Healius Limited · ASX:HLS
Healius — Primary Health Care — H1 2016 Earnings Presentation
31 slides from Healius's earnings presentation, Feb 17, 2016
Slide 1: 1H 2016 Results
1H 2016 RESULTS 6 MONTHS ENDED 31 DECEMBER 2015 17 FEBRUARY 2016
Slide 2: Overview
OVERVIEW 1H 2016 1H16 1H15 $ million • Underlying result in line with expectations Reported Reported • Reported results strong supported by one-offs Revenue 835.0 798.6 • Strengthened balance sheet EBITDA 204.0 196.1 • Dividend of 5.6 cps, 60% UNPAT payout, DRP/BSP suspended NPAT 68.6 53.4 Underlyin
Slide 3: 1H 2016 Results
1H 2016 RESULTS Bridge Road Imaging Centre, Richmond, Victoria, opened in FY 2015 and expanded in FY 2016 3 1H16 RESULTS
Slide 4: Group Reported Performance
1H 2016 GROUP REPORTED PERFORMANCE Reported Movement 1H 2016 1H 2015 $ million $ Revenue 835.0 798.6 36.4 EBITDA 204.0 196.1 7.9 Depreciation and amortisation (80.7) (83.9) 3.2 EBIT 123.3 112.2 11.1 Finance costs (30.5) (33.3) 2.8 PBT 92.8 78.9 13.9 Income tax (24.2) (25.5) 1.3 NPAT 68.6 53.4 15.2 •
Slide 5: Group Underlying Performance
1H 2016 GROUP UNDERLYING PERFORMANCE Underlying 1 Movement 1H 2016 1H 2015 $ million $ Revenue 815.2 785.7 29.5 EBITDA 181.9 188.0 (6.1) Depreciation and amortisation (79.8) (75.3) (4.5) EBIT 102.1 112.7 (10.6) Finance costs (30.5) (33.3) 2.8 PBT 71.6 79.4 (7.8) Income tax (21.5) (23.8) (2.3) NPAT 5
Slide 6: Divisional Performance
1H 2016 DIVISIONAL PERFORMANCE 1H 2016 (underlying) Medical Centres Pathology Imaging Medical Director $M % $M % $M % $M % Revenue 165.3 3.0 482.3 5.7 162.1 (2.1) 21.0 12.3 EBITDA 87.7 1.2 73.4 5.2 30.5 (20.6) 9.4 (4.1) Depreciation & Amortisation (39.4) (5.3) (13.4) (10.7) (20.0) (9.9) (2.6) 35.0 E
Slide 7: Net Debt and Gearing
1H 2016 NET DEBT AND GEARING Reported As at As at Movement $ million 31 Dec 15 30 June 15 $ Bank and finance debt 1,162.6 1,053.2 (109.4) Cash (64.2) (50.0) 14.2 Retail Bonds - 152.3 152.3 Net debt 1,098.4 1,155.5 57.1 Gearing (net debt: net debt + equity) 30.7% 32.1% Gearing ratio (covenant <3.5x)
Slide 8: Waterfall Cash Flow
1H 2016 WATERFALL CASH FLOW PP&E of $54m v $81m 250 1H15. 33% saving on pcp HCP acquisitions net of tax of $36m Capital recycling including Medical Centres $27m 200 (82) 45 (54) 150 23 174 (36) $A million 37 (45) (13) 100 Capital recycling (35) 40 Capital recycling 50 64 50 - Opening Operating Inter
Slide 9: Dividend
1H 2016 DIVIDEND As at As at 31 Dec 15 31 Dec 14 Dividend cps 5.6 9.0 Dividend payout ratio % (UNPAT) 60% 86% EPS cps (underlying) 9.65 10.48 • Dividend payout reflective of the company’s growth strategy • Dividend yield of ~ 6.0%1 v 5-year average yield of 4.2% • Dividend franked at 50% with franki
Slide 10: Strategic Initiatives
STRATEGIC INITIATIVES Baulkham Hills Medical Centre, New South Wales opened August 2015 10 1H16 RESULTS
Slide 11: Medical Centres: Recruitment and retention ahead of expectations
MEDICAL CENTRES Recruitment and retention ahead of expectations in 1H 2016 • ATO settlement resolved uncertainty • Recruitment and retention ahead of 1H 2015 • Net cost per GP reducing as benefit from tax deduction/transition to new models • Improving trend expected to continue 65 35 45 30 25 25 GP
Slide 12: Medical Centres: Step change in recruitment and retention
MEDICAL CENTRES Step change in recruitment and retention • Flexible models rolled out 2Q16 with range of offerings • Initial reaction positive, especially re-signs • Meet financial, personal and professional needs • Improving GP engagement with clinical management, lead doctors, training institute B
Slide 13: Medical Centres – Pathway to Growth
MEDICAL CENTRES – PATHWAY TO GROWTH Central to business model – 8m consultations p.a. • GP acquisition strategy driven by engagement model including flexible remuneration • Expecting stronger 2H 2016 to position for growth in FY 2017, returning us to l/t industry rates Pipeline of centres to roll-ou
Slide 14: Pathology: Aggressive cost out in ACCs
PATHOLOGY Aggressive cost out in ACCs PRY ACCs exc. 2100 Border acquisition • ACC deregulation added significant costs to industry • Unsustainable growth in ACC rents and labour with ~12% 2050 CAGR since deregulation 2000 1950 • 2Q 2016 stabilisation in ACC numbers 1900 • Closed/exited 100 sites in
Slide 15: Pathology
PATHOLOGY Mature business – 15m patient cases p.a. • Competitive cost base but revenue pressure and limited to domestic organic growth Continue to attack cost base • Strong focus to reduce ACC costs • Review of regional laboratories and centralisation of certain tests • Improved procurement and prod
