New Frontier Health Corporation
New Frontier Health — Q1 2020 Earnings Presentation
51 slides from New Frontier Health's earnings presentation, May 27, 2020
Slide 1: New Frontier Health Q1 2020 Results
1 1 New Frontier Health Q1 2020 Results May 27, 2020
Slide 2: Disclaimer: Forward-Looking Statements
2 2 Disclaimer Forward - Looking Statements This presentation includes “forward - looking statements” within the meaning of the “safe harbor” provisions of the Private Securi ties Litigation Reform Act of 1995. The actual results of New Frontier Health Corporation (the “Company”) may differ from the
Slide 3: Table of Contents
3 3 Overview Q1 2020 Business Highlights Q1 2020 Financial R esults Growth Initiatives Appendix A - I ndustry Overview Appendix B - Additional Materials Table of Contents
Slide 4: Overview
4 4 Beijing United Family Hospital North ( 2020 ) OVERVIEW
Slide 5: Leading Private Healthcare Service Provider in China
5 5 Leading Private Healthcare Service Provider in China COMPREHENSIVE SERVICE OFFERING covering 30+ specialties 9 hospitals 1 14 clinics 1 1,000+ licensed beds 800+ physician staff 1000+ physician consultants 2019 A outpatient visits: ~ 6 33 ,000 2019 A inpatient visits: ~ 11, 000 Operating Assets
Slide 6: Nationwide Geographic Footprint
6 6 5 Hospitals Hub Spoke 8 Clinics Hub - and - Spoke Model 2 Hospitals Hub Spoke 4 Clinics Hub - and - Spoke Model 2 Hospitals Hub Spoke 2 Clinics Hub - and - Spoke Model Beijing Tianjin Qingdao Guangzhou Hangzhou Hainan Shenzhen 2 Shanghai Source: Company ; As of Dec 31, 2019 1. 5 hospitals in Bei
Slide 7: Diversified Foundation for Future Growth
7 7 Expat 46% Local 54% BROADER ADDRESSABLE MARKET WITH MORE LOCAL PATIENTS 3 Commercial Insurance 37% Self - pay 63% Diversified Foundation for Future Growth Expat 29% Local 71% MULTI - SPECIALTY SERVICE OFFERING 1 2019A Source: Company 1. OB/GYN: Obstetrics and Gynecology; Peds: Pediatrics; Ortho:
Slide 8: Revenue driven by high acuity departments; entire lifecycle coverage
8 8 Revenue driven by high acuity departments including Orthopedics & Surgery High Acuity 163 351 2014 2019A Surgery Orthopedics Potential for Dermatology, ENT 1 , Ophthalmology & New Hope Oncology Centre New Specialties 51 138 2014 2019A Ophthalmology ENT Dermatology Comprehensive Provider with Ent
Slide 9: One of the Most Reputable Private Healthcare Brands in China
9 9 UFH A B C D E 1.85 1.55 1.53 1.50 1.08 1.48 UFH A B C D E 1.75 1.64 1.55 1.38 1.30 1.38 One of the Most Reputable Private Healthcare Brands in China Ranks top for medical quality among high - end private hospitals by patients, doctors and government regulators Source: Company, Company Analysis 1
Slide 10: Asset Overview
10 10 Operating Stats 4 Open Date 1997/2014 2004 2019 2012 2015 2013 2018 2018 2020 2021 Signed MoU & framework agreement in major Tier 2 locations (lease / operate and management contract model) Gross Floor Area (sqm) 34,448 2 7,559 2 20,844 2 6,900 30,057 3 16,145 69,008 2 28,471 22,834 64,000 # o
Slide 11: 2019 Revenue / Pro-forma Adjusted EBITDA Summary
11 FY2019 Revenue (in million RMB) FY2019 Pro - forma Adjusted EBITDA (in million RMB) 2019 Revenue / Pro - forma Adjusted EBITDA 1 Summary 483 163 161 159 Tier 1 Operating Assets Total 0 HQ Tier 2 Operating & Other Assets Expansion Assets 1,811 359 280 Tier 1 Operating Assets Total Tier 2 Operating
Slide 12: Hospitals: Long Term Maturity Cycle
12 12 Hospitals: Long Term Maturity Cycle 0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900 950 1,000 1,050 1,100 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 QDU (20,057 sqm 3 ) BJU (24,959 sqm) PXU (previo
Slide 13: Significant White Space for Growth in Tier 1 Cities
13 Significant White Space for Growth in Tier 1 Cities 1 Tier 1 Cities # of UFH Patients 2 ~200,000 Tier 1 Cities Target Addressable Market 3 ~4.1 million Tier 1 Cities Total Resident Population 4 ~ 74 million ~5% ~0.3% Significant white space within Tier 1 Cities for future growth Source: Company A
