Acquisition of Healius fertility unit positive for Virtus: analysts

The Queensland Fertility Group Cairns clinic has taken delivery of a new embryo incubator, which improves embryo monitoring and selection, leading to more successful outcomes for patients. Scientists analyse the embryo development time-lapse video produced by the EmbryoScope+ incubator on a computer screen. Picture: Supplied

An acquisition by Virtus Health of the Healius-owned Adora IVF business provides the company with the opportunity not only to boost its size but lower its overall costs, say analysts at Macquarie Group.

Virtus announced on Monday it had purchased the Adora fertility business from Healius for $45m.

The announcement came after DataRoom revealed that Virtus was in exclusive talks to buy the business.

The analysts say that they expect that the acquisition will be between 1 and 2 per cent accretive to earnings in the 2022 to 2023 financial year.

It came as the analysts said that the full year earnings result for the 2021 financial for Virtus was about 7 per cent below its expectations, impacted by lower-than expected Australian IVF cycle volumes.

Virtus reported a flat net profit of $43m and a moderate lift in underlying earnings of $112.9m for the 2021 financial year.

The acquisition of Adora will provide an additional 11 fertility specialists and three day hospitals to Virtus’ existing operation, as well as providing potential cost savings that were estimated to be $1.5m in the first year after the acquisition.

Virtus has opted to fund the acquisition with a $35m placement at $6.80 a share – a 5.4 per cent discount to the last closing price - and $10m of cash reserves.

The transaction equates to 10 times the Ebitda of the business before synergies.

The analysts said despite the weaker-than-expected result for the 2021 financial year, it continued to see the outlook for the business as favourable.