Healius Limited · ASX:HLS
Healius — H1 2020 Earnings Presentation
34 slides from Healius's earnings presentation, Feb 26, 2020
Slide 1: 1H 2020 Results
1H 2020 Results Half year ended 31 December 2019 26 February 2020
Slide 2: 1H 20 overview
1H 20 overview GROUP PATHOLOGY IMAGING MEDICAL CENTRES Strategic review identified key long- Strong revenue growth from a mix of Good revenue growth underpinned Investment for long-term growth with term growth opportunities and volume and fees, underpinned by by ramp-up of NBH2 and ADF3 qual
Slide 3: Medical Centres – Investment for future growth
Medical Centres – Investment for future growth Now Pre-2016 2016 - 2019 2020 onwards Legacy Business Model Transformation Sustainable Growth o Rigid general practitioner contracts o Introduced new engagement model attractive to GPs o Strong brand Doctor o Primary Health Care brand had poor o Removed
Slide 4: Group results
Group results 4 1H 2020 Results
Slide 5: Group results
Group results Group Underlying1 Reported2 $m 1H 2020 1H 2019 1H 2020 1H 2019 Revenue 945.1 878.9 945.1 878.9 EBIT 75.7 72.7 45.0 51.0 NPAT 42.1 39.1 66.3 20.4 • Underlying results: o Underlying has been shown before AASB16 adjustments to enable comparability to 1H191 o Revenue up 7.5% with Pathology
Slide 6: Sustainable Improvement Program
Sustainable Improvement Program • Driving efficiencies and price savings to offset cost inflation through property (network rationalisation), labour, consumables and IT • 2-3 year process with progressive growth in savings In 1H20, SIP reduced Opex by $20m (2.6% of cost base) with largest savings on
Slide 7: Free cash flow
Free cash flow 200 180 (32) 150 (19) 129 (35) $m 100 70 (51) (90) 50 43 (21) 2 0 Gross Interest Tax Operating Maintenance Growth capex Cash flow Proceeds from Lease Dividends Net increase operating cash flow capex after investing borrowings liabilities in cash cash flow • Operating Cash Flow: o Pre-
Slide 8: Net debt and dividend
Net debt and dividend Reported As at 31 December 30 June $m 2019 2019 Bank and finance debt 867.9 797.9 Cash (121.3) (119.7) Net debt 746.6 678.2 Bank gearing ratio (covenant <3.5x)1 2.7x 2.4x Bank interest ratio (covenant >3.0x) 9.6x 9.5x Gearing (net debt: net debt + equity) 26.4% 24.9% • Leverage
Slide 9: Divisional Results and Strategies
Divisional Results and Strategies
Slide 10: Pathology - results
Pathology - results Underlying 1H 2020 1H 2019 Better/ $m $m (worse) % Revenue 583.0 551.5 5.7 EBITDA 62.9 58.8 7.0 Depreciation (10.2) (10.0) (2.0) Amortisation (3.0) (3.8) 21.1 EBIT 49.7 45.0 10.4 Total capital expenditure 23.9 16.7 (43.1) • Above market revenue growth of 6%1: o Mix of volume and
Slide 11: Pathology - strategy
Pathology - strategy Cost control • On-going optimisation of regional lab network and consolidation of esoteric testing • Successful focus on returns metrics within ACC and hospital footprints • Further efficiencies to be delivered Investment • Upgraded Serum Work Area (main lab testing equipment).
Slide 12: Imaging - results & strategy
Imaging - results & strategy Underlying 1H 2020 1H 2019 Better/ $m $m (worse) % Revenue 201.8 192.0 5.1 EBITDA 28.6 26.2 9.2 Depreciation (6.2) (6.7) 7.5 Amortisation (1.1) (1.2) 8.3 EBIT 21.3 18.3 16.4 Total capital expenditure 7.2 11.4 36.8 • Revenue up 5%: 14% EBIT CAGR in past 3 years o New/expa
Slide 13: Medical Centres - group results
Medical Centres - group results Underlying 1H 2020 1H 2019 Better/ $m $m (worse) % Revenue 183.2 155.8 17.6 EBITDA 30.0 29.6 1.4 Depreciation (11.5) (9.9) (16.2) Amortisation (2.2) (1.8) (22.2) EBIT 16.3 17.9 (8.9) HCP capital expenditure 15.7 15.5 (1.3) Total capital expenditure1 36.0 46.0 21.8 • R
Slide 14: Medical Centres - GP results
95 sites nation-wide Medical Centres - GP results 73 Healius Medical Centres 62 with Dental sites 4 with IVF clinics Healius Medical Centre GPs1 13 Health & Co • Cohort of 1,155 GPs (969 FTEs2) 14 Day Hospitals (9 stand-alone) • 101 recruited (94 BaU, 5 M&A, 2 Registrars). Departures higher at 110,
Slide 15: Medical Centres - GP strategy
Medical Centres - GP strategy People • Ongoing strong pipeline for 2H20 testament to quality of brand and offerings to GPs • Focus on continued recruitment of quality GPs, better service and engagement, investment in frontline staff • Moderated M&A spend but range of infill opportunities remain • Gr
Slide 16: Medical Centres - GP strategy
Medical Centres - GP strategy Property • 15 better performing centres refurbished in FY19, 1H20 further 1 centre / 6 skin / treatment rooms • Filling capacity created: 19 FTEs commenced / 30+ in pipeline for FY19 centres Targets update • Investment: o $59m of $140m spent (FY19 $45m 1H20 $14m) with $
Slide 17: Emerging businesses - Dental & IVF
Emerging businesses - Dental & IVF Dental • Dental in 62 Medical Centres with 169 Dentists, 126 FTEs • Revenue up 8% to $20m and EBIT at $3m • Further dental expansions under Leapfrog Adora Fertility • Completed move to Westside Day Hospital in Brisbane • Market share up to over 10% (WA over 30%) •