Slide 14: Q1 2020 Business Highlights
14 14 Shanghai United Family Pudong Hospital Q1 2020 BUSINESS HIGHLIGHTS
Slide 15: Q1 2020 Operational and Financial Snapshot
15 15 Financial Snapshot Outpatient Visit - 41.0 % YoY 89,463 Visits Inpatient Admission - 20.7 % YoY Utilization Rate Compared to 36.1 % of 1Q19 32.7 % Operational Snapshot Adjusted EBITDA (before IFRS 16 Adoption) 1 RMB - 67.7 mn Total Revenue - 25.4 % YoY RMB 430.9 mn 2,056 Admissions Q1 2020 Ope
Slide 16: January 2020 Pre-COVID Status
16 January 2020 Pre COVID - 19 Status Up to Jan 20 th , we had recorded favorable growth trends compared with 2019 Notes: 1.Tier 1 Operating Assets mainly include Beijing United Family Hospital, Shanghai Puxi United Family Hospital and associated clinics 2.Tier 2 Operating & Other Assets mainly incl
Slide 17: Top Priority Is Health and Safety of Staff and Patients
17 Top Priority Is to Ensure the Health and Safety of Our Staff and Patients Specially approved fever clinics separating patient flows in major UFH hospitals Levered on global supply chain network to source adequate PPE inventory Temperature check stations at all entry points Restricted non
Slide 18: Supporting the Frontline Medical Staff Across China
18 Zhongnan Hospital of Wuhan University 武汉大学中南医院 Supporting the Frontline Medical Staff Across China In partnership with New Frontier Group and several strategic investors / partners Leveraged our global supply chain network to source urgently needed medical supplies Donated essential supplie
Slide 19: Significant Development in Oncology and Higher Acuity Services
19 Significant Development in Oncology and Other Higher Acuity Services We have been able to attract high acuity patients since the beginning of the pandemic, demonstrating the reputation and technical capabilities of UFH system Multiple high acuity surgical and ICU patients referred by external
Slide 20: COVID PCR and Antibody Testing Capabilities
20 COVID - 19 PCR and Antibody Testing Capabilities One of the few nationwide networks approved by government to provide the COVID - 19 PCR tests and antibody tests Started to test in mid - April and tested nearly 5 , 000 patients to date In discussions with a number of large Fortune 500 compa
Slide 21: Launched Online Consultation Service during the Pandemic
21 Launched Online Consultation Service during the Pandemic Launched online consultations in February and covered more than 30 specialties In total ~5,000 online consultation s to date 1 - ~30% patients are new to UFH, and ~8% patients covert from online to offline - Existing patient offline re
Slide 22: Revenue Recovering to >93% of 2019 by Last Week in May
22 22 Revenue is Recovering and Has Reached >93% of 2019 By Last Week in May 2019 2020 Q1 Wuhan Lift lock down 4 / 8 Chinese New Year 2019 Chinese New Year & Wuhan Lock down 1/23 B eijing lowered COVID - 19 emergency response to 2 nd level 4/30 - 42% - 25% - 7 % - 51% Post COVID - 19 Recovery Stage
Slide 23: Strong Recovery Post SARS in 2003
23 23 0 50 100 150 200 250 300 350 400 450 500 550 600 650 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Strong Recovery Post SARS in 2003 R evenue Picked Up Meaningfully Post SARS Outbreak Due to Higher Willingness to Spend on Premium Healthcare SARS epidemic Willingness to spend increas
Slide 24: Cost Saving Initiatives
24 24 C ost Saving Initiatives Note: 1. Before accounting for approximately RMB 15 million public company costs Post COVID - 19 Recovery Cost Savings at Facility Level Total 2020 HQ SWB Savings ~ - 14 Voluntary Pay Reduction & No Bonus Annualized Cost Savings from Headcount Reduction 120 - 160 ~ - 9
Slide 25: Cost Saving Initiatives (Cont'd)
25 25 C ost Saving Initiatives (Cont’d) Note: 1. Excluding relocation of CCC from headquarter to Beijing market Corporate Headquarters Facility - Level Reduced HQ headcount by ~ 50 or ~ 28 % of total headcount 1 from April through June Estimated to achieve run - rate cost savings of ~ 26 million
Slide 26: Synergy Through Beijing Market Restructuring
