I would now like to hand the conference over to Mr. Michael Knoep, CEO. Please go ahead.
Thank you, Melanie, and good afternoon, everyone, and thank you for joining us today for Monash IVF Group's results presentation for the first half of this financial year. Our CFO, Malik Genardeen, joins me and will later be stepping us through some of the details of the financials. By way of background, Monash IVF is a market leader in providing fertility solutions for all in our core assisted reproductive services, diagnostics, genetics and pathology services, with a growing network of 47 IVF and women's ultrasound clinics and centers across Australia and Southeast Asia. Our experienced and capable team includes 123 doctors and in excess of 550 scientific nursing and support staff. An appropriate time to take this opportunity to thank every one of our team for the unrelenting patient first mindset and the agility that they have shown in order to thrive during the pandemic.
This focus and effort of our people is the reason we are delivering such a positive result today. I'd now like to touch on the key points in the first half of the financial year 2021 represented on Page 3 of the presentation. We delivered a $14,600,000 reported NPAT being an increase of 78.5% versus the previous corresponding period. This correlated to an adjusted or operating impact of $12,000,000 representing a 32% growth from the previous corresponding period. Furthermore, this was well above our 3rd half profit guidance provided in November 2020 of between $11,000,000 $11,500,000 We achieved 27.4% stimulated cycle growth in the first half of FY 'twenty one due partly to the recovery of pent up demand created during the temporary suspension of services in the April to May 2020 period.
Importantly, in the Q2 of FY 'twenty one, our Australian stimulated cycles grew by 33.1%, well above the industry national growth rate of 20.6% for the same period. This led to market share gains all across our group. These growth rates represent the resilience of our Australian IVF business and the industry as a whole, and it also highlights the non discretionary and critical nature of our IRS services. Our Sydney CBD flagship clinic opened in November illustrating best in class patient experience. This is a cornerstone initiative to attract new fertility specialists in the region and grow our market share where we only hold 9 point 1% market share in the first half of FY 'twenty one.
Our ultrasound business remained open throughout the pandemic and delivered solid ultrasound scan growth of 11.7%. In Kuala Lumpur, we achieved 6.6% stimulated cycle growth as the clinic experienced a slower recovery with ongoing impact of COVID-nineteen on the Malaysian economy. Despite this, we made solid progress in our Southeast Asian expansion plan with 2 Southeast Asian based partnerships now in place. Our cash flow generation and our capital metrics all remain solid with a strong balance sheet positioning us well for future organic and inorganic growth, which includes the support of key strategic infrastructure projects. With all of this in mind, we have recommenced dividends to our shareholders declaring a $0.021 fully franked interim dividend for the first half of FY 'twenty one.
As we take a look at the financial summary on Slide 4, our revenue increased by 17.8 percent at $19,800,000 for the half, which was impacted positively by the robust recovery following the impact of COVID-nineteen, market share gains and an underlying increase in demand for IRS services and a strong performance from our ultrasound business. Our underlying business and fundamentals are solid with positive momentum with our growth and improvement programs along with a strong patient pipeline as we entered into the second half of this financial year. We achieved $12,000,000 adjusted or underlying NPAT and adjusted EBITDA of $24,700,000 and a $28,700,000 reported EBITDA. Malik will take us through some of the adjustments later on. As we move on to the specifics of the recovery and our return to growth on Slide 6, This table provides some of the growth metrics during and post the heavily impacted COVID-nineteen period and the subsequent recovery, which then evolved to market growth beyond the pent up demand.
In the March to June 2020 period, we declined in our Australian stimulated cycles by 14.5% and then managed to recover that and more with a 22.3% growth in the Q1 of this financial year. Our growth then accelerated in the Q2 of FY 'twenty one to 33.1% as we gained market share. Combined, this brought our total growth to 27.4% for the first half and our new patient pipeline growth indicates strong growth well above historical industry averages will continue to occur in the second half of FY 'twenty one. In Malaysia, COVID-nineteen restrictions and developments continue to have the consumer confidence. This has impacted the quality of the recovery in that region.
We were pleased that we delivered 11.7 percent of our town scan growth in the first half of FY 'twenty one compared to the previous corresponding period following market share and industry growth. Having a clear picture of the recovery and growth acceleration of our Australian IVF volumes, I would like to cover off on the state growth rates on Slide 6. All of our Australian states experienced robust growth in the first half of FY 'twenty one apart from Tasmania. In Queensland, our stimulated cycles increased by 43.4% with the acquisition of Fertility Solutions and organic growth all contributing. In New South Wales, our stimulated cycles increased by 29.6% with the new Sydney CBD clinic anticipated to contribute to ongoing growth.
