Healius Limited (ASX:HLS)

Malcolm Parmenter
Market Cap (AUD): 1.82B
Sector: Health Care
Last Trade (AUD): 2.93 +0 (+0%)
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1. About

Healius Limited (formerly Primary Health Care) is one of Australia's leading healthcare companies and has been providing quality, affordable and accessible healthcare to the people of Australia for more than 30 years.

Primary has an expansive network of multi-disciplinary medical centres, pathology laboratories and diagnostic imaging centres, which are underpinned by a cohort of dedicated healthcare professionals.

2. Business model


The Group operates in following divisions:[1]



Revenue ($M)

% of Revenue

% of Profit (before Int, Tax, Depn & Amort)

Profit drivers[2]





Revenue was up 5.0% with increases in both volume and average fee per episode and a strong performance in the niche specialities of genetics, veterinary pathology and the new Human Papillomavirus testing. This increase was underpinned by good market growth for the majority of the year, with softer market demand in May and June 2018

Medical Centres




GP gross billings rose from $416.0 M to $425.2 M with increased gross billings per GP and greater non-Medicare fees generated per patient. In line with the new contract models, Primary’s average share of revenue declined which drove a decrease in GP revenue from $183.2 M to $171.5 M





Imaging grew revenue by 10.5%, with continued strength in the hospital segment and in CT and MRI modalities, and on-going strong market demand with MBS five-year rates at 6.2%. The division recorded some slow-down in May and June referrals






Intersegment Sales





3. Strategy


A snapshot of Primary’s strategic initiatives is set out below:[3]



People – Workplace of Choice

Introduction of new Purpose, Mission and Values

Further development of performance management framework


Process – Organisational Efficiency

Modernisation of corporate support services infrastructure


Property – Yield Optimisation

Outsourcing of facilities and lease management

Property cost optimisation program



People – Workplace of Choice

Staff engagement

Laboratory Information System/Serum Work Area delivering improved referrer experience and enhanced brand


Process – Organisational Efficiency

LIS delivering efficiencies and improved patient experience

Optimisation of pre-analytical processes

Technology upgrade to SWA


Property – Yield Optimisation

Approved Collection Centres network optimisation

Laboratory uplifts

Specialty services expansion

ACC enhancement in Medical Centres



People – Workplace of Choice

Quality reset to deliver the right culture

Attract Healthcare Professionals with simplified contracts, career pathways, skills development, the appointment model, and a new recruitment team

New streams of HCPs via young professionals, Barefoot GPs, and roll-in acquisitions

Improve nursing and support staff


Process – Organisational Efficiency

Re-engineering clinic and corporate support workflows

Improve integration to reduce leakage

Modernise HCP billing practices

Better consumer experience: online access via websites and apps, e-recalls, and continuity of care


Property – Yield Optimisation

Modernise, improve and extend 52 Medical Centres

Expand service offerings including urgent care



People – Workplace of Choice

Staff engagement

Imaging Core Application Refresh delivering improved radiologist experience and enhanced brand


Process – Organisational Efficiency

Labour and operating model optimisation in dispersed community network

iCAR 3 delivering efficiencies and improved patient experience


Property – Yield Optimisation

Revitalisation of community sites

Optimisation of hospitals including Northern Beaches Hospital

Development of high-end sites

Upgrade Imaging sites in Medical Centres

4. Markets


The Group operates in the following industries:[4]


Industry (Australia)

Industry Revenue (2018)

Growth Rate (annual 13-18)

Health Services

$137 billion


Pathology Services

$3 billion

1.6% (annual 14-19)

Diagnostic Imaging Services

$4 billion


5. Competition


Major competitors Include:[5]


  • Abbott Laboratories (NYSE:ABT)
  • Ramsay Health Care Limited (ASX:RHC)
  • Sonic Healthcare Limited (ASX:SHL)

6. History



Warringah Mall 24 Hour Medical Centre opened by Dr. Edmund Bateman in Brookvale



DAY SURGERY opened in Warringah Mall 24 Hour Medical Centre



The second Primary Health Care Medical Centre opened (Chatswood Medical and Dental Centre)



Primary Health Care's third medical centre opened (Bankstown Medical and Dental Centre)



Listed on Australian Stock Exchange with market capitalisation of $50 million



Primary Health Care purchased Sydney Diagnostic Centre – 3rd largest pathology provider in NSW at the time



First regional centre opened (Dubbo NSW)



First centre outside of NSW opened in Elizabeth, South Australia



Purchased Health Communications Network (HCN) a program used by over 60 percent of GP surgeries



Primary Health Care acquires Symbion Ltd



Consolidation of Primary and Symbion Refurbishes and upgrades Pathology laboratories and imaging sites and equipment



54th large scale medical centre opened in Western Australia



57th large scale medical centre opened



58th large scale medical centre opened



Primary announced sale of Transport Health



Opened Corrimal Medical and Dental Centre in Corrimal, NSW



Primary Announced the acquisition of Montserrat Day Hospital

7. Team


Board of Directors[7]


