H.U.Group Holdings, Inc. · TSE:4544
H.U.Group — FY2023 Earnings Presentation
41 slides from H.U.Group's earnings presentation, May 10, 2024
Slide 1: FY2023 Annual Financial Results
FY2023 (Ended March 31, 2024) Annual Financial Results May 10, 2024 (TSE: 4544)
Slide 2: Notes & references
Notes & references: * The financial information in this document follows Japanese GAAP, with the exception for EBITDA (Operating profit + Depreciation + Amortization of goodwill), which is a non-GAAP measure. * In some cases, “Net Profit attributable to shareholders of the parent company” may be abb
Slide 3: Financial Results for FY2023
Financial Results for FY2023 2
Slide 4: Consolidated Results for FY2023
Consolidated Results for FY2023 (\ billion) FY2022 FY2023 Profit Profit Variance Results Results ratio ratio Net sales 260.9 237.0 -23.96 -9.2% LTS 163.1 146.7 -16.36 -10.0% IVD 70.1 61.9 -8.15 -11.6% HS 27.8 28.3 +0.56 +2.0% 1 Operating profit/loss 23.4 9.0% -4.0 -1.7% -27.42 ー LTS 0.3 0.2% -12.5 -
Slide 5: Consolidated Net Sales Changes
Consolidated Net Sales Changes (\ billion) 280 260.9 -16.36 260 -8.15 240 1 +0.56 237.0 45.1 1 12.6 220 Decrease in COVID-19 tests: -72% 200 215.8 Growth in base business: +4% 224.4 180 0 FY22 LTS IVD HS FY23 4 1. Net sales related to COVID-19 testing
Slide 6: Consolidated Operating Profit Changes
Consolidated Operating Profit Changes (\ billion) (＋) Efficiency effect of profitability improvement (－) Profit decrease due to decrease in COVID-19-related tests 25 23.4 -12.79 (－) Marginal profit decrease due to increase in raw material costs, etc. 20 (－) Profit decrease due to decrease in Covid-1
Slide 7: Difference Between Forecast and Result of OP in Q4
Difference Between Forecast and Result of OP in Q4 1. Anticipated recovery in test volume within the base business fell below expectations 2. Decline in COVID-19-related testing was more substantial than initially anticipated 3. Profitability improvement, particularly within LTS, experienced a delay
Slide 8: Consolidated Ordinary Profit/Loss & Net Profit/Loss
Consolidated Ordinary Profit/Loss & Net Profit/Loss Ordinary Profit/Loss Net Profit/Loss (\ billion) (\ billion) 30 30 22.0 20 20 15.7 10 10 -7.2 -7.6 0 0 -10 FY22 FY23 -10 FY22 FY23 Major non-operating factors Foreign exchange gains \0.98 B Equity in losses of affiliates \2.79 B 7
Slide 9: Quarterly Performance Trend
Quarterly Performance Trend Net sales EBITDA, OP (\ billion) Net sales related to (\ billion) Net sales EBITDA Operating Profit COVID-19 testing 90 45 75.1 70.2 68.8 66.9 62.5 61.9 63.5 64.1 65.3 59.9 59.9 61.0 59.4 60 54.7 18.7 23.2 15.0 11.4 56.6 30 9.5 12.9 11.8 12.3 6.4 4.0 3.2 2.5 12.2 2.9 43.9
Slide 10: LTS Quarterly Results
LTS Quarterly Results YoY Comparison Net sales EBITDA, OP (\ billion) (\ billion) (\ billion) 60 18 FY22 FY23 Variance Net sales 163.1 146.7 -16.36 -10.0% Off-site 125.2 117.5 -7.68 -6.1% 38.4 36.2 37.7 36.8 40 36.1 12 FMS/Branch 30.9 24.3 -6.57 -21.3% 2.1 0.8 1.0 1.3 1.8 Others 7.0 4.8 -2.11 -30.4%
Slide 11: IVD Quarterly Results
IVD Quarterly Results YoY Comparison Net sales EBITDA, OP (\ billion) (\ billion) (\ billion) 24 20 FY22 FY23 Variance Net sales 70.1 61.9 -8.15 -11.6% Lumipulse 34.3 25.7 -8.62 -25.1% 16.9 16.2 15.5 Japan 30.7 22.0 -8.67 -28.3% 14.4 2.7 Overseas 3.6 3.7 +0.06 +1.6% 13.4 3.3 CDMO etc. 23.3 25.7 +2.4
Slide 12: HS Quarterly Results
HS Quarterly Results YoY Comparison Net sales EBITDA, OP (\ billion) (\ billion) (\ billion) 10 4 FY22 FY23 Variance Net sales 27.8 28.3 +0.56 +2.0% 7.1 7.2 6.9 7.1 7.2 Sterilization 21.5 22.0 +0.56 +2.6% Home-visiting, 1.6 1.6 1.6 1.6 6.3 6.3 -0.00 -0.1% 1.6 welfare EBITDA 2.76 10.0% 3.04 10.7% +0.
