While pandemic travel restrictions were more commonly linked to tourism businesses, the resumption of movement in FY23 enabled allied health company Healthia (ASX: HLA) to resume moving its teams around Australia and New Zealand to rollout a range of organic growth initiatives that are now bearing fruit.
Operating more than 300 allied health clinics across Australia, Healthia has rapidly grown its network since listing on the ASX in 2018 with just 95 clinics. Healthia’s growth has been fueled by the acquisition of clinics across the highly fragmented allied health industry where they have become the fastest growing operator with a network consisting of podiatry, physiotherapy and optometry businesses.
All acquisitions have been earnings accretive but the greater growth opportunity for Healthia has come by improving acquired clinics with a range of organic growth initiatives. In many cases, this has involved acquiring an underperforming clinic, optimising floorspace, introducing new services within the clinic and integrating Healthia’s support services.
In order to roll out these initiatives though, it has required freedom of travel across Australia and New Zealand which only resumed in 2022, but within 12 months are seeing a surge in organic revenue growth across the Healthia network.
In Q3 FY23, Healthia reported 12.8% organic growth which was followed by 6.8% in Q4. Both figures are notably higher than the 3-6% targeted by the Company.
The growth has been powered by Healthia’s support teams being able to move freely between clinics to roll out co-location of services which might see an acquired physiotherapy clinic begin to offer podiatry, hand therapy or other complimentary allied health services. The lifting travel restrictions in FY23 also enabled Healthia to freely move its clinicians into clinics to offer these new services and travel for education opportunities offered by Healthia to upskill their professional repertoire.
Rolling out of these growth initiatives, most of which were delayed for two years during COVID, has started to be reflected in Healthia’s financial performance.
For the 12 months ended 30 June 2023, Healthia expects to report underlying revenue in the range of $253m – $254m which would represent a 24.8% increase on the previous year.
Of greater interest to investors though is the underlying EBITDA which is expected to be in the range of $38m – $39m. On the lower end of the range, this will represent a 55.1% increase on the previous year and demonstrates the value Healthia has been adding to acquired clinics with its organic growth strategy.
It hasn’t been all smooth sailing for Healthia however, with the earnings falling just short of the $40m guidance issued by the Company in February 2022 due to uncontrollable circumstances around abnormally high sick leave and the one-off Queen’s Memorial public holiday issued to mourn Queen Elizabeth II in September 2022.
The public holiday alone cost Healthia $960k in lost margins.
Staff sick leave as a percentage of wages was 2.35% in Q4 FY23. It was notably higher than the 1.69% recorded in Q3 and the 1.5% witnessed by Healthia pre-pandemic.
“While Healthia budgets for some sick leave, these higher than normal periods mean that some patients with appointments could not be treated, temporarily impacting our trading performance,” said Healthia CEO, Wesley Coote.
“Notwithstanding these events, it has been pleasing to deliver a strong uplift on our FY22 performance where easing of pandemic restrictions enabled Healthia to roll out a range of organic growth initiatives which had been delayed during COVID.”
Further rollout of new allied health services in Healthia clinics is expected to continue into FY24 as the Company continues catching up with a backlog generated during the pandemic.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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