Diagnostic and imaging healthcare corporation Healius [ASX:HLS] has acknowledged that declining COVID cases have resulted in sinking revenue year-on-year in its latest trading update.
The healthcare service now faces financial corrections as the environment shifts and stated an adjusted cost base as trading conditions return to normal.
Year to date, the medical stock has plunged 38% and is down 24% in its sector over the last 12-month period.
By comparison, CSL [ASX:CSL] biopharmaceuticals developer is up 5% in the year so far, and ResMed [ASX:RMD] has decreased by more than 4%.
Source: tradingview.com
Healius’ revenue downturn — the post-COVID testing boom
Today the Healius share price was falling by more than 4%, with the revelation of significant changes in trading conditions.
‘COVID-19 testing has reduced from 13,000 tests per working day in July to between 3,000-4,000 tests per working day in October and in November to-date, reflecting an industry-wide drop in COVID-19 PCR testing,’ the company said.
This time last year, COVID-related revenue had come to a total of $370.6 million — this year so far, it has been severely discounted by generating a mere $54 million.
Collections were undertaken in HLS’s core facilities, and only four of its COVID-19 allocated drive-throughs.
As a result, Healius has been pressed to adjust its cost base and aims to work with the shift to mitigate the effects of declining demand.
The company provided the following summary of unaudited trading results for the 2023 financial year to date:
- Pathology revenue totalled $401.5 million for FY23 year to date, an actualised difference of 4.9% on FY22’s $382.9 million.
- Imaging revenue totalled $144.6 million, an improvement of 8.6% on FY22’s $133.1 million.
- Day Hospitals totalled $17.4 million in revenue in FY23 so far, 6% more than FY22, which brought in $16.4 million.
- As mentioned earlier, COVID-19-related revenue plunged 85.4%, from $370.6 million to $54.0 million.
As a result of the above-combined trading results so far in the 2023 financial year, total revenue came to $617.5 million.
This was a 31.6% loss on the revenue earned at the same time last year, which came to $903 million.
EBITDA had understandably also moved down by 64.2%, counted at $347 million last year, and more than halved this year, with the total so far being $124.3 million.
The EBITDA margin, therefore, slid from 38.4% to 20.1% year-on-year, normalising to pre-COVID levels.
Source: HLS
Business as usual amidst challenging headwinds
While recent trading highs were optimal for boosting the healthcare company’s revenue, HLS said the dying down of the COVID-testing boom means the company will be returning to business as usual — and some serious cost balancing.
Having said that, HLS believes its usual segments will continue to deliver sound results:
‘Revenues in Pathology are growing steadily and progressively including in November. Imaging revenues are growing at a faster rate including in November.
‘Healius believes its Imaging revenue growth is above-market, driven by public hospital contract wins and by the investment in a suite of consumer-facing digital services.’
The company outlined ‘well-publicised headwinds’ buffeting both the healthcare sector and the general economy, such as staff and frontline role shortages, declining bulk billing subsidies, and surging testing schemes requested through GP referrals.
Nevertheless, HLS was optimistic, calling such headwinds ‘temporary rather than structural’ and pointed out the continuing necessity of diagnostic testing in light of an aging population with longer lifespans but increasingly complicated health concerns.
The healthcare company believes its Sustainable Improvement Program will coincide with an expected transition to business-as-usual testing but noted the precise timeframe would be difficult to predict.
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