The HRL Holdings Ltd (ASX: HRL) share price is surging today on the back of a guidance and trading update.
At the time of writing, HRL Holdings shares are up 20.69% to 10.5 cents in late afternoon trade. With this rise, the company’s market capitalisation currently stands at around $52 million.
HRL Holdings provides sampling, laboratory testing and data management services across Australia and New Zealand.
The company’s customer base comprises companies within the food, environmental, occupational hygiene and construction industries.
FY20 guidance
HRL’s guidance update is likely what has been spiking investor interest today. Although HRL noted that future mid-term activity levels remain difficult to accurately predict, it provided an update on its current financial performance.
The company expects FY20 revenue to land in the range of $32 million to $32.7 million, up from FY19’s revenue result of $30.7 million.
Meanwhile, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to be between $5.5 million and $5.8 million, up from $4.5 million in FY19. HRL was quick to point out that analyst consensus of underlying EBITDA is $4.8 million.
Trading update
Along with the guidance, HRL also shed light on recent trading conditions.
As previously announced, the company’s New Zealand business has been impacted by the nationwide lockdowns. During alert level 4 which was in place from late March through to late April, only HRL’s food and water testing laboratory operations were permitted to remain open.
However, all New Zealand operations recommenced in mid-May when restrictions were relaxed to alert level 2. The company stated that trading is improving but still below pre-COVID-19 volumes.
On a positive note, HRL’s Australian businesses continued to trade without interruption during April and May.
On the whole, HRL noted that fourth quarter trading conditions benefited from the company’s ability to operate “essential services” food testing for honey and dairy, combined with a strict cost control strategy that has been executed across the business.
In terms of cash, operating cashflows over the second half of FY20 have been positive and HRL stated it remains “significantly” within banking covenants.
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Motley Fool contributor Cathryn Goh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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