Healius Limited · ASX:HLS
Healius — H1 2023 Earnings Presentation
27 slides from Healius's earnings presentation, Feb 27, 2023
Slide 1: 1H 2023 Results
1H 2023 Results 27 February 2023 New Omni PET/CT machine installed at St Vincent’s Private Hospital Northside 1
Slide 2: Acknowledgement of country
Acknowledgement of country We acknowledge the Gadigal People of the Eora Nation as the traditional custodians of the land on which we gather today, and pay our respects to their Elders – past, present and emerging 2
Slide 3: Today’s message
Today’s message It has been an extraordinary 3-year period of volatility – demonstrating Last 3 years the operating leverage of our pathology network and HLS’ ability to scale-up and scale-down capacity. The focus of the last 6 months has been resetting the fixed cost base (mostly labour via SIP), r
Slide 4: Context: An extraordinary last 3 years
Context: An extraordinary last 3 years COVID volumes demonstrated the operating leverage of the network – Pathology EBITDA margins peaking >40%. Responded to COVID volumes receding in previous six months by pulling out the COVID costs HLS pathology episodes (millions), ex PEI/P10 2.8 COVID BAU 100+
Slide 5: Context: Pathology sector revenue – Analysis prepared by Australian Pathology
Context: Pathology sector revenue – Analysis prepared by Australian Pathology Covid, Nucleic Acid and Gynae Cytopathology items excluded Average - Month Average – 12 Months Linear Fit Jul-05 to Feb-20 Linear Fit- Projected $14,000,000 Last 3 years $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000
Slide 6: Our strategic priorities
Our strategic priorities Recent focus has been increasing operating leverage through fixed cost reduction in Pathology. Looking forward, we are investing in profitable growth of the core diagnostic businesses along 4 strategic pillars Operating leverage Service Insights People Grow the network Roll-
Slide 7: Our capital management framework
Our capital management framework HLS’ medium-term strategy to maximise shareholder return is to invest in organic growth Capital management levers HLS current strategy 50-70% dividend payout ratio Dividends & buybacks No interim dividend – focus on debt reduction Maintenance capex $40-50m p.a. for l
Slide 8: Sustainability progress on roadmaps
Sustainability progress on roadmaps HLS reduced its Scope 1 and 2 emissions in 1H23; adopted Australian Cyber Security Standards and fast-tracked a suite of cyber risk mitigations Our Shareholders Our People ▪ Adopted the United Nations ▪ Driving gender diversity in leadership Sustainable Developmen
Slide 9: Group results
Group results 1H23 focus for HLS has been cost reduction to respond to the market conditions in Pathology. Promising recovery in Imaging 1H 2023 Group, $m Underlying1 Reported2 Period of substantial change BAU revenue 799.7 799.7 ▪ 88% drop in COVID PCR testing from historic highs in 1H22 – reason f
Slide 10: Group cost reset
Group cost reset 1H23 focus has been resetting the cost base to the $m (underlying) last pre-COVID period (1H20) FY20-23 (reset) CAGR Margins dependent on expected volume recovery 824 766 1% SIP Phase 2 ($67m annualised) completed, 735 102 88 primarily cost reduction 0% Other 88 115 ▪ Significant co
Slide 11: Pathology
Pathology 1H23 focus for HLS has been cost reduction (COVID and BAU- related) to respond to the market conditions while continuing the digital investment Underlying 1H 2023, $m ▪ BAU revenue/ACC up 8% v 1H20 BAU revenue 585.1 ▪ January BAU up 20% v soft pcp, up 10% v 1H20 revenue/ACC COVID – 19 reve
Slide 12: HLS Pathology – Revenue and network
HLS Pathology – Revenue and network The strategy until FY22 has been to consolidate the ACC network to release ▪ FY20-22 ACC unprofitable / unproductive revenue share. Now expanding the network to drive growth. consolidation to increase yield. 1H23 MBS change selective expansion -1% (1H23 v 1H20) of
Slide 13: Growing Pathology
Growing Pathology Focused on sustainable organic growth in the medium-term Expanding ACC network following a period of rationalisation; revenue per ACC +8% vs 1H20 Network 58 new sites in 1H23; strong pipeline of new sites to be opened in 2H23 expansion Maintaining leading presence at public and pri