This clinic is performing to plan in the January February months. Our Victorian student loan cycles increased by 23.4% and we gained market share for the half. This is particularly pleasing given the loss of 5 doctors in the previous corresponding period. In South Australia, our simulated cycles increased by 14% and in the Northern Territory, our cycles increased by 46.5%. Tasmania on a small base decreased their simulated cycles by 6.2%.
Furthermore, our frozen embryo transfers increased by 15.7% with Allstate's demonstrating solid growth and it is expected to grow in the second half of FY 'twenty one following strong stimulated cycle growth in the first half of this financial year. As we now look at Slide 7 to focus on the broader ARS Australian market, where demand for services is at record highs. In our key markets, industry stimulated cycle volumes were favorably impacted in the Q1 as a result of the pent up demand created in the Q4 of the previous financial year. This growth continued into the Q2, whereby we now see the industry's 3 5 year annual CAGRs at around 3%. Broadly speaking, the COVID-nineteen pandemic has changed the mindset of our patient cohort, with great emphasis on family, health and well-being, resulting in a redirection of priorities towards family extension.
As we take a look at Slide 8 on our Australian market share. Market share gains reconfirm our best in class market positioning and our adoption to a COVID safe operating environment to protect the health and safety of our patients, our doctors and our employees. In our key markets, our simulated cycle market share increased to 20.2% from 19.6%, with the gain being delivered in the Q2 in this financial year. This is a reflection of the positive momentum we have as we move into
2021. Growth
in market share was driven by a number of factors, some of which I have previously mentioned. However, others worth noting include the increase in marketing investment, which is having both a short term and long term positive patient pipeline impact. This has allowed us to have an extremely high share of voice during the pandemic, which triggered strong demand generation for our services. We have also been very successful in attracting new fertility specialists that are contributing towards the growth and market share gains. This has triggered stimulated cycle market share growth in Victoria, New South Wales, Queensland and the Northern Territory, whilst we continue to hold majority market share in excess of 60% in South Australia.
I would now like to welcome our CFO, Malik Genadine, to take us through the financial overview of the year.
Thanks, Michael. And turning over to Slide 10, it illustrates the detail of the buildup in growth of our revenue during the 6 months. We generated an additional $5,200,000 of revenue in our domestic IVF business in the Q1, and much of this growth was achieved by servicing the pent up demand created at the end of last year, following the shutdown of services in the initial response to COVID.
At the start of
the year, there was uncertainty as to whether growth could continue beyond the Q1, and our Q2 has demonstrated that real underlying growth has occurred. A further $5,600,000 of additional revenue was generated during the 2nd quarter, reflecting growth in the industry, but also market share gains. This revenue growth reflects the additional 608 stimulated cycles performed in the 2nd quarter, resulting in more than 30% growth on last year. It should be noted that our Q2 revenue per stimulated cycle was impacted from the bulk billing of treatments provided to patients who have been impacted by the suspension of one of our in house genetic tests. The Fotili Solutions acquisition in Queensland in September 2019 added a further $1,200,000 of revenue and is performing well and above expectations.
Our ultrasound business contributed a further $1,400,000 of revenues, reflecting scan growth of almost 12% and our in house NIPT test grew by almost 18%. The only negative, as Michael mentioned, was the performance of our KL clinic in Malaysia, which has been challenged by pricing pressures, more adverse and continued COVID impacts. While stimulator cycles grew, our average price in KL reduced in response to competitor activity. If we turn over to Slide 11, and it provides a summary of the P and L, our reported NPAT for the half was up by 85 percent to $14,700,000 and our adjusted NPAT was $12,000,000 for the half, which is up by 32% on PCP and above the guidance provided in November at the AGM. We achieved reasonable leverage following the increase in revenues with adjusted EBIT up by 30%.
In saying this, our cost base has had to increase to deliver the strong volume growth experience. We've invested into the future, as Michael mentioned, Marketing spend was up by $600,000 compared to last year, and it was quite evident during the half we had the majority of share of voice in the sector. We saw this as an opportunity which has supported our strong pipeline going into the second half. Our cost base includes operating and commissioning costs at our new Sydney fertility clinic prior to opening in November and our cost base also includes costs associated with our response to the suspension of NIPGT testing. What was positive was the realization of cost based actions taken in FY 2020, which has resulted in a $2,700,000 reduction in our cost base, which has been offset many of the cost increases noted.
