ALS LIMITED — Earnings Release 2013

May 26, 2013

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asx/media release

27 May 2013

FY2013 underlying profit up 7.0%

(Statutory Profit up 2.2%)

Final dividend 27 cents per share

ALS Limited (ASX: ALQ) has announced a record financial result for the year ended 31 March 2013, with an underlying net profit* after tax (attributable to equity holders of the Company and excluding unusual items) of $237.9 million, in line with guidance provided to the market.

The result was up 7.0% on the previous year and was generated from revenue of $1,499.3 million (up 6.7% on the year to March 2012).

Net profit after tax attributable to equity holders of the Company including unusual items was $227.3 million. Unusual items contributed a net loss after income tax of $10.6 million and relate to the divestment of the remaining businesses in the Campbell Chemicals division and a write down of all remaining goodwill in the Reward Distribution segment.

The Chairman, Nerolie Withnall commented that the record profit result was achieved in very challenging market conditions and was a testament to the Company’s growth strategy and diversification into non-minerals testing markets.

“In more recent years the focus for the Company’s growth and diversification has been into new testing markets; including industrial testing, food and pharmaceuticals, as well as geographical growth of our environmental businesses. To some extent this has reduced our exposure to the cyclical downturn in the minerals sector.” The Company’s performance has increased shareholder returns for the year, with underlying earnings per share* increasing 5.5% to 69.53 cents (up from 65.90 cents per share last year), on a post share-split basis.

Directors have declared a final partly franked (50%) dividend for the year of 27 cents per share (2012: 26 cents partly franked on a post-share split basis) bringing the total partly franked (50%) dividend for the year to 48 cents per share (2012: 45 cents partly franked).

The dividend will be paid on 2 July 2013 on shares registered in the Company’s register at the close of business on 14 June 2013. The Company’s dividend reinvestment plan will operate for the final 2013 dividend at a 5.0% discount to the volume weighted average price of the Company’s shares over the 5 trading days following the record date.

*Underlying net profit and underlying earnings per share are non-IFRS disclosures. They include the results from operating activities of discontinued operations but exclude unusual items relating to the Campbell Chemicals and Reward Distribution segments.

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Result Overview

Results of each of the Company’s business segments for the full year are:

Financial Results In millions of AUD ALS Minerals ALS Life Sciences ALS Energy ALS Industrial Reward Distribution Campbell Chemicals*	Revenue	Contribution
	FY2013 FY2012 + / - 608.4 591.3 +2.9% 454.4 360.7 +26.0% 105.0 87.8 +19.6% 168.6 152.5 +10.6% 119.2 123.2 -3.2% 43.7 90.1 n/a	FY2013 FY2012 + / - 211.3 214.7 -1.6% 89.3 78.1 +14.3% 32.6 23.7 +37.6% 30.6 24.5 +24.9% 0.9 3.7 -75.7% 3.8 8.2 n/a
Total segments	1,499.3 1,405.6 +6.7 %	368.5 352.9 +4.5%
Net finance expenses Unallocated corporate costs Acquisition costs Net foreign exchange gain Net (profit)/loss attributable to non- controlling interests Income tax expense		(19.6) (15.6) (21.0) (24.8) (1.8) (3.4) 4.6 2.9 (3.2) (2.3) (89.6) (87.3)
Underlying net profit after tax Unusual items after tax		237.9 222.4 7.0% (10.6) -
Net profit after tax		227.3 222.4 2.2%

• The Campbell Chemicals segment was divested during September 2012.

The Managing Director, Greg Kilmister, said all divisions within the ALS testing services business generated higher levels of revenue than the previous year.

“This translated into improved contribution margins for ALS Energy and ALS Industrial, whilst ALS Minerals and ALS Life Sciences experienced slight contractions in margin.”

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“Despite flat sample flows into the geochemical laboratories, cost overruns in the Australian metallurgical business, and restructuring costs in the European inspection business, the Minerals Division performed well to maintain a full year EBIT margin of close to 35% compared to 36% in the previous year. The Australian coal business, Asian and Australian environmental businesses, Canadian metallurgical business and the global tribology businesses also had outstanding full year performances.”

“The Life Sciences Division’s margin was impacted by integration costs of acquisitions and a higher weighting of revenue to the northern hemisphere which is heavily impacted by the winter months.”

“Operating profit margins increased in the Energy and Industrial divisions as a result of higher work volumes in the coal laboratories and improved cost controls in the North American tribology laboratories.”

Divisional Performance

ALS Minerals division experienced softening market conditions across its business streams during the second half of the financial year as global exploration activity and mine development slowed. Global sample flow into the company’s geochemical laboratories was 2% less than in the previous full year. Sample flows in the second half were down 18% compared to the second half of the previous year, as a result of a traditional off season this year and a decline in overall market activity. The resulting tightening in contribution margins was closely monitored and controlled by an effective cost management program. The South American and European regions of the ALS Geochemistry stream produced strong revenue and earnings growth, benefiting from recent capital expenditure on facilities and equipment. ALS Metallurgy’s North American region also performed well, growing its revenue and contribution in challenging conditions.

