ACY
24/11/2014 09:59
HALFYR
REL: 0959 HRS Acurity Health Group Limited
HALFYR: ACY: Acurity Health Group Limited Half Year Earnings
Half Year In Line With Forecast
Acurity Health Group Limited today reported net profit after tax of $4.94
million for the six months ended 30 September 2014 (21.8% up on the result
for the same period last year of S4.06 million). Adjusting for the non-cash
revaluation of interest-rate swaps, underlying earnings for the six months
ended 30 September 2014 were $5.02 million, an increase of 47.3% on prior
half year earnings expressed on the same basis.
Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) for the
six months ended 30 September 2014 increased by 17.8% compared to the
equivalent period in the prior year. This was largely due to increased
revenues from DHB outsourcing and cost savings.
Acurity's chairman, Alan Isaac, said that "the six months ended 30 September
have continued the gains from the prior year with increased revenue, further
initiatives to control costs, and an overall increase in underlying earnings.
There has been a good increase in revenue volumes driven in part by
pre-election DHB outsourcing and encouragingly some early signs of an
increase in private patient demand. We continue to see the trend towards
shorter lengths of in-hospital patient stay. Overall we report results in
line with the recent forecast contained in the market update provided as part
of statutory process in dealing with the takeover offer from Connor
Healthcare Ltd."
Reported net earnings in both the current and prior comparable period were
impacted by the revaluation of interest rate swaps as required by
International Accounting Standards. This is a non-cash accounting adjustment
that will continue to create volatility in reported earnings. The table
below shows the reconciliation of reported earnings and earnings adjusted to
exclude this revaluation.
Six months ended 30 Sep 2014
Six months ended 30 Sep 2013
Change
Reported net profit after tax 4,944 4,059 21.8%
Add back revaluation of interest rate swaps (net of tax) 77 (651)
Adjusted net profit after tax 5,021 3,408 47.3%
Adjusted earnings per share (cents per share) 29 20 45.0%
Detailed earnings for the six months ended 30 September 2014
A breakdown of reported earnings for the six months ended 30 September 2014
compared to the prior year is shown in the table below.
$000, except per share amounts
Six months ended 30 Sep 2014
Six months ended 30 Sep 2013
Change
Revenue 56,547 49,820 13.5%
Medical supplies expense 12,527 11,206 11.8%
Employee costs 16,284 16,016 1.7%
Specialist contract expense 10,151 6,830 48.6%
Other expenses 6,256 6,152 1.7%
EBITDA 11,329 9,616 17.8%
Depreciation and amortisation 4,019 4,208 (4.5%)
EBIT 7,310 5,408 35.2%
Interest expense (1,034) (1,326) (22.0%)
Interest rate swap revaluation (107) 904 (111.8%)
Share of profits of associates 529 479 10.4%
Tax expense (1,754) (1,406) 24.8%
Net Earnings 4,944 4,059 21.8%
Reported earnings per share (cents per share) 29 24 20.8%
Final dividend paid (cents per share) 11 8 37.5%
Interim dividend declared (cents per share) 0 6 (100.0%)
Reported revenues have increased 13.5% on the prior year however 6.4% of this
increase is attributable to lead provider revenue on behalf of the
specialists. The majority of the remaining 7.1% increase relates to
additional DHB volumes resulting from the government elective surgery funding
initiatives.
The private patient revenues component has been maintained in the context of
the total overall revenue and there was a small increase in ACC revenues.
The additional DHB revenue was predominately from the Hawkes Bay DHB however
there were also increased volumes from Capital and Coast DHB in Wellington
and Bay of Plenty DHB in Tauranga.
The increase in medical supplies is a result of orthopaedic surgery volumes
increasing through the DHB outsourced work and the related prosthesis costs.
Although permanent employee numbers are down on last year employee costs
increased 1.7% which reflects an increase in the overall remuneration rates
and additional staff called in to support the DHB peak volumes.
The continued focus on cash controls has resulted in good operating cash
flows and lower debt levels which is reflected in lower interest expense.
Net earnings were again impacted by the ongoing revaluation of interest rate
swaps to market values, as required by accounting standards. The six months
to September 2014 saw a decrease to reported earnings pre tax of ($107,000)
(2013 increase $904,000) resulting from revaluation of interest rate swaps
based on current market rates. This reflects the increase in swap rates over
the past 6 months. This is a non-cash adjustment which will be a source of
ongoing volatility to future reported earnings.
Norfolk Southern Cross and Endoscopy/Laparoscopy Auckland
The Company has a 60% joint venture investment in the Norfolk Southern Cross
partnership (which owns Grace Hospital in Tauranga). The investment accounted
for as a "joint operation" with the earnings accounted for on a share of
revenue and expense basis.
The Company also has a 40% equity accounted investment in both Endoscopy and
Laparoscopy Auckland (increased from 30% to 40% in September 2014 with
further options to increase to 50% by 2016). Breakdown of net earnings for
the six months ended 30 September 2014 are detailed below:
Associates (equity accounted)
Six months ended 30 Sep 2014 $000
Six months ended 30 Sep 2013 $000
Endoscopy Auckland/Laparoscopy Auckland 529 479
Reported earnings from associates 529 479
Wakefield Hospital Complex
As advised at the Annual Meeting in August we have commenced planning for the
development of a Next Phase Wakefield Hospital and Campus.
A Project Control Group of specialists, staff, and board representatives has
been established which are working through the requirements for the project
and currently engaging a heath planner to develop master plans.
Capital expenditure
The capital expenditure outlay increased to $5.5 million up from $2.2 million
in the prior year primarily due to investments at Grace Hospital in Tauranga
on the Oropi Centre day stay development and a replacement Da Vinci robot.
Takeover Offer
On 26 August 2014, Connor Healthcare Limited ("Connor"), a company associated
with some of Acurity's largest shareholders, made a full takeover offer for
all of the Acurity shares not owned by Connor, at $7.25 per share (after
initially indicating $6.50 per share).
The offer was conditional on:
1) Overseas Investment Office consent - which was received 22nd October
2014;
2) 90% minimum shareholder acceptance by 21st November 2014 - achieved
97.64%; and
3) Commerce Commission clearance - still awaited.
Under the terms of the offer, Connor has until 22nd December to satisfy the
Commerce Commission condition. The Commission anticipates releasing their
decision on 28th November 2014.
Outlook
The company expects a continuation of the lift in revenues experienced over
the past 12 months. The Wellington market is improving with an increased
amount of outsourced DHB work and steady growth in ACC and insured patients.
Investments in Auckland and Tauranga continue to show steady growth.
Chairman Alan Isaac said "the company sees growth continuing in line with
forecasts, supported by the ongoing focus on efficiencies and cost savings.
ACC has increased its budget for elective surgery and DHB outsourcing work
has shown some growth in the recent months though with low margins. The
expectation is for this to continue for the remainder of the financial year."
As a result of the necessity to provide a trading update and prospective
financial information in connection with the response to the recent takeover
offer, the Company provided guidance in late August that it anticipated that
full year EBITDA was likely to be a small improvement on the prior financial
year. The August and September trading results have been in line with
expectations so that expectation remains valid.
Dividend
As the Company is currently the subject to Takeover Offer the Board have
resolved not to declare an interim dividend at this time.
Ends
Issued by Acurity Health Group Limited
24 November 2014
For further enquiries, please contact:
Matthew Kenny
Company Secretary
Acurity Health Group Ltd
Telephone +64 4 381 8127
End CA:00258000 For:ACY Type:HALFYR Time:2014-11-24 09:59:51
