Healius (ASX: HLS) has announced a major asset sale this morning, it’s selling its medical centres for $500 million.
What is Healius?
Healius, formerly known as Primary Health Care, 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.
What did the healthcare business announce?
Healius has announced the sale of its medical centres business, Healius Primary Care, to BGH Capital for $500 million on a cash and debt free business.
The company retains the rights to an income tax refund for around $70 million (including interest) associated with a court case on the treatment of healthcare practitioner lump sum payments for FY03 to FY07.
What will the money be used for?
The sale proceeds of approximately $470 million will be used to strengthen the balance sheet and support growth in pathology and imaging, and over time the day hospital business. It will reduce the pro forma gearing ratio at 31 December 2019 from 2.7x to 1.5x.
Since the last update on 14 April 2020 the company has experienced “good growth” in activity in its diagnostics businesses, partly supported by increased COVID-19 testing.
The day hospital, dental and IVF segments are moving back towards pre-COVID levels after the lifting of clinical restrictions.
Healius wants to reset its cost base by ‘entrenching’ a number of the short term cost reductions.
It has also resigned the refinancing of its $500 million bank debt facility, which was due to mature in January 2020. That facility has been increased by $70 million to $570 million and it will mature in January 2024.
The return of normal trading is good. The refinancing of debt is a wise move. Healius seems to have thought the sale through. However, I’m not sure about the long-term direction of a business like Healius. Something like Pro Medicus (ASX: PME) appeals more, at a lower price.
Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.