We turn over to Slide 12, which provides a reconciliation of statutory profit to adjusted profit. The items we have adjusted are presented on the slide. We've adjusted out the costs associated with the new Sydney Fertility Clinic prior to it opening in November. We've adjusted the net benefit of JobKeeper subsidies received during the Q1, which increased our reported NPAT by $3,500,000 The business was not eligible for any further JobKeeper payments beyond September considering the strength of our revenue in the Q2. In saying this, the JobKeeper subsidy has supported our business considering we could not provide our services for a period of time, ensuring our workforce was engaged and maintained so that we could deal with the growth we have experienced.
And the last item to note is we've normalized out a $200,000 increase in our acquisition related earn out provisions, considering the strong performance of our Fertility Solutions business in Queensland. If we turn over to Slide 13, which summarizes movements in cash flow during the year. Our conversion of EBITDA to operating cash flow was solid at 83%, an improvement as compared to this time last year, and we should see further improvement in the second half. Cash available for dividends and debt repayments was substantial with $9,600,000 available for this, which is $10,000,000 higher than last year. We've continued to invest in the future with much of our $6,200,000 of CapEx spent on the new Sydney clinic and growth assets in our laboratories to keep up with the demand we have experienced and expect to experience in the second half.
If we turn over to Slide 14, which illustrates our balance sheet position. Net debt has reduced by $4,700,000 and our balance sheet is well positioned to support the execution of our growth strategy. Following the equity raising last year, we've completed our new Sydney fertility clinic. We've completed an acquisition in Johor Bahru, which is just outside of Singapore. We have partnered with a large Indonesian private hospital to open a new clinic in Jakarta.
We are advancing our plans to build new clinics in Melbourne, Brisbane and the Gold Coast, and we are prepared to open further clinics in Asia. Following the strong results in the first half, the Board have declared a $0.021 fully franked interim dividend, which is at a 68% underlying NPAT payout ratio. I'll hand you back to Michael now to go through the operational performance in more detail.
Thank you, Billiec. If we now turn to Slide 18, as we start to work through some of the details of our Australian ARS operational performance. So, we'll start with scientific leadership. We have an unrelenting focus on investing and building scientific capability to ensure we are giving our patients the best possible outcomes and differentiating our value proposition to patients. The chart at the top represents the continuous improvement in our clinical pregnancy rates across our whole group, with clinical pregnancies in calendar year 2020 increasing by a very significant 3.8% as compared to calendar year 2018.
We have been on this journey of continuous improvement throughout our long heritage. However, it is worthwhile calling out some of the initiatives that have contributed to the group wide improvement over the previous couple of years. The key driver of our improvement is our group wide scientific collaboration on the Monash Way, which has been in place for in excess of 3 years. Under the Monash Way, we unify scientific practices across all our clinics. We have a comprehensive end to end laboratory reviews.
We have made investment in state of the art equipment and lab systems and our people continue to evolve our scientific value proposition whilst utilizing our in house learning and development tools. Furthermore, all our internal reporting and benchmarking is aligned with the newly launched Your IVF National Reporting Guidelines and Framework, ensuring we are monitoring and benchmarking across the industry in real time. We will continue to partner innovative organizations to advance new technologies such as the safer and softer method of ICSI that is demonstrating improved fertility rates, therefore creating more embryos for our patients. New partnerships and technologies backed up by our ongoing research focus through our various internal research flows will ensure we continue to evolve and improve our success rates. I'll take your attention to Slide 17.
In regards to doctor partnerships specifically, 2 new experienced fertility specialists have joined us whilst an additional 4 trainee doctors were credentialed and are now treating patients. We now have 9 trainee doctors in our network with a foundation for growth and succession planning. We will continue to focus on recruiting fertility specialists across Australia with a specific focus on the Sydney market to grow our market share. A key strategic leadership appointment was made of a genomic pathologist to lead our next generation of genetics products and services as our genetics capability continues to evolve and support our IVF business. In regards to clinical infrastructure, the pictures you see on this slide are of our Sydney CBD clinic that has commenced patient treatments and the recent refurbishment of our Reprobed clinic in Adelaide.