26 26 Meaningful Synergy Created Through Beijing Market Restructuring Starting in March, Consolidated 3 Hospitals and 8 Clinics in Beijing Under a Unified Leadership Revenue Synergy Cost Savings Removed the redundant administrative roles and streamlined the reporting structure Optimized approxim
Slide 27: New Member of the Board and Chairman of Audit Committee
27 New Member of the Board and Chairman of Audit Committee The board of directors has appointed Lawrence Chia as an independent director and the chairman of audit committee, effective March 31, 2020 CEO of the Samling Group of Companies , which has businesses in automobiles, properties, timber, in
Slide 28: Strategic Priorities in 2020
28 Strategic Priorities in 2020 Geographic Market Reorganization and Consolidation Ramp - up of Newly Opened Facilities (Shanghai Puxi , Shanghai Pudong and Guangzhou) Invest in Core Markets and Expand Capabilities in Selected Specialties Invest in Digital Capabilities Expand Tier 1 City O
Slide 29: Q1 2020 Financial Results
29 29 Shanghai United Family Hospital Q1 2020 FINANCIAL RESULTS
Slide 30: Q1 Revenue Impacted by COVID Outbreak
30 Q1 Revenue Impacted by COVID - 10 Outbreak 23 43 55 69 74 82 65 61 71 79 84 87 83 93 96 64 391 429 405 434 435 477 437 462 302 18Q3 577 470 20Q1 18Q1 640 18 18Q2 18Q4 19Q1 562 19Q2 628 19Q3 19Q4 520 507 604 431 20 Operating Tier 1 Operating Tier 2 & Other Assets Expansion Revenue (in million RMB)
Slide 31: Outpatient and Inpatient Volume by Segment
31 Outpatient and Inpatient Volume by Segment Outpatient Volume Inpatient Admission 521 291 378 392 446 361 1,575 561 514 581 616 528 614 616 451 1,612 1,597 1,686 1,687 1,789 1,598 1,850 1,244 2,096 37 2,175 18Q3 2,604 18Q1 2,912 18Q2 0 2 18Q4 19Q1 2,695 19Q2 19Q3 19Q4 2,148 2,430 2,594 20Q1 2,056
Slide 32: ASP Increased in Q1 Due to Higher Acuity Procedures
32 ASP 1 Increased in Q1 Due to Higher Acuity Procedures Outpatient ASP Inpatient ASP 83,932 89,969 19Q1 19Q3 20Q1 79,807 18Q3 19Q2 86,379 81,965 18Q1 89,755 92,964 19Q4 86,847 18Q4 18Q2 87,019 2,240 2,226 19Q2 2,608 18Q3 18Q2 2,358 18Q1 19Q1 2,267 19Q3 2,341 2,390 18Q4 2,383 20Q1 2,377 19Q4 9% 6% 4
Slide 33: Adjusted and Pro-forma Adjusted EBITDA
33 Adjusted and Pro - forma Adjusted EBITDA 1 Tier 1 Operating Assets Tier 2 Operating and Other Assets Expansion Assets Total (incl. HQ Expenses which are not shown above) 52.8 34.2 5.8 5.8 5.8 1.9 - 67.7 18Q2 18Q1 18Q3 18Q4 30.9 19Q1 19Q2 27.6 19Q3 25.7 19Q4 20Q1 35.9 50.5 - 10.9 8.8 36.7 58.6 40.
Slide 34: Operating Expenses: Lowered Cost Structure
34 34 Operating Expenses L owered Cost Structure Due to Cost Saving Initiatives 19Q1 326.6 20Q1 304.2 SWB 57% As % of Revenue 71% Salary, Wages & Benefits (in million RMB) 71.6 65.1 83.6 108.1 93.0 75.5 19Q1 2.3 255.0 4.0 3.4 4.6 256.2 20Q1 Impairment of Trade Receivable Supplies & Purchased Medical
Slide 35: Strong Balance Sheet and Limited Cash Outflow in Q1 2020
35 Strong Balance Sheet and Limited Cash Outflow in Q1 2020 Notes: 1. Adjusted cash spent for operating activities is defined as cash spent for operating activities less capital lease payments, a ddi ng back interest expense and one - off transaction related costs. See slide 50 for detailed reconcil
Slide 36: Growth Initiatives
36 36 Qingdao United Family Hospital GROWTH INITIATIVES
Slide 37: Managed Care
37 37 Managed Care Patient is paired with a Primary Care Provider Incentivizes pro - active prevention Aligns the interests of payer, provider and patient I ncentivizes chronic disease management I ncentivizes cost saving with no compromise on quality 1 2 3 4 5 Provider Patient Payer Shared Risk Mod
Slide 38: Enhance Clinic Networks in Existing Markets
38 38 Enhance Clinic Networks in Existing Markets Integrated Healthcare Services Model Generating Significant Synergies. Continue to Replicate Outpatient Networks in Existing Mar kets Significant Referral Revenue from Beijing Clinics (RMB mm) SUCCESSFUL HUB & SPOKE BUSINESS MODEL Source: Company; As
Slide 39: Upside Catalysts Delivering Additional Value
