Healius Limited · ASX:HLS
Healius — H1 2024 Earnings Presentation
29 slides from Healius's earnings presentation, Feb 27, 2024
Slide 1: 1H 2024 Results
1H 2024 Results 27 February 2024 1
Slide 2: Forward-looking Statements
Forward-looking Statements This presentation may include forward-looking statements about our financial results, guidance and business prospects that may involve risks and uncertainties, many of which are outside the control of Healius Limited. Readers are cautioned not to place undue reliance on fo
Slide 3: Group overview
Group overview Maxine Jaquet, CEO & Managing Director 3
Slide 4: 1H24 results: Underlying EBIT in line with guidance
1H24 results: Underlying EBIT in line with guidance Revenue BAU Underlying EBIT Financial Performance $847m $16m Group BAU revenue up 4.9%. • Pathology revenue $808m in pcp (up 4.9%) $40m in pcp $16m ex COVID • BAU revenues up 4.0% including Agilex Underlying NPAT Reported net loss after tax • Covid
Slide 5: Lumus Imaging
Lumus Imaging Financial • Revenue growth of 8.5% (ex Medical Centres, BUPA and closed sites) • Top line revenue growth of 3.3% • Realisation of community sites strategy with 9.9% growth - ahead of plan • EBIT margin 7.0% - up from 6.7% • Average fee increase of 7.9% vs 1H23 due to indexation of 4.1%
Slide 6: Lumus Imaging
Lumus Imaging Operational • Community site strategy to increase average revenue per clinic ahead of plan • 3 new MRI services launching in 2H24 • Commissioning of 2 Greenfields sites (1 comprehensive) in 2H24 • 4 new comprehensive Greenfield sites planned in 1H25 (1 including PET) • Hospital segment
Slide 7: Agilex Biolabs
Agilex Biolabs Financial • Revenue for 1H24 grew 19.5% to $19.0m • EBIT for 1H24 grew 250% to $2.1m from $0.6m Operational • SGS agreement - enabling Agilex to sell a global Phase 1 to Phase 3 proposition, Agilex to form part of SGS’ offering • Pipeline remains on track to deliver forecast growth •
Slide 8: Pathology
Pathology Financial • Total revenue (excluding Agilex) down 5.3% on pcp • Core pathology revenue up 3.6% • Covid revenues down 97.0% or $54.4m • EBIT (excluding Agilex) of $4.0m for 1H24, impacted by loss of high margin Covid EBIT contribution of $24m Operational Higher Value Channels – Specialists
Slide 9: Pathology
Pathology Operational GP Channel • ACC wins (+30) at higher gross margin than ACC losses (-9) • Despite being critical to primary health care, this segment is the most challenged with no indexation for 24 years, coning at 4% CAGR (at a cost of $240-250m1 annualised unpaid work), rent inflation and d
Slide 10: Pathology
Pathology Indexation • Pathology has not been indexed for 24 years • Coning is growing and creating significant additional cost in the business • Engaging productively with the Federal Government on the need for indexation of the Medicare Benefits Schedule to support the continuation of bulk-billing
Slide 11: Management focused on step-change in cost structure
In the context of margin dislocation in a changed operating environment, management is focussed on delivering a fundamental step-change in the cost structure H27 Plan – Digital Automation FY26-27 New Operating Model FY24-25 • Zero-based design on digital Support cost optimisation workflows FY20-23 •
Slide 12: Digital automation underpins the cost restructuring of the Pathology business
Digital automation underpins the cost restructuring of the Pathology business Pre-Analytics Lab Post-Analytics REFERRALS COLLECTIONS LAB PORTAL RESULTS BILLING HUB PORTAL INSTRUMENT MANAGER APP SYSTEM • Capturing higher share • Eliminating error prone • Eliminating manual touch points in • High util
Slide 13: Digitisation of diagnostic processes on track
Digitisation of diagnostic processes on track Progress Estimation. Build and roll-out progress are not linear, with big one-off steps across modules What we are building How it drives benefits Build Rollout Referrals Hub Integrating with doctor workflows to order diagnostics • Capture telehealth ref
Slide 14: Key financials
Key financials Paul Anderson, Chief Financial Officer 14
Slide 15: 1H24 Group Results