Slide 13: Cash and Deposits / Interest-bearing Debts
Cash and Deposits / Interest-bearing Debts (\ billion) FY2023 FY2022 Cash and deposits Short-term debts 44.2 39.9 46.5 44.2 Bonds due within Cash and Interest- one year deposits bearing Long-term debts debts 3.7 3.6 3.7 Interest- 10.0 Lease debts bearing debts 18.7 25.0 -26.5 25.0 Bonds payable -33.
Slide 14: Analysis of Consolidated Cash Flows (FY2023)
Analysis of Consolidated Cash Flows (FY2023) Investment cash (\ billion) Operating cash flows +16.6 Others -9.5 flows -16.1 Free cash flows +0.5 1 1 -33.0 -9.0 (Increase in net interest-bearing debts) -42.0 March 31, 2023 March 31, 2024 Operating cash Income flows Operating capital -0.4 taxes and Pu
Slide 15: Analysis of Consolidated Cash Flows (FY2022)
Analysis of Consolidated Cash Flows (FY2022) Investment cash (\ billion) Operating cash flows +32.5 Others -9.4 flows -29.6 Free cash flows +2.9 1 1 -26.5 -6.5 (Increase in net interest-bearing debts) -33.0 March 31, 2022 -0.1 March 31, 2023 Decrease in +10.9 purchase debts -21.0 -Decrease in Sales
Slide 16: FY2020-FY2023 Cumulative Cash Flow (Capital Allocation)
FY2020-FY2023 (4 years) Cumulative Cash Flow (Capital Allocation) (\ billion) FY2023 Other：5.4 OCF：16.6 Free Cash Flow Dividend：29.8 Total 35.1 FY2022 OCF：32.5 Other investment：9.2 H.U. Group： 7.0 HS：5.6 Operating Cash Flow Total 139.9 FY2021 OCF：55.2 IVD：28.5 CAPEX： 95.6 FY2020 LTS：54.5 OCF：35.6 15
Slide 17: FY2024 Business Plan and Future Growth Strategy
FY2024 Business Plan and Future Growth Strategy 16
Slide 18: Activities to date and Future Directions
Activities to date and Future Directions FY2020~FY2022 FY2023 FY2024 Despite anticipating downturn of Achieve revenue growth while profitability attributed to the launch Profitability sharply declined due to increase profit and establish a of AkirunoCube, COVID-19 initiatives lower sales and higher
Slide 19: EBITDA and OP Outlook for the Next Five Years
EBITDA and OP Outlook for the Next Five Years • The initial phase of the current medium-term plan emphasized COVID-19 initiatives and structural reform, with a focus on profit expansion in the latter phase. However, due to the prolonged impact of COVID-19, the current focus has shifted to facilitati
Slide 20: Full-year outlook for FY2024
Full-year outlook for FY2024 Comparison between Medium-term FY2024 Outlook targets and current outlook FY2023 FY2024 plan (\ billion) Medium-term plan target for FY2024 results • Sales CAGR：6%+ Net sales 237.0 241.0 +4.1 +1.7% • Operating profit margin：10%+ LTS 146.7 151.0 +4.3 +2.9% • ROE：12%+ IVD
Slide 21: Breakdown of FY2024 Operating Profit Forecast
Breakdown of FY2024 Operating Profit Forecast Key factors affecting OP in FY2024 (details of ① to ④ will be provided in the following slides) HS/ LTS IVD Others 10.0 Growth initiatives in SRL 1 4 3 3 3 ‐4.0 2 1 1 FY23 COVID-19-sales Sales growth Marginal profit Fixed costs AkirunoCUbe Other COVID-19
Slide 22: Outlook for COVID-19-related Test (LTS, IVD)
① Outlook for COVID-19-related Test (LTS, IVD) We anticipate COVID-19-related sales to continue at a certain level, especially in the IVD business. However, we expect a decline compared to FY2023 as COVID-19 transitions to an endemic state Results and forecast of COVID-19-related sales (billion yen)
Slide 23: Sales Growth in LTS Business
② Sales Growth in LTS Business Expecting a sales CAGR of 3.5% or higher, driven by expansion of base testing through customer acquisition and the growth of genetic testing Base Testing: Expecting stable growth of Outlook for LTS business sales growth 3% or higher +6％ or higher • Offsetting a 1-2% de
Slide 24: Profitability Improvement in LTS Business: AkirunoCube
③ Profitability Improvement in LTS Business (details will be provided in the following slides) • Project delays resulted in unmet improvement targets for FY2023 • In FY2024, we aim to offset gaps and realize the originally anticipated effects Increase in running AkirunoCube alone cost and D&A Periph
Slide 25: Profitability Improvement in LTS Business (AkirunoCube Alone)
③ Profitability Improvement in LTS Business (AkirunoCube Alone) • No one-time costs are anticipated from FY2025 onwards • A decrease of approximately 3.0 billion yen is expected in the amortization of intangible fixed assets in FY2027 • Efficiency effects are expected to peak in FY2025 (ref.) LTS De
Slide 26: Profitability Improvement in LTS Business (Peripheral Effects)
③ Profitability Improvement in LTS Business (Peripheral Effects) Major effects generated by profitability improvement measures (initial assumption and results of FY2023 versus target of FY2024) (\ billion) FY23 FY23 FY24 initial assumption results target Marginal ・Review testing costs profit ・Improv