Slide 14: Agilex
Agilex Scale-up is taking more time than anticipated. HLS has appointed a new $m CEO with Clinical Trials Experience. We remain confident in the market fundamentals, strategic rationale for +23% the acquisition, and Agilex’s competitive position. ~32 ▪ Translation of revenue growth to EBITDA is behi
Slide 15: Lumus Imaging
Lumus Imaging 1H23 focus has been investing in growth (especially radiologist recruitment). Promising volume recovery. Underlying 1H 2023, $m ▪ Lumus Imaging up 10% excluding MCs (8% overall) v 1H22 ▪ January trading: Lumus Imaging up 11% excluding MCs (9% overall) v Revenue 212.8 pcp EBITDA 46.9 ▪
Slide 16: Growing Imaging
Growing Imaging Focused on sustainable organic growth in the medium-term Successful recent imaging sites (e.g. Highfields); focus on radiologist, sono and nuc med recruitment Network Investment in greenfields and higher margin modalities in FY 2023 under national Lumus Imaging brand – 8 expansion PE
Slide 17: Cashflow
Cashflow Cash flow aligned to revenue recognition; targeted capex for sustainable growth $m, reported (31-Dec-22) Gross cash flows from operating activities 248 >100% conversion of Net income tax paid 78 EBITDA to gross operating cash flow with alignment of Net cash flows from operating activities 1
Slide 18: Maintenance capex
Maintenance capex ~$20-25m of maintenance capex (per half) is the range for long-term sustainability $m 35 ▪ Following the sale of Medical Centres, 30 maintenance capex reduced 25 ▪ 1H22 was unusually 23 25 high due to buy 21 21 versus lease 19 20 decisions in Imaging ▪ ~$20-25m is the range for lon
Slide 19: Debt management
Debt management Disciplined cost control to minimise net debt while trading conditions improve 1H23 2H23 Net debt $551m v $525m at 30/06/22 Drawn debt will reduce with receipt of funds from sale of Day Hospitals Gearing1 at 2.98x1 - covenant of <3.5x Expecting to be within both covenants at Interest
Slide 20: Digital – Holistic strategy across diagnostics
Digital – Holistic strategy across diagnostics Platform for pathology and radiology. Funding envelope $85-90M over 3 years. On track and on budget. x 1H23 Focus Referrals Bookings Tests Results Billings Pathology 3 4 5 6 1 2 Collections Courier Lab Instrument 9 10 Portal Portal Portal Manager Referr
Slide 21: Digital – Core enabler for growth and efficiency
Digital – Core enabler for growth and efficiency Building a competitive service model for customers and generating cost reductions through automation. Progress in H1 FY23 Focus for H2 FY23 Referral Hub – Seamlessly getting electronic referrals Booking Portal – Self-service online appointment from me
Slide 22: Digital – Building solutions that are future fit
Digital – Building solutions that are future fit Contemporary experience. Digitised workflows. Connected and accessible data sets. Agility to continuously improve. Going from outdated legacy systems… …to robust new clinical software 22
Slide 23: Digital – Building solutions that are future fit
Digital – Building solutions that are future fit Contemporary experience. Digitised workflows. Connected and accessible data sets. Agility to continuously improve. Going from poor doctor experiences… …to market leading functionality 23
Slide 24: Appendix
Appendix tthealius
Slide 25: Underlying v reported reconciliation 1H 2023
Underlying v reported reconciliation 1H 2023 1H 2023 Underlying EBIT 40.0 Underlying NPAT 8.1 Pathology digital transformation (9.7) After-tax adjustments to underlying EBIT (36.8) Write-down (impairment of leased assets (39.1) Tax differential for non-deductible items 3.3 Restructuring and terminat
Slide 26: Divisional reconciliation - underlying
Divisional reconciliation - underlying Pathology Imaging Corporate Group1 1H 2023, $M Revenue 649.5 212.8 2.0 864.1 EBITDA 136.5 46.9 (6.6) 176.8 EBIT 32.0 16.5 (8.5) 40.0 1H 2022, $M Revenue 1,112.3 199.6 3.4 1,315.1 EBITDA 473.1 43.5 (12.6) 504.0 EBIT 375.8 11.9 (14.6) 373.1 1 In 1H 2023 $0.2 mill
Slide 27: tihealius
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