39 39 Upside Catalysts Delivering Additional Value CLEAR SPECIALTY FOCUS Continue deep specialization in select areas but maintain a comprehensive suite of services Grow IVF from Tianjin to nationwide New centers of excellence: oncology, orthopedics, ENT, sleep center, geriatric center, gyneco
Slide 40: Investment Highlights
40 40 Investment Highlights Well - established nationwide platform with scale and an experienced management platform 4 Attractive valuation on a sum - of - the - parts basis 5 Multi - dimensional growth opportunities 6 The leading comprehensive healthcare services provider with the most reputable br
Slide 41: Appendix A - Industry Overview
41 APPENDIX A - INDUSTRY OVERVIEW
Slide 42: Rapid Growth in Demand for Healthcare Services
42 42 REVENUE FOR HEALTHCARE SERVICES IN CHINA - HOSPITALS & PRIMARY CARE (US$ bn) 1 CAGR 13 - 18 (%) CAGR 18 - 23 (%) 22% 11% 21% 9% (US$ bn) 1 42% 58% 59% 59% 59% 60% 62% 41% 41% 41% 40% 38% Rapid Growth in Demand for Healthcare Services 23% 25% CAGR 17 - 23 (%) 20% 22% CAGR 13 - 17 (%) Source: NH
Slide 43: China is Under-penetrated in Private Healthcare
43 43 China is Under - penetrated in Private Healthcare 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 300 700 500 600 900 1,000 1,100 400 1,300 1,200 800 5,300 0 Germany SOUTH AFRICA Spain Private healthcare spending per capita (US$) Taiwan South Korea GDP per capita (US$ ‘000) Canada Japan Un
Slide 44: Top Trends in Chinese Public and Private Hospital Sectors
44 44 (2,300) ( RMB bn ) Top Trends in the Chinese Public and Private Hospital Sectors Source: Frost & Sullivan, PwC survey on urban middle class Chinese, National Health and Family Planning Commission, Company A nal ysis; As of 2016 SCARCITY AND UNEVEN DISTRIBUTION OF QUALITY MEDICAL RESOURCES IMME
Slide 45: Aging Population and Commercial Insurance Are Key Growth Drivers
45 45 25 40 64 103 314 106 139 183 240 483 131 179 247 343 797 90 109 155 212 303 7% 8% 11% 15% 22% 0 200 400 2000A 2010A 2020E 2030E 2040E Population Aged 65+ as % of Total Population Aging Population and Commercial Healthcare Insurance are Key Long - Term Growth Drivers of Healthcare Services 15%
Slide 46: Appendix B - Additional Materials
46 46 APPENDIX B – ADDITIONAL MATERIALS
Slide 47: Summary Shareholder Structure of NFH
47 47 Summary Shareholder Structure 1,2 of NFH 7% 11% 7% 4% 10% 61% New Frontier Group Other Public Investors Vivo Capital Capital Group Fosun UFH Management Free Float (%) ~90 Note : 1 . 131 mm s hares outstanding before accounting for roll - over NFH ESOP from UFH management and SPAC warrants (cur
Slide 48: Management Team of NFH
48 48 Management Team of NFH Roberta Lipson Antony Leung Carl Wu Executive Committee of the Board of Directors ▪ CEO of NFH ▪ Founder of United Family Healthcare ▪ Medical industry experience: 35+ years ▪ One of the most well - regarded healthcare executives in China ▪ Chairman of NFH ▪ Chairman / C
Slide 49: Experienced Board of Directors
49 49 Experienced Board of Directors Independent Non - executive Directors Antony Leung Carl Wu Non - Independent Directors ▪ Managing Director of New Frontier Group ▪ Blackstone Private Equity Group (HK) ▪ Barclays David Zeng ▪ Chairman of NFH ▪ Chairman / Co - Founder of New Frontier Group ▪ Forme
Slide 50: Reconciliation of Operating Cash Flow to Free Cash Flow
50 Reconciliation of Operating Cash Flow to Free Cash Flow (RMB million) 1Q20 Operating Cash Flow & Free Cash Flow: Operating Cash Flow (237) Less: Capital Lease Payments (3) (53) Add: Interest Expense 49 Add: One - off Transaction Expense 180 Adjusted Operating Cash Flow (61) Less: Maintenance CAPE
Slide 51: Reconciliation of Non-IFRS Financial Measures
51 51 Reconciliation of Non - IFRS Financial Measures Notes: 1. Monitoring fee payable to TPG and Fosun is not related to business operation and is discontinued from 2020 onwards 2. The adjustments include ( i ) giving a pro forma effect to annual rent reimbursement of approximately RMB15 million wh