Earnings flat but older Aussies to deliver spark
HEALTHSCOPE, Australia’s second biggest private hospitals operator, says it is still expecting flat earnings this financial year as softer conditions put pressure on margins.
Chief executive Gordon Ballantyne says the Melbourne-based company is confident of the private healthcare industry’s long-term future, given a growing and ageing population are driving demand for healthcare services.
But “softer private hospital market conditions” were among factors that were putting pressure on profit margins, Mr Ballantyne told shareholders yesterday.
Speaking at Healthscope’s annual meeting in Melbourne, he said costs in “certain areas of the business have grown faster than our health fund revenue increases”.
Variability in Healthscope’s patient case mix also had an impact, he said.
Case mix refers to the types of patients – by specialty, treatment or diagnosis – in a hospital at any one time.
Healthscope affirmed its expectation that operating earnings before interest, tax, depreciation and amortisation for its hospitals division in the year to next June were likely to be similar to the past year.
First-half operating earnings for the hospitals division are expected to decline, but earnings should grow in the second half, with momentum carrying into 2019 and beyond, the group said.
Healthscope’s hospitals division generated operating earnings – a measure of underlying profitability – of $359.4 million the past financial year, up 1.3 per cent on the previous year.
But hospitals in Victoria and Tasmania, which generate about one third of divisional earnings, underperformed because of increased competition, a slower lift in patient volumes at newer facilities, and a high wage bill, it said.
Shares in Healthscope – the biggest Australian private hospital operator behind Sydneybased Ramsay Health Care – rallied 2.7 per cent yesterday, closing at $1.925.