Pinned straw:
Sarah Thompson, Kanika Sood and Emma Rapaport
Apr 22, 2024 – 5.27pm
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Vicki Brady isn’t afraid to slice and dice to get Telstra firing.
Street Talk understands the $42.2 billion telecommunications giant is preparing to put its sluggish Telstra Health division up for strategic review, less than two years after it absorbed GP patient management software play MedicalDirector.
The unit, made up of a collection of businesses, provides IT and software services to health and aged care groups in Australia including government-run services and private providers. Telstra is yet to appoint an investment bank to oversee the review, Street Talk understands, however sources said Barrenjoey was well-placed to score the gig.
Vicki Brady has been the chief executive of Telstra since late 2022. Dion Georgopoulos
A Telstra spokesperson declined to comment when contacted by Street Talk on Monday. Strategic reviews can result in no activity but more often than not they’re a precursor to a sale or recapitalisation.
Brady, who struck a $268 million deal to acquire cloud services business Versent in October, talked up her desire to actively manage the telco’s sprawling portfolio at the half-year result, calling it out as a key area of focus to “maintain the strength of our balance sheet” and “optimise returns and unlock value”.
Telstra’s Health unit is a black box, reporting its revenue numbers under a non-discreet ‘other’ category – and only revenue. As such, it makes it hard for analysts to get a good read. Then again, health services is miles away from Telstra’s core business and even if Health made $50 million EBITDA, it wouldn’t move the needle. By the numbers, Health’s income hit $305 million in financial year 2023, an increase of $62 million on the prior year thanks to organic growth and the MedicalDirector and PowerHealth acquisitions.
Telstra is weathering a storm in its network applications and services unit which led to it cutting full-year earnings guidance in February. The unit suffered from a deterioration in professional services demand, with revenue down 12 per cent on a year earlier to $233 million. Telstra is reviewing its domestic enterprise business but hasn’t specified exactly how it will cut costs and whether a restructuring would include job losses.
Formed in 2014, Telstra Health has had its ups and downs. In late 2016, it looked more like a failed experiment, rudderless and lacking in leadership, following the departures of former Telstra Health managing director Shane Solomon and director Tim Kelsey.
A year later, it was forced to write off $77 million from an acquisition binge that cost Telstra $240 million, but resulted in it owning stakes in a series of separate businesses, but lacking a platform to bring them all together. But, it has since consolidated its operations and management backed the growth of the business in 2020, making bolt-on acquisitions in the hope of making it a significant contributor to the size and success of the company. In 2022, Telstra Health told The Australian Financial Review it was aiming to hit $500 million in revenue by 2025.
Today, Telstra Health is made up of the National Cancer Screening Register, the 1800Respect domestic and sexual violence counselling service, practice management software company MedicalDirector, digital prescriptions service Fred IT – the best asset in the bunch – and solutions aimed at aged care and first nations healthcare services.
Sarah Thompson has co-edited Street Talk since 2009, specialising in private equity, investment banking, M&A and equity capital markets stories. Prior to that, she spent 10 years in London as a markets and M&A reporter at Bloomberg and Dow Jones. Email Sarah at [email protected]