The Pro Medicus Limited (ASX: PME) share price has come under pressure this morning following the release of its half year results.
In early trade, the health imaging company's shares were down as much as 17% to $38.00.
The Pro Medicus share price has since recovered slightly but remains 8% lower at $41.83 at the time of writing.
Why is the Pro Medicus share price crashing lower?
Investors have been selling Pro Medicus shares on Wednesday after its half year results fell short of the market's lofty expectations.
For the six months ended 31 December, the company reported a 7.8% increase in revenue to $31.6 million. Management advised that the stronger Australian dollar impacted its result. On a constant currency basis, its revenue would have been up 12.4% to $32.9 million.
Currency headwinds also weighed on its profits. Reported underlying profit before tax came in 25.9% higher at $18.76 million but would have been up 29% to $19.7 million in constant currency.
On the bottom line, Pro Medicus delivered a 12.4% increase in net profit after tax to $13.5 million. This includes tax expense of $4.66 million, which represents a tax rate of 25.6%. This compares to a tax rate of 18.6% in 2019.
At the end of the period, the company had cash reserves of $50.9 million and no debt.
This strong balance sheet allowed the Pro Medicus board to declare a fully franked interim dividend of 7 cents per share.
How does this compare to expectations?
According to a note out of Goldman Sachs, Pro Medicus missed on both revenue and earnings.
The broker notes that Pro Medicus feel short of its revenue forecast by 9% and its EBIT forecast by 7%.
This goes some way to explaining the weakness in the Pro Medicus share price today.
What were the drivers of its growth?
Pro Medicus' CEO, Dr Sam Hupert, revealed that the company performed well across all markets despite the restrictions of COVID-19.
He said: "It was a good six months across all jurisdictions. Examination numbers in the first three months of the quarter were still recovering from their April 2020 lows however we were able to make up for the decrease with new clients coming on stream and exam numbers tracking back to pre COVID levels."
The star of the show for the company was arguably the Australian business, which delivered a 22.8% increase in revenue. This was largely due to the rollout of the Healius Ltd (ASX: HLS) contract and the extension of a contract with I-MED.
The company's European operations also had a positive half. This is expected to continue in the second half thanks to its new contract with Ludwig-Maximilians University.
Outlook
No guidance or commentary was given in regard to its second half outlook. This may have disappointed investors and be contributing to the Pro Medicus share price decline today. Though, it is worth noting that this is customary for Pro Medicus.
Positively, Dr Hupert did speak briefly about the company's sales pipeline.
He said: "We have had a very good run of contract wins over the past seven to eight months and pleasingly we have seen an increasing number of opportunities enter the pipeline in addition to those opportunities that have been progressing through the sales cycle. Importantly, the opportunities are across a range of market segments, including some for multiple Visage products, as well as a healthy mix of Cloud and non-Cloud."