The strategic priority of clinic infrastructure continues to be a focus in the medium term horizon. Other key infrastructure projects include transformation of our Melbourne footprint and new clinics in both the Gold Coast and Brisbane are in the preliminary phases of planning. Our patient experience principle remains focused on care, empathy, support, empowerment and a consistent patient journey throughout our network of clinics. And our net promoter score continues to be a key measure of patient satisfaction, which assists us in identifying and prioritizing areas of the business in most need of improvement. If you turn to slide 18.
Our people engagement remains a key priority. We are continuing to develop, adapt and innovate our people based processes to navigate COVID normal with the safety of our people, patients and doctors, the key priority. We have also implemented a new flexible working policy to support our employees working under a hybrid model returning to offices and clinics and working from home. We continue to work with our leadership teams to drive engagement to create a high performing, accountable, fun, safe and inclusive workplace. On our marketing and brands, we strategically increased our marketing investment during the first half of FY 'twenty one, building a strong media presence.
We also implemented a new innovative and progressive marketing strategy with the launch of a new brand, new creative for mainstream and digital advertising and events, and also a new website for our IDF business. All this activity and effort is a key driver of market share growth and has contributed to set us up for a strong future pipeline. If we take a look at Slide 19 on our diagnostics performance, we delivered solid growth in the first half of FY 'twenty one whereby ultrasound scan volumes increased by 11.7% and non invasive prenatal testing increased by 17.9%. Ultrasound scan volumes increased across all markets with Sydney growing by 13.6% and Melbourne growth was a little more subdued at 2.7%. The Melbourne market was impacted by the COVID-nineteen movement restrictions during the July to October period.
The COVID-nineteen movement restrictions impacted the patient geographical spread with clinics in outer suburban areas delivering good growth and there was decline in the inner city locations. We are now starting to gradually see a reversion of patients back to the inner city clinics. The key appointment of our genetics and genomic pathologists, this ensures compliance with our NPAC lab supervision guidelines, which become mandatory for all IVF labs from August 2021. We also delivered a 64% increase in reproductive carrier screening counseling volumes, which is expected to be a key strategic driver of future simulated cycle growth in order to prevent genetic disease in children. Public awareness is continuing to grow for this service.
As we take a quick look at our IRS International performance on Slide 20. Recovery in Kuala Lumpur has been slower due to the ongoing impact of COVID-nineteen. However, given the challenging environment, the performance was solid with stimulated cycles increasing by 6.6% for the first half. Our payout revenue was $5,500,000 which was down 6.6% compared to the PCP, which was primarily due to promotional and discount offerings in light of current competitive pricing pressure and the weaker macroeconomic conditions. As a result, the EBIT decreased by 22% from $2,500,000 to $1,900,000 Movement control orders continue to impact performance in Kuala Lumpur during the first half of FY 'twenty one and they have continued into the early months of the second half.
However, we are continuing to service our patient needs. We have made progress with our Southeast Asian expansion strategy. And in June 2020, we acquired a majority stake in a recently established IVF clinic in Juhu Baru, Malaysia. The clinic services patients in Southern Malaysia and Singapore, which has been impacted by the continued closure of the border between Singapore and Malaysia. Current restrictions, the Juhu Baru clinic is performing in line with expectations.
Then in January of 2021, we, in partnership with a large Indonesian private hospital group, Mitra Kaluaga, opened a greenfield fertility clinic in Jakarta, further expanding our footprint in the Southeast Asian region. The acquisition and partnership opportunities are continuing to evolve and present in this region, notwithstanding the current pandemic. If you move to Slide 22, our Vision 2022 strategic roadmap is consistent and provides a clear pathway forward. It also enables everyone to understand the priorities, actions and decisions required to achieve success and deliver profitable growth in the oncoming years. We have made significant progress on our strategic pillars as outlined in previous slides and we will continue to do so in order to deliver our vision 2022.
It is pleasing that we continue to maintain momentum on our strategic growth initiatives whilst navigating through the uncertainties and interruptions as a result of the pandemic. Moving to Slide 23. The strong and swift recovery in industry volumes following the disruption to ARS services during the pandemic demonstrates the resilience of the industry and the favorable underlying demographics and the fundamentals. The desire for patients to seek assistance when trying to conceive has increased despite the ongoing pandemic. Our Patient Pipeline balance sheet and adapted COVID safe operating environment positions us well to grow future earnings through operational and strategic growth initiatives.
