Pro Medicus Limited

ASX code: PME www.promed.com.au
Image shows a line graph with a title “Pro Medicus Limited.” Subtitles below the graph are ASX code: PME and followed by a website: www.promed.com.au. X-y line graph, in which x-axis shows years (2016--2019) and y-axis shows share values in dollars. The highest peak is seen in the year beyond 2019 and the lowest peak is seen in the year before 2016. An increasing trend in the area under the graph can be seen.
Share price ($)   36.32
12-month high ($)   37.87
12-month low ($)   8.73
Market capitalisation ($mn)   3763.4
Price-to-NTA-per-share ratio   120.9
5-year share price return (% p.a.)   108.0
Dividend reinvestment plan   No
Sector: Health care Company Sector
Price/earnings ratio (times) 196.7 37.1
Dividend yield (%) 0.2 1.4

Melbourne-based Pro Medicus, established in 1983, provides software and internet products and services to the medical profession. Its Visage 7.0 medical imaging software provides radiologists and clinicians with advanced visualisation capability for the rapid viewing of medical images. Its Radiology Information Systems (RIS) product provides proprietary medical software for practice management. In Australia it operates the Promedicus.net online network for doctors. It has extensive business operations throughout Australia, Europe and North America, and overseas sales represent more than 80 per cent of total turnover.

Latest business results (June 2019, full year)

Strong overseas sales generated yet another stellar result, with the weak dollar enhancing the performance. North America represents nearly 70 per cent of total income, and sales rose 42 per cent, following the signing of two significant new contracts, with Partners Healthcare in Massachusetts — a seven-year, $27 million deal, the largest contract in the company's history — and with Duke Health in North Carolina. The best result came from Europe, with revenues more than doubling, thanks to an extension of the company's contract with the German government. Europe now contributes 13 per cent of total company income. Australian operations were also strong, with revenues up 30 per cent, largely due to RIS contracts with Healius and I-MED Radiology Network. The Promedicus.net online network held its market position in the face of increasing competition.

Outlook

Pro Medicus has been enjoying some outstanding success in America for its Visage 7 software, which has the speed and functionality to meet the requirements of many different kinds of users. Thanks to new development work, the product also has the ability to handle very large amounts of data, making it suitable for large health systems and hospitals. The company is now one of the market leaders in this business, and it is making a substantial investment in research and development activities aimed at new products and enhancements to existing products, including artificial intelligence–based products and cloud-based systems. As more contracts are signed, generally for periods of from five to seven years, the company generates an increasing amount of annuity-style recurring revenue, depending on how much the products are used. Also, as the company expands, its profit margins rise. Thanks to recent contract signings, the company says it is now the imaging provider at five of the top 20 hospitals in the US, including what it describes as the top two, Mayo Clinic and Massachusetts General Hospital. It also has a growing pipeline of new business opportunities.

Year to 30 June 2018 2019
Revenues ($mn) 33.9 50.1
EBIT ($mn) 15.2 25.9
EBIT margin (%) 45.0 51.6
Profit before tax ($mn) 15.3 26.1
Profit after tax ($mn) 10.0 19.1
Earnings per share (c) 9.66 18.46
Cash flow per share (c) 14.44 24.34
Dividend (c) 6 8
  Percentage franked 100 100
Net tangible assets per share ($) 0.18 0.30
Interest cover (times) ~ ~
Return on equity (%) 28.5 45.3
Debt-to-equity ratio (%) ~ ~
Current ratio 3.5 3.8