Shares in Healius (ASX: HLS) were up around 13% to $1.49 at the open after the Pathology services provider gave the market some exciting updates to digest this morning.
Healius outlined plans to achieve a high single-digit margin by June 2027 under a plan dubbed "T27".
Having repositioned itself as a pure-play pathology and diagnostics business, Healius’ new CEO Paul Anderson and refreshed board are focused on streamlining its national operating model.
The company has already identified $15 million to $20 million in cost savings by removing unallocated corporate expenses and plans to reduce labour, consumables, and logistics costs across the network.
The company also outlined a $300 million special dividend payout following the $965 million sale of its Lumus imaging business.
Once completed on 1 May, the Lumus sale is expected to net proceeds of $800 million after repayment of equipment leases, closing adjustments, fees and other costs.
31.3% dividend yield
The company will pay a special fully franked dividend of 41.3 cents per share on 1 May, which, based on yesterday's close price, represents a whopping 31.3% dividend yield.
Existing debt will also be repaid and refinanced with a new $300 facility.
Within today’s trading update, the company advised the market that overall volumes year-to-date were up 4% to February, while revenue was up 6.2%.
The company expects capital expenditure (capex) for FY25 to be $36 million and estimates future capex to be $35 million or equivalent to annual depreciation.
“Post Lumus we are removing $15 million - $20 million of costs, of which the majority will be from unallocated corporate costs and the balance from other pathology costs,” the company noted today.
“Significant additional cost efficiencies are part of the T27 margin expansion and will be embedded by June 2027.”
Mixed 1H result
Today’s trading update follows a mixed first half result, which saw the company trim its half-year net loss to $12.8 million from $635.8 million in the previous period.
Group revenue of $934 million was up 10% year on year and beat market estimates of $908 million.
Pathology revenue, excluding Healius' bioanalytics lab Agilex, grew by 7% to $641.7 million, while Lumus delivered revenue growth of 13.3% to $286.5 million.
However, due to a slowing market and a downturn in new drug development programs globally, Agilex saw revenue decline to $18.8 million from $19 million a year earlier.
Jarden analysts saw "no obvious upside" with the 1H FY25 result and noted that a deterioration in its Healius' pathology earnings margins was an unexpected outcome.
Healius has a market cap of around $1 billion which put it just outside the ASX300; the share price is up 16% over one year and up 8% year to date.
According to Commsec, the stock’s shares appear to be in a near-term downtrend confirmed by its 20-day moving average.
Consensus is Hold.
