Virtus Health Ltd share price climbs 4.7% on healthy report

Virtus Health Ltd (ASX: VRT) share price climbed 4.7% after the IVF provider reported its result for the six month period to 31 December 2017 today.

Virtus Health is Australia and Ireland’s largest assisted reproductive services provider.

Below are some of the highlights compared to the prior corresponding period.

Revenue increased by 1.8% to $133.8 million. The revenue improvement was driven by a strong performance in Victoria and New South Wales, but offset by market share loss in Queensland and Tasmania.

There was overall market volume growth of 6.1% along the eastern seaboard, but only 1.8% market growth excluding Queensland.

Group earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 9.7% to $34.8 million, which includes some non-trading expenses.

A lot of the EBITDA growth came from the domestic fertility segment, with Australian EBITDA growing by 6.2% to $36 million as a result of operational efficiencies and ‘cost out initiatives’.

The International segment grew EBITDA by 74.4% which was boosted by the Aagaard acquisition in Denmark and an improvement to the Singapore business. A negative from the International segment was the Irish operations which saw reduced cycles performed, revenue down 3% in local currency and EBITDA down 6.7% in local currency.

Net profit after tax (NPAT) attributable to ordinary Virtus shareholders grew by 12.6% to $16.6 million. Diluted earnings per share (EPS) grew by 12.5%.

Virtus management increased the dividend by 7.7% to 14 cents per share, compared to 13 cents per share in the prior corresponding period.

Operating cash flow increased by 90.7% to $34.8 million and free cash flow increased by 1.74% to $11.7 million.

Management were pleased with Virtus Diagnostics, its revenue increased by 5.8% and EBITDA increased by 31.2% which was driven by more IVF activity across Australia, a growth in genetic testing and a large operational efficiency improvement.

Virtus Health CEO, Sue Channon, said “We expect continued strong Diagnostics performance as our advanced testing technologies and services improve patient care and outcomes. We saw a 27.3% increase in pre-implementation genetic diagnosis and screening services, with one in five IVF patients now utilising this technology”.


Virtus believes that the demographic drivers for assisted reproductive services growth remains favourable globally.

Management will continue to drive shareholder value through organic growth and international acquisitions.

Ms Channon commented on the company’s result saying “Virtus delivered headline earnings growth driven by a consistent Australian ARS performance, accelerated growth in diagnostics and international activities, supported by effective cost management”.

She also re-affirmed Virtus’ view that international growth is key “International activity remains key to our growth and diversification strategy. We continue to actively pursue opportunities in Europe and the UK in a disciplined way”.

Foolish takeaway

I thought was a solid performance from Virtus, considering the troubles it has experienced over the last year or two with low-cost competition and market volume volatility. I think Virtus could be the better pick over Monash IVF Ltd (ASX: MVF) due to its desire to expand overseas, which should give it more room to grow in the long-term.

Virtus is currently trading at 14x FY18’s estimated earnings with a grossed-up dividend yield of 6.73%.

Virtus isn't the only leader in its industry, these top stocks are also well worth investing in.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Monash IVF Group Ltd and Virtus Health Limited. 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.

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