Virtus Health Ltd (ASX: VRT) has hit investors with a significant profit downgrade today, despite having confirmed its earnings guidance as recently as February.
When the company, which is Australia's largest provider of In Vitro Fertilisation, or IVF, reported its half-year earnings results in February, management said that it was still on track to achieve "low-to-mid teens" growth in net profit after tax (NPAT), before non-recurring items of $2.1 million were accounted for.
Now, Virtus has revised that target to "low-to-mid-single digit percentage growth in NPAT", before non-recurring items of $2.3 million as a result of lower than forecast cycles.
Some of the reasons provided by Virtus regarding the slow growth are a concern for investors. To begin with, it said that it has lost a small amount of market share in Victoria and Queensland while bulk bill providers in New South Wales are also impacting its market growth. Other reasons provided by Virtus include the temporary closure of its Maroubra facility in Sydney as a result of storm damage, together with a slower-than-anticipated start-up volume from its operations in Singapore.
Indeed, the stock has fallen out of favour with investors over the last 12 months and today's update has by no means eased the market's concerns. Investors responded by selling the stock down 16.4% to $6.38, wiping more than $90 million from the company's market value.
While the profit downgrade could certainly have an impact on the share price over the coming weeks, or even months, long-term investors could look at this as an opportunity to begin building a small position in the IVF provider.
