Primary Health Care — FY2015 Earnings Presentation
26 slides from Primary Health Care's earnings presentation, Aug 12, 2015
Slide 1: FY15 Results
Primary Health Care FY 15 RESULTS 12 AUGUST 2015 1
Slide 2: Year in Review: Results overview
YEAR IN REVIEW Results overview FY15 FY14 • Solid revenue growth across core businesses $ million Underlying 1 Restated • Underlying EBITDA flat, NPAT up on FY14 Revenue 1,618.5 1,524.1 • Margin pressure: EBITDA 400.5 399.1 • Challenging transition year EBIT 248.1 255.5 • One-off issues including Vi
Slide 3: Financials
Primary Health Care FINANCIALS 3
Slide 4: Financial Performance
FINANCIAL PERFORMANCE Year ended 30 Year ended 30 Year ended 30 $ million June 2015 June 2015 June 2014 (Underlying) 1 (Reported) (Restated) Revenue 1,618.5 1,618.5 1,524.1 EBITDA 400.5 260.0 399.1 Depreciation and Amortisation (152.4) (162.1) (143.6) EBIT 248.1 97.9 255.5 Finance costs (66.5) (66.5
Slide 5: Medical Centres
MEDICAL CENTRES Year ended Year ended $ million 30 June 2014 % change 30 June 2015 (Restated) Revenue 327.9 309.6 5.9% EBITDA 180.1 175.8 2.4% Depreciation (20.4) (18.3) (11.5)% Amortisation (55.8) (50.0) (11.6)% EBIT 103.9 107.5 (3.3)% EBIT margin (%) 31.7% 34.7% (300)bps • Strong revenue growth •
Slide 6: Pathology
PATHOLOGY Year ended Year ended $ million 30 June 2014 % change 30 June 2015 (restated) Revenue 937.8 887.4 5.7% EBITDA 153.4 156.7 (2.1)% Depreciation & Amortisation (24.4) (22.3) (9.4)% EBIT 129.0 134.4 (4.0)% EBIT margin (%) 13.8% 15.1% (130)bps • Revenue growth strong and in line with expectatio
Slide 7: Imaging
IMAGING Year ended Year ended $ million 30 June 2014 % change 30 June 2015 (restated) Revenue 339.0 316.1 7.2% EBITDA 73.3 73.0 0.4% Depreciation & Amortisation (39.0) (38.2) (2.1)% EBIT 34.3 34.8 (1.4)% EBIT margin (%) 10.1% 11.0% (90)bps • Revenue growth strong, helped by immigration visa medicals
Slide 8: Medical Director
MEDICAL DIRECTOR Year ended Year ended $ million 30 June 2014 % change 30 June 2015 (restated) Revenue 38.2 37.3 2.4% EBITDA 20.2 20.2 in line Depreciation & Amortisation (6.3) (8.8) 28.4% EBIT 13.9 11.4 21.9% EBIT margin (%) 36.4% 30.6% 580bps • Strong growth in the two core revenue streams: • GP &
Slide 9: Cash Flow
CASH FLOW $500 $400 (129) Cash Flow $ million $300 $200 377 (123) $100 (63) (54) (90) 104 27 50 $0 -$100 Cash at Start Gross Interest & PPE Barangaroo, Doctor Net Dividends Cash at End of Year Operating Tax THI, VEI Acquisitions Borrowings of Year Cash Flow • 94% conversion of Underlying EBITDA to G
Slide 10: Net Debt and Gearing
NET DEBT AND GEARING As at As at $ million 30 June 2015 30 June 2014 Bank and finance debt 1,053.2 945.3 Cash (50.0) (27.5) Retail Bonds 152.3 152.3 Net debt2 1,155.5 1,070.2 Gearing 32.1% 31.1% • Gearing increase primarily due to capital expenditure including Barangaroo and Transport Health • VEI s
Slide 11: Strategic Review
Primary Health Care STRATEGIC REVIEW 11
Slide 12: Model has attractive fundamentals
MODEL HAS ATTRACTIVE FUNDAMENTALS IMAGING PATHOLOGY MEDICAL DIRECTOR World Class Labs MEDICAL CENTRES Large Scale Multidisciplinary SPECIALISTS ALLIED HEALTH Cardiologists, neurologists, IVF, Audiologists, chiropractors, dermatologists, endocrinologists, dieticians, occupational therapists, gastroen
Slide 13: Medical Centres: Invest for Growth, Improve ROI
MEDICAL CENTRES INVEST FOR GROWTH IMPROVE ROI • Accelerate roll-out from flat base • Improve HCP recruitment and retention • Capacity to grow market share • ATO issues resolved with positive feedback • Large-scale centres drive revenue across • Flexible recruitment and retention models Group • T
Slide 14: Pathology: Invest for Growth, Improve ROI
