Healius Limited · ASX:HLS
Healius — Primary Health Care — FY2018 Earnings Presentation
29 slides from Healius's earnings presentation, August 2018
Slide 1: FY 2018 Results
FY 2018 RESULTS YEAR ENDED 30 JUNE 2018
Slide 2: Primary's Vision
PRIMARY’S VISION 2 EVENT TITLE TEXT HERE
Slide 3: Primary's Vision
PRIMARY’S VISION Our Purpose » Healthcare in Australia largely unchanged for decades We are inspired to care for your health and wellbeing at every stage of life. » At a watershed with costs, technology and choice driving change Our Mission » Primary has the scale, people and drive to lead the secto
Slide 4: Initiatives Across the Group
INITIATIVES ACROSS THE GROUP PEOPLE PROCESS PROPERTY workplace of choice organisational efficiency yield optimisation ✓ Purpose, Mission and Values ✓ Modernisation of corporate support services ✓ Outsourced facilities management / leasing GROUP ✓ Performance management framework infrastructure ✓ Pro
Slide 5: Group Results
-= —_ E GROUP RESULTS PRIMARY HEALTH CARE LIMITED
Slide 6: Underlying Profit Stable
UNDERLYING PROFIT STABLE Group Underlying1 Reported2 $m FY 2018 FY 2017 FY 2018 FY 2017 Revenue 1,740.3 1,658.6 1,740.3 1,658.6 EBIT 167.0 174.6 71.5 (469.7) NPAT 92.3 92.1 8.9 (516.9) As at 30 June 2018 30 June 2017 Free cash flow3 146.6 141.5 Dividend cps 100% franked (60% UNPAT) 10.6 10.6 » Reven
Slide 7: Free Cash Flow Remains Solid
FREE CASH FLOW REMAINS SOLID 250 200 92 (55) 150 $m 100 202 (77) 147 50 (57) 70 13 0 OCF Maintenance Free cash flow Growth capex Cash flow after growth Dividends Cash flow after capex capex dividends » Operating cash flow: – Includes investment in non-underlying initiatives – Benefitted from reduced
Slide 8: Debt Levels Maintained
DEBT LEVELS MAINTAINED Reported As at $m 30 June 2018 30 June 2017 30 June 2016 30 June 2015 Total debt 860.8 879.7 898.3 1,205.5 Cash (84.0) (95.5) (82.3) (50.0) Net debt 776.8 784.2 816.0 1,155.5 Bank gearing ratio (covenant <3.5x) 2.7x 2.5x 2.4x 3.0x Bank interest ratio (covenant >3.0x) 9.0x 7.9x
Slide 9: Growth on BAU Basis
GROWTH ON BAU BASIS Underlying FY 2018 FY 2017 Better/ $m $m (worse) % EBIT 167.0 174.6 (4.4) New centres / Health & Co 14.8 5.7 EBIT Business as Usual 181.8 180.3 0.8 » FY 2018 underlying EBIT up 0.8% and underlying NPAT up 7.6% on BaU basis, reflecting large number of new sites opened this year »
Slide 10: Underlying Results Reflect Core Trading
UNDERLYING RESULTS REFLECT CORE TRADING FY 2018 Restructuring & Non-recurring $m Reported Impairment strategic initiatives items Underlying EBIT 71.5 49.5 40.9 5.1 167.0 Finance costs (35.1) (35.1) $95.5m EBIT adjustment PBT 36.4 131.9 Income Tax (27.5) (39.6) NPAT 8.9 92.3 FY 2017 Restructuring & N
Slide 11: Divisional Results & Strategies
DIVISIONAL RESULTS & STRATEGIES
Slide 12: Pathology: Strong Core Performance
PATHOLOGY: STRONG CORE PERFORMANCE Underlying FY 2018 FY 2017 Better/ $m $m (worse) % Revenue 1,090.6 1,038.4 5.0 EBITDA 145.6 146.0 (0.3) Depreciation (19.0) (18.8) (1.1) Amortisation (5.6) (7.7) 27.3 EBIT 121.0 119.5 1.3 Total capital expenditure 21.1 26.9 21.6 » Pathology continues to generate st
Slide 13: Pathology: Consistent Growth
PATHOLOGY: CONSISTENT GROWTH The Pathology division is Primary’s largest business producing consistent growth over a long period » Whole-of-Primary approach: increased footprint and improved visibility under Project Leapfrog » Strong focus on staff engagement » Re-platforming technology in LIS and S
Slide 14: PRY Medical Centres: Greenfield Costs and Contract Transition
PRY MEDICAL CENTRES: GREENFIELD COSTS AND CONTRACT TRANSITION Underlying FY 2018 FY 2017 Better/ $m $m (worse) % Revenue 313.4 317.8 (1.4) EBITDA 99.3 125.8 (21.1) Depreciation (18.0) (20.8) 13.5 Amortisation (45.5) (55.4) 17.9 EBIT 35.8 49.6 (27.8) HCP capital expenditure 26.8 30.3 11.6 Total capit
Slide 15: PRY Medical Centres: GP Key Drivers
PRY MEDICAL CENTRES: GP KEY DRIVERS GPs FY 2018 FY 2017 FY 2016 FY 2015 Better/ (worse) % FY18-FY17 Headcount 1,056 1,040 960 923 1.5 1 FTEs 945 959 920 908 (1.5) Gross billings ($m) 425.2 416.0 417.5 415.8 2.2 Share of revenue (%) 40.3% 44.0% 46.7% 48.2% (370) pp 2 Revenue ($m) 171.5 183.2 195.1 20
Slide 16: PRY Medical Centres: GP Recruitment
PRY MEDICAL CENTRES: GP RECRUITMENT Having the right GPs in the right clinics is paramount Numbers » Record of 159 new GPs recruited » Nearly half of leavers due to PRY initiatives = clinic closures, quality reset program and holding the line on offers = essential for future » Retention at industry
