Healius Limited · ASX:HLS
Healius — Primary Health Care — FY2016 Earnings Presentation
35 slides from Healius's earnings presentation, Aug 17, 2016
Slide 1: FY 2016 Results
FY 2016 RESULTS 12 MONTHS ENDED 30 JUNE 2016 17 AUGUST 2016
Slide 2: Overview
OVERVIEW Knox Private Hospital, Melbourne, Victoria 2 FY16 RESULTS
Slide 3: Financial Highlights
FINANCIAL HIGHLIGHTS Group Underlying Reported $ million FY16 FY15 FY16 FY15 Revenue 1,651.0 1,599.3 1,714.6 1,617.9 EBIT 206.6 225.8 164.9 86.5 NPAT 104.0 111.5 74.7 127.5 FY16 FY15 Net debt $’m 816 1,155 Gearing % 25.2% 32.4% Dividend cps 12.0 20.0 • Underlying results in line with forecast after
Slide 4: Strategic Transformation
STRATEGIC TRANSFORMATION • Building a sustainable future o Delivery of good health outcomes to patients o Sustainable growth for shareholders • FY 2016 achievements o Introduction of new HCP recruitment packages o Successful capital recycling program • Refocused on 3 core activities o Medical Centre
Slide 5: Financial Results
FINANCIAL RESULTS Laverty Pathology, North Ryde, NSW 5 FY16 RESULTS
Slide 6: Underlying Performance
UNDERLYING PERFORMANCE Underlying FY 2016 FY 2015 Movement $m $m % Revenue 1,651.0 1,599.3 3.2 EBITDA 364.2 379.4 (4.0) Depreciation and amortisation (157.6) (153.6) (2.6) EBIT 206.6 225.8 (8.5) Finance costs (58.0) (66.5) 12.8 PBT 148.6 159.3 (6.7) Income tax at 30% (44.6) (47.8) 6.7 NPAT 104.0 111
Slide 7: Divisional Performance
DIVISIONAL PERFORMANCE Underlying Medical Centres1 Pathology1 Imaging1 Corporate1 $m % $m % $m % $m % Revenue 2 323.7 0.0 994.4 6.4 326.9 (1.2) 1.6 n/a EBITDA 166.8 (3.5) 161.5 6.5 62.2 (14.1) (41.2) (9.3) Depreciation and amortisation (80.9) (5.9) (26.6) (9.5) (37.0) 2.9 (8.5) 0.0 EBIT 85.9 (10.9)
Slide 8: Reported Performance
REPORTED PERFORMANCE Continuing Reported operations1 FY 2016 FY 2015 Movement FY 2016 $m $m % $m Revenue 1,714.6 1,617.9 6.0 1,636.9 EBITDA 326.2 251.6 29.7 271.1 Depreciation and amortisation (161.3) (165.1) 2.3 (156.7) EBIT 164.9 86.5 90.6 114.4 Finance costs (58.0) (66.5) 12.8 (58.0) PBT 106.9 20
Slide 9: Bridge of Reported to Underlying
BRIDGE OF REPORTED TO UNDERLYING Restructure & Gains on ATO Balance FY16 $m Reported strategic Underlying sale settlement sheet review initiatives EBIT 164.9 (63.6) (13.5) 32.9 85.9 206.6 Finance costs (58.0) (58.0) PBT 106.9 148.6 Income tax (32.2) (44.6) NPAT 74.7 104.0 Restructure & ATO Balance F
Slide 10: Cash Flow
CASH FLOW 500 Total capital recycling $328m 450 Total capital spend of $176m v FY15 $255m (2) 56 400 350 (135) 153 300 (311) $A million 250 344 (94) 200 119 150 (68) 49 (64) 100 (14) 50 82 50 83 - Opening cash OCF Interest & tax PPE Net HCP Other Net cash after ATO PPE recycling MD sale THI/VEI sale
Slide 11: Net Debt and Dividend
NET DEBT AND DIVIDEND Group reported as at 30 June 16 30 June 15 $m $m Total debt (inc. retail bonds in FY15) 898.3 1,205.5 Cash (82.3) (50.0) Net debt 816.0 1,155.5 Gearing (net debt: net debt + equity) 25.2% 32.4% Bank gearing ratio1 (covenant <3.5x) 2.3x 3.0x Bank interest ratio1 (covenant >3.0x)
Slide 12: Strategic Initiatives
STRATEGIC INITIATIVES Preston IVF, Melbourne, Victoria 12 FY16 RESULTS
Slide 13: Transformation Journey
