The Healthscope Limited (ASX: HSO) share price is sitting flat on the ASX today despite the company doubling statutory net profit after tax (NPAT) to $236.6 million in the year.
The results are in…
The 199.1% NPAT increase included a one-off gain on sale of Asian Pathology of $166.9 million in the half, with NPAT from continuing operations down 6.7% year-on-year (YoY) to $66.9 million. Hospital Operating earnings before interest, tax, depreciation and amortisation (EBITDA) fell within guidance at $185.7 million, up 8.8% from 1H18, as the company saw benefits from operational efficiencies and the closure of loss-making hospitals in FY18 flow through to the bottom line.
The company’s NZ Pathology unit was robust throughout the half, with revenue up 2.9% and EBITDA up 0.7% in an indication of further growth potential.
The newly opened Northern Beaches Hospital (NBH) opened on-time and within budget in October 2018, admitting more than 10,300 patients in its first 100 days in a sign that major hospital expansion projects could yield organic growth for the Aussie healthcare provider.
The company reduced net debt by $576.6 million to $1.21 billion following the receipt of the NSW Government Capital Payment relating to the NBH construction, while net debt to EBITDA fell from 4.52x in FY18 to 3.02x in the half.
The biggest hit to underlying profitability was a 22.0% increase in the company’s net interest expense to $31.6 million, which offset the 3% increase in revenue. Operating cash flow was up 4.1% to $218.4 million for the first half, whilst the company announced a 3.5 cents per share (cps) fully-franked dividend per share (DPS), up from a 0% franked 3.2 cps DPS in 1H18.
So, is the Healthscope share price a Buy?
Healthscope remains a complex company, with the potential $4.4 billion takeover bid from Brookfield creating a huge shadow over earnings season. The deal will still need to pass ACCC and Foreign Investment Review Board (FIRB) approval but is looking like it’s pretty much in the bag. With that in mind, I wouldn’t expect to see Healthscope’s share price of $2.48 move significantly, given the Brookfield bid price of $2.465 per share. For those interested in healthcare stocks, it could be worth taking a look at Ramsay Health Care Ltd (ASX: RHC) which is set to report later in February.