Ramsay Health Care Limited · ASX:RHC
Ramsay Health Care — FY2005 Earnings Presentation
34 slides from Ramsay Health Care's earnings presentation, Aug 29, 2005
Slide 1: Results Briefing for the year ended 30 June 2005
oe EN RAMSAY HEALTH CARE Results Briefing for the year ended 30 June 2005 29 August 2005
Slide 2: FY 2005 Results
ES RAMSAY HEALTR CARE, FY 2005 RESULTS >» Stronger than expected core net profit result > Building a platform for future growth
Slide 3: Overview
Overview Year of significant profit growth in underlying business, augmented by growth through acquisitions Affinity acquisition makes Ramsay Australia’s premier hospital operator Core* net profit target considerably exceeded 24 half core net profit exceeded ist half for existing Ramsay hospitals (b
Slide 4: Overview
RAMSAY Overview » Positive ACCC outcome a Affinity integration to begin shortly, except for divestment hospitals » Hospital divestments expected to realise competitive prices given high level of inquiries » New Ramsay building a platform for continuing solid growth, and upside from Affinity hospital
Slide 5: Financial Highlights - Overall Group
aS RAMSAY Financial Highlights —- Overall Group CARE. » Core NPAT up 27% to $54.1m » Group revenue up 88% to $1,442.8m a» Group EBITA up 62% to $125.8m » Core EPS of 39 cps, up 18% a Final dividend 11.5cps, fully franked, full year dividend to 20cps, up 14% a» Dividend reinvestment plan reinstated
Slide 6: Financial Highlights - Ramsay Hospitals
Sy Financial Highlights - Ramsay RAMSAY Hospitals Ramsay results excluding Affinity: » Core net profit up 21% to $51.8m » Revenue up 44% to $1.1bIn > Excluding Benchmark revenue rose 12.3% » EBITA up 25% to $96.8m >» Excluding Benchmark EBITA rose 11% a» EBITA margin (excluding Benchmark) holding at
Slide 7: Financial Performance
RA Ms SAY HEALER ©. Financial Performance 1,442.8 8E% Operating Revenue 768.1 Operating Revenue (excluding Affinity) 768.1 1,105.9 44% EBITDA 105.8 169.3 60% EBITA 77.6 125.8 62% EBITA (excluding Affinity) 77.6 96.8 25% Net Profit before Tax & Non-recurring items 61.3 66.6 9% Non-recurring Items (ne
Slide 8: Non-recurring Items (previously announced)
aS Non-recurring Items (previously RAMSAY announced) $m Borrowing costs associated with divestment hospitals 2.6 Borrowing costs associated with bridge funding 3.9 Borrowing costs associated with July 2004 refinancing 2.9 Restructuring provisions associated with Affinity acquisition 6.2 15.6 Tax eff
Slide 9: Strong EBITA Growth
a a RAMSAY STRONG EBITA GROWTH HEALTR CARE 78 52 39. 26 FY 2001 FY 2002 ° @ RHC (existing business) G5 Affinity (acq Apr'O5) = EBITA up 62% for the year a EBITA (exc Affinity) up 25% a EBITA (exc Affinity & Benchmark) up 14%
Slide 10: Breakdown of Group EBITA Growth
Ramsay BREAKDOWN OF GROUP EBITA GROWTH HEALTH CARE, » EBITA up 62% for the year (exc Affinity EBITA up 25%) Excluding Benchmark and Affinity, all Ramsay hospital divisions (med/surg, veteran, psych, rehab) reported solid EBITA growth for the year & Organic Growth - 6% @ Growth from Expanded Capacity
Slide 11: Cash Flow
Cash Flow $m EBITDA/Cash Flow 190 150 110 “le Oe! Be FY 2000 FY2001 FY2002 FY2003 FY2004_~ FY 2005 @ EBITDA O Gross Operating Cash Flow =» EBITDA translates into strong gross operating cash flow = Continuing effective cash flow management
Slide 12: Core net profit growth target exceeded
na eay Core net profit growth target exceeded $m 60 45 42.7 37.7 30 16.8) 15 oO FY 2001 FY 2002 FY 2004 FY 2005 @ RHC (existing business) O Affinity ( acq Apr'05) aw Core NPAT up 27% for the year a Core NPAT (exc Affinity) up 21%
Slide 13: Half year core net profit growth
HEALTH CA ae 7 Ramsay Half year core net profit growth $m 25 15 10 int 24 half inc. A Fy 2003 FY 2004 © 1st half 2nd half m 2nd half core net profit above ist half, and exceeds upgraded guidance given at half year
Slide 14: Core EPS growth
Core EPS growth 14.9 79 FY2000 Fy 2001 Fy 2002 FY 2005 # Core EPS up 18% for the year m Average annual compound growth rate over 5 years of 37.6% (base year FY 2000)
Slide 15: Dividend growth
nannay Dividend growth HEALTH CAKE 20.0* 4 11.0) Fy 2000 FY 2001 Fy 2002 Fy 2003 FY 2004 FY 2005 @ Interim Dividend @ Final Dividend * Dividend fully franked # 2005 full year dividend up 14%
Slide 16: Patient Days
Patient Days Patient days '000 Aa 8 800 600 + FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 —e Inpatient (exc Affinity) —*— Total (exc Affinity) - — - Inpatients - A+ Total (Inpatient & Day Patients) a Excluding Affinity and Benchmark, admissions were up 8% a Admissions (exc Affinity) up 43% over
Slide 17: Operational highlights
raMsay Operational highlights a» Organic EBITA growth (excluding Affinity and Benchmark) contributed 6% to group » All hospital divisions (med/surg, veteran, psychiatric, rehab) reported solid EBITDA growth for the year » Admissions for Ramsay hospitals division (before Benchmark and Affinity acquis
