Healius staff will meet as strategic review begins in earnest

Healius staff will meet on Wednesday, with further resizing of the workforce flagged as a potential cost cutting measure by market watchers.

Healius is conducting a stretgic review after a challenging year.

A resizing of Healius’s workforce has been flagged as a potential focus area for new Healius boss Paul Anderson ahead of an all staff briefing to be held on Wednesday.

Mr Anderson - a former Network Ten chief executive who guided that organisation through administration and receivership in 2017 before its buyout by CBS - was elevated to the top job at Healius last week after the abrupt exit of managing director Maxine Jaquet, who had only been in the role for a year.

Investment bank UBS has been brought on to help with the wide-ranging strategic review of the business announced last week, with Mr Anderson himself flagging that finding greater efficiencies, particularly in the company’s pathology business, which employs about 6000 people, would be a priority.

Early last year, Healius told the market it had reduced the headcount in the pathology division by about 500 as it wound down numbers following the pandemic surge in pathology operations.

Healius has flagged that cost controls will be a priority and in last week’s announcement Mr Anderson said the focus would be on “structuring and operating the business with a clear goal to maximise (shareholders’) investment’’.

Morningstar analysts say Mr Anderson’s background in media will be valuable, given the parallels in the headwinds which have faced the two sectors.

“We think Anderson is well-placed to consider asset sales and resize Healius’s labour and infrastructure costs following pandemic testing largely ceasing,” Morningstar said in a note to clients.

“Before being appointed chief financial office of Healius in March 2023, Anderson had a 17-year tenure at Network Ten, which included the roles of chief financial officer, chief operating officer and chief executive officer.

“We see many parallels to his media experience, including balancing the competing aims of managing costs and investing in digitisation in an industry facing change.”

Analysts have considered various scenarios for the business, which could be broken down into its three divisions of pathology, Lumus Imaging and Agilex Biolabs for sale.

Healius and the broader industry are also lobbying strongly for a resumption of the indexation of Medicare payments for pathology procedures, for the first time in 24 years, which would provide a revenue boon for the company.

Morningstar has a positive view on Healius going forward, with a bullish $3 per share fair value estimate, saying that over the longer term it will benefit from demographic factors and productivity improvements.

While the company had a challenging 2023, Morningstar says with the pandemic overhang flushing out, there was upside to be had.

“Shares are materially undervalued,’’ Morningstar says.

“Healius’s base businesses remain well-placed to service known under-diagnosis for routine healthcare services.

“In the longer term we anticipate increased operating leverage from higher values in the base businesses and a continued focus on labour productivity and higher-value pathology tests and imaging modalities, which will more than offset current rent and wage inflation.

“We also anticipate margin expansion from network optimisation, digital initiatives, and increases to out of pocket fees for non-Medicare items.’’

At the other end of the scale, Citi analysts downgraded the stock following its half year results and the announcement of the strategic review, saying it created uncertainty.

Citi put a $1.10 price target on the company.

“We downgraded Healius to sell ... given the uncertainty around the restructuring ahead combined with the limited earnings visibility,’’ Citi said in a note to clients.

“The subdued growth in community pathology volumes continues to have a negative impact on Healius, which is heavily exposed to this market segment.

“The changes in CEO and CFO in March are likely to accelerate the restructuring and potential sale of assets, including imaging.’’

Citi said the Lumus Imaging division could be worth about $525m, but even were this realised via a sale, the residual business would still lag competitor Sonic Healthcare by a wide margin on an enterprise value to EBIT ratio.

Healius shares were trading at $1.33, up 1.5 per cent, on Tuesday.