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Healthscope's NZ pathology shares efficiencies with DHBs, stalling earnings growth

Tuesday 21st August 2018

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Healthscope's New Zealand pathology business gave up earnings growth as it shared operating efficiencies with district health boards through the re-contracting process. 

The New Zealand lab testing division reported a 1 percent decline in revenue to A$240.2 million in the year ended June 30 and a 2.7 percent dip in operating earnings before interest, tax depreciation and amortisation to A$58.1 million. In NZ dollar terms, revenue rose 1.6 percent and earnings 2.5 percent, slowing from the unit's outperformance in 2017. 

"Revenue growth has moderated by the sharing of operational efficiencies with district health boards through re-contracting, combined with no new DHB contract work," the company said in its annual report. "The priority for Healthscope in New Zealand is maintaining strong relationships with the DHBs by delivering high-quality services and superior operational efficiencies."

The pathology business is willing to share "some of the long-term" gains with the DHBs to "strengthen existing relationships". Healthscope operates under the Labtests, Southern Community Laboratories, and Northland Pathology brands in New Zealand, and provides veterinary services through Gribbles Veterinary. 

Healthscope said the Gribbles Vet unit posted a "good performance" for revenue and margins "on the back of expanded services nationwide". 

Group profit fell 19 percent to A$89.4 million due to the cost of hospital closures and onerous lease provisions, while revenue increased 3.7 percent to A$2.34 billion. 

The Melbourne-based company completed a strategic review of its A$1 billion Australian hospital portfolio and plans to set up an unlisted property trust to house those assets, leasing them back to Healthscope. 

The ASX-listed shares slipped 0.2 percent to A$2.165. 

(BusinessDesk)

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