Medical centre operator Healius says a "benign" winter flu season and paybacks from a long-running pay dispute have sapped its first-half result, with profit down 6.3 per cent to $20.7 million, but Morningstar expects conditions to improve.

Healius (ASX: HLS), formerly known as Primary Health Care, said on Friday that revenue for the six months to 31 December rose 4.7 per cent to $871.6 million but that its bottom line was below par because of soft market conditions and a less severe flu season.

The company also noted a combined $14 million in back payments were made following the settlement in September of a decade-long dispute involving 600 staff from Dorevitch Pathology.

Separately, an award adjustment had also been made for medical centres.

Healius Result first half profit

Healius's loss of the national bowel screening contract, which will cycle out in the second half of the fiscal year, also weighed on earnings, though the company's imaging unit posted solid growth.

Chief executive and managing director Malcolm Parmenter said a modest financial recovery in October and November had been offset by inconsistent growth rates across the divisions, but he expected underlying market conditions to improve in the rest of the financial year.

"We are just over 12 months into our change agenda and the result today contains a number of positive trends - green shoots if you will - as we near the end of our GP contract transition period and see early signs of traction on our initiatives," Dr Parmenter said.

Healius's repositioning of its Medical Centres business, known as Project Leapfrog, as well as the development of efficient IT platforms in Pathology and Imaging, are expected to boost the company's bottom line in the second half.

Commenting on the weak performance, Morningstar equity analyst Daniel Ragonese said he doubts soft market conditions will continue and anticipates volumes to eventually revert toward the historical norms.

"The second half of fiscal 2019 should improve, as efficiency initiatives in pathology and imaging contribute an approximate $10 million earnings before interest and taxes uplift," he said. 

Management now expects full-year underlying net profit after tax to be between $93 million and $98 million, slightly below Morningstar's previous forecast.

Ragonese has trimmed the company's fiscal-2019 net profit after tax forecast by about 6 per cent to $96 million. However, his $3.50 fair value estimate unchanged, and he maintains that his long-term thesis is intact. At 12.18pm on Monday, Healius was trading at $2.91.

"Despite the challenging near-term conditions, we continue to believe the stock is attractively valued," he said.

"The long-term outlook for Healius’s services remains positive, and we forecast high-single-digit EPS growth over the four years from fiscal 2020, underpinned by the growing and aging population, advancements in medical technology, and rising cancer survival rates."

Healius has cut its interim dividend from 5.1 cents to 3.8 cents per share, fully franked.

The company, which recently rejected a takeover offer from China's Jangho Group, has 2500 sites across Australia and is pushing into the dental, IVF, and day-hospital industries.

It acquired Montserrat Day Surgery for $138.5 million in September.