PATHOLOGY INVEST FOR GROWTH IMPROVE ROI • Expand service offering e.g. genetic testing • Continue investment to lower cost base • Focus on Government outsourcing contracts • Expand collection centres only at rents which deliver reasonable returns • Explore opportunities offshore 14
Slide 15: Imaging: Invest for Growth, Improve ROI
IMAGING INVEST FOR GROWTH IMPROVE ROI • Alignment of remuneration and performance • Bridge Road Imaging Centre is the 1st large scale centre and model for future centres • Greater efficiencies in costs including funding • Focus on large scale sites • Use of Property Trust to reduce capital costs
Slide 16: Medical Director: Invest for Growth, Improve ROI
MEDICAL DIRECTOR INVEST FOR GROWTH IMPROVE ROI • Continue new product development e.g. online • Evaluate strategic partners to provide expertise appointments • Evaluate optimal capital structure • Develop new income streams e.g.: • e-health • consumer connectivity 16
Slide 17: Capital Management: Strengthen Balance Sheet
CAPITAL MANAGEMENT STRENGTHEN BALANCE SHEET Capital recycling • VEI sale in July ~$38 million • Barangaroo property - ‘held for sale’ Capital Expenditure • Full review including property and IT Property Trust • New investments off balance sheet including Bridge Road Imaging ATO refunds Dividend po
Slide 18: Stakeholder Engagement
STAKEHOLDER ENGAGEMENT Patients • Service innovations • Multi-disciplinary medical centres Staff • Performance-based remuneration model HCPs • Communication and • $110 million ATO settlement collaboration across • Flexible the group recruitment/retention models • Single head office • Primary Health
Slide 19: Profit Improvement Program
PROFIT IMPROVEMENT PROGRAM Procurement benefits Removal of duplication Back office Capture network Capex review benefits REIT structure Better HCP 2-3% margin Retention uplift Lower Capital Revenue Efficiency Gains Costs Improvements 19
Slide 20: Summary
SUMMARY Results overview • Solid revenue growth across core businesses • Underlying EBITDA flat, NPAT up on FY14 • Margin pressure: • Challenging transition year • One-off issues including Vitamin D, B12 and Folate Medicare cuts • Uncertainty for HCPs around ATO issue / co-payments Strategic Review
Slide 21: Appendices
Primary Health Care APPENDICES 21
Slide 22: Reconciliation of reported to underlying
Reconciliation of reported to underlying $ million EBITDA D&A Tax NPAT Reported 260.0 (162.1) 105.1 136.5 Less: ATO refund for tax deductibility of medical practice - - (155.7) (155.7) acquisitions Plus: ATO settlement on behalf of 110.5 - - 110.5 healthcare practitioners Plus: Impairment of assets
Slide 23: Change in accounting policy for healthcare practice acquisitions
Change in accounting policy for healthcare practice acquisitions Background • Change in accounting policy for acquisition of healthcare practices was made HY15 • Impacts accounting for doctors’ acquisitions in Medical Centres (GP, specialist and allied health) and Imaging • No impact on Pathology Ne
Slide 24: Change in accounting policy for healthcare practice acquisitions
Change in accounting policy for healthcare practice acquisitions Financial implications • No change to EBITDA • No change to cash spend • No change to dividends per share • No impact on debt covenants • Incremental amortisation expense $55.0 million in FY15 ($49.7 million in FY14 restated) • Impact
Slide 25: Change in accounting policy for healthcare practice acquisitions
Change in accounting policy for healthcare practice acquisitions Taxation implications • Healthcare Practitioners acquired 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 in
Slide 26: 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