Slide 17: PRY Medical Centres: Other Revenue
PRY MEDICAL CENTRES: OTHER REVENUE Dental and IVF growth Dental » Strong recruitment and quality reset with 137 closing FTEs » Revenue and EBIT up 8% to $34.2m and $4.6m respectively » Improvements in key drivers » Dental in 61 Medical Centres with targeted expansion under Leapfrog IVF » Expanded la
Slide 18: Leapfrog
LEAPFROG A comprehensive renewal of the operating model » A unique portfolio of large-scale clinics with competitive advantages in terms of size, location, accessibility and range of services » Project Leapfrog will deliver a comprehensive renewal of the operating model » Underpinned by three stream
Slide 19: Health & Co: Accretive Practices; Focus on Roll-ins
HEALTH & CO: ACCRETIVE PRACTICES; FOCUS ON ROLL-INS Underlying FY 2018 FY 2017 $m $m Revenue 6.2 1.8 11 medical practices EBITDA (4.1) (2.3) Depreciation - - ~100 general practitioners, 64 FTE GPs Amortisation (0.1) - EBIT (4.2) (2.3) $6m in annual practice earnings Capital expenditure 9.8 8.4 Opera
Slide 20: Imaging: Strong Profit Growth
IMAGING: STRONG PROFIT GROWTH Underlying FY 2018 FY 2017 Better/ $m $m (worse) % Revenue 368.4 333.5 10.5 EBITDA 57.0 57.8 (1.4) Depreciation (14.0) (16.8) 16.7 Amortisation (9.2) (12.0) 23.3 EBIT 33.8 29.0 16.6 HCP capital expenditure 2.8 4.3 34.9 Total capital expenditure 36.9 28.2 (30.9) » Revenu
Slide 21: Imaging: Community Sites and Operational Enhancements
IMAGING: COMMUNITY SITES AND OPERATIONAL ENHANCEMENTS Revitalisation of community sites focusing on consumer value proposition, rebrand and marketing » Investment in iCAR : technology replacement and innovation across Holy Spirit Northside Private Hospital, Brisbane radiologist workflow, voice recog
Slide 22: Corporate
CORPORATE Underlying FY 2018 FY 2017 Better/ $m $m (worse) % Revenue 0.0 0.1 (100.0) EBITDA (15.6) (16.1) 3.1 Depreciation (2.5) (2.8) 10.7 Amortisation (1.3) (2.3) 43.5 EBIT (19.4) (21.2) 8.5 » FY 2018 decrease reflecting savings from Head Office streamlining » Modernisation of support functions to
Slide 23: FY 2019 Forecast
FY 2019 FORECAST » Primary currently expects underlying NPAT in FY 2019 to be at or above FY 2018 underlying NPAT, prior to the impact of the capital raising and potential acquisition » Based on current trading activity, industry growth is expected to be slower in 1H 2019 and then normalise to long-
Slide 24: Appendices: A Market Leading Network
APPENDICES A market leading network AUSTRALIA-WIDE COVERAGE 2,604 Total sites 21 TOTAL SITES 671 TOTAL SITES 21 217 TOTAL SITES 84 73 Primary Medical Centres 16 621 34 7 206 4 62 TOTAL SITES Centres 11 Health & Co 861 TOTAL SITES 7 50 5 34 764 63 2,377 2,269 ACCs 39 TOTAL Pathology 108 Laboratories
Slide 25: Industry Trends
INDUSTRY TRENDS Pathology: Market Services & Benefits Diagnostic Imaging: Market Services & Benefits 12% 10% 9% 10% 8% 8% 5 year growth rate of 6.2% 7% 5 year growth rate of 4.4% 6% 6% 5% 4% 4% 2% 3% 2% 0% 1% -2% 0% Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Jun 13
Slide 26: Divisional Reconciliation: Underlying EBIT
DIVISIONAL RECONCILIATION: UNDERLYING EBIT FY 2018 Pathology Medical Centres1 Imaging Corporate Group2 $m Revenue 1,090.6 319.6 368.4 - 1,740.3 EBITDA 145.6 95.2 57.0 (15.6) 282.2 Depreciation (19.0) (18.0) (14.0) (2.5) (53.5) Amortisation (5.6) (45.6) (9.2) (1.3) (61.7) EBIT 121.0 31.6 33.8 (19.4)
Slide 27: Medical Centres Reconciliation: Underlying EBIT
MEDICAL CENTRES RECONCILIATION: UNDERLYING EBIT FY 2018 Primary Health & Co Medical Centres $m Medical Centres Revenue 313.4 6.2 319.6 EBITDA 99.3 (4.1) 95.2 Depreciation (18.0) - (18.0) Amortisation (45.5) (0.1) (45.6) EBIT 35.8 (4.2) 31.6 FY 2017 Primary Health & Co Medical Centres $m Medical Cent
Slide 28: HCP Acquisitions: Tax Implications
HCP ACQUISITIONS: TAX IMPLICATIONS Healthcare Professionals contracted on or after 1 July 2015: » Deferred tax liability (DTL) to be recognised at the time of the acquisition of healthcare practices and capitalisation of contractual relationship intangible assets » Equal movement in DTL will ensure
Slide 29: Disclaimer
DISCLAIMER » This presentation has been prepared by Primary Health Care Limited (ACN 064 530 516) (‘PRY’). » Material in this presentation provides general background information about PRY which is current as at the date this presentation is made. Information in this presentation remains subject to