Acurity beats guidance as FY profit gains 55%, sees PPP opportunities
Acurity Health Group [NZX: ACY], the private hospital operator formerly known as Wakefield Health, boosted annual profit 55 percent, beating guidance, and anticipates growth in the coming year from the public sector, which it says is ripe for public-private partnerships.
Net profit rose to $9.1 million, or 53 cents per share, in the 12 months ended March 31 from $5.9 million, or 34 cents, a year earlier, the Wellington-based company said in a statement. Underlying earnings, which strip out a $1.1 million gain on the sale of its stake in Boulcott Clinic and a $789,000 gain in the, value of interest rate swaps, climbed to $7.2 million from $5.9 million. In February, Acurity said net profit would rise to as much as $8.7 million, and underlying earnings would be in a range of $6.3 million to $6.9 million.
"After a period of tough market conditions, it is encouraging to finish the year with activity levels showing very positive movement," chairman Alan Isaac said. "It is also pleasing to report that with the strong focus on expense control alongside positive contributions from investments, we have delivered a significantly improved net profit result."
Acurity's warning that revenue would be down on a year earlier didn't eventuate, with healthcare services up 0.6 percent to $83.2 million and specialist contract revenue gaining 7.2 percent to $13.7 million. Total revenue rose 2.6 percent to $98.1 million, including the gain on the sale of Boulcott Clinic. The increased specialist contract revenue came from more Accident Compensation Corp work, and more procedures under the Southern Cross Insurance Affiliated Provider Scheme.
Earnings before interest, tax, depreciation and amortisation advanced 13 percent to $20.2 million. Acurity's operating cash inflow rose to $14.9 million in the year from $10 million in 2013, and it held $1.8 million as at March 31 in cash and equivalents, down from $3.1 million, with debt repayments accounting for the biggest outflow. Its term borrowings were $31.9 million as at March 31, down,from $42.3 million a year earlier.
The company said there are increased signs of demand for private sector health emerging, and the extra $110 million allocated to elective surgery in this year's Budget may need to be contracted out due to capacity constraints in public hospitals.
Acurity said the government policy hasn't been developed to set up public-private partnerships with private hospital operators, which it says would "provide a vehicle for optimising healthcare outcomes between the private and public sectors" and allow for shared benefits of capital investment by maximising the use of shared facilities.
The board declared a final dividend of 11 cents per share, payable on June 27 with a June 20 record date. That takes the total return for the year to 23 cents, including a special dividend, up from 14 cents a year earlier.
The shares gained 1,7 percent to $5.34, having shed 3.5 percent this year. The stock was rated a 'hold' with a target price of $5.70 by Forsyth Barr's Feb. 28 report.