TRANSFORMATION JOURNEY Introduced capital-light Sale & lease back of Bridge Road HCP recruitment Sold Medical Imaging equipment Imaging opened models Director Sold Transport Health Reset Dividend Established Clinical Policy at 1H16 Councils New capabilities Established Launched Opened Commenced HR,
Slide 14: Medical Centres
MEDICAL CENTRES Establish Primary as a preferred brand • HCPs and staff to work • Patients to trust Respond to changing needs of patients • E-health • Ownership of records • Demands as consumers FY17 focus • Recruitment and retention of HCPs • Growth of new Bulk Billing centres • Enhanced Medical Ho
Slide 15: Bulk Billing: GP recruitment
BULK BILLING GP recruitment • New recruitment models introduced - over 50% 2H joiners on no-upfronts, retention up 35% • GP capital costs reduced 35% with new models/benefit of tax deduction • Overall numbers up on FY15 but need to recruit more GPs • Brand improvement longer-term - engagement, lead
Slide 16: Bulk Billing
BULK BILLING Optimise footprint • 4 large scale /1 super centre, funded predominantly by REIT Enhanced Medical Home • Increase non-MBS revenue e.g. Dental, Chronic Care • Preston IVF site opened in FY16, 2 new sites in FY17 IT investment • Next generation systems via Medical Director Improve staff e
Slide 17: Private Billing
PRIVATE BILLING Market opportunity • Market consolidating driven by government policy pressures • Opportunity to lead consolidation with premium brand • Diversification of revenue stream reduces reliance on MBS Primary’s competitive advantage • Scale in support and back-office services • Collaborati
Slide 18: Pathology
PATHOLOGY Continue savings in cost efficient business • Optimisation of laboratory infrastructure, improved procurement and productivity initiatives ACCs exc: HSO and Border acquisitions Clarification required for ACC strategy Net increase due to possible • Underperforming sites closed/exited 2100 m
Slide 19: Imaging
IMAGING Optimal portfolio realignment • Hospitals - National Capital / Knox Private • High-value, large scale imaging centres - Bridge Road / Varsity Lakes • Pipeline of sites for FY17 onwards Reset cost base • Closed 8 sub-scale loss-making community sites • Reduced staffing levels • Exploration of
Slide 20: Government Position
GOVERNMENT POSITION The facts • Bulk-billing environment has served us well • Extended election campaign created uncertainty and drop in growth rates • Hiatus remains while awaiting clarification on: o MBS freeze o Pathology: regulation of ACC rents and BBI cuts o Imaging: BBI cuts and review into ‘
Slide 21: Outlook
OUTLOOK • Long-term demand drivers remains positive • Underpinned by population growth, ageing population and growing health expectations • Outsourcing of public hospital work gaining traction e.g. Northern Beaches Hospital in NSW • Hospital and chronic care costs increasing • Frontline, preventativ
Slide 22: Appendices
APPENDICES As at 30 June 2016 22 FY16 RESULTS
Slide 23: Medical Centres
MEDICAL CENTRES Underlying FY 2016 FY 2015 Movement Movement $m $m $m % Revenue 323.7 323.8 (0.1) 0.0 EBITDA 166.8 172.8 (6.0) (3.5) Depreciation (20.0) (20.6) 0.6 2.9 Amortisation (60.9) (55.8) (5.1) (9.1) EBIT 85.9 96.4 (10.5) (10.9) • Revenue broadly flat impacted by starting the year with fewer
Slide 24: Pathology
