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Healius shares pop 16% on results and takeover speculation

Healius Ltd (ASX: HLS) shares have shot out of the gates this morning following the release of the healthcare company’s half year results and news of a potential takeover bid. The Healius share price closed at $2.76 yesterday but has risen 16.30% in early trade to $3.21 at the time of writing, on reports the takeover bid may be pitched at around $3.40 a share. 

Healius results 

Healius reported revenue of $945.1 million for the 6 months ending 31 December 2019, up from $878.9 million in the prior corresponding period (pcp). The increase in revenue was supported by growth in pathology and Montserrat. Underlying earnings before interest and tax (EBIT) were $75.7 million, up 4%, with EBIT in pathology increasing by 10% and the imaging segment increasing by 16%.

Underlying net profit after tax (NPAT) increased 8% for the half year to $42.1 million, up from $39.2 million in the pcp. Results reflect efficiencies from Healius’ organisational redesign and cost savings initiatives. 

Sector results

Volume and fee increases assisted pathology to achieve above market revenue growth while benefitting from new and expanded sites including the Northern Beaches hospital in Sydney. Fees delivered growth of 6% in the half to reach $583 million. EBIT rose 10% to $50 million also reflecting improved cost control.

Imaging revenue grew to 5% to $202 million following successful contract wins. EBIT increased by a strong 16% to $21 million, with margin expansion underpinned by savings in consumables and property expenses. Further opportunities to improve returns will be delivered through a strategic focus on the higher margin hospital channel and large-scale high-end community sites.

Medical centres revenue rose 18% to $183 million with Montserrat and Healius medical centres driving most of the increase. EBIT declined by $1.6 million due to the performance of the medical centres, however Montserrat and Health & Co delivered good EBIT growth. Five Healius day hospitals generated a revenue increase of 22% but remained in EBIT loss, with 2 new sites still ramping up. 

Outlook 

Healius has increased the bottom end of its guidance, forecasting underlying NPAT of $96 – $102 million for FY20. Healius also confirmed it intends to explore a sale process of part or all of the Medical Centres business to instead focus on growth in the Diagnostics divisions and eventually the Day Hospital business.  

Additionally, after market close yesterday, the company confirmed it had received an unsolicited, non-binding, indicative proposal from Partners Group to acquire all Healius sharesThe bid values Healius at $2.1 billion, with Partners offering $3.40 per share. In the lead up to the bid, Partners Group acquired an option over the share of Healius’ largest shareholder, Chinese company Jangho, which holds a 15.88% stake in Healius. 

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Motley Fool contributor Kate O'Brien has no position in any of the 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 Scott Phillips.

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Kate O'Brien