Slide 18: Emerging businesses - Day Hospitals
Emerging businesses - Day Hospitals Montserrat • Diversified revenue platform • $18m revenue, $3.5m EBITDA and $2m EBIT • 3 new centres ramping up including Brisbane’s multi-specialist Westside Private • Westside delivered $1m EBITDA in first full 6 months • Expecting further strong growth in 2H20 a
Slide 19: Corporate and wrap-up
Corporate and wrap-up Corporate • $11.6m in corporate costs, up on 1H19 but in line 2H19. • Cost reductions partially offsetting increases in activity-related property costs and insurance premiums Organisational redesign • Simplified Group management structure • Further savings identified in 2H20 Fo
Slide 20: A market leading network
A market leading network 19 Total Sites Australia-wide 690 Total Sites coverage 19 2,574 Total sites 220 Total Sites 637 19 34 2,334 2,235 ACCs v 56 Total Sites 99 Laboratories 204 12 4 Pathology 841 Total Sites 44 7 5 ACT 73 Healius Medical Centres 40 Total Sites 95 62 with Dental sites 742 36 63 4
Slide 21: Appendices Reconciliations
Appendices Reconciliations
Slide 22: Divisional reconciliation
Divisional reconciliation 1H 2020 Pathology Medical Centres1 Imaging Corporate Group2 $m Revenue 583.0 183.2 201.8 0.0 945.1 EBITDA 62.9 30.0 28.6 (8.5) 113.0 Depreciation (10.2) (11.5) (6.2) (1.8) (29.7) Amortisation (3.0) (2.2) (1.1) (1.3) (7.6) EBIT 49.7 16.3 21.3 (11.6) 75.7 1H 2019 Pathology Me
Slide 23: Underlying v reported reconciliation
Underlying v reported reconciliation 1H 2020 Restructuring/strategic Underlying pre Reported Impairments Tax case Underlying AASB 16 impact $m initiatives AASB 16 EBIT 45.0 31.0 8.3 84.3 (8.6) 75.7 Interest (13.5) (23.3) (36.8) 21.2 (15.6) PBT 31.5 47.5 12.6 60.1 Income Tax benefit/(expense)1 34.8 (
Slide 24: Strategic projects
Strategic projects 1H 2020 Laboratory Leapfrog iCAR Corporate Total $m Platforms Total Opex (adjusted between reported and underlying) 6.0 6.1 1.9 3.0 17.0 Property, plant & equipment 0.8 3.6 0.0 0.0 4.4 Intangibles 3.3 4.1 3.0 4.6 15.0 Total Capex 4.1 7.7 3.0 4.6 19.4 Total Project Costs 10.1 13.8
Slide 25: Tax case 2003-2007
Tax case 2003-2007 • Healius was advised in 2015 by the Commissioner of Taxation (“the Commissioner”) that lump sum payments made by it to healthcare practitioners for the financial years 2010 to 2014 were tax deductible. • Healius subsequently filed an application for similar tax deductions for the
Slide 26: Accounting change AASB 16
Accounting change AASB 16 AASB 16, which removes the distinction between operating and finance leases, was adopted on 1 July 2019. It has impacted the reported results of Healius in 1H20 but has no economic impact on Healius, nor on its covenants, cashflows or shareholder value. The impacts are summ
Slide 27: Accounting change AASB 16 - P&L
Accounting change AASB 16 P&L 1H20 1H20 $'m $'m Property & other expenses 105.7 Operating lease expense reversed EBITDA 105.7 Depreciation (97.1) Depreciation of right of use asset recognised EBIT 8.6 Finance costs (21.2) Interest paid on lease liability recognised Profit before tax (12.6) Tax @ 30%
Slide 28: Accounting change AASB 16 - cash flow and balance sheet
Accounting change AASB 16 Cash Flow 1H20 1H20 $'m $'m Gross cash flows from operating activities 108.6 Operating lease payments reversed from gross operating cash flow s Interest paid on lease liabilities (18.2) Interest paid on lease liability recognised in operating cash flow s Net cash provided b
Slide 29: Appendices Medical Centres
Appendices Medical Centres Additional Information
Slide 30: Healius Medical Centres GPs - Key Drivers
Healius Medical Centres GPs - Key Drivers GPs 1H 2020 1H 20191 1H 20181 Better/(worse) % 1H20-1H19 Headcount 1,155 1,072 1,060 7.7 FTEs 2 969 931 963 4.1 Gross billings ($m) 213.8 211.5 214.4 1.1 Share of revenue (%)3 31.3% 32.8% 33.6% (152) pp Revenue ($m)3 66.9 69.4 72.0 (3.6) GP capital expenditu
Slide 31: Healius Medical Centres GPs - Recruitment
Healius Medical Centres GPs - Recruitment 200 25 150 20 100 GP capex ($m) 15 50 # of GPs 0 1H16 2H16 1H17 2H17 1H18 2H18 1H19 2H19 1H20 10 (50) 5 (100) (150) 0 Starters (LHS axis) M&A (LHS axis) Registrars (LHS axis) Leavers (LHS axis) HLS initiatives After-tax capex (RHS axis) 31 1H 2020 Results
Slide 32: Healius Medical Centres - Tax implications of HCP acquisitions
Healius Medical Centres - Tax implications of HCP acquisitions Healthcare Professionals 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
Slide 33: Disclaimer
Disclaimer This presentation has been prepared by Healius Limited (ACN 064 530 516) (‘HLS’). Material in this presentation provides general background information about HLS which is current as at the date this presentation is made. Information in this presentation remains subject to change without n
Slide 34: tinealius
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