Overview of FY2016 Result
The Chairman, Nerolie Withnall said that whilst the Company has made considerable progress in developing a balanced portfolio the FY2016 result reflected the ongoing commodity price uncertainty impacting a number of companies and sectors globally.
Commenting on the full year result, Managing Director, Greg Kilmister said that the Life Sciences Division was successful in growing revenue in all regions as a result of consistent investment and market share growth. The Industrial Division was relatively stable through the year, with the Tribology business growing strongly in line with previous years and the Australian Asset Care business being impacted by the unwinding of CAPEX projects in the resources sector partially offset by OPEX related activity in the sector remaining strong. ALS’s Minerals and Energy Divisions were faced with further reductions in exploration and development activity coupled with aggressive cost cutting initiatives from producers, leading to a lower overall profit margin for the Company.
Outlook for FY2017
The Company is confident that the quality of its platform, its operating model, and its strategic focus, will see it continue to increase its client penetration and market share despite the challenges of current conditions.
The Company continues to pursue growth opportunities in Life Sciences; particularly in the food sector where it is evaluating a select number of high quality bolt-on acquisition targets in Europe and North America. ALS expects that Life Sciences contribution to the overall business will continue to increase at a strong pace, with revenues growing in the high single digit percentage through the next few years.
ALS Minerals is focused on growing organically in the Inspection service sector by delivering quality, innovation and value to new and existing clients. The resilience that the Division exhibited in FY2016 is expected to improve margins in spite of market conditions. Ongoing market share growth through technology leadership, quality, and innovative service delivery remains a firm objective. The business remains well positioned to leverage the upturn in the cycle.
The Energy operations are undergoing a critical evaluation of all components to ensure the business is matched to the current environment. A major element of the review is to rebase the operating model to reduce the cost base to sustainable levels. The objective is to get the Oil & Gas business to a breakeven point by September this year under current very poor market conditions. The Company expects short to mid-term market conditions to remain challenging and unpredictable until the oil price stabilises.
Australian market conditions for ALS Industrial are expected to remain flat. Market share growth is the priority focus in the mining and Oil & Gas maintenance sectors. In North America, revenue growth is expected in the context of robust downstream Oil & Gas and petrochemical sectors. The Industrial Division is strongly focused on business development and is well positioned to increase market share.