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Centric Health Reports Q2'18 Financial Results, Announces New Strategic Direction

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Centric Health Reports Q2'18 Financial Results, Announces New Strategic Direction

Canada NewsWire

Strategic focus on seniors care services, commitment to strengthening balance sheet

TORONTO, Aug. 14, 2018 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX:CHH), one of Canada's leading healthcare services companies, today reported its financial results for the three and six month periods ended June 30, 2018.

"After completing my assessment of the Company as the new CEO, we are taking decisive action to reposition the business for profitable growth," said David Murphy, President and CEO of Centric Health. "This includes establishing a more focused strategic direction, developing new growth platforms, and accelerating the re-engineering of operations and deleveraging of our balance sheet.  Although previously announced regulatory changes will impact 2018 financial performance, we are embarking on an exciting new path that will transform the Company and position us to maximize value for all stakeholders."

Highlights for the Second Quarter of 2018
(All comparative figures are for the second quarter of 2017)

  • Revenue from continuing operations increased by 1% to $43.3 million from $42.7 million, primarily driven by procedure growth in Surgical and Medical Centres.

  • Adjusted EBITDA1 from continuing operations declined 30% to $3.4 million from $4.9 million, primarily driven by regulatory changes and other gross margin compression in Specialty Pharmacy.

  • Business Re-Engineering Plan underway to mitigate the impact of regulatory changes and improve the operational efficiency of the business, expected to be completed by the end of 2018.

  • Continued advancement of a seniors medical cannabis strategy with operational plans underway to facilitate the provision of medical cannabis to seniors through strategic partnerships with licensed producers.

  • Changes to strengthen leadership, with the appointment of David Murphy as President and CEO.

Highlights subsequent to quarter-end

  • Secured new customer contracts in Specialty Pharmacy segment
    • Signed new contracts with regional multi-site home operators located in Ontario and British Columbia;
    • New contracts are expected to increase overall number of beds serviced in Specialty Pharmacy by approximately 1,400 beds nationally by the fourth quarter of 2018; and
    • Newly serviced beds will leverage existing operational infrastructure and capacities within each respective province.

  • Continued collaboration with AceAge Inc. ("AceAge") to launch its home-based automated drug delivery appliance ("Karie")
    • The Company was selected as the Pharmacy Fulfillment Partner for AceAge's upcoming Industry Innovation Partnership Program study in Ontario and Alberta, led by the Centre for Aging + Brain Health Innovation; and
    • AceAge is expected to launch the first Karie units in late summer of 2018, with 2,000 units expected to be deployed by the end of the year.

STRATEGIC POSITIONING AND PRIORITIES

Centric Health also announced today its strategic positioning and priorities under its new leadership.

"As CEO of Centric Health, my primary strategic focus is to establish the Company as the leading provider of pharmacy and other healthcare services to Canadian seniors," said Mr. Murphy. "The seniors population is the fastest growing demographic in Canada, and I believe the Company's footprint and capabilities strongly position us to capitalize on the significant opportunities and unmet needs that exist in seniors care services. Centric Health intends to be the leader in aggressively executing on the growth potential in this space, and our investment in AceAge and development of a seniors medical cannabis platform are examples of this commitment."

Successful execution of this strategic direction will require the Company to be disciplined in the allocation of its efforts and investment, and will require a further strengthening of its balance sheet.  Accordingly, today the Company announced that it is undertaking a review of existing businesses and assets that may not fit with its new strategic direction, and that it may consider divestitures in order to reduce debt and pursue growth opportunities in its core business.

2018 OUTLOOK

As previously announced, the Company initiated an expansive business re-engineering plan to improve the operational efficiency of the business and mitigate the impact of recent regulatory changes.  The Company is confident that the execution of this plan, on-boarding of new customer contracts and implementation of other strategic initiatives will enable it to offset the regulatory headwinds and re-establish a growth trajectory for the business.  However, the Company anticipates that there will be timing differences in offsetting the impact of the regulatory changes as these initiatives are implemented throughout the remainder of 2018.  This will continue to put downward pressure on short-term financial results, particularly in the third quarter of 2018, with an expected return to steady-state results by the first quarter of 2019.

FINANCIAL RESULTS

Selected Financial Information

(All amounts in the chart below are in thousands except per share, shares outstanding, and percentage data)


For the three month periods
ended June 30,

For the six month periods
ended June 30,


2018

2017

2016

2018

2017

2016

(in $000)

$

$

$

$

$

$

Revenue

43,318

42,708

42,817

87,680

86,155

83,416








Income (loss) from continuing

operations

(52)

1,069

(2,645)

457

1,221

(3,702)








Income (loss) from continuing

operations before interest expense

and income taxes

(19,680)

2,058

(6,848)

(19,384)

3,019

(8,146)








EBITDA1 from continuing operations

(17,396)

4,453

(3,909)

(14,726)

7,725

(2,282)

Adjusted EBITDA1 from continuing

operations

3,430

4,923

4,160

7,272

9,391

7,065


Per share - Basic2 and Diluted2

$0.02

$0.02

$0.03

$0.04

$0.05

$0.04

Adjusted EBITDA1 Margin from

continuing operations

7.9%

11.5%

9.7%

8.3%

10.9%

8.5%








Adjusted EBITDA1

3,407

4,915

4,082

7,232

9,371

6,902


Per share - Basic2 and Diluted2

$0.02

$0.02

$0.03

$0.04

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