Acurity cost-cutting improves 1H earnings, warns on pace of private sector growth

Monday 4th November 2013

Acurity Health Group, the private hospital owner and operator formerly known as Wakefield, has boosted first-half earnings as it stripped out costs, while warning that private healthcare operators are still in decline.

Net profit climbed to $4.1 million, or 24 cents per share, in the six months ended Sept. 30, from $2.4 million, or 14 cents a year earlier, the Wellington-based company said in a statement. That was at the top end of last month's forecast range between $3.9 million and $4.1 million, and included gains on revaluations in interest rate swaps. The company lifted revenue 0.2 percent to $48 million.

Underlying profit, which strips out the gain from interest rate swaps, rose 19 percent to $3.4 million, with guidance of $3.3 million to $3.5 million. Medical supplies costs rose 1.2 percent to $11.2 million, while employee costs gained 1 percent to $16 million, though Acurity cut other unspecified expenses 3.9 percent to $11.2 million.

Chairman Alan Isaac said the private health sector is still struggling, with Wellington in particular struggling due to the minimal outsourcing by Capital & Coast district health board, though there are early signs of improvement in Hawkes Bay and Tauranga.

"We remain conscious that the market has seen a further decline in the total number of New Zealanders with private health insurance, and the level of this insurance cover, and we still expect it to be some time before growth returns to the private insurance sector," Isaac said.

"DHB outsourcing work in Wellington is now at its lowest level for many years, and the outlook is for it to remain at these very low levels for the remainder of the financial year," he said.

Isaac said demand for Accident Compensation Corp elective surgery continued to outstrip funding, which was also weighing on earnings. ACC spent $255 million on elective surgery in the 2012/13 financial year, up from $234 million a year earlier, though below its forecast $270 million spend, according to its annual report.

Acurity's board declared a final dividend of 6 cents per share, payable on Dec. 6 to shareholders on the register at Nov. 29. The shares were unchanged at $5.50 today, and have gained 10 percent this year.

BusinessDesk.co.nz

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