Slide 27: Examples of LTS Profitability Improvement Measures
③ Examples of LTS Profitability Improvement Measures Operational improvement in the automated area Decrease in labor costs • Productivity improvement increased • Gradually reallocate employees along by 40% compared to FY2021 with AkirunoCube transfer complete • Pretreatment operation headcount • Con
Slide 28: Sales Growth in IVD Business (Key initiatives in FY2024)
④ Sales Growth in IVD Business (Key initiatives in FY2024) CDMO NEURO Domestic Lumipulse • Completing development of some • We aim to speed-up the expansion • We will address new-item promotion items and transitioning them to of Lumipulse Neuro makers line-up in our domestic installed base of manufa
Slide 29: Outlook for IVD Business
④ Outlook for IVD Business ■：Base Business Business Growth Outlook for IVD Business ■：COVID-19-related sales 7%+ Maintaining CAGR growth of mid-single digit Base business growth CAGR: 6.9% FY2019 FY2020 FY2021 FY2022 FY2023 FY2024 FY2028 （Plan） （Target） OP Margin 15.2% 20.9% 21.7% 25% or higher 28
Slide 30: FY2024 R&D, CAPEX and D&A Costs
FY2024 R&D, CAPEX and D&A Costs (\ billion) Research & Development Capital Expenditure Depreciation and Amortization 15 25 25 21.5 20.3 11.3 11.1 19.1 Continue 20 20 10 over \10 B 1 15 6.8 15 11.1 10 3.4 1 10 5 At the level 12.3 of \7 B 5 5 7.7 0 0 0 FY23 FY24 FY25 FY26 FY27 FY28 FY23 FY24 FY25 FY26
Slide 31: Approach to Shareholder Returns
Approach to Shareholder Returns Basic policy on • DOE* (dividend on equity ratio) has been adopted as main KPI for dividend shareholder returns • We will aim for a 6%-level DOE and provide a stable and consistent dividend, (unchanged since comprehensively taking into consideration cashflows and main
Slide 32: Future Strategy of LTS Business
Future Strategy of LTS Business 31
Slide 33: Changes in the business environment and company strategy direction
Changes in the business environment and the direction of the company's strategy • Considering changes in the business environment, the Company’s strategy has undergone partial revision We will establish a foundation to provide optimal service to GP tailored to each region and medical department or
Slide 34: Revision of GP Strategy
Revision of GP Strategy Previous The accelerated realignment of hospital beds would result in an assumption and our increase in number of general tests and expansion of GP market direction ⇒ We aimed to expand our GP customer base Change in business environment Business conditions Patients’ behavior
Slide 35: Strengths in the Infectious Disease Testing Field
Strengths of the Company in the Infectious Disease Testing Field By leveraging our accumulated expertise, we have achieved competitive advantages in the infectious diseases field Infectious Disease Genetic Testing Automation System Tuberculosis testing: Full Automation of Preprocessing Steps (World'
Slide 36: Strengths in Genetic Testing Field
Strengths of the Company in Genetic Testing Field In the field of leukemia genetic testing, where we hold a market share of over 70% in chromosomal testing, our unique equipment automates the nucleic acid extraction process, achieving both high quality and high productivity We improved producibili
Slide 37: Timeline for Completing the Transfer to AkirunoCube
Timeline for Completing the Transfer to AkirunoCube • Transferring from the old system to the new system by the end of 2024 Gradually transition while conducting operational testing and verification of esoteric testing control and oversight systems, billing and reporting systems, etc. • The one-time
Slide 38: Direction of LTS Business for Future Growth
Direction of LTS Business for Future Growth We aim to maximize added value in advanced medical care fields by concentrating resources on hospital market Maximize corporate value Advanced medical care Maximize added value Develop technology Advanced medical care Accumulated Expand our customer base
Slide 39: Appendix
Appendix FES y.u.croup
Slide 40: Major Global ESG Evaluations
Major Global ESG Evaluations ESG evaluations ESG indexes FTSE Blossom Japan Index MSCI ESG Ratings Selected for the first time in 2023 Maintaining AAA rating (top rating) from 2022 FTSE Blossom Japan Sector Relative Index CDP : responses in 2023 Selected for two consecutive years CDP Climate
Slide 41: Contact information
EE 【Contact information】 IR/SR Department Email : ir@hugp.com Disclaimer regarding forward-looking statement: The performance forecast provided in this document is prepared by the management based on currently available information and various hypotheses and ideas including significant risks or unce