Wakefield full-year profit tumbles 39% as sales drop, costs remain

Monday 17th May 2010

Wakefield Health, the owner of Wellington’s Bowen and Wakefield hospitals, posted a 39% drop in full-year profit, reflecting a decline in ACC-funded patients, less work from district health boards and a drop in patient-funded major surgery in the wake of recession.

Profit fell to $6.2 million, or 44 cents a share in the 12 months ended March 31, from $10.1 million, or 72 cents a year earlier, the company said in statement. Revenue fell 11% to $76.8 million, while operating expenses slipped 5.5% to $60.5 million.

Wakefield, a niche-market hospital operator, is making a full takeover offer of $22.6 million for Norfolk Investments, gaining 60% of Tauranga’s Grace Hospital, which counts Southern Cross as its other shareholder. Wakefield said today that while current trading conditions have suppressed short-term earnings, it is “working to ensure it remains well positioned to meet the inevitable increased future demand” for its health-care services.

“Recessionary economic conditions appear to have played a factor in suppressing private demand, particularly for major surgeries that are patient funded or have a major patient contribution,” chief executive Andrew Blair said. “As economic conditions improve, it is expected that demand will again pick up” though the timing is uncertain.

Shares of Wakefield trade infrequently and were last at $7.01 on May 11. The stock has declined 21% in the past six months. The company cut its final dividend to 18 cents a share from 25 cents.

Wakefield is sprucing up and expanding Bowen Hospital and upgrading specialist and theatre staff facilities at Wakefield at the same time it is making an acquisition.

The company can do this because its gearing is just 5.8%, meaning it has the balance sheet strength to take on debt.

Shareholders in Norfolk include Wakefield’s chairman John Calder, with a 7.5% holding, who has committed to sell into the offer. Under NZX listing rules, Calder’s acceptance of the offer constitutes a related party transaction.

NZX regulation has granted the company a waiver to allow the deal to proceed without going to a shareholder vote, provided that directors not associated with Calder vouch that it is fair and in Wakefield’s best interests.

Businesswire.co.nz

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