• Group Revenue Growth: Up 10%.
• Pathology Revenue Growth: Up 7%.
• Agilex Revenue: Down 1.1%.
• Lumus Imaging Revenue Growth: Up 13.3%.
• EBITDA Growth: Up 3.3%.
• EBIT Growth: Up 51% to $23.7 million.
• Pathology Volume Growth: Up 5%.
• Genomic Diagnostics Revenue Growth: Up 45%.
• Collection Center Closures: Reduced by 50% from 800 to 400 per week.
• Contact Center Call Reduction: Reduced by one-third or 65,000 calls per month.
• Agilex EBIT: Reduced to $1.1 million.
• Lumus Imaging EBIT Growth: Up 50% to $26.4 million.
• Cash Conversion: Strong control over working capital.
• Capital Expenditure: Expected to be consistent with the first half.

• Warning! GuruFocus has detected 8 Warning Signs with ASX:HLS.

Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Healius Ltd (ASX:HLS) reported a 10% increase in group revenue, with pathology revenue growing by 7% and Lumus imaging revenue up by 13.3%.
• EBITDA increased by 3.3% and EBIT rose significantly by 51% to $23.7 million.
• The company has successfully reduced collection center closures by 50%, improving customer service levels.
• Genomic diagnostics revenue grew by 45%, highlighting strong growth potential in emerging diagnostics.
• The sale of Lumus imaging for $965 million is expected to generate net proceeds in excess of $800 million, which will be used to repay debt and return surplus cash to shareholders.

Negative Points

• Despite revenue growth, margins remained flat due to increased labor costs from investments in staffing collection centers and call centers.
• Agilex Biolabs' performance was impacted by the US elections, resulting in flat revenue and a reduction in EBIT to $1.1 million.
• The pathology segment's revenue growth has not yet translated into higher earnings due to deliberate investments in labor.
• There are concerns about stranded costs post the sale of Lumus imaging, which may affect profitability.
• The company faces challenges with indexation and potential changes in government policy, such as the B12 and vitamin year-end changes.

Q & A Highlights

Q: Can you provide insights on when productivity initiatives will impact margins, given they were flat this period? A: Paul Anderson, CEO, explained that while revenue improved by 7%, it came with increased labor costs to keep collection centers open and call centers staffed. The focus now is on improving productivity and reducing labor costs, but it's an ongoing process without a specific timeline.

Q: What are the expected stranded costs post the sale of Lumus, and how do you plan to address them? A: Paul Anderson, CEO, stated that they have a good understanding of the stranded costs and will provide more details at the Investor Day. Some costs will naturally disappear post-sale, while others will be managed through transition services agreements.

Q: Can you comment on the recent press about a potential merger with Australian Clinical Labs? A: Paul Anderson, CEO, clarified that the news was unexpected and there is no current activity regarding a merger with Australian Clinical Labs.

Q: How should we think about EBIT margin seasonality in the second half of FY25 for Pathology? A: Paul Anderson, CEO, noted that revenue and volume growth have continued into January and February. The focus is on reducing costs, particularly labor, which could improve margins, but timing is challenging to predict.

Q: What is Healius' position in delivering genomics and specialist services compared to peers? A: Paul Anderson, CEO, highlighted that Healius has a successful genomic diagnostics business in Victoria, growing at 50% half-on-half. They have a plan to expand this area without significant capital investment, focusing on reproductive health, oncology, and hematology.

Q: How are you managing the increase in labor costs for collection and call centers? A: Paul Anderson, CEO, mentioned that the uplift in labor costs is largely in place, and the focus is now on reducing these costs through improved productivity and negotiating new EBAs at more normal rates.

Q: What are the key drivers for pathology revenue growth exceeding volume growth, and will this trend continue? A: Paul Anderson, CEO, attributed the growth to B2B business, genomics, and increasing average fees. He expects revenue growth to continue outpacing volume growth, despite concerns over government changes affecting certain tests.

Q: What are the major CapEx plans for Pathology in the second half? A: Steve Humphries, CFO, outlined plans for digital IP, ACCs, labs, new contracts, genomics analyzers, and instrument connection licenses, all scheduled for the second half.

Q: Can you provide clarity on the dividend amount post-Lumus sale? A: Paul Anderson, CEO, stated that while they have franking credits and aim to have little or no debt, they have not specified a dividend amount. Details will be provided once the sale is complete.

Q: Are there any plans to pursue a merger or sale of the pathology division? A: Paul Anderson, CEO, confirmed that there are no current plans to pursue a merger or sale of the pathology division, focusing instead on organic growth and improving operations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.