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ACL - AUSTRALIAN CLINICAL LABS LIMITED


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Australian Clinical Labs Ltd (ACL) is a leading private provider of pathology services in Australia. ACL annually collects, analyses and reports on 8.3 million episodes via its national network of 995 collection centres, 30 clinics and 86 accredited laboratories.

 

ACL is one of the largest private pathology providers to hospitals nationally, servicing over 90 private and public hospitals. In its four established regions of Western Australia, Victoria, South Australia and the Northern Territory, ACL has an equivalent market position in community pathology to Sonic Healthcare and Healius. ACL also has a growing presence in New South Wales and the Australian Capital Territory and has recently expanded into Queensland.

 

ACL had pro forma revenues of $595.1 million and pro forma EBITDA of $178.6 million for the 12 months to 31 December 2020.

 

 

After raising $408million, fully underwritten by Merrill Lynch Equities (Australia) Limited and Goldman Sachs Australia Pty Ltd (Joint Lead Manager) via a PDS at $4.00 a share, ACL will list on the ASX on 12 May 2021

 

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ACL has been owned by mid-market Australian PE firm Crescent Capital, which bought Healthscope's pathology business for $105 million to create the company in 2015.

 

Crescent would own 34.6 per cent of the company on listing, while its co-investors (Bank of America and Goldman Sachs) would have another 9.8 per cent. Crescent’s Michael Alscher was listed as the company’s non-executive chairman.

 

Coming on at 15 times PE.

 

 

 

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  • 4 weeks later...

ACL has upgraded prospectus full year net profit guidance by 10 per cent to 15 per cent due to increased revenue and the improved running of the overall business. The $717 million company was listed on the ASX by former owners private equity firm Crescent Capital Partners on May 17. The firm still owns a large chunk of the listed business.

 

ACL said costs, not including consumables, have remained in line or below forecasts.

 

Full year pro forma sales are now tipped to be up 2 per cent to 3 per cent to between $657.7 million and $663.3 million for the full year to December 31, while expected EBITDA will be 5 per cent to 7 per cent higher to between $217.4 million and $222.3 million.

 

ACL now expects pro forma net profit after tax to be up 10 per cent to 15 per cent to between $82 million and $85.4 million.

 

 

 

Up 7.3 per cent to $3.81 each in early trade on Thursday morning; of course the listing price was $4.00 per share.

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James Marlay (Livewire Markets): Now, Simon, we’re going to start with you. A relatively new name on the market, Australian Clinical Labs. IPO earlier this year, but it just delivered a great profit of above prospectus and an upgrade of 30 per cent. Is it a buy, hold or sell?

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Simon Conn (Investors Mutual): It is a buy for us, James. Australian Clinical Labs is the number three player in the pathology market in Australia. It’s a very strong, defensive market, and this business generates good cash. Under private equity ownership, they have actually invested in technology. I think that has really come to the fore in the COVID period, where we’ve seen strong volumes, and this company’s delivered really rapid turnaround times. It has also come through in the results. We have seen strong operating leverage where they have generated a huge amount of cash from the COVID underlying volumes.

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SC: ... But I think it is also a business that is well positioned to grow through M&A. So whilst COVID volumes will decline, the cash on the balance sheet will position them well for further bolt on acquisitions, which I think they can really then leverage their technology platform. So, well led by Melinda McGrath, good board, and really well positioned, I think, in a strong industry.

James Marlay: Roger, Australian Clinical Labs, a buy, hold or a sell for you?

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Roger Montgomery (M.I.M) : It is a buy for us as well. Some say itis another Sonic in the making. They have upgraded their first half 22 guidance twice in September. That was mostly attributed obviously to the continued strong demand for COVID testing. But unlike Sonic, where underlying testing is flat, ACL have reported recovery in the underlying or base business. Obviously, the Victoria and NSW outbreaks have been a big kicker with revenue guides upgraded by 10 per cent. I think NPAT was upgraded by over 30 per cent.

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RM: ... EBITDA margins also look like they are ahead of prospectus, and management reckons margins are going to settle around 27 per cent. Now what is interesting is that there will be, in the future, some sensitivity to PCR testing, which of course itself is tied to infection outbreaks, but we all know that efficacy drops after six months, enough to warrant booster shots, which I think a lot of people are going to forget or not get around to doing. That means we are going to be chasing our tails with respect to COVID for some time. So COVID testing is likely to settle at a higher than currently expected level. So overall testing is going to be higher in a post COVID world, and I think that is underestimated by the market. So, that is why we’ve got it as a buy.

 

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