values have never been more relevant than in the current global environment.
As part of our continually evolving plan for a sustainable future, we launched a Climate Change Strategic Plan during the year. While the Group’s overall carbon footprint is relatively small at an estimated 88,000 tons of CO2 scope one and two emissions per annum, we have adopted a goal of delivering a 40% reduction in carbon intensity for these emissions by 2030. We will achieve this by improving efficiency, focusing on sustainable purchasing and investing in renewable energy to power our operations. We developed this strategic plan after consulting with our people across our global operations to ensure we are supporting the communities in which we operate.
Repayment of government subsidies
The Group will voluntarily repay COVID-related government net subsidies that were received in all jurisdictions where repayment mechanisms exist. This includes $20.5 million in Canada and $3 million received under the Australian JobKeeper program. We saw this as the right course of action given our improved performance in the second half of FY21 and as it demonstrates our support of the communities in which we operate.
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Remuneration
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The board strives to deliver a balanced and measured set of remuneration outcomes that align with the culture, strategy and performance of the business, and the contribution of our executives. It is important that the remuneration framework is a reflection of the conditions and challenges facing the Group at a particular time.
During FY21, the board’s overarching philosophy was that our global workforce needed to be incentivised and rewarded if they delivered for stakeholders during what was a very dangerous time for their personal health and that of their families.
In addition, we needed to recognise and balance the fact that many of our stakeholders were also suffering financial and health stresses during the year.
In the end, we were delighted that our workforce delivered a very good financial outcome for shareholders, and we believe an appropriate balance has been achieved in rewarding them. Some of the key principles we adhered to included:
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Ensuring all government subsidies were refunded and excluded from calculating remuneration outcomes;
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By instigating a fixed salary freeze, including for directors (which has now been in effect since 2019);
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We reduced STI potential at target in quantum by 25%;
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We set a minimum underlying NPAT gateway for any STI to be awarded; and
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- We ensured that any increase in STI payments was in-line with percentage increases in dividends to shareholders (both approximately 30%).
After applying these principles to the STI scorecards, awards to KMPs ranged from 30-88% of maximum opportunity available.
The sustained strong performance of the business over the past three years will also result in the Long-Term Incentive (LTI) plan vesting at a portion of 97% of the maximum potential. This reflects the full achievement of performance hurdles for absolute EPS growth, absolute ROCE and relative EBITDA margin versus peers; and partial achievement of relative TSR targets.
Comparing these remuneration outcomes to the shareholder experience for the year, the settings helped deliver a 74.1% increase in share price (albeit off a low base), and a 31.3% increase in dividend for the year.
Following remuneration benchmarking with external remuneration advisers and consultation with major shareholders, the board has proposed a package of changes to the executive remuneration framework for FY22. Key changes include the requirement for executives to acquire a minimum holding in ALS shares as well as some adjustments to the executive STI & LTI framework and quantums. A transparent and detailed description of these changes is outlined in the 2021 Annual Report.
Looking forward, we have growing confidence that the strength and resiliency of the Group will continue to deliver acceptable financial returns through the pandemic. Our diverse business model, strong balance sheet and talented management team have demonstrated we are also able to capture growth opportunities as global economic conditions improve.
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In terms of financial guidance, today we are returning to our tradition of providing first half guidance at the AGM. On the basis of no significant deterioration in trading conditions, we expect to deliver underlying NPAT of between $115m and $125m in the first half of FY22, compared to $80.6 million in the prior corresponding period, an increase of 49% at the midpoint.
Raj will provide more commentary regarding this guidance and the business outlook in his presentation.
Conclusion
Finally, I wish to say thank you to my board colleagues for their guidance and support during what was a very busy year. I’m sure you will also join with me in thanking the management team, and indeed all of the talented and dedicated people across our business, for their hard work and dedication during unprecedented times.
Most importantly I wish to thank you, our shareholders, for your continued loyalty and support.
I will now hand over to Raj who will provide further detail on the operational performance and strategy of the Group, as well more detail on the outlook for the first half of FY22.
Thank you.
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