ALS LIMITED — Annual Report 2011

May 23, 2011

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asx/media release

24 May 2011

Global growth lifts Campbell Brothers to record result

Global testing services group Campbell Brothers Limited (ASX Code: CPB) today announced a record financial result for the year ended March 2011, with a 34.3% lift in revenue driving a 75.6% rise in underlying net profit after tax (NPAT) to $132.2 million.

Revenue increased to $1.108 billion from the previous $825.53 million while NPAT (excluding unusual items) jumped from $75.3 million. Earnings per Share (EPS) rose 57.4% for the year to $2.03, up from $1.29 (on both a basic and diluted basis).

The result compares with the previous record result in 2009 of $920.3 million in revenue and NPAT of $106.2 million. It is in line with full year guidance recently released to the market.

The Chairman of Campbell Brothers, Geoff McGrath, said the results showed the Company’s global expansion and diversification strategy was achieving strong results.

“This is a record financial result for Campbell Brothers and it significantly exceeds our previous record result achieved two years ago, in 2009,” Mr McGrath said.

“It is especially satisfying that our strategy to continue expanding and diversifying our global business has achieved these excellent results only one year after there were uncertainties in the global economic environment.”

Directors have declared a final partly franked (50%) dividend for the year of 75 cents per share (2010: 55 cents partly franked) bringing the total partly franked (50%) dividend to $1.40 (2010: $1.00 partly franked). The dividend is payable on 1 July 2011 to all shareholders on the company’s register as at close of business on 10 June 2011. As previously announced, shareholders have been advised that Campbell Brothers has suspended its Dividend Reinvestment Plan (DRP).

The consolidated result is summarised as follows:

Revenue Underlying profit before financing costs, income tax and unusual items Net financing costs Income tax expense relating to underlying profit before unusual items Underlying profit before unusual items Net loss attributable to non-controlling interests before unusual items Underlying profit before unusual items attributable to equity holders of the company Unusual items net of income tax attributable to equity holders of the company Profit attributable to equity holders of the company Basic earnings per share Diluted earnings per share	This Year $’000 1,108,329 196,120 (10,244) (53,732) 132,144 64 132,208 146 132,354 $2.03 $2.03	Last Year $’000 825,533
		116,983 (11,121) (30,971)
		74,891 410
		75,301
		-
		75,301
		$1.29 $1.29

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Overview

The Managing Director of Campbell Brothers, Greg Kilmister, said the excellent result followed the Group’s success in preparing for, and benefiting from, a recovery in global business conditions.

“We have successfully advanced our business strategy and expanded our analytical laboratory division, ALS, to capitalise on some significant opportunities, including the upturn in global mineral exploration activity,” Mr Kilmister said.

“Our investments in strategic acquisitions and increased operational capacity have established a platform from which the Group has launched a significant increase in business volumes.

“In particular, the recovery in global mineral exploration activity lifted demand for the analytical testing services provided by ALS Minerals division. This division made the largest contribution to Group revenue of any of our divisions after achieving a 63% increase in revenue over the previous year.

“It is pleasing to note that the strong growth in our financial results was achieved despite the impact of the stronger Australian dollar on our international earnings.”

Divisions

Campbell Brothers operates in three business areas: ALS Group – laboratory analysis and testing services; Campbell Chemicals - industrial chemicals importer/distributor; and Reward Distribution – hospitality, cleaning and catering products supplier. The divisional results are as follows:

Financial Results $’000 ALS Minerals ALS Environmental ALS Coal ALS Tribology ALS Industrial Campbell Chemicals Reward Distribution Intra-group revenue Total divisional	Revenue	Contribution
	FY2011 FY2010 + / - 334,477 204,984 63.2% 308,281 245,205 25.7% 73,023 61,755 18.2% 30,338 29,826 1.7% 112,034 (12 months) 19,823 (3 months) n/a 130,322 151,799 -14.1% 123,869 117,785 5.2% (4,015) (5,644)	FY2011 FY2010 + / - 111,796 53,344 109.6% 66,195 43,798 51.1% 17,151 15,034 14.1% 4,009 4,643 -13.7% 12,608 (12 months) 1,299 (3 months) n/a 7,386 8,246 -10.4% (1,811) 3,424 -152.9%
	1,108,329 825,533 34.3%	217,334 129,788 67.5%
Net finance expenses Unallocated corporate costs and net result attributable to non-controlling interests Income tax expense	(10,244) (11,121) (21,150) (12,395) (53,732) (30,971)
Net underlying profit after tax	132,208 75,301 75.6%

