Healthscope's NZ pathology business fattens margins on tech gains and new services

The company anticipates gains in New Zealand earnings will moderate in the coming year.

ASX-listed Healthscope's New Zealand pathology business outperformed the larger Australian divisions as an expanded offering on this side of the Tasman coincided with the roll-out of new technology to strip out costs, widening margins for the private healthcare business.

Healthscope's New Zealand unit lifted earnings before interest, tax, depreciation and amortisation 18 percent to A$59.7 million in the year ended June 30, outpacing the 3.5 percent gain across the wider group. The company anticipates gains in New Zealand earnings will moderate in the coming year.

Operating ebitda margins widened by 180 basis points to 24.6 percent as the pathology unit reaped an 8.9 percent boost in revenue to A$242.5 million as the service agreement with the Capital & Coast, Hutt Valley and Wairarapa district health boards went through its first full year, and as Healthscope beefed up its scope of its local services. Meantime, operating costs increased a more modest 6.3 percent to A$182.8 million as new tech help strip out costs, including the roll-out of an electronic ordering system to improve data collection.

"Our New Zealand pathology division delivered another strong result," chief executive Gordon Ballantyne said in a statement. "Expanding the scope of our commercial, veterinary and analytical businesses contributed to strong growth in revenue, and the business enjoyed efficiency gains as a result of increased investment in technology."

Healthscope's New Zealand division accounted for almost 15 percent of the group, which reported a 9.2 percent fall in net profit to A$162.6 million on a 3.8 percent increase in revenue to A$2.32 billion. The group's Australian private hospitals division, its biggest, is dealing with shrinking margins and last week the company announced plans to sell its medical centre portfolio.

Its focus for the New Zealand arm is to maintain strong relations with the government, which ultimately funds the DHB contracts, and seek out new commercial revenue streams.

The ASX-listed shares sank 15 percent to A$1.8575 today.