Reinforcing international growth strategy: Assisted Reproductive Services (ARS) provider, Virtus Health Ltd (ASX: VRT), has signed up contracts for the acquisition of 90% of the ordinary share capital of Complete Fertility Limited based at the Princess Anne Hospital Southampton for a cash free debt free consideration of approximately £5.0 million (AUD $8.8 million), and this price represents 7.0 times normalised FY17 EBITDA. This transaction has been made under a 30-day Contract Award notification period and will be finalised at the end of March subject to finalising regulatory compliance requirements. Further, this includes an agreement for CFL to acquire the business and assets relating to the provision of fertility services by the University Hospital Southampton NHS Foundation Trust.

This move will assist VRT strengthen its international growth strategy with UK being a key target market that meets the Virtus expansion criteria for being well regulated with excellent scientific capability. It is worth noting that the cash free debt free consideration will be funded from existing cash and debt resources and the acquisition will be EPS accretive in FY2019. VRT is confident to derive value from this move as Complete Fertility has an established and professional patient centric service which provides a natural cultural fit with Virtus Health. Meanwhile, the group had witnessed headline earnings growth driven by consistent Australian ARS performance, and continued growth in diagnostics & international activities supported by effective cost management in 1H FY18. Its overall market volume along eastern seaboard has been up 6.1% on prior corresponding period and its international segment EBITDA was up 74% to $4.6M.


Priorities (Source: Company Reports)
 
Despite the news, VRT stock (with annual dividend yield of 4.73%) edged little low post a rise of 6.8% in last five days, as at February 22, 2018. We have a “Hold” recommendation on the stock at the current price of $5.49, while the group is putting efforts on acquisition front for better prospects and exposure at global level.

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