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ALS Group, which has five business divisions, experienced strong increases in revenues, profits and margins, with ALS Minerals and ALS Environmental divisions achieving the strongest growth. In its first full year of trading, ALS Industrial established itself as ALS’s third largest division in terms of revenue.

Campbell Chemicals’ revenue eased following the December 2010 divestment of its Cleantec business, while the Reward Distribution business lifted revenue for the year but experienced difficult trading conditions.

ALS Group

Mr Kilmister said ALS achieved exceptional results for the year, led by ALS Minerals which delivered a 63.2% increase in revenue and lifted its profit contribution by 109.6%.

“ALS Minerals performed very strongly in buoyant market conditions during the year,” Mr Kilmister said.

“Capital investments made during the previous 12 months were well timed with the increased capacity being deployed to meet the significant increase in demand for analytical services.”

The acquisition of Ammtec Limited, completed in December 2010, added a valuable suite of metallurgical and consultancy services to the division’s capabilities.

ALS Environmental recorded revenue growth of 25.7% and secured important government project work.

Despite the impact of natural disasters on clients’ exploration activities, ALS Coal’s revenue rose 18.2%.

The newly formed ALS Industrial business unit, created following the acquisition of industrial services company PearlStreet in January 2010, performed ahead of expectations. ALS Industrial generated revenue in excess of $112 million in its first full year with the Group.

A stronger Australian dollar impacted the translation of earnings from the North American region which dominates ALS Tribology, a business unit specialising in the analysis of oils and fluids used in equipment lubrication. Profit margin eased slightly in this division, however there was improvement in the second half which is expected to continue.

Campbell Chemicals

Campbell Chemicals delivered a slight improvement in profit margin, despite some disruption caused by the divestment of the Cleantec business unit in December 2010. Operational efficiencies improved including a reduction in some purchasing costs due to the stronger Australian dollar.

The Panamex trading operation generated improved gross sales margins in its key regions.

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Reward Distribution

The Group’s hospitality supplies business lifted revenue during the year, however, difficult trading conditions in the first half impacted earnings.

“Although these conditions were successfully addressed in the second half, when the business returned to break even, a loss was recorded for the full year,” Mr Kilmister said.

“Reward now has a re-focussed national procurement team together with a new national sales and marketing support group”.

Shareholder returns

The Group’s improved performance has significantly increased shareholder returns for the year.

The full year dividend of $1.40 per share was 40% higher than in 2010. Earnings per share increased 57.4% to $2.03 per share (2010: $1.29) on both a basic and diluted basis.

These increases were achieved even though the number of shares on issue rose due to 3.49 million new shares being issued pursuant to the Group’s acquisition of Ammtec Limited.

Outlook

The Group’s expansion strategy successfully accelerated business growth in 201011 and it is expected that additional potential from this strategy will be realised in the 2011-12 financial year and beyond.

Mr Kilmister said the Group will continue to advance ALS’s services further along the strategic path, increasing its prominence as a leading global provider of Testing, Inspection and Certification (TIC) services.

“Acquisitions finalised in the second half of 2010-11, including Ammtec in Australia and Analytical Laboratory Services, Inc. in the US, are expected to make significant contributions in the year ahead, as will the ALS Industrial division, which reported its first full year result in 2010-11.”

The Group’s new world-class coal testing facility which opened in Brisbane in April 2011 is expected to deliver additional service and technical capabilities at a time when further upturn is anticipated for the coal mining sector.

The divestment of the Cleantec business, finalised last December, will also assist the Group to advance the opportunities identified across all business divisions.

ENDS:

For further information: Greg Kilmister, Managing Director, Campbell Brothers Limited, +61 7 3367 7900

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