AJ Lucas Share Price is Up on Dramatic Profit Turnaround (ASX:AJL)

If the ASX ever hands out medals for backflips, then AJ Lucas Group Ltd [ASX:AJL] has to be certified lock for gold.

This small-cap marvel saw its share price fly out the gates in this morning’s market open. With the AJL share price peaking at a 380% gain just 40 minutes after trading began.

As of time of writing, this gain has fallen to 132%. But that is still an incredible result for a stock that has been trading sideways for the better part of the last six months.

So, what was the cause for this sudden surge?


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Back in the black

AJ Lucas Group managed to book a stellar $9.9 million profit for the six months ended 31 December. A more than $20 million turnaround from the $10.3 million loss they posted this time last year.

Few companies ever achieve that kind of resurgence. Especially amidst challenging market conditions during a pandemic.

But, as a drilling services provider, it speaks volumes to the rampant demand for resources recently. Showcasing the incredible commodities ‘supercycle’ that we now find ourselves in.

More importantly for AJ Lucas’ management though, it proves that their efforts haven’t gone to waste. The company has embarked on several cost-cutting measures and asset consolidation efforts, all of which has helped them deliver a better bottom line result.

As CEO Brett Tredinnick comments:

‘The result reflected the strong operational performance of Lucas Drilling during the half despite revenue being impacted by COVID-related and other interruptions to clients’ operations.

The drop in revenue in the period was more than offset by the increase in earnings resulting from a better mix of more technical, higher yielding drilling as well as the various operational and corporate efficiency measures taken. The Group is now better positioned to maximise growth opportunities and better withstand any possible future shocks.

What’s next for AJL Share Price?

So, while today’s result is fantastic, it is just the beginning for AJ Lucas.

Management now needs to make sure today’s result isn’t an outlier. Proving that they can not only make a profit but keep the company profitable for the foreseeable future. A task that will rely upon said growth opportunities.

For that reason, shareholders have reason to celebrate today, but should also be thinking about the future. Especially if any future shocks are as dramatic as the last.

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Ryan Clarkson-Ledward,
For Money Morning

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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