Healthscope's NZ pathology business outperforms on Wellington deal

Tuesday 23rd August 2016

ASX-listed Healthscope's New Zealand pathology business continued to outperform the rest of the Australian private hospital and health service's units as its successful bid to service the Wellington region drove earnings.

The New Zealand unit lifted operating earnings before interest, tax, depreciation and amortisation to A$50.7 million in the year ended June 30, from A$41.6 million a year earlier, the Melbourne-based company said in a statement. Revenue rose 22 percent to A$222.7 million largely on a new service agreement with the Capital & Coast, Hutt Valley and Wairarapa district health boards. Ebitda margins were steady at 22.8 percent in a year when Healthscope's invested in a new Wellington regional lab and upgraded its Auckland facilities.

"These results were primarily driven by the successful implementation of a new pathology services contract in the greater Wellington region, with Healthscope providing services to the region from July 2015," it said. "The priority for Healthscope in New Zealand is to maintain strong government relationships and continue to deliver a high-quality and cost-effective value proposition to the DHBs as well as driving operational efficiencies that generate benefits for both Healthscope and our DHB partners."

Healthscope holds contracts with 13 of the country's DHBs, most of which are on multi-year terms.

The company said it will continue to chase new DHB contracts when they become contestable, hoping to use its national network to lower the cost of its lab work.

Healthscope won the tender merging pathology lab testing for the Capital & Coast, Hutt Valley and Wairarapa district health boards after a rival, Aotea Pathology, quit over the proposed terms of the contract. NZX-listed Abano Healthcare later decided to sell its 55 percent stake in Aotea to Healthscope.

The New Zealand pathology business accounts for about 12 percent of Healthscope's overall earnings. The group's ebitda rose at a slower pace than in New Zealand at 7.1 percent. Net profit was up 19 percent to A$182.8 million on a 6.2 percent increase in revenue to A$2.29 billion.

The ASX-listed company's board declared a final unfranked dividend of 3.9 Australian cents per share, payable on Sept. 28 to shareholders registered on Sept. 14. That takes the annual payment to 7.4 cents, up from 7 cents in 2015.

The shares rose 3.1 percent to A$2.99, having gained 9 percent so far this year.

BusinessDesk.co.nz

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