Having emerged from the coronavirus pandemic in good shape, Healthia (ASX: HLA) is poised to deploy its $27 million ‘war chest’ for further acquisitions in the fragmented podiatry and physiotherapy sectors.
In May the company settled the $5 million purchase of The Foot and Ankle Clinic, which consists of 12 clinics in Melbourne and regional Victoria. The acquisition expanded Healthia’s ‘footing’ in the sector, bringing their podiatry network to 93 clinics. But as Managing Director Wes Coote notes, in revenue terms the group still accounts for just over 5% of what is a $900m market annually.
“We still have a long way to go,” said Coote.
“There are plenty of opportunities out there still, including in other allied health areas and a larger share of the global foot orthotics market.”
Mr Coote says it’s the right time to approach practice vendors as they are looking to increase support in the wake of the virus outbreak.
“This financial year we deployed $18m on acquisitions, roughly half podiatry and half physiotherapy, but knocked back three times as many on valuation grounds.
“We are seeing an increase in good quality businesses willing to discuss partnering with us and their future succession plans. I’m more than comfortable that we will achieve our stated target of $15m new capital deployed on acquisitions in FY21.”
As a guide, vendors are indicating they would be happy to sell on a multiple of 3 to 4.5 times EBITDA. On average, the company paid 4.2 times EBITDA across their FY19 acquisitions.
Mr Coote says Healthia is just as interested in expanding in physiotherapy, which is almost twice the size of the podiatry market with $1.6 billion annual turnover. Beyond their 93 podiatry clinics, the company currently operates 43 physiotherapy clinics, as well as 14 specialty hand therapy clinics.
While physiotherapy is more keenly competed, the sector has the advantage of higher recognition among consumers than podiatrists. After all, everyone knows what a ‘physio’ does, but the foot whisperers are often confused with paediatricians.
“There are a few stereotypes and misconceptions about podiatrists we need to break down – and we can do that as a larger group with regional marketing and education campaigns,” says Coote.
In particular, the Company’s scale and multidisciplinary approach has enabled Healthia to withstand the Covid-19 crisis more resiliently than many of its smaller competitors.
“As a group, our practices have poolled their resources and supported each other over these tough times. While many operators ran for the hills or changed their opening hours we held our
ground.”
Another advantage is that 60% of Healthia’s practices are in Queensland, a region less affected by Covid-19.
The $27m ‘war chest’ Healthia intends to start deploying in FY21 consists of $4m of cash on hand and $23m of debt headroom on a $50 million facility provided by the Bank of Queensland and the ANZ Bank.
“We are in great shape and our expansionary journey has only just begun.”
*Owners of this website are shareholders in a company mentioned in this article and have been engaged by them to assist in investor communications
Tim Boreham edits The New Criterion
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