Healius calls time on pandemic-fuelled bonanza as Covid-19 testing crumbles

Shares in pathology group Healius have dived more than 10 per cent after it revealed its pandemic-related revenue had slumped as Australians ditch pathology-based testing for Covid-19.

On Monday, Healius said it was now averaging 3000-4000 Covid-19 tests a day – down from 13,000 a day in July. Picture: Getty Images

Healius shares have dived more than 10 per cent after it revealed its taxpayer-funded bonanza from the Covid-19 pandemic has evaporated as Australians ditch expensive pathology-based testing for coronavirus.

But the company says a backlog in undiagnosed illnesses – after people dodged hospitals during the pandemic – will help deliver “strong growth” for the pathology group, despite its Covid-19 profits plunging.

In a trading update on Monday, Healius said revenue from taxpayer-funded Covid-19 tests had dived 85.4 per cent to $54m in the four months to October, compared with the same period last year. The news sent Healius shares diving more than 10 per cent to $3.03. This compared with a 0.4 per cent drop across the broader sharemarket.

The results further highlight how boom times from Covid-19 tests have come to a screeching halt for Australia’s biggest pathology companies.

Healius rival Sonic Healthcare revealed two weeks ago that its pandemic-related revenue had dived 64.8 per cent to $280m in the four months to October 31. This compares with Sonic reaping $795m from PCR testing in the same period last year.

On Monday, Healius said it was now averaging 3000-4000 Covid-19 tests a day – down from 13,000 a day in July – reflecting a nationwide drop in pathology-based PCR testing as people opt for cheaper rapid antigen tests or no diagnosis at all.

It comes as the federal government has scrapped mandatory isolation periods, with even Victorian Premier Daniel Andrews – who presided over Australia’s longest lockdown – declaring an end to the pandemic.

“The company is adjusting its cost base to address this demand shift, with collections now being undertaken in the core facilities and in only four Covid dedicated drive-throughs at its major laboratories,” Healius said in a statement to the ASX.

Healius’s earnings before interest, tax, depreciation and amortisation fell 64.2 per cent to $124.3m in the four months to October. Meanwhile, EBITDA margin has crumbled from 38.4 to 20.1 per cent.

This brings it closer back to pre-pandemic levels, with it generating an EBITA margin of 20.5 per cent in the first half of 2020.

“With its margins leveraged to volumes, Healius is addressing the current adjustment period with a dual approach of resetting its costs to meet near-term demand and to deliver a more flexible base, while also continuing to drive revenue growth via selective investment in its footprint and in consumer services,” the company said.

But Healius argued that it was still well-placed to deliver growth to shareholders. “Importantly, the reversion to trend, the backlog of under-diagnosed illnesses, and a small but likely base-load level of Covid testing in combination will deliver strong growth into the system,” it said.

“Healius is well-positioned to capitalise on that growth. In the meantime, its agenda is the proactive management of the cost base during this transition period, moving at pace with the digital initiatives in the pipeline, and delivery of the sustainable improve­ment program.”

Stripping out Covid-19 tests, Healius’s revenue firmed 5.8 per cent to $563.5m in the four months to October.

Taxpayer-funded Covid-19 tests have delivered a bonanza to listed pathology companies such as Sonic Healthcare, Healius, Australian Clinical Labs and Integral Diagnostics, fuelling record earnings and generating billions of dollars in revenue.

Analysts forecast in January that Covid-19 was set to inject $160m-plus a year into the coffers of Australia’s biggest pathology companies when the pandemic subsides and the virus’s risks become more like the flu’s.