I would just like to reemphasize a few of the key initiatives to support this growth. We have recently attracted new fertility specialists and opened the Sydney CBD IVF clinic. We are investing in the transformation of our Melbourne footprint along with other clinic infrastructure projects. Our innovative marketing investment above historical levels continues to deliver a strong patient pipeline for the future. And we are also continuing our focus on the significant opportunities available in the Southeast Asian IVF market.
As we move to the all important outlook statement on Slide 24, I would like to clarify that the following outlook statement is subject to any further COVID-nineteen related disruption of services. Our reported impact for the year ending 30 June 2021 is expected to be approximately $23,700,000 to $25,700,000 as compared to $11,800,000 in the prior comparative period. Our impact before certain non regular items for the year ending 30th June 2021 is expected to be approximately $21,000,000 to $23,000,000 as compared to $14,400,000 in the prior comparator period. To clarify the difference between our reported and adjusted operating NPAT, the difference is the total non regular items that occurred in the first half of twenty twenty one amounting to $2,700,000 post tax, which Malek has already taken us through. It is also worthwhile noting that the NPAT before certain non regular items is inclusive of the impact of goodwill and ex gratia remediation treatment offers applicable to our non invasive PDTA patients that were impacted by the suspension of this program.
That concludes the formal part of the presentation, and Malik and I are happy to take questions. Thank you, Melanie.
Thank Your first question comes from David Stanton with Jefferies. Please go ahead.
Firstly, just in Australia, I wonder if you could tell me how many remediation cycles you had in the first half, please? And if you can give us that number, how were they mostly seen in the 2nd quarter? Or are they split between the 1st and second quarters?
Dave, it's Malik here. So they all came through in the Q2. I won't quite the exact numbers, but it's immaterial. And many of those patients were already in our pipeline for future service. It's just happened that they were all bulk billed treatments provided to that patient group.
Okay. Yes, sure. But I guess I would say that even if they're as you say immaterial, they're going to have some effect on your market share gains. Would that be fair enough statement or not?
I think the market share gains are valid as they're presented, David, because as Malek said, those patients were already in the pipeline and we're planning treatment anyway.
Okay. And then if we could move on to sort of a market growth assumption in Australia for the second half of FY 'twenty one in terms of volume. Would it be fair to say that we should be thinking the market may grow at 6% to 7% for the second half?
Look, we're going to go by the numbers that we're seeing. And as we said, our patient pipeline is strong and we expect it to be well above historical averages in growth rate. And we see a number a little bit north of the number that you have quoted at 6% to 7%. And our outlook statement reflects that.
Understood. And then longer term, ex COVID and ex the bump you've seen from people getting back into IVF post COVID. I mean, should we be thinking still a longer term growth rate for the industries in that 2% to 3% volume growth range in Australia?
I think at this stage, we do see consistent growth rates and that's driven also by new technology, genetics capability, etcetera, donor services, social egg freezing and all those other elements where they continue to grow the categories. So, we don't see as abating to that in the near term. But certainly in the longer term, we expect it to probably normalize for that number.
Okay. And then finally, before I get back in the queue, cost growth implied in your guidance for the full year, should we be thinking an increase an ongoing increase marketing spend into the second half greater than the first half and effectively cost growth guidance, I guess, for the second half of FY 'twenty one compared to the first half, please?
The second half spend will be consistent with the first half, Dave. So we'll continue with that momentum because we're seeing that it has an improvement to our pipeline. And the strategy around the marketing is working.
Okay. So overall marketing spend, 1st half equals 2nd half. But overall cost growth, I mean, should we be thinking cost expense growth or expenses in the second half, should I call expenses in the first half?
Yes. The real step change is the Sydney fixed costs, and we call that out as a non regular item in part of the first half, but that will be embedded in our cost base going forward. So you can add that back into our cost base in the second half.
Great. Thank you.
Thanks,
There are no further questions at this time. I'll now hand back to Mr. Knaap for closing remarks.
Yes. Look, I'd just like to say thank you for your time and interest in Monash IVF. And we, Malik and myself and Hamish Hamilton, our COO, will be joining us on the roadshow. And we look forward to seeing many of you over the oncoming weeks. So, thank you again for your time.
That does conclude our conference for today. Thank you for participating. You may now disconnect.