MENU

Why the Virtus Health Ltd share price lost 7% on today’s results

The Virtus Health Ltd (ASX: VRT) share price fell 7% to $5.26 after the company released its annual results to the market this morning. Here’s what you need to know:

  • Revenue fell 1.8% to $257 million
  • Group earnings before interest, tax, depreciation and amortisation (EBITDA) fell 6% to $65 million
  • Net profit after tax (NPAT) fell 15% to $28 million
  • Earnings per share of 35 cents
  • Dividends of 25 cents per share
  • Net debt of $126 million

So what?

Much like Monash IVF Group Ltd (ASX: MVF) which reported yesterday, Virtus Health also reported a decline in overall market activity. Virtus reported that its total cycles fell 3.7% on a ‘like-for-like’ basis, however group cycles overall were flat due to new clinics and growth in Ireland.

Virtus continues to expand into ancillary services such as diagnostics and genetic testing, and the company may be able to grow further by expanding these services to all its clinics. However, there’s no getting away from the fact that business is sort-of cyclical (no pun intended) due to the fluctuations in demand for IVF. When the market is down, sales go backwards but costs (staff, rent, etc) remain relatively fixed, which can punish profits – as happened this year.

Now what?

The company continues to expand in new markets such as Ireland, Singapore, and Denmark, and the Irish segment grew strongly this year. As Virtus grows further overseas, results should hopefully become ‘smoother’ because the Australian segment will become a smaller part of Group operations.

Virtus carries a meaningful amount of debt, and my view is that growth would come to a stop if there was, for example, some sort of regulation that hurt its profits. Again that risk becomes less relevant with international expansion, and with a long-term trend towards increasing demand for fertility services, Virtus could prove a solid buy over the long term.

Here are the best ASX dividend stocks to buy now

If you're looking for solid income from dividend stocks, look no further. The Motley Fool's top dividend analyst, who leads our dividend stock newsletter, Dividend Investor, recently picked what he believes are the best dividend stocks in the market right now.

These dividend cash cows -- paying franked and fully franked dividends -- could be the latest in a list of top stocks Dividend Investor has picked over the years.

Click here to learn how you can get access!

Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!