Chief Financial Officer’s Report


Michael Knaap
Chief Financial Officer and Company Secretary, Monash IVF Group

Strong revenue growth of 25.3% or $31.6m enabled Monash IVF Group to deliver a 34.6% increase in reported NPAT to $28.8m in FY16.

The most pleasing aspect of the growth is that 10.7% of the revenue growth was organic, driven by both market share growth and above trend IVF industry growth rates, but also 14.6% of the revenue growth was derived through acquisitions from our Sydney Ultrasound for Women business and the Monash IVF Bondi Junction business.

As a result of the revenue growth we experienced EBITDA growth of 27.6% to $49.6m, whilst our EBITDA margins improved 70 basis points to 31.7% as we generated the benefits of leverage.

The FY16 earnings growth further consolidates a track record of strong financial performance with a 16.3% compound annual growth rate increase in NPAT over the previous 3 years.

Domestically, our growth enabled a strong performance and delivered revenue growth of $31.0m, or 26%, in the Australian market. This enabled a 29.3% growth in onshore EBITDA. We again had strong revenue growth of 10.7% in our Kuala Lumpur clinic in Malaysia, where we generated an EBITDA of $2.4 million, which was up on the prior year.

A real strength of our business is the excellent cash flow generation and earnings conversion whereby we generated $44.2 million in net operating cash flow at a pre-tax cash flow conversion of nearly 100.0%.

As a result of the strong cash flow we were able to pay down $11.8 million in absolute debt and fund dividend payments in the period of $18.1 million. We also supported a significant capital expenditure program of $8.2 million in FY2016 geared around improved patient management systems, new technologies and services for our patients and investment in upgrading and relocating clinic facilities.

A strong balance sheet improved further during FY16 with net debt to equity ratio of 55.9% at 30 June 2016 versus the prior year at 67.2%. We have built balance sheet capacity to support strategic growth opportunities and currently have access to further debt of $60m.

In June 2016, we re-financed our Syndicated Debt Facility with a new $110m term debt facility and $5m working capital facility. In addition, a $40m accordion facility is available for strategic growth opportunities. The new Syndicated Debt Facility has a blended 3, 4 and 5 year maturity profile.

All of our capital management metrics have improved on the prior year with significant headroom in all of our banking covenants. Our key leverage ratio was at 1.75 times, which improved from 2.14 times in the previous year. Our interest cover was strong at 11.8 times, improved from 9.9 times in the previous year. In addition our key capital return metrics all improved on prior year with a 19.3% return on equity and a 10.1% return on assets for FY16.

The board declared a 4.5 cents fully franked FY2016 final dividend, bringing the total fully franked dividend in FY16 to 8.5 cents per share, 22.3% growth on prior year and representing a 70% dividend payout ratio.