RE:EBITA operating margins = 51%uudamann wrote: Why are the owners selling something this lucrative?
CML bought overpriced US clinic assets and got whacked when CT fees were cut almost immediately after purchase. Sold the same assets with 60% discount a year later. This very stupid purchase was made possible via a bought PP using OPM (other people's money) when CML shares were at an all time high. Suckers never learn! The orignal sellers knew a pigeon when they saw one and laughed all the way to the bank. At least CML had a lucrative, albeit hard capped, Lab business to fall back on.
KMH did the same stupid thing. At least Alaris Inc. knew what to do when the schiatt hit the fan, but nevertheless was initialily sucked in by the same stupid idea that health care delivery can be scaled. KMH got liquidated.
these aren't clinic purchases. these are gastroenterologists who are selling a portion of their anesthesia business to CRH. the doctors perform the GI procedures and a lot of them also happen to own the anesthesia provider, which is billed separately. CRH has nothing to do with the core clinic business and the costs of ownership. that's why it's so lucrative.
as for why - the doctors are selling a *partial* interest in the anesthesia business for a nice lump sum payment and they also benefit from leaving all the admin/billing work to CRH Medical. the doctor benefits from continuing to be an owner of the anesthesia business and the margins are improved because CRH has purchasing power due to their scale. note this arrangement also ensures CRH never loses the anesthesia contract as the doctor wouldn't "cancel" on themselves and bring on another anesthesia vendor.
there's risk of deep sedation reimbursement rates changing, which has happened in the past, but CRH has been doing this since 2015 without issue.
solid business with huge runway for growth as the market seems very fragmented - mostly comprised of small, regional GI doctors clinics. CRH has a huge list of prospects as they also make a hemmerhoid banding device which they've been selling to GI doctors for quite some time. this gives them an "in" with many of these clinics.
here's a VERY old analyst write up that summarizes the investment thesis nicely:
https://beaconsecurities.ca/wordpress/wp-content/uploads/downloads/2015/02/CRH-2015-02-09.pdf