PATHOLOGY Underlying FY 2016 FY 2015 Movement Movement $m $m $m % Revenue 994.4 934.5 59.9 6.4 EBITDA 161.5 151.7 9.8 6.5 Depreciation (19.1) (17.1) (2.0) (11.7) Amortisation (7.5) (7.2) (0.3) (4.2) EBIT 134.9 127.4 7.5 5.9 • Increase in volumes drove above-market revenue growth, in a difficult oper
Slide 25: Pathology: Market Services and Benefits
PATHOLOGY: MARKET SERVICES AND BENEFITS Medicare benefits Long term average of 6.6% Rolling 12 month average of 4.2% (1.2%1H16) 25 FY16 RESULTS
Slide 26: Imaging
IMAGING Underlying FY 2016 FY 2015 Movement Movement $m $m $m % Revenue 326.9 330.8 (3.9) (1.2) EBITDA 62.2 72.4 (10.2) (14.1) Depreciation (25.6) (26.2) 0.6 2.3 Amortisation (11.4) (11.9) 0.5 4.2 EBIT 25.2 34.3 (9.1) (26.5) • On annual basis revenue (adjusted for lost hospital contracts and new imm
Slide 27: Imaging: Market Services and Benefits
IMAGING: MARKET SERVICES AND BENEFITS Medicare benefits Long term average of 7.0% Rolling 12 month average of 3.0% (3.3%1H16) 27 FY16 RESULTS
Slide 28: Corporate
CORPORATE Underlying FY 2016 FY 2015 Movement Movement $m $m $m % Revenue 1.6 3.1 (1.5) (48.4) EBITDA (41.2) (37.7) (3.5) (9.3) Depreciation (1.6) (0.8) (0.8) n/a Amortisation (6.9) (7.7) 0.8 10.4 EBIT (49.7) (46.2) (3.5) (7.6) • Increased investment in new capabilities: Group Strategy, Human Resour
Slide 29: Reconciliation of Reported to Underlying
RECONCILIATION OF REPORTED TO UNDERLYING Restructure & Gain on ATO Balance FY16 $m Reported strategic Underlying sale settlement sheet review initiatives Revenue 1,714.6 (63.6) 0.0 0.0 0.0 1,651.0 EBITDA 326.2 (63.6) (13.5) 31.9 83.2 364.2 Depreciation and (161.3) 0.0 0.0 1.0 2.7 (157.6) amortisatio
Slide 30: Reconciliation of Reported to Underlying
RECONCILIATION OF REPORTED TO UNDERLYING Restructure FY15 ATO Balance FY15 $m Reported & strategic Underlying adjustments settlement sheet review initiatives Revenue 1,617.9 5.4 0.0 (24.6) 0.6 1,599.3 EBITDA 251.6 30.6 110.5 (21.7) 8.4 379.4 Depreciation and (165.1) 9.7 0.0 1.6 0.2 (153.6) amortisat
Slide 31: Balance Sheet Review
BALANCE SHEET REVIEW PBT NPAT $m MC Path Imaging Corporate Group Group FY16 41.2 5.4 33.2 11.9 91.7 66.3 Underlying 2.5 2.5 0.6 0.2 5.8 1 3 4 Non-underlying 38.7 2.9 32.6 11.7 85.9 FY15 6.3 0.2 4.9 0.0 11.4 5 9.0 5 Underlying 2.8 0.0 0.0 0.0 2.8 Non-underlying 3.5 0.2 4.9 0.0 8.6 Pre-FY15 30.9 2 1.4
Slide 32: FY15 Restatement
FY15 RESTATEMENT FY 15 as reported BS review FY 15 FY 15 as reported $m in FY15 adjustments in FY16 Revenue 1,618.5 (0.6) 1,617.9 EBITDA 260.0 (8.4) 251.6 Depreciation and amortisation (162.1) (3.0) (165.1) EBIT 97.9 (11.4) 86.5 Finance costs (66.5) 0.0 (66.5) PBT 31.4 (11.4) 20.0 Income tax 105.1 2
Slide 33: Bridge of Continuing and Total
BRIDGE OF CONTINUING AND TOTAL FY16 FY15 Continuing Medical Total Continuing Medical Total $m Operations Director Group Operations Director Group Revenue 1,636.9 77.7 1,714.6 1,579.7 38.2 1,617.9 EBITDA 271.1 55.1 326.2 231.4 20.2 251.6 Depreciation (156.7) (4.6) (161.3) (158.8) (6.3) (165.1) and am
Slide 34: Tax Implications of HCP Acquisitions
TAX IMPLICATIONS OF HCP ACQUISITIONS • Healthcare Practitioners acquired on or after 1 July 2015: o Deferred tax liability (DTL) to be recognised at the time of the acquisition of healthcare practices and capitalisation of contractual relationship intangible assets. o Equal movement in DTL will ensu
Slide 35: 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 chan