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Monash IVF Group’s (ASX:MVF) Profit Just Flopped

Monash IVF Group Ltd (ASX: MVF) today released its half-year results to the market reporting its net profit after tax (NPAT) slumped 19.8% to $9.67 million.

Monash IVF Group operates in the assisted reproductive technology and tertiary level prenatal diagnostics field and is best known for “IVF”, or In Vitro Fertilisation.

Key Results

Monash IVF reported:

  • Revenue up 0.3% to $77.2 million
  • EBITDA down 9.8% to $18.7 million
  • EBIT down 16.5% to $15.3 million
  • NPAT down 19.8% to $9.7 million
  • Interim dividend per share down 11.8% to 3cps.

Key Specialist Impacted Financials

Monash IVF reported that its half-year results were impacted by the departure of a fertility specialist in September 2017. For a company that has annual revenues in excess of $150 million, I think it’s hard to conceive that one person could have such an impact on the company – and quite alarming if true!

Review of Operations

Monash IVF reported that its total Australia treatments were down 7% for the year to 7,132, while its international treatments were up off a smaller base by 32.3% to 1,033. However, its total treatments were down overall by 3.3% to 8,165 from 8,447 in the prior year.

Competition in Australia?

There are other competitors in the Australian market who offer similar services which are covered by certain private health insurance providers and bulk billing. This could explain why their margins have been declining over the past several years from a return on equity (ROE) of 18.6% to 11.9%.

Rask Perspective

While IVF Monash may look tempting from a valuation perspective, declining margins amongst increased competition signals to me they lack a competitive advantage. For this reason, I have no desire to add the stock to my portfolio at these prices.

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