ALS Life Sciences division delivered solid revenue improvement in all regions during the year. This was driven by a combination of increased market share in most territories and strategic acquisitions in Europe and Latin America. Acquisition integration expenses and cost pressures associated with the prolonged northern hemisphere winter led to a mild contraction in the division’s contribution margin.

ALS Energy division experienced strong organic growth in all regions which resulted in significant revenue and contribution gains during the financial year. In Australia, the coal business grew its market share and in the second half of the year negotiated challenging market conditions that required a keen focus on both client service and cost management. These initiatives together with new project work in South Africa and Canada drove improved margin performance during the year.

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ALS Industrial division reported revenue and contribution gains during the year in both the Asset Care and Tribology business units. Asset Care revenue growth was primarily driven by a number of large outage programs for long-term clients in the oil and gas, process, and power generation industries. The Tribology business delivered solid revenue growth which resulted in improved margins. With competitive markets in North America and Australia, Tribology performed well at both improving market share and containing costs.

The Reward Distribution hospitality supplies business experienced difficult trading conditions in its key tourism and hospitality markets and delivered disappointing results with lower levels of revenue and contribution margin.

The remaining Campbell Chemicals Division businesses, Panamex and Deltrex Chemicals, were divested in September 2012.

Acquisitions during the year

During the financial year, the Company continued its strategy of business expansion and diversification in testing and inspection services. The Company made further progress in building its non-minerals businesses, as well as making significant progress in further diversifying its geographical base.

Specifically, the Group undertook the following major acquisitions:

• Eclipse Scientific Group, a food, dairy, water and pharmaceutical testing business servicing England and Ireland (acquired April 2012). The acquisition gives ALS a leading position on the British food testing market.

• Milana A/S, a provider of a broad range of analytical testing services to the Danish environmental market (acquired July 2012);

• An 80% holding in the Corplab environmental testing group in Latin America with operations in Peru, Brazil, Argentina and Ecuador (acquired December 2012).

Other acquisitions made were:

• Severn Trent Analytical Services, providing a leading market position in the provision of analytical services to water authorities in the UK;

• Analytical Solutions, provider of environmental testing services in Brazil; and

• Artek, leader in the provision of environmental analysis and sampling in Turkey.

ALS’s target is to reach $2 billion in revenue in FY2017 based on becoming more diversified and gaining market share in the global testing, inspection and certification markets via further acquisitions in the Oil & Gas and Life Sciences sectors, organic growth via entering new geographies, and a progressive increase in service offering.

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Outlook for 2013/14

Mr Kilmister said he expects that the acquisitions finalised during the financial year will contribute strongly to the Company’s result in the 2013/14 financial year.

“The Company expects to see growth in its environmental businesses across all regions with perhaps the exception of Australia. Growth is expected to be strongest in Asia and the USA. We expect to see further significant growth in our global food laboratories; both organically and via acquisitions”.

“The Industrial Division will see organic growth across the Tribology laboratories and margin improvement in the Asset Care businesses.”

“ALS’ coal business is predominantly Australian based and the industry in Australia is under considerable cost pressures. Whilst export tons are likely to increase, we are seeing a sharp reduction in both exploration and pre-production drilling. Conditions are not expected to improve in the near future and the focus of the Company is on laboratory rationalisation, cost cutting, and productivity improvements to ensure EBIT margins are maintained above 20%.”

“We expect to see improved performance from our Metallurgy and Inspection businesses in a flat market, due to the benefits from cost cutting measures implemented during the last year, and the commissioning of the new metallurgical facility in Chile and the Iron Ore Technical Centre in Perth. The global exploration industry will move further into a cyclical downturn, most pronounced in North America, and sample flows into our geochemical laboratories will continue to decline through the year. However, ALS’ strict adherence to its “hub and spoke” model through the up cycle of the last decade will provide flexibility in maintaining margins and will create market share gain opportunities as was seen in the cyclical downturns in 1991, 1998 and more recently during the GFC in 2008.”

“The new year will see the Company aggressively pursue its longer term diversification strategy whilst reducing CAPEX in its traditional businesses. The operating focus will be on cost controls, productivity, and maintaining margin.”

Mrs Withnall added that “the investment in diversified industry sectors and new facilities over the last ten years has strongly positioned the Company and the Board remains positive about the prospects for earnings growth in the medium and longer term”.

-ENDS-

Further information: Greg Kilmister Managing Director ALS Limited +61 (7) 3367 7900

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About ALS Limited (ASX: ALQ)

ALS is a global Testing, Inspection & Certification business. The company's strategy is to broaden its exposure into new sectors and geographies.

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