The Monash IVF Group Ltd (ASX: MVF) share price has had a disappointing start to the week following the release of its half-year results. At the time of writing the fertility treatment company's shares are down 6% to $1.23.
For the six months ended December 31, Monash IVF posted earnings before interest, tax, depreciation and amortisation (EBITDA) of $20.8 million on revenue of $77 million. This was a 17.7% and 2.2% decline, respectively, on the prior corresponding period.
On the bottom line first-half net profit after tax came in 20.9% lower than the prior corresponding period at $12.1 million or 5.12 cents per share. Management has declared a 3.4 cents per share fully franked interim dividend, down 20.9% from FY 2017's interim dividend of 4.3 cents per share.
According to management, its performance has been impacted by operational challenges related to changing competitive dynamics, the impact of a high-volume doctor departure, and investments in building a strong foundation for the future.
During the half, Australian assisted reproductive services (ARS) fell by 10.5% due largely to lower activity in Victoria. This ultimately led to its share of the stimulated cycles market falling by 4% to 21.9% and segment revenue tumbling 3.4% to $73 million.
The main catalyst for the weakness in Victoria was the departure of its high-volume doctor, Dr Lynn Burmeister. Unfortunately, her departure from Monash IVF could continue to weigh heavily on the company for a little while longer. Last year management warned that when her non-compete clause comes to an end, it has the potential to cause a significantly negative impact to the company's profits.
One bright spot, though, was the company's International business. Supported by the move to its new premises in Kuala Lumpur, the segment achieved patient treatment growth of 17.1% and segment revenue growth of 25.8% to $3.9 million. International EBITDA increased by 49.5% to $1.6 million during the period.
Unfortunately, the second-half isn't expected to be any stronger than the first. Management expects full-year net profit after tax to be 25% lower than FY 2017. Management does, however, remain optimistic that the strategic roadmap it has developed will ultimately create sustainable shareholder value and deliver strong returns into the future.
Should you invest?
Whilst at 11x trailing earnings its shares do look cheap in comparison to Virtus Health Ltd (ASX: VRT), I am concerned that earnings could continue to slide lower in FY 2019 when Dr Burmeister's non-compete clause comes to an end. In light of this, I intend to keep Monash IVF on my watchlist and wait until it returns to growth before clicking buy.
