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Monthly Report Australian Fund April 2023

30/04/2023

Australian Fund April Monthly Report

The Forager Australian Shares Fund unit price increased 2.6% in April, a touch more than the 1.8% increase for the All Ordinaries  Accumulation Index.

Online tradie platform Hipages (HPG) announced an improved quarterly update during the month. The past few years have been sluggish for Hipages. Tradies inundated with work don’t need to pay subscription fees to a lead generation platform. But the situation has changed markedly since December. Softening consumer demand now means tradies are having to chase jobs.

The quarter to March saw monthly recurring revenue grow 7% on the quarter to December and the business is on track to continue growing, with new tradie registrations continuing at historical highs. The business has hit cash flow break-even and is set to generate positive free cash flow next financial year.

The repercussions of Covid continued to be felt throughout the health system last year. But the latest Medicare data shows that patients are starting to return to pre-Covid patterns. General practitioners are seeing more patients in person with visits up 11% in March compared to the same month last year. This has led to increased referrals to imaging providers for X-rays, ultrasounds and CT scans.

The likes of Integral Diagnostics (IDX) have now seen national benefits grow nearly 13% in the March quarter from the prior year and improve slightly from the previous quarter. It’s a welcome change from lower volumes and higher labour costs that plagued the business in the back half of 2022 when earnings fell
36% from the prior year. Higher patient volumes and improved imaging indexation to 3.6%, starting in July, should help Integral recover its lost profit margin.

Allied health also saw improvements, with physio, optometry and podiatry benefits growing 9% on the prior year and 12% on pre-Covid levels. This is all good news for the allied health provider Healthia (HLA). The business saw organic revenue growth of 7.6% in the three months to January 2023, and this new data suggests continued growth. Healthia reaffirmed its guidance in February and continues to sensibly deploy capital on buying new practices.

On the tech side of the portfolio, the March quarterly updates were mixed. Whispir (WSP) delivered a disappointing update with cash receipts down 8%. The real negative surprise, though, came on the cash flow side, with a $4m net cash outflow, leaving the company with only $6m of net cash and sending management
scrambling to secure debt facilities to bridge the gap to break even, which is now expected to happen in the September quarter of 2023. Given their track record, we will believe that when we see it.

Whispir owns a valuable platform used by more than 1,000 clients, but a Covid surge in demand has turned into a virus of its own. An inflated cost base and falling demand have left the business in a precarious position.

On the other hand, Fineos’s (FCL) announcement, while scant on details, was very well received, sending the stock up about 50% during the month. Its third quarter showed a net cash inflow of €8m, bringing the net cash position to €31m as of March and dispelling concerns about its balance sheet. At the same time, costs seem to have been reigned in, with cash spend down more than 10% versus the previous quarter.