Bleeding bottom line drains interest in Advanced Health
Group is in a sweet spot by offering more affordable day surgery procedures, but profits aren’t rolling in yet
The market was clearly hoping for a stronger dose of good news from day hospitals group Advanced Health on Thursday.
Advanced’s share price more than doubled from about 44c in early November to settle at around 95c for most of this year. But in the last few weeks the share has trended weaker, and lost almost 7% on Thursday after the release of interim results to end December that showed the bottom line still bleeding.
Advanced remains excited about private healthcare in SA, and – on paper – the group is in a sweet spot by offering more affordable day surgery procedures.
But this enthusiasm is not translating into profits … yet. Advanced’s local operations did show markedly reduced losses, but it seems there will still be a fair wait until there are meaningful profits and cash flows.
Encouragingly, Advanced did say more medical schemes were directing surgical procedures towards its day hospitals as a more cost-effective option. Notably the Discovery Health Medical Scheme recently introduced the Discovery Day Surgery Network, which will ought to mean more patients for Advanced.
While expansion is not happening at a breakneck pace, Advanced is pushing hard to start operations at the Harbour Bay Surgical Centre in Simonstown. This looks like a smart move in an area not well serviced with private hospitals.
But Advanced – as always – is quick to remind investors that it takes up to 18 months to establish a new day hospital, which then requires a settling-in period of up to 36 months or longer before profit is achieved.