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The impact of the coronavirus outbreak has been devastating, to say the least. The statement was corroborated by the Managing Director of IMF, Ms Kristalina Georgieva who, on 23 March 2020, said that the outlook for the remainder year is bleak with a recession likely to be as dreadful as the 2007-08 GFC or even worse. Ms Georgieva also mentioned that starting from a single country, the coronavirus had now become a global concern and required a cohesion among countries to deal with the threat.
COVID-19 pandemic has sent governments in contemplation, looking for ways to control the rapid spread of the harmful virus. Partial/complete lockdowns and curfews are some of the preventive measures adopted by countries.
Several companies have had to downsize their businesses, and some have had to close their operations because of a lack of demand for their products and services. Virtus Health is one such Company that has seen a fall in demand for its services and thus, has taken a hit in the market.
Let’s have a look at Virtus Health and its latest updates to understand its current position.
Virtus Health Limited (ASX:VRT) provides services in IVF and related diagnostics along with day hospital services. The Company has developed medical collaborations around the globe which cater to scientists, clinicians, support staff and researchers. VRT has a strong presence in Australia and Ireland in the field of fertility services. Additionally, Virtus is developing an international presence in Denmark, the UK and Singapore.
Falling stock price:
The effect of coronavirus pandemic on VRT’s stock performance is palpable. The stock settled the day’s trade at $2.150 on 24 March 2020, a decline of 0.463 per cent compared to the previous day’s closing price. The Company recorded its 52-week low of $2.010 on 24 March before settling at a slightly better price. VRT has generated substantial negative returns of 52.32 per cent and 50.91 per cent in the last three months and last six months, respectively. The Company had an annual dividend yield of 11.11 per cent and a P/E ratio of 6.03x.
Adverse Effect of Coronavirus on VRT’s Earnings:
On 23 March 2020, the Company notified the market about the impact of coronavirus on its business operations. The highlights of the update are mentioned below:
- Virtus highlighted that earnings till February 2020 were in line with the current expectations. However, estimating the performance for the fourth quarter of FY 2020 is highly unpredictable due to the prevailing conditions emanating from COVID-19.
- The two activities of the Company in Australia include IVF and Australian Diagnostics and Day Hospital. It is expected that the former would witness a decline in its activity levels commencing from April 2020 and beyond. However, the latter is anticipated to be in line with the consensus expectations.
- Depending on the severity of the disease in the countries in which the Company operates, Virtus Health has witnessed a reduction in new appointments at its clinics located at its locations in Australia, Singapore and Europe. The IVF treatment is allowed in each of these countries as per the published guidelines from the state governments, which are mentioned below:
- In Australia, treatment is allowed as per the published guidelines from The Fertility Society of Australia.
- In Singapore as well, the local government approves the IVF treatment considering assisted reproductive treatment to be safe.
- In Europe, the existing patients continue to be treated as per the guidelines from the European Society of Human Reproduction. However, the clinics are scheduled to be shut effective first half of April.
Despite the allowance of IVF treatment at the respective country, people are not turning up. It is unfortunate for the Company that negligible cases are registering.
- While the world is struggling from the spread of COVID-19, the Company is taking essential steps to mitigate the business risk and maintain its responsibility towards the health and safety of its patients. Virtus Health is reviewing the situation on a daily basis by taking opinion from the relevant government authorities.
- Running through this hard time, VRT has mentioned that it has a firm belief in its business fundamentals and the value of its services in the domain of assisted reproductive services.
Early on-role of New Appointment:
Ms Kate Munnings was appointed as a Director of the Board effective 18 March 2020. Most recently, she was the Chief Operating Officer of Ramsay Health Care Limited (ASX:RHC).
On 24 January 2020, VRT’s Chair, Ms Sonia Petering, announced that Ms Munnings would be appointed as the Group Chief Executive Officer of the Company starting 14 April 2020. However, witnessing the current scenario, Ms Munnings began her role as Group CEO effective 23 March 2020.
A quick look at the latest Reported Numbers:
In the first half results of FY 2020 (for the period ended 31 December 2019) announced on 18 February 2020, Virtus showcased an increase of 1 per cent and 21 per cent in revenue and EBITDA, respectively. The main drivers for this growth in top line and EBITDA were the progress in QFG full-service volumes and a strong performance from The Fertility Clinic.
An improvement of 4.5 per cent in EBITDA was reported for Australian IVF clinic. The earnings per share were noted at 18.65 cents, an increase of 2.4 per cent. EBIT and Profit from ordinary activities after tax increased by 3.9 and 3.7 per cent, respectively. Half-year profit that was attributable to the VRT’s owners stood at $14.97 million.
Segmental revenue and EBITDA for Australia region was $112.8 million and $39.7 million respectively. Day operations of Australia had a stable performance with EBITDA enhanced by $0.3 million over the prior year due to more non-IVF surgeries.
The final ordinary dividend (fully franked) of 12 cents per security was paid in October 2019 for the year ended 30 June 2019. Virtus Health managed to provide an annual dividend in the range of 0.24 to 0.29 since 2016.
