The Virtus Health Ltd (ASX: VRT) share price is climbing higher this morning after the fertility services company released its half-year FY20 results. At the time of writing, Virtus shares are trading 5.57% higher at $4.55.
Virtus Health is Australia and Ireland's largest Assisted Reproductive Services (ARS) provider, with a presence in the UK, Denmark and Singapore.
Earnings highlights of Virtus Health
Virtus Health reported a revenue increase of 1% to $142.1 million on the prior corresponding period (pcp). Group earnings before interest, tax, depreciation and amortisation (EBITDA) was up 21.9% to $39.5 million, with a $7.4 million increase in segment EBITDA resulting from the adoption of AASB 16 Leases.
Australian IVF clinic EBITDA increased 4.5% (excluding AASB 16 impact) compared to pcp, while net profit after tax climbed 3.7% higher to $15.5m and was impacted by the CEO transition and restructuring costs.
Basic earnings per share (EPS) increased 2.4% to 18.65 cents, while diluted EPS increased 2.1% to 18.48 cents.
Total expenditure on tangible and intangible assets was $2.8m in H1 FY20 compared to $ 9.0 million in H1 FY19.
Activity update
The company noted that Virtus cycle activity in Australia in the half-year increased 2.7% compared to an increase in Virtus' available market of 1.2%. The company's Victorian and Queensland cycle activity grew by 10% and 6% respectively, while Virtus' NSW and Tasmanian business activity reflected local market weakness.
Virtus volume from The Fertility Centre (TFC) low-priced network increased 30.2% with growth achieved in every TFC clinic. TFC activity now represents 22% of Virtus Australian cycle activity compared to 17.3% in the pcp.
Virtus Health commented that its core ARS business outperformed market growth and remains the only provider participating across all patient demographics in Australia.
Diagnostics and day hospitals update
Virtus Diagnostics revenue increased 0.2% and EBITDA decreased 30.2% over the pcp due to a less favourable revenue mix. This included lower Preimplantation Genetic Testing (PGT) volumes following a previously reported clinical practice change, and increased compliance costs.
Virtus Specialist Day Hospital revenue increased 2.9% due to improved demand for non-IVF procedures which now account for 50% of total day hospital revenue. Non-IVF procedure revenue increased 6.8% on the pcp across all Virtus Specialist Day Hospitals. EBITDA improvement from non-IVF procedures was noted to be offset by lower premium IVF procedures in NSW.
International segment update
Virtus' international business continues to represent 21% of the company's overall revenues. In Ireland, Virtus clinics experienced a stronger first half primarily related to effective cost management with EBITDA in local currency increasing 17.1% in spite of a small cycle volume decline.
In the UK, Complete Fertility increased revenue by 13.4% and this resulted in an EBITDA performance more than double that of the pcp.
Virtus Danish clinics experienced a difficult six months with cycles down 8.7%, while Danish EBITDA declined 45% compared to pcp.
Meanwhile, Virtus' Singapore operation delivered an 18.2% increase in cycle volume and an EBITDA increase of 77.4% compared to pcp.
CEO change
Late last year, Virtus CEO Sue Channon advised that she would step down from the role in February after a 16-year tenure with the company, seven years of those being as the company's leader.
With this, Ms Channon's tenure will conclude on 29 February 2020 and Kate Munnings, former Australian chief operating officer of Ramsay Health Care Limited (ASX: RHC), will commence as CEO on 4 May 2020. Glenn Powers, Virtus CFO, will act as interim CEO during March and April 2020.
