Medibank Private Plunges On Loss Of A Key Contract

  • Nov 19, 2018 AEDT
  • Team Kalkine
Medibank Private Plunges On Loss Of A Key Contract

Medibank Private Limited (ASX:MPL) released a notice pertaining to requesting for a halt in trading on November 19, 2018 i.e. today. In absence of any new announcements made by the company to ASX, MPL planned to commence its normal trading by November 21, 2018. This was pertaining to the release of an outcome of tender process with Garrison Health Services contract. 

Subsequently, MPL made a media release after an hour or so regarding the outcome of the tender it applied for. The company has been informed by the Australian Government Department of Defence regarding its non-selection for the contract renewal of the Garrison Health Services. The company failed to get selected as the preferred tenderer and secure the renewal of the contract with the Garrison Health Services.

Medibank has provided its healthcare services to the Australian Defence force for a period of around six years. MPL has delivered high level of care to approximately 60,000 permanent and 20,000 reservists Australian defence force person, and along with this it has remained consistent in meeting all the key performance indicators and maintaining at desirable levels as mentioned by the ADF.

ADF current contract with MPL will end on June 30, 2019. MPL will continue its contract till that date and will perform all the required duties towards the contract till its expiry. Approximately $30million operating profit was generated in FY18 from the already existing contract with the Garrison Health services. In absence of securing the renewal for the already existing contract, the company expects some exit cost which will approximately come to $5 million in the second half of FY19.

The company will remain focused towards the development and delivery of health care services across Australia. No such material stranded cost will be generated from the exit from the contract.

Meanwhile, the group has successfully posted net profit after tax of $445.1 million for the full year, and the group net profit after tax was down by 1% on account of fall in the net investment income. Health insurance operating profit showed considerable growth and increased to $535.6m in FY18 from $497.5m in FY17, while management expenses declined by $11.2 million. Strong performance was posted on full year basis, along with stabilized market share; and the acquisition of HealthStrong which was done 16 months ago, and Home Support Services in August 2018 will help the company to secure a national platform and further continuation of the expansion plans for its home care options and tap a bigger market.

MPL provided guidelines to cut the management costs by almost $60 million by the end of 2020, and the recent guideline showed an increase of almost $10m from the earlier set target. In line with its strategy, MPL will focus on its already existing network of approximately 3.7 million customers, and will focus towards providing them with customized offerings and experience  by offering better health services and advice. The last traded price of MPL was $2.6, down 6.137%.


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