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Fertility clinic owner Virtus profit down 7.6% after relocations

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Virtus Location Graphic V1 World

Fertility clinic owner Virtus Health’s full-year profit has slipped 7.6 per cent despite a rise in revenue following costs incurred from multiple facility relocations and then refurbishments, and a downturn in international volumes.

Revenue for the 12 months to June 30 rose 6.1 per cent to $280.1 million but additional technology and infrastructure investment, expansion in the Australian lower margin segments, and a slower than expected performance internationally dragged full-year profit down to $28.4 million.

Nonetheless, chief executive Sue Channon says “FY19 set the foundation for improving productivity and, ultimately, advancing market share”.

The IVF provider experienced a decrease of 30 per cent in earnings before interest, tax, depreciation and amortisation (EBITDA) for its diagnostics department, from the previous corresponding period, after relocating its main pathology laboratory.

EBITDA for its day hospitals market segment reduced by about $1.5 million after moving two facilities to Alexandria, in Sydney, and Hobart.

Ms Channon told AAP the company had outgrown the spaces that were no longer relevant or appropriate but she was confident these upgrades would lead to improved results for FY20.

Overseas another clinic in Southampton in the UK required refurbishment, which had an adverse affect on volumes throughout FY19.

While a fertility centre in Trianglen, Denmark, exceeded expectations following its acquisition in June 2018, overall volumes in the Danish region reduced by 23.2 per cent, compared with the previous year, after its clinic in Aagaard suffered short-term staffing issues.

Singapore operations experienced continual growth delivering a 3.0 per cent improvement in cycle volumes and an EBITDA increase of $200,000.

Despite the fertility industry growing 4.9 per cent in the eastern markets during the past year, Ms Channon said the addition of small operators had increased competition but she believed Virtus would benefit from its focus in Australia on lower margin segments, especially in Queensland, where there are more bulk-billed services.

“Five years ago we recognised there was a group of patients in lower socio-economic demographics who were not accessing IVF treatments, and since we set up this new segment we’ve seen significant uptake in this area,” Ms Channon told AAP.

She said the company’s investment in artificial intelligence was especially exciting and would become a tool for ranking and selecting better embryos, ultimately speeding up the process of pregnancy.

Virtus offers a full suite of fertility services including surrogacy and egg freezing, and has seen an increase in same-sex couples taking part in the donor sperm program, as well as patients wanting to access genetic services to ensure the optimum health of their baby.

Ms Channon said it was disappointing to see a number of people seeking gender selective services offshore, which remain illegal in Australia.

Virtus shares were down 5.91 per cent to $4.62 at 1239 AEST, while the company reported a fully franked final dividend – unchanged – at 12.0 cents per share.

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