Slide 16: Imaging
IMAGING Asset intensive business – 3m examinations p.a. • Emphasis on returns by improving revenue mix and cost-out program in existing asset base • Transition mix from small community sites to multi-disciplinary medical clinics, specialised, high-yield centres and hospital contracts, resulting in c
Slide 17: Capital Management
CAPITAL MANAGEMENT Capital recycling progress • $40m Barangaroo sale unconditional and will complete in March 2016 • Further capital recycling • Seeking ATO refund for FY 2003-07 Property trust established • Established with Australian Unity • $22m seeded from Bridge Road and Corrimal sites • Additi
Slide 18: Response to Government Reviews
RESPONSE TO GOVERNMENT REVIEWS The facts • Bulk-billing has been an underlying philosophy for Primary and has served us well • Funding now under constant pressure – rebate freeze, MBS review MYEFO • Market growth well below long term trends, the likely consequence of regulatory uncertainty and refer
Slide 19: Outlook
OUTLOOK Underlying drivers • Strong underlying demand with ageing and growing Health spending per person, population 2003-04 to 2013-14 (constant $) $ • Hospital and chronic care costs unsustainable 2500 • Frontline, preventative care is the most effective form of healthcare 2000 • Large-scale multi
Slide 20: 2H 2016 & Forecast
2H 2016 & FORECAST • Expect stronger 2H 2016 underpinned by profit improvement initiatives underway UNPAT bridge: 1H to 2H 2016 4-9 60 - 65 65 63 61 59 57 55 2 53 51 4 49 47 50 45 1H2016 Labour and New sites / Revenue 2H2016 UNPAT (6 other cost acquisitions growth UNPAT (6 months) reductions initiat
Slide 21: Appendices
APPENDICES Delivering nationwide coverage As at 30 June 2015 21 1H16 RESULTS
Slide 22: Reconciliation of Reported to Underlying (1H 2016)
RECONCILIATION OF REPORTED TO UNDERLYING 1H 2016 $million Revenue EBITDA EBIT Reported 835.0 204.0 123.3 Gain on sale/dissolution including VEI (19.8) (19.8) (19.8) ATO settlement - (13.5) (13.5) Other - 11.2 12.1 Underlying 815.2 181.9 102.1 • Gain on disposal of Vision Eye Institute shareholding,
Slide 23: Reconciliation of Reported to Underlying (1H 2015)
RECONCILIATION OF REPORTED TO UNDERLYING 1H 2015 $million Revenue EBITDA EBIT Reported 798.6 196.1 112.2 Gain on sale (1.0) (1.0) (1.0) Accelerated D&A - - 8.6 Other (11.9) (7.1) (7.1) Underlying 785.7 188.0 112.7 • Underlying profit was not reported for 1H 2015. In order to provide comparatives on
Slide 24: Medical Centres
1H 2016 MEDICAL CENTRES Underlying Movement Movement 1H 2016 1H 2015 $ million $ % Revenue 165.3 160.5 4.8 3.0 EBITDA 87.7 86.7 1.0 1.2 Depreciation (9.1) (10.2) 1.1 10.8 Amortisation (30.3) (27.2) (3.1) (11.4) EBIT 48.3 49.4 (1.1) (2.2) • Other revenue growth including dental and IVF, offsetting de
Slide 25: Pathology
1H 2016 PATHOLOGY Underlying Movement Movement 1H 2016 1H 2015 $ million $ % Revenue 482.3 456.2 26.1 5.7 EBITDA 73.4 69.8 3.6 5.2 Depreciation (9.6) (8.4) (1.2) (14.3) Amortisation (3.8) (3.7) (0.1) (2.7) EBIT 60.0 57.7 2.3 4.0 • Increase in volumes drove revenue growth with slight reduction in ave
Slide 26: Imaging
1H 2016 IMAGING Underlying Movement Movement 1H 2016 1H 2015 $ million $ % Revenue 162.1 165.5 (3.4) (2.1) EBITDA 30.5 38.4 (7.9) (20.6) Depreciation (13.8) (13.8) (0.0) - Amortisation (6.2) (4.4) (1.8) (40.9) EBIT 10.5 20.2 (9.7) (48.0) • Revenue drop with 4% reduction in average fee per exam with
Slide 27: Medical Director
1H 2016 MEDICAL DIRECTOR Underlying Movement Movement 1H 2016 1H 2015 $ million $ % Revenue 21.0 18.7 2.3 12.3 EBITDA 9.4 9.8 (0.4) (4.1) Depreciation (0.3) (0.2) 0.1 (50.0) Amortisation (2.3) (3.8) 1.5 39.5 EBIT 6.8 5.9 0.9 15.3 • Record levels of customer retention and transactional revenue from t
Slide 28: Pathology: Market Services and Benefits
PATHOLOGY: MARKET SERVICES AND BENEFITS Medicare benefits Long term average of 6.6% Rolling 12 month average of 1.2% 28 1H16 RESULTS
Slide 29: Imaging: Market Services and Benefits
IMAGING: MARKET SERVICES AND BENEFITS Medicare benefits Long term average of 7.0% Rolling 12 month average of 3.3%. 6 month average 1.8% 29 1H16 RESULTS
Slide 30: Tax Implications of Healthcare Practitioner Acquisitions
TAX IMPLICATIONS OF HEALTHCARE PRACTITIONER 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 movem
Slide 31: 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