Integral Diagnostics (ASX: $IDX) 1H FY24 Financial Results

Integral Diagnostics Limited (ASX: $IDX) has reported a 7.2% increase in revenue for the first half of the financial year 2024, reaching $231.3 million, compared to $215.7 million in the prior corresponding period. The company's operating EBITDA margin also saw an increase to 18.7% from 18.5% in the prior corresponding period. However, the company reported a statutory net loss after tax of ($66.8m), down 513.7% from a net profit after tax of $16.1m in the first half of the financial year 2023. After adjusting for impairment losses, transaction and integration costs, amortisation of customer contracts, and other costs, net of tax, of $74.2m, the operating net profit after tax (NPAT) was down 5.6% to $7.4m from $7.8m in 1H FY23. The company's net debt to EBITDA (pre-AASB 16) stood at 3.0x, slightly below 3.1x at 31 December 2022, and is projected to trend down gradually over time.

Executive Commentary on 1H FY24 Performance

The company's operating results for 1H FY24 are consistent with the Trading Update provided on 3 November 2023. The solid revenue growth of 7.2% was driven by improved Medicare indexation, annualisation of FY23 out of pocket fee increases, and continued favorable mix impact. However, the company faced prolonged cost pressures, especially higher labor costs, driven by inflation and labor market supply constraints, together with higher interest funding costs. The management has focused on containing and reducing costs wherever possible. An impairment loss of $71.5m was recognized in the New Zealand division, reflecting the company's revised, more modest growth expectations for this business. The company believes that the fundamentals of the essential radiology industry are strong and is strategically well positioned to benefit from demographic and technological trends. It continues to focus on executing key operational improvement initiatives and driving organic earnings growth, accelerating the use of teleradiology, digital, and AI to enhance the patient and referrer experience, driving environmental, social, and governance (ESG) strategy, nurturing and developing culture and leadership across its people, and considering accretive acquisitions that represent a strong clinical, cultural, and strategic fit as balance sheet capacity permits.

Outlook and Future Focus

Integral Diagnostics (ASX: $IDX) remains focused on driving organic earnings growth, accelerating the use of teleradiology, digital, and AI to enhance the patient and referrer experience, driving environmental, social, and governance (ESG) strategy, nurturing and developing culture and leadership across its people, and considering accretive acquisitions that represent a strong clinical, cultural, and strategic fit as balance sheet capacity permits. The company expects an improvement in 2H FY24 trading performance and Operating EBITDA margin compared to 1H FY24, to be in line with or slightly higher than the 2H FY23 EBITDA margin of 20.2%. Additionally, for the month of January 2024 and up to and including 15 February 2024, the company achieved solid revenue growth of 11.6% compared to the prior corresponding period. The company anticipates FY24 replacement and growth capex to be between $30.0m to $40.0m. The Directors declared a fully franked interim dividend of 2.5 cents per share, representing a dividend payout ratio of 78.9% of Operating NPAT. The Dividend Reinvestment Plan (DRP) is available for participation for the 1H FY24 dividend at a 1.5% discount.