The Healius Ltd (ASX: HLS) share price finished the week on a positive note, edging 0.6% higher to close at $3.29. The company delivered its full-year results this morning, with earnings before interest and tax (EBIT) and net profit after tax (NPAT) landing in line with Healius’ trading update in late July.
Healius 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, with 2,234 pathology sites, 146 imaging sites and 15 day hospitals.
Unpacking Healius’ FY20 report
| FY20 | Change (vs. FY19) | |
| Revenue | $1.6 billion | +2.0% |
| Underlying EBIT | $102.7 million | -18.4% |
| Underlying NPAT | $55.4 million | -21.2% |
| Reported NPAT | -$70.5 million | N/A |
The reported NPAT result includes a $142.5 million loss related to the sale of the Healius Primary Care business, primarily driven by a non-cash impairment of goodwill. Healius received roughly $470 million in proceeds from the sale, importantly bolstering the company’s balance sheet in these uncertain times.
Healius said it was tracking in line with guidance until mid-March, with strong growth in revenue and earnings in the Pathology, Imaging and Montserrat Day Hospitals divisions.
The company revealed that Pathology is eligible for government assistance, currently estimated at $11 million, while Montserrat and Healius Day Hospitals received a combined $1.7 million in JobKeeper and viability payments.
Healius generated operating cash flow of $153.4 million in FY20, a 20% improvement on the prior year despite the trading disruptions from COVID-19. Combined with strong trading outside of the COVID period, this delivered an improved net debt position of $666 million at the end of June, comprising $144.5 million cash and $810.5 million debt.
Pathology performance
Healius’ Pathology division delivered 2.8% growth in underlying revenue, which came in at $1.16 billion. Volumes were down 1.5%, or 3.6% excluding COVID-19 testing, with strong trading seen outside of the lockdown period. Average fees were up 2.9%, driven by initiatives such as private billing for electrocardiograms, overseas patient billing and health fund gap billing.
The Pathology division also received COVID testing fees from the government, which enabled the reconfiguration of laboratories to accommodate COVID-19 testing equipment and the roll-out of drive-through testing centres.
In terms of earnings, strong trading outside of lockdown and cost management delivered a 3.7% increase in EBIT.
Imaging performance
While Pathology volumes were partially offset by COVID-19 testing, there was no such hedge for the Imaging division. Revenue declined by 3.7% to $376.7 million, driven by a 19.1% drop in revenue in the June quarter due to lockdowns and deferrals of elective surgeries.
Since the division’s cost base is largely fixed, it suffered a 55.2% fall in EBIT, partially mitigated by reduced opening hours, site closures and labour management. Healius noted that the Imaging business received no government assistance, but employment levels were maintained for permanent staff.
Healius dividend
The Healius board decided not to declare a final dividend, stating, “Notwithstanding its relatively strong FY20 result, the Board does not consider it appropriate to pay a final dividend for FY20 because it has received the benefit of assistance and, in some cases, personal sacrifices from its stakeholders including its people, landlords and Government throughout a challenging second half of FY20.”
Healius confirmed it will, however, pay its deferred interim dividend as scheduled on 15 October 2020.
Given the strong FY21 outlook (more on this in a minute), the board expects to recommence regular dividends in the first half of FY21. A special dividend may also be on the cards, relating to the sale of Healius Primary Care.
Now what?
Healius said it has gotten off to a strong start in FY21. Pathology revenues were up 25% in July, with further significant increases in community COVID-19 testing.
Additionally, Pathology has commercial contracts for COVID screening, including with the likes of the Federal Government and the AFL. Healius expects growth from these commercial contracts as organisations endeavour to operate in a safe environment while COVID-19 remains in the community.
In Imaging, revenues were down by 4% in July compared to the prior corresponding people, with further declines into August.
Finally, Healius revealed that the Day Hospital division has started the new financial year significantly ahead of 2020, contributing positively to the company’s results. Montserrat’s revenue was up 27% in July, while Adora Fertility was up over 50%.
Healius said it intends to provide a further trading update at its AGM in October, at which time it will also provide a capital structure update.
In other news today, TPG Telecom Ltd (ASX: TPG) handed in its merged half-year report, while investors liked what they saw from the Suncorp Group (ASX: SUN) result.
