Did You See The Healius (HLS) FY19 Dividend Cut?


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Healius Ltd (ASX: HLS) reported its FY19 results this morning, including a cut to its final dividend. Here’s what you need to know.

About Healius

Healius, formerly known as Primary Health Care Limited (ASX: PRY), is a healthcare business that provides pathology, diagnostic imaging, medical centres and low-cost fertility services, such as IVF. It operates across thousands of sites Australia wide.

Here Are The Three Key Points

  • Revenue grew 5.9% to $1,804.5 million, up from $1,704.6 million
  • Underlying net profit after tax (NPAT) increased by 6.5% to $93.2 million
  • A final dividend of 3.4 cents per share (cps) was declared, down from 5.5 cps in FY18

Analyst Estimates

According to Bloomberg, analysts were estimating NPAT of $93.77 million and a dividend of 5.1 cents per share for Healius.

The actual NPAT result came in marginally lower than estimates, but it seems the dividend cut was not anticipated by analysts.

Dividends

The reason that the dividend was cut from 5.5 cps to 3.4 cps is so that Healius can “provide an appropriate balance between the current capital investment phase, dividends and prudent gearing levels”.

The dividend cut means the full-year dividend will be 7.2 cps, compared to 10.6 cps in FY18. The final dividend is fully-franked and will be paid on 27th September 2019.

Division Results

The pathology division, which is Healius’ largest division, saw relatively weak revenue growth of 3.9% in FY19. An increase in labour costs and the loss of a bowel screening contract resulted in EBIT being slightly below FY18.

The medical centres division saw much higher growth with EBIT up 19% to $37.6 million. Healius recruited a record 259 GPs during the year, a 63% growth on FY18 recruitments, resulting in a total of 1,164 GPs at 30th June 2019.

Imaging revenue grew by 7.9% to $391.3 million and EBIT was up 14.5% to $38.7 million.

FY20 Outlook

Healius reported that FY20 underlying NPAT is expected to be higher than FY19 subject to market conditions. The report states that the underlying demand for healthcare in Australia is strong and driven by a growing and ageing population, as well as an increased life expectancy for many Australians living with chronic illness.

Is Healius A Buy?

While Healius has performed well and reported modest growth, the dividend cut is a concern. Healius currently trades on a trailing price-earnings (PE) ratio of 284 times, so I’m also unsure about the valuation.

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Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.

Max Wagner

Max Wagner

Max is based in Brisbane, Queensland His passion for finance and investing started in high school with the ASX Share Market game. Max is passionate about financial education and truly believes that everybody should learn how to invest and manage their money from a young age. He believes in long-term value investing as the key to growing wealth. You can follow him on Twitter @maxwagner_.