Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

Healius sees ‘green shoots’ despite benign flu season, backpay bill

Emma Rapaport with AAP  |  18 Feb 2019Text size  Decrease  Increase  |  
Email to Friend

Medical centre operator Healius says a "benign" winter flu season and paybacks from a long-running pay dispute have sapped its first-half result, with profit down 6.3 per cent to $20.7 million, but Morningstar expects conditions to improve.

Healius (ASX: HLS), formerly known as Primary Health Care, said on Friday that revenue for the six months to 31 December rose 4.7 per cent to $871.6 million but that its bottom line was below par because of soft market conditions and a less severe flu season.

The company also noted a combined $14 million in back payments were made following the settlement in September of a decade-long dispute involving 600 staff from Dorevitch Pathology.

Separately, an award adjustment had also been made for medical centres.

Healius Result first half profit

Healius's loss of the national bowel screening contract, which will cycle out in the second half of the fiscal year, also weighed on earnings, though the company's imaging unit posted solid growth.

Chief executive and managing director Malcolm Parmenter said a modest financial recovery in October and November had been offset by inconsistent growth rates across the divisions, but he expected underlying market conditions to improve in the rest of the financial year.

"We are just over 12 months into our change agenda and the result today contains a number of positive trends - green shoots if you will - as we near the end of our GP contract transition period and see early signs of traction on our initiatives," Dr Parmenter said.

Healius's repositioning of its Medical Centres business, known as Project Leapfrog, as well as the development of efficient IT platforms in Pathology and Imaging, are expected to boost the company's bottom line in the second half.

Commenting on the weak performance, Morningstar equity analyst Daniel Ragonese said he doubts soft market conditions will continue and anticipates volumes to eventually revert toward the historical norms.

"The second half of fiscal 2019 should improve, as efficiency initiatives in pathology and imaging contribute an approximate $10 million earnings before interest and taxes uplift," he said. 

Management now expects full-year underlying net profit after tax to be between $93 million and $98 million, slightly below Morningstar's previous forecast.

Ragonese has trimmed the company's fiscal-2019 net profit after tax forecast by about 6 per cent to $96 million. However, his $3.50 fair value estimate unchanged, and he maintains that his long-term thesis is intact. At 12.18pm on Monday, Healius was trading at $2.91.

"Despite the challenging near-term conditions, we continue to believe the stock is attractively valued," he said.

"The long-term outlook for Healius’s services remains positive, and we forecast high-single-digit EPS growth over the four years from fiscal 2020, underpinned by the growing and aging population, advancements in medical technology, and rising cancer survival rates."

Healius has cut its interim dividend from 5.1 cents to 3.8 cents per share, fully franked.

The company, which recently rejected a takeover offer from China's Jangho Group, has 2500 sites across Australia and is pushing into the dental, IVF, and day-hospital industries.

It acquired Montserrat Day Surgery for $138.5 million in September.

. Emma Rapaport is a reporter for Morningstar Australia.

© 2020 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'class service' have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend