Healius Limited · ASX:HLS
Healius — H1 2018 Earnings Presentation
28 slides from Healius's earnings presentation, February 2018
Slide 1: 1H18 Results
1H18 RESULTS 6 MONTHS ENDED 31 DECEMBER 2017
Slide 2: Group Results
GROUP RESULTS 2 1H 2018 RESULTS
Slide 3: Growth in Profit and FCF
GROWTH IN PROFIT AND FCF Group Underlying1 Reported2 $m 1H 2018 1H 2017 1H 2018 1H 2017 Revenue 856.5 808.7 856.5 808.7 EBIT 81.3 81.9 61.6 61.1 NPAT 44.0 41.9 22.1 21.1 As at 31 Dec 2017 31 Dec 2016 Free cash flow3 45.7 23.9 Dividend cps 100% franked (60% UNPAT) 5.1 4.8 » 6% revenue growth with inc
Slide 4: Further Increase in Free Cash Flow
FURTHER INCREASE IN FREE CASH FLOW 250 $59m capex includes $32m for growth $46m FCF funded dividend and net debt reduction 200 92 (31) (7) 1 150 105 (21) (30) (4) $m 46 100 17 13 50 95 95 95 95 - Opening cash OCF PPE Net HCP Other Net cash after Capital Dividends Net cash after Reduction in Closing
Slide 5: Progressive Decrease in Debt
PROGRESSIVE DECREASE IN DEBT Reported As at $m 31 Dec 2017 30 June 2017 Total debt 878.6 879.7 Cash (108.0) (95.5) Net debt 770.6 784.2 Bank gearing ratio (covenant <3.5x) 2.52x 2.51x Bank interest ratio (covenant >3.0x) 8.78x 7.86x Gearing (net debt: net debt + equity) 29.3% 29.6% » Significant imp
Slide 6: BAU Delivers 3.8% EBIT Growth
BAU DELIVERS 3.8% EBIT GROWTH Underlying 1H 2018 1H 2017 Better/ $m $m (worse) % EBIT 81.3 81.9 (0.7) New centres / Health & Co 5.8 2.0 EBIT Business as Usual 87.1 83.9 3.8 » 1H18 underlying EBIT up 3.8% (underlying NPAT up 11.8%) on BaU basis, reflecting new sites opening this year » Recognises net
Slide 7: Digital Investment to Drive Better Services and Efficiencies
DIGITAL INVESTMENT TO DRIVE BETTER SERVICES AND EFFICIENCIES » Deliver modern platforms with an enhanced digital presence, tools and marketing » Medical Centres Clinical and Practice Management System (PMS) and Imaging Core Application Refresh (iCAR) projects underway - to complete over next 18-24 m
Slide 8: Focus on Underlying Results
FOCUS ON UNDERLYING RESULTS $m 1H 2018 1H 2017 Reported EBIT 61.6 61.1 Restructuring - redundancies & other termination payments 5.8 2.1 Technology strategic initiatives 5.9 1.4 Other strategic initiatives 4.6 3.8 Business set-up costs 1.4 2.4 Restructuring and strategic initiatives 17.7 9.7 Non-rec
Slide 9: Divisional Results & Strategies
DIVISIONAL RESULTS & STRATEGIES 9 1H 2018 RESULTS
Slide 10: Pathology: ACC Costs Growing Less Than Revenue
PATHOLOGY: ACC COSTS GROWING LESS THAN REVENUE Underlying 1H 2018 1H 2017 Better/ $m $m (worse) % Revenue 534.0 504.9 5.8 EBITDA 67.0 64.6 3.7 Depreciation (9.7) (9.5) (2.1) Amortisation (4.4) (3.8) (15.8) EBIT 52.9 51.3 3.1 Capital expenditure 7.9 13.8 42.8 » 5.8% revenue growth with increases in b
Slide 11: Top-Line Growth, ACC Optimisation and Infrastructure Improvements
TOP-LINE GROWTH, ACC OPTIMISATION AND INFRASTRUCTURE IMPROVEMENTS » Growth – Whole-of-Primary approach – Expanding Medical Centres footprint / optimising hospital contracts – Specialty partnerships – genetics, vets, histopathology » ACC optimisation – Better service levels to reduce leakage – Rent n
Slide 12: PRY Medical Centres: Changing Metrics as Contracts Transition
PRY MEDICAL CENTRES : CHANGING METRICS AS CONTRACTS TRANSITION Underlying 1H 2018 1H 2017 Better/ $m $m (worse) % Revenue 159.3 157.0 1.5 EBITDA 54.3 65.4 (17.0) Depreciation (8.7) (10.7) 18.7 Amortisation (23.6) (27.8) 15.1 EBIT 22.0 26.9 (18.2) HCP capital expenditure 16.1 17.2 6.4 EBITDA – HCP ca
Slide 13: It's All About the Right GPs in Right Clinics
IT’S ALL ABOUT THE RIGHT GPS IN RIGHT CLINICS » Recruitment – Simplified contracts – fewer restraints in ‘Workplace of Choice’ environment – Locally-based, internal recruitment team – Right GPs in the right places – Quality initiatives » Project Leapfrog – Giving GPs what they want in the work envir
Slide 14: Leapfrog to Evolve the Operating Model
LEAPFROG TO EVOLVE THE OPERATING MODEL » Recruitment – Simplified contracts – fewer restraints in ‘Workplace of Choice’ environment – Locally-based, internal recruitment team – Right GPs in the right places – Quality initiatives » Project Leapfrog ‒ Giving GPs what they want in the work environment:
Slide 15: Other Growth Initiatives
OTHER GROWTH INITIATIVES » Recruitment – Simplified contracts – fewer restraints in ‘Workplace of Choice’ environment – Locally-based, internal recruitment team – Right GPs in the right places – Quality initiatives » Project Leapfrog – Giving GPs what they want in the work environment: appointments,
Slide 16: Health & Co: More Ambitious M&A Program
HEALTH & CO: MORE AMBITIOUS M&A PROGRAM Underlying 1H 2018 1H 2017 Better/ $m $m (worse) % Revenue 2.7 0.2 EBITDA (2.5) (0.8) EBIT (2.5) (0.8) Capital expenditure 3.1 8.3 62.7 » Existing clinics 100% retention, successful recruitment of new GPs and improved performance » Increase in loss with ramp-u
Slide 17: Imaging: Growth in Revenue and EBIT
IMAGING: GROWTH IN REVENUE AND EBIT Underlying 1H 2018 1H 2017 Better/ $m $m (worse) % Revenue 179.3 162.8 10.1 EBITDA 28.7 27.7 3.6 Depreciation (7.0) (7.8) 10.3 Amortisation (5.3) (5.6) 5.4 EBIT 16.4 14.3 14.7 HCP capital expenditure 1.8 2.1 14.3 Capital expenditure 10.3 16.8 38.7 » Revenue up 10.
Slide 18: Portfolio Alignment, Operational Excellence and Technology Uplift
PORTFOLIO ALIGNMENT, OPERATIONAL EXCELLENCE AND TECHNOLOGY UPLIFT » Portfolio alignment to hospital sector, Primary’s medical centres and high-end specialised sites – Hospital contracts (BPI) – Northern Beaches Hospital critical for enhancing reputation (due to open October 18) – Primary’s new large
Slide 19: Wrap-Up
Primary Medical Centre |: |) (|) CRAIGIEBURN, WRAP-UP 19 «1H 2018 RESULTS *
Slide 20: Healthcare Delivery Is Changing: Primary to Be at Forefront
HEALTHCARE DELIVERY IS CHANGING: PRIMARY TO BE AT FOREFRONT » More positive short-term policy settings but funding pressures remain » Important juncture in healthcare delivery with cost, convenience and technology shaping future consumer demands » Care must move out of hospitals into the community w
Slide 21: Appendices: A Market Leading Network
APPENDICES A market leading network AUSTRALIA-WIDE COVERAGE 2,613 Total sites 20 TOTAL SITES 675 TOTAL SITES 20 216 TOTAL SITES 75 70 Primary Medical Centres 14 627 34 7 205 4 66 TOTAL SITES Centres 5 Health & Co 853 TOTAL SITES 5 56 5 32 759 62 2,396 2,288 ACCs 40 TOTAL Pathology 108 Laboratories S
Slide 22: Improving Industry Trends
IMPROVING INDUSTRY TRENDS Pathology: Market Services & Benefits Diagnostic Imaging: Market Services & Benefits 12% 10% 9% 10% 8% 5 year growth rate of 6.3% 8% 7% 5 year growth rate of 4.1% 6% 6% 5% 4% 4% 2% 3% 2% 0% 1% ‐2% 0% Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec
Slide 23: Divisional Reconciliation
DIVISIONAL RECONCILIATION 1H 2018 Pathology Medical Imaging Corporate Group2 $m Centres1 Revenue 534.0 162.0 179.3 - 856.5 EBITDA 67.0 51.8 28.7 (5.5) 142.0 Depreciation (9.7) (8.7) (7.0) (1.3) (26.7) Amortisation (4.4) (23.6) (5.3) (0.7) (34.0) EBIT 52.9 19.5 16.4 (7.5) 81.3 1H 2017 Pathology Medic
Slide 24: Medical Centres Reconciliation
MEDICAL CENTRES RECONCILIATION 1H 2018 Primary Health & Co Medical Centres $m Medical Centres Revenue 159.3 2.7 162.0 EBITDA 54.3 (2.5) 51.8 Depreciation (8.7) - (8.7) Amortisation (23.6) - (23.6) EBIT 22.0 (2.5) 19.5 1H 2017 Primary Health & Co Medical Centres $m Medical Centres Revenue 157.0 0.2 1
Slide 25: PRY Medical Centres: GP Key Drivers
PRY MEDICAL CENTRES: GP KEY DRIVERS GPs 1H 2018 1H 2017 1H 2016 Better/ Better/ (worse) % (worse) % 1H 18-17 1H 18-16 Headcount 1,055 979 955 7.8 10.5 FTEs1 958 922 923 3.9 3.8 Gross billings ($m) 212.2 206.5 207.5 2.8 2.3 Share of revenue (%) 41.3% 44.9% 47.3% (360) pp (600) pp Revenue ($m)2 87.7 9
Slide 26: PRY Medical Centres: GP Recruitment
PRY MEDICAL CENTRES: GP RECRUITMENT GP recruitment » Recruitment and retention are critical success factors - right GPs in right clinics is paramount 91 » 67 GPs recruited, 50 leavers of which 20 due to clinic closures and quality reset program 67 » Retention at 95% across cohort = industry levels 6
Slide 27: HCP Acquisitions: Tax Implications
HCP ACQUISITIONS: TAX IMPLICATIONS » Healthcare Practitioners 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 ensur
Slide 28: 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