Mr. Robert Hubbard – Non-Executive Chairman

Mr. Gordon Davis – Non-Executive Director

Ms. Sally Evans – Non-Executive Director

Dr. Paul Jones – Non-Executive Director

Dr. Errol Katz – Non-Executive Director

Dr. Malcolm Parmenter – Managing Director and Chief Executive Officer

Ms. Arlene Tansey – Non-Executive Director


Management Team


Malcolm Parmenter – Managing Director and Chief Executive Officer

Malcolm Ashcroft – Chief Financial Officer

Wes Lawrence – Chief Executive, Pathology

Dr. Tim Haggett – Chief Executive, Medical Centres

Maxine Jaquet – Chief Executive, Health & Co

Dean Lewsam – Chief Executive, Imaging

Scott Beattie – Group Executive, Commercial Solutions

Yvette Cachia – Group Executive, People, and Legal

Ryan Fahy – Chief Information Officer

Janet Payne – Group Executive, Corporate Affairs

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8. Financials


2018 Full Year Results Presentation


Financial Year 2017/18 (ended 30 June):[8]



Revenue ($M)


% Change


Profit (before Int, Tax, Depn & Amort) ($M)

% Change






Medical Centres















Intersegment Sales










9. Risk


Major risks include:[9]


Business Risk


Regulatory Compliance

Primary operates in sectors which are subject to extensive laws and significant levels of regulations relating to the development, licencing and accreditation of facilities and services.


Medicare Benefits Schedule

Primary is committed to providing affordable, accessible and quality healthcare, with bulkbilling a key feature of the service delivery. Any changes to Medicare Benefits Schedule (MBS) or other government funding initiatives may impact profitability through reductions in Government revenue, and reduced patient numbers due to out-of-pocket expense increases impacting affordability.


Healthcare professionals

Primary contracts to provide services to healthcare professionals (HCPs), including general practitioners, specialists and radiologists. A significant component of Primary’s revenues is dependent upon service fees paid by HCPs providing services to patients. Failure to maintain strong relationships with these parties may impact our ability to retain and recruit HCPs. This may impact growth prospects, revenue earned, the cost structure and profitability of Primary’s businesses.



Primary is reliant upon doctors continuing to choose a pathology or diagnostic imaging services provider affiliated with Primary. A reduction or loss of referrals may impact the financial performance of Primary.



Primary is dependent on the quality of its staff, their skills, expertise and commitment to the Group. A loss of key staff may risk the loss of significant corporate knowledge.


Industrial Relations

Many of Primary’s employees are covered by awards, enterprise bargaining agreements and other workplace agreements which periodically require classification, renegotiation and renewal. Negotiations could result in issues which may lead to disruptions to Primary’s operations and increased direct and indirect labour costs. These may adversely impact the financial performance and reputation of Primary.


IT Systems

Primary relies on effective information technology systems. Operations may be significantly impacted by disruption to a core IT platform.


Cyber Security

Primary maintains sensitive clinical and financial information and its databases may be at risk from cyber attacks.



Competition may come from new entrants into the market, existing competitors attempting to increase market share or from new disruptive technologies that may change the way services are delivered. A change in competition may impact profitability, and the ability to attract and retain HCPs and secure attractive locations for its businesses.


Business strategies and transformation projects

Primary is undergoing significant transformation as it seeks to position itself for future growth and sustainability. There is a risk that significant change may impact current operational focus and ineffective implementation, misguided strategies or industry changes of initiatives and strategies, may impact the financial performance of the business.



Primary’s reputation may be impacted by a future event that creates adverse perception of the Group for the public, investors, regulators, or rating agencies that directly or indirectly impacts earnings or value.


Financial Risk


Credit risk
Credit risk is the risk of financial loss if a customer or counterparty to a financial asset held by the Group fails to meet its contractual obligations under the terms of the financial asset (to deliver cash to the Group). The Group’s exposure to credit risk arises principally from cash and derivatives held with financial institutions and trade receivables due from external customers. The credit risk on cash and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-ratings agencies. The Group’s maximum exposure to credit risk from trade receivables is equal to the carrying amount of the Group’s trade receivables as at the reporting date of $119.0 million (30 June 2017: $100.2 million).


Liquidity risk

Liquidity risk refers to the risk that the Group will encounter difficulties in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial liability. The Group manages liquidity risk by continually monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and financial liabilities and ensuring that sufficient unused facilities are in place should they be required to refinance any short term financial liabilities.


Interest rate risk
The Group is exposed to interest rate risk as entities in the Group borrow funds at floating interest rates plus a fixed margin. Interest rate risk is managed by the Group by the use of interest rate swap contracts (cash flow hedges), executed by authorised representatives of the Group within limits approved by the Risk Management Committee.


Currency risk
The Group transacts predominantly in Australian dollars and has a relatively small exposure to offshore assets or liabilities. The Group predominantly uses the spot foreign currency market to service any foreign currency transactions. A sensitivity analysis has not been performed on the currency risk as this is not considered material.