The Virtus Health Ltd (ASX: VRT) share price will be one to watch today after the company revealed slower than expected international growth has negatively impacted its 2019 financial results.
Virtus Health is an assisted reproductive services provider with operations in Australia, Denmark, Singapore and the United Kingdom. The company is headquartered in Sydney and is currently the largest in vitro fertilisation provider in Australia.
Virtus announced a disappointing 7.6% decline in net profit after tax (NPAT) to $28.4 million. This was despite a 6.1% increase in total revenue which came in at $280.1 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) were down by 2.3% to $63.5 million. The following Rask Finance education video explains the meaning of EBITDA:
Underlying revenue from the Australian operations was steady at $218 million whilst revenue was up 25% from their international businesses. The future performance of Virtus’ share price is likely to be heavily reliant on management’s ability to successfully execute its international expansion plans.
Despite slower than expected growth the company’s international operations now make up 21% of total revenue and this expected to continue to grow in the coming years.
Virtus has declared a fully franked final dividend of 12 cents per share. This brings the full-year dividend to 24 cents per share, which at the current share price translates to a dividend yield of 4.9%.
Commenting on today’s result Virtus CEO Sue Channon said: “Virtus has achieved cycle and revenue growth, however additional costs relating to technology and infrastructure investment, targeted expansion in the Australian lower margin segments, and a slower than expected performance in international operations impacted the full year FY19 results.”
She added, “FY19 set the foundation for improving productivity and, ultimately, advancing market share. We are confident the investments made will facilitate business development opportunities and growth through our competitive service offerings in FY20.”
Are Virtus Shares Cheap?
At the current price Virtus shares are trading for 14 times FY19 profit. On face value, this certainly doesn’t appear expensive but profit growth has failed to meet my expectations in recent years as the dynamics of the assisted reproductive services industry has changed. I own a small parcel of shares in the company and whilst slightly disappointed with today’s result I will continue to hold for now.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: At the time of publishing, Luke owns shares in Virtus Health