Healius to consider sale of medical centres

Medical imaging provider Healius will seek a buyer for its medical centres division, which is dragging on earnings growth.

Diagnosing a knee problem. Picture: istock

Medical imaging and pathology services provider Healius says it will seek a buyer for its medical centres division, which dragged on earnings growth in its first half.

“We have today confirmed that we intend to explore a sale process of part or all of the medical centres business to focus on a range of growth initiatives in the diagnostic divisions and, in time, the day hospital business,” Healius said in a regulatory filing.

The decision was announced alongside a more than tripling in net profit to $66.3 million for the six months through December, up from $20.4 million a year earlier. On an underlying basis, profit totaled $42.1 million, up 7.7 per cent.

Directors of the company declared an interim dividend of 2.6 cents a share, lower than the payout of 3.8 cents a year earlier.

Healius’s share price has stabilised after a turbulent few years that saw directors tack to a more conservative dividend payout ratio and step up investment. The company last year fended off a takeover proposal from China’s Jangho Group, its largest shareholder, with a roughly 16 per cent interest.

Healius’s business overhaul has included introducing more flexibility into doctors’ work arrangements following complaints that one-size-fits-all contracts were incompatible with their family lives, especially their need to care for young children. For years the company, in return for a hefty sign-on fee, had required a commitment to work up to 50 hours a week, including weekends and nights.

The shift toward more flexible work agreements has boosted the recruitment of doctors at a time when the business also benefits from an influx of migrants to Australia and an ageing population. However, Healius has seen many potential gains eroded by a high level of churn within the industry as doctors job hop, which has weighed on productivity.

The medical centres division recorded an 18 per cent rise in half-year revenue to $183 million, but earnings before interest and tax fell by $1.6 million.

“Continued good recruitment of GPs and patient demand were offset by GP retirements, service fee pressure and a short-term productivity dip from system familiarisation,” Healius said. “Priorities to reverse this trend include better service levels to existing GPs, investment in frontline staff, a portfolio review of underperforming sites and initiatives to deliver divisional Head Office efficiencies.”

Healius said its pathology division increased half-year earnings before interest and tax by 10 per cent to $50 million. The pathology division traditionally accounts for about 60 per cent of company profit. In its imaging unit, underlying EBIT rose 16 per cent to $21 million.

Healius tightened a forecast for annual underlying net profit, projecting an outcome of $96 million to $102 million in the 12 months through June, before accounting for any changes in accounting for lease liabilities. That would represent growth of 9.4 per cent at the top end of the range, but Healius said it would require a second-half improvement in pathology in line with a year earlier.

Healius had previously pegged the bottom end of the range at $94 million.

Dow Jones Newswires