Medical device seller Lifehealthcare Group Ltd (ASX: LHC) reported its full-year results to the market after the close of trading yesterday, and it was another strong performance for this relatively new business.
Shares soared 11% on the announcement of a new acquisition and a 16% increase in profit, with shareholders not at all put off by the 47.7% drop in statutory profit (more on this below). Here are the highlights from today's full-year report:
- Revenue grew by 13.8% to $99.3m
- Net Profit After Tax (NPAT) fell by 47.7% to $3.7m
- Underlying profit* rose 16.7% to $8.8m
- Earnings per share of 20.6 cents per share
- Dividends of 15 cents per share (yield of 4.5% at today's prices)
- Increase in gross margin from 53.5% to 54.4% as a result of more sales of higher-margin products
- Investment in staff to lay foundation for further growth in 2016
- Acquisition of M4 Healthcare in May, and acquisition of Medical Vision Australia (MVA) announced subsequent to report date
- Cash of $6m and debt of $29.6m drawn from a $38m facility
*Statutory net profit was affected by a non-cash accounting adjustment, 'Underlying' profit excludes this as well as one-off acquisition costs
So What?
Lifehealthcare has continued its success from last year, successfully raising revenue, profits and margins despite the headwind of a falling Australian dollar. Debt continues to fund part of the rise with the acquisition of M4 Healthcare and MVA, though shareholders should experience a decent boost to their earnings in 2016 as a result.
Management is aiming to grow revenues to $200m per annum through its three existing channels; Spine/Neuro, Orthopedics, and Cardiology, through a combination of organic and acquisitive growth. Growth will also come by developing new channels as opportunities present.
In their outlook for 2016, management reported a solid start to the year with high organic sales growth and the potential to grow further with future new product releases and new surgeons agreeing to use those products. M4 Healthcare will contribute its first full year of earnings, and MVA should contribute significantly to the tune of $5.8m in revenue.
Now What?
Lifehealthcare was sold off recently on market jitters and perhaps some profit taking ahead of the annual report, so shares still look reasonably priced despite their rapid recovery today.
In the near term I expect the company could see margin pressure as the impacts from a weaker Australian dollar are felt further, but by and large I feel Lifehealthcare is well placed for the long term and is a decent buy at today's prices of ~$3.20.