1H24 Group Results 1H24 1H23 Underlying EBIT in line with guidance $m $m Chg % BAU revenue 847.3 808.0 4.9% • Group BAU revenues up 4.9% / Covid revenues reduced 97.0% Covid revenue 1.7 56.1 (97.0%) • Pathology experiencing continued GP referral softness and margin Total revenue (Underlying) 849.0 8
Slide 16: Pathology
Pathology 1H24 1H23 BAU revenues up 3.6% $m $m Chg % BAU revenue 598.3 577.5 3.6% • Strong growth rate in Q1 FY24 did not continue in Q2 FY24 Covid revenue 1.7 56.1 (97.0%) • MBS benefits paid reduced significantly in November and December 2023 to low single digits Agilex revenue 19.0 15.9 19.5% • M
Slide 17: Agilex Biolabs
Agilex Biolabs 1H24 1H23 Strong revenue and margin improvement $m $m Chg % • Revenue up 19.5% Revenue 19.0 15.9 19.5% • EBITDA up 105% and EBIT up 250% vs pcp EBITDA 4.1 2.0 105.0% • New business development structure showing positive signs with increase in new contracts signed EBIT 2.1 0.6 250.0% •
Slide 18: Lumus Imaging
Lumus Imaging 1H24 1H23 EBIT growth and margin expansion driven by revenue growth $m $m Chg % 1 • Gross revenue growth in community and hospital channels of 8.5% Gross revenue 252.8 244.8 3.3% in line with market after adjusting for BUPA and closed sites Statutory revenue 228.3 212.8 7.3% • Communit
Slide 19: Cashflow and capex
Cashflow and capex Cashflow aligned to revenue recognition; targeted capex for sustainable growth 1H24 Gross Operating Cashflow Cash conversion Cashflow conversion $114m 83% • 83% conversion of EBITDA to gross operating cash flow • Maintenance capex $18m, primarily site refurbishments for ACC’s and
Slide 20: Balance sheet: non-cash impairment of goodwill
Balance sheet: non-cash impairment of goodwill • A non-cash impairment charge of $603.2m has been made to goodwill in the Pathology cash generating unit (CGU) • This impairment relates to near-term lower volumes and cashflows at a point in time as required for accounting standards, along with an inc
Slide 21: Debt management
Debt management Disciplined capital management remains a key focus 1H24 2H24 Outlook Debt Facilities • Net debt reduced to $327m • Capital management remains a • Bank Facilities reduced by ($447m FY23) major focus $250m to $750m • Gearing1 at 3.17x – covenant2 of • Disciplined capital investment • R
Slide 22: FY24 outlook
FY24 outlook • Group EBIT guidance of $70m - $80m based on BAU Pathology volumes growing between 1 and 3% • Significant changes being undertaken to cost base and structure of Pathology operations matching costs to volume environment • Imaging market to continue current momentum through FY24 • Agilex
Slide 23: Q&A
Q&A thea lius
Slide 24: Appendix
Appendix 24
Slide 25: Underlying v Reported Reconciliation
Underlying v Reported Reconciliation 1H24 1H23 1H24 1H23 $m $m $m $m Underlying EBIT 15.7 40.0 Underlying NPAT (14.2) 8.1 Digital transformation costs (12.5) (8.0) After-tax adjustments to underlying EBIT (433.5) (36.8) Transaction costs (1.4) (1.7) Tax differential for non-deductible items (182.3)
Slide 26: Divisional reconciliation - underlying
Divisional reconciliation - underlying 1 Pathology Imaging Corporate Group $m $m $m $m Elim 1H24 Revenue 619.0 228.3 1.9 849.0 (0.2) EBITDA 119.4 45.6 (5.9) 159.1 - EBIT 6.1 17.6 (8.0) 15.7 - 1H23 Revenue 649.5 212.8 2.0 864.1 (0.2) EBITDA 136.5 46.9 (6.6) 176.8 - EBIT 32.0 16.5 (8.5) 40.0 - 1 In 1H
Slide 27: Pathology services market in Australia
Pathology services market in Australia Medicare benefits paid (MBS) represents a portion of the pathology services market Avg. fee Market segment Payor Referrer (indexed to GP) Total pathology services market Clinical trials Biopharma sponsors Biopharma / CROs n/a in Australia is made up of all of t
Slide 28: Specialist segment is driving market growth
Specialist segment is driving market growth GP and Specialist attendances, Financial Year to Date GP attendances continue to trail Specialist attendances, with market growth driven by Specialists Source: Australian Pathology data 28
Slide 29: 1H24 Sustainability highlights
1H24 Sustainability highlights Core to our purpose is the delivery of high-quality, accessible and efficient diagnostic healthcare services Scope 1 & 2 emissions Long-term renewable for 1H24 were 15.1 kt energy agreement commenced in Jan-24 Supporter of local Committed to gender communities through