One of the best performers on the S&P/ASX 200 Index (ASX: XJO) on Friday was the ALS Ltd (ASX: ALQ) share price.
The testing services company's shares jumped 5.5% to $5.39 following the release of a coronavirus update.
This compares very favourably to a disappointing 5.3% decline by the benchmark index.
What did ALS announce?
This morning ALS provided an update on how the coronavirus outbreak was impacting its businesses.
According to the release, the operations of a small number of its laboratories, primarily in South America, have been temporarily suspended due to government restrictions.
However, as a key part of the supply chain for the commodity, environmental, food and pharmaceutical industries, the majority of its laboratories in jurisdictions impacted by government restrictions have been granted essential business status and continue to operate.
The company's CEO, Raj Naran, commented: "While the uncertainty of the situation makes it difficult to foresee the exact financial impact from COVID-19, we have a strong management team who are experienced at managing the business through cycles caused by different global forces and we have acted quickly to align our cost base with demand from our clients. We are prudent with capital to ensure strong liquidity during this uncertain time and that we are well positioned for a recovery."
Balance sheet strength.
Management believes its balance sheet is strong and has a leverage ratio broadly in-line with previous reporting periods. It is also currently well within the key debt covenant of 3.25 times.
However, as part of its conservative and prudent capital management plan, the company has taken the precaution to draw down sufficient funds from its existing bank facilities. This is primarily to meet the maturation of a ~A$245 million US Private Placement (USPP) debt tranche which is due at the end of calendar year 2020.
In addition to this draw down, ALS notes that it maintains strong liquidity with upwards of A$200 million of undrawn facilities and cash available.
Though, to mitigate against the possibility of a longer term COVID-19 impact, it is also taking the pre-emptive action of working with bank lenders to increase existing facilities and the leverage ratio covenant for a period of time.
It is also continuing to focus on aligning costs with client demand across all its operations. It notes that the 'hub and spoke' model which is employed across most of the company gives management the ability to react quickly to changing market conditions. In addition, non-essential capital expenditure has ceased and the company has increased its focus on cash collection to support liquidity.