Slide 18: Operational highlights - Aged Care
AL AMSAY Operational highlights Ag ed Care Acquired 5 Ellis aged care facilities in April 2005 (406 licensed places) Operational results are meeting expectations Slightly EPS dilutive in 1St year as per guidance Allocated additional 407 high/low and extra care places (Coffs Harbour, Greenslopes, Nor
Slide 19: Operational Highlights - KPIs
HEAL RAMSAY Operational Highlights - KPIs Revenue Admissions (% inc over previous year) EBITDAR EBITDAR Margin EBITA EBITA Margin $862.6 m 8% $121.6 m 14.1% $85.9 m 10.0% $1,105.9 m 43% $153.7 m 13.9% $96.8 m 8.8% $1,442.8 m 92% $195.6 m 13.6% $125.8 m 8.7%
Slide 20: Impact of AIFRS
rantsay Impact of AIFRS HEALTH CARE Expected impact on Earnings (FY 2005) $m Goodwill subject to annual impairment testing rather than amortisation over 20 years 13.0 Share based remuneration recognised as an expense (0.8) Affinity hospitals held for re-sale are not depreciated nor will there be any
Slide 21: Affinity
Affinity >» Company transforming acquisition > FY 2006 building a platform for strong growth, based on uplift from Affinity
Slide 22: Strategic Rationale
RAMSAY Strategic Rationale HEALTH CAR Unique opportunity to bring together two companies with the best portfolios of quality hospitals >» Staff, doctors, infrastructure >» Strong referral base Significant upside due to: >» Integration synergies » Ongoing improved micro-management » Acquisition enhan
Slide 23: Affinity results post-acquisition
RAMSAY Affinity results post-acquisition CAR » Pleased with initial Affinity results (acq. 14 April) » Ontrack to meet prospectus expectations to be EPS neutral to mildly accretive in FY2006 » Ramsay prevented from making management changes during ‘hold separate’ period pending ACCC ruling » Despite
Slide 24: Affinity synergies confirmed
ramsay Affinity synergies confirmed ATLE, » Pre-tax cost synergies of $35m per annum targeted by end-FY08 - 45% in FY06 =» Pre-tax revenue synergies of $15m per annum targeted by end-FY08 -— 50% in FY07
Slide 25: Positive ACCC outcome
RAMSAY Positive ACCC outcome a» Ramsay required to divest 19 hospitals compared with Ramsay offer to divest 17 » While keen to keep as many hospitals as possible, Ramsay comfortable with divestments required by ACCC a Lifting of hold separate arrangement imminent, allowing integration of Affinity to
Slide 26: Divestments
Divestments Interest from industry and financial sponsors suggest Ramsay can expect to achieve competitive price for hospitals to be divested Negotiations with CVC/Ironbridge on the sale of 14 hospitals progressing Net proceeds from all divestments (14 + 5) to be applied against senior debt Financia
Slide 27: Strong cash flow underwrites gearing reduction
Strong cash flow underwrites gearing reduction Net proceeds from divestments to be applied against Senior Debt Robust cash flow business and Ramsay has history of converting EBITDA to strong operating cash flow Strong cash flow generation capacity underpins ability to reduce gearing >» Appropriate i
Slide 28: The New Ramsay: Strategic positioning in a growth industry
aS RAMSAY HEALTH CARE, The New Ramsay: Strategic positioning in a growth industry
Slide 29: The New Ramsay
is RAMSAY The New Ra msay H CARE = Premier private hospital portfolio in Australia with quality hospitals in growth areas and annual revenue in excess of $2 billion = Portfolio (post divestments) to have around 21% market share (based on separations) >» 70 hospitals (67 in Australia, 3 in Indonesia)
Slide 30: New Ramsay Revenue Split
as RAMSAY New Ramsay Revenue Split HEALTH CARS, We) Pro Forma Revenue by Division Pro Forma Revenue by State Rehab SA Psychiatric mn 2% Ag ed Care 4% ‘Oo Veteran 14% Med/Surg Other 60%
Slide 31: Phase Growth Potential
3 Phase Growth Potential Affinity acquisition enhances Ramsay’s long- term growth potential e ist Phase - Acquisition synergies » Integration » Economies of Scale e 2° Phase - Upside through value-added management, margin improvement e 3° Phase - Brownfield capacity expansion » Future industry capac
Slide 32: FY2006 focus
» FY2006 focus: > Implement Affinity integration plan, realise synergy targets for year > Continued focus on core hospital management expertise > Manage transition out of exclusive DVA contract > Effectively use robust cash flow to reduce gearing and invest in enhancing quality portfolio » FY2006 ye
Slide 33: Outlook
RAMSAY Outlook CAR, » Post divestments, undertake strategic review of all assets to optimise shareholder value » FY2006 post-divestments: > Core net profit growth expected to be significantly higher than pcp due to Affinity contribution > Targeting low double-digit core EPS growth (after payment of
Slide 34: RAMSAY
oe EN RAMSAY HEALTH CARE