Shares of assisted reproductive services (ARS) company, Virtus Health Ltd (ASX: VRT), have opened up more than 4% higher today after releasing better-than-expected FY16 results.
The company delivered a 14.5% increase in reported net profit after tax (NPAT), which was driven primarily by growth from its international operations.
Other highlights from the result included:
- Revenue up 11.6% to $261.2 million
- Total cycles up 9.6% to 18,719
- Total treatments up 14% to 34,269
- Reported EBITDA up 12.3% to $68.9 million, adjusted EBITDA up 8.5% to $67.6 million
- Adjusted EBIT margin decreased 75 bps to 21.6%
- Reported NPAT increased 14.5% to $34.8 million, adjusted NPAT increased by 5.8% to $34.6 million
- Diluted earnings per share (EPS) increased 11.6% to 40.79 cents
- Final dividend of 15 cents per share, bringing the full year dividend to 29 cents per share – an increase of 7.4% from FY15
Overall, this result from Virtus was solid without being spectacular. The Australian division continues to churn out steady growth, albeit at a much lower rate than the international division.
The result was also consistent with Virtus' recent financial performance, as highlighted by the graphs below:
Australian Division
New entrants into the Australian ARS market have resulted in an increase in competition recently, although Virtus was still able to increase Australian cycle numbers by 6.6% to 16,097 cycles and segment EBITDA by 3.8% to $71.2 million. Virtus enjoyed especially strong growth in New South Wales over the year, while growth in Queensland and Tasmania was broadly in line with the overall ARS market.
International Division
The international division enjoyed very strong growth in FY16 with a 46.6% increase in treatment numbers. Operations in Ireland were especially strong and the company's operations in Singapore have finally become profitable also. Although the result was off a low base, Virtus achieved international EBITDA growth of 138% to $5.7 million.
As highlighted by the chart below, the international division is now beginning to make a substantial contribution to the group's overall performance.
Outlook
Virtus hasn't provided any guidance to the market but recent trends suggests investors should expect the international operations to continue to be the growth driver behind the company's overall results. Management has noted that it remains focused on pursuing further expansion opportunities in the UK and Europe and this should provide further growth opportunities moving forward.
Valuation
Virtus shares have increased by around 74% over the past 12 months and this sees the shares currently trade on a trailing price-to-earnings (P/E) ratio of just over 20. The shares are also offering a trailing dividend yield of 3.5%.
Foolish takeaway
A P/E ratio of 20 appears to be quite attractive for a healthcare company operating in a market with attractive demographic and social trends, especially if it can continue to make progress with its overseas expansion strategy.
With that said, the shares have performed exceptionally well over the past 12 months and investors looking for a bargain might want to wait for a pullback before buying a large parcel of shares.
