1H 2019 Results Half year ended 31 December 2018 15 February 2019 - PowerPoint PPT Presentation

1H 2019 Results Half year ended 31 December 2018 15 February 2019

Our Group Design concept

A market leading network 19 Total Sites Australia-wide 680 Total Sites coverage 19 2,541 Total sites 212 Total Sites 625 21 34 v 61 Total Sites 2,191 ACCs 2,299 197 11 4 108 Laboratories Pathology 851 Total Sites 49 7 5 ACT 75 Healius Medical Centres 32 Total Sites 96 61 with Dental sites 750 36 65 5 with Day Hospitals Medical Centres 4 with IVF clinics & Day Hospitals 3 27 2 13 Health & Co 8 Montserrat Day Hospitals 660 Total Sites 26 Total Sites 28 Hospitals 146 606 19 35 Diagnostic 63Community Centres 26 *as at January 2019 55 Medical Centres Imaging 3 1H 2019 Results

Our vision Healius • New Purpose, Mission and Values OUR PURPOSE OUR MISSION • Underpinned by a new brand and name: ‘Healius’ We are inspired to care for your We share a mission to seek and health and wellbeing at every sustain life-enhancing healthcare stage of life. delivered by people who care. Vision • Substantial shift in value proposition • Become Workplace of Choice in frontline healthcare OUR VALUES • Deliver care when, where and how consumers need it • Maximise value of data analytics in delivering company strategy Clear and comprehensive strategy 1 • Repositioning the model in Medical Centres • Leading-edge infrastructure platforms inc. Pathology and Imaging • Modernisation of corporate support functions • Developing Dental, IVF, Day Hospitals • Successful capital raise enabling momentum in programs • Investing ahead of returns. Full realisation of benefits takes time • Expected to deliver material operational, clinical and financial improvements 1 Refer slide 27 for initiatives across the group 4 1H 2019 Results

Key achievements in 1H 2019 Medical Centres EBIT up nearly 50% on 2H 2018 lows  48% increase in GPs recruits  Gross billing up (average $234/ph in January)  Appointment roll-out to 39 MD3 /7 MedTech centres. All moving to single PMS  Property expansion in Maroubra with 15 to complete 2H 2019 Imaging EBIT up 13% on pcp  Winning the imaging services contract for ADF Health Services, as partner to BUPA  Successful Northern Beaches Hospital (NBH) opening with new fully-licenced MRI Concept design Siemens MRI, NBH  iCAR roll-out: 30 live sites, 50% radiologists trained, $11m in annualised benefits identified 5 1H 2019 Results

A transformation-in-progress However, near-term results not reflective of the future • Soft market conditions in all divisions in 1H 2019 • Cleared the decks on known legacy matters, addressed Dorevitch / Medical Centres award pay • Medical Centres not yet delivering future state 2H 2019 increase in contribution • Strong GP recruitment with 32 GPs / 22 FTEs in January, good pipeline • Market conditions expected to improve throughout remainder of 2H 2019 and to normalise to long-term averages • 2H 2019 $10m EBIT benefit of productivity programs in Pathology and Imaging Concept design 6 1H 2019 Results

Group results 1 2 Group Underlying Reported $m 1H 2019 1H 2018 1H 2019 1H 2018 Revenue 870.6 832.7 871.6 832.7 EBIT 81.3 51.4 61.6 73.1 NPAT 44.0 20.7 22.1 39.4 • Underlying EBIT: Double-digit growth in Imaging and a good performance in Medical Centres partially offset the decline in Pathology with well-documented o headwinds Medical Centres up 50% from 2H 2018 lows o Soft market conditions across all 3 divisions. Expected to improve throughout remainder of 2H 2019 and to normalise to long-term averages o Includes ~$8 million of investment in greenfield sites 3 o • Reported EBIT reflects $21.7m of investment in strategic initiatives (Leapfrog, LIS, iCAR, corporate refresh) and set-up costs inc. Montserrat Adoption of AASB 15 for upfront HCP payments = $20m reduction in revenue/EBITDA but nil EBIT/NPAT impact 5 • • Interim fully franked dividend of 3.8 cents per share, 60% of UNPAT 1 All comments relate to underlying results unless noted 2 Reported EBIT reconciliation – slide 8 7 1H 2019 Results 3 Business as Usual reconciliation – slide 31 5 AASB 15 adjustment –slides 32 & 33

Underlying results 1H 2019 Restructuring & Reported Non-recurring items Underlying $m strategic initiatives EBIT 51.4 21.7 0.0 73.1 Finance costs (16.8) (16.8) “In terms of the strategic initiatives, PBT 34.6 56.3 we have several major projects Income Tax (13.9) (16.9) underway. While spanning more NPAT 20.7 39.4 than a year, they are transformational in nature and 1H 2018 Restructuring & unlikely to be undertaken again at $m Reported strategic initiatives Non-recurring items Underlying such a collective magnitude.” EBIT 61.6 17.7 2.0 81.3 Finance costs (18.5) (18.5) Rob Hubbard, AGM 2018 PBT 43.1 62.8 Income Tax (21.0) (18.8) NPAT 22.1 44.0 • Strategic initiatives: Leapfrog $5.2m - 3 year program o Pathology IT $3.6m - 5 year program o Imaging IT $2.1m - 3 year program o Corporate renewal $4.3m - 3 year program o • Balance relates to business set-up, primarily Montserrat, and redundancies 8 1H 2019 Results

Free cash flow 100 (15) 92 (21) $m 50 92 (30) 56 26 0 Gross OCF Interest Tax OCF Maintenance capex Free cash flow • OCF of $55.6m (1H 2018 $105.2m). EBITDA decline, plus: $14m back pay for the Medical Centres modern awards adjustment and Dorevitch pay o determination. Both fully provided in FY18 $14m tax movement relating to $4m payment for FY18 tax v $10m refund for FY17 tax o • Maintenance capex $30m delivering $26m FCF • Growth capex $115m - partly funded by the capital raise - includes: $67m Montserrat Day Hospitals acquisition o $20m new clinics in Healius Medical Centres and Health & Co o $7m investment in Imaging sites 1 and iCAR o $4m Leapfrog property initiatives o 1 Northern Beaches Hospital & Highfields in NSW, St Vincent’s Private Hospital Northside in QLD Westside Private Hospital 9 1H 2019 Results

Net debt Reported As at $m 31 Dec 2018 30 June 2018 Total debt 860.8 757.5 Cash (84.0) (105.1) Net debt 776.8 652.4 Bank gearing ratio (covenant <3.5x) 1 2.7x 2.4x Bank interest ratio (covenant >3.0x) 9.0x 9.2x Gearing (net debt: net debt + equity) 24.1% 29.9% Net debt reduction • Significant improvement in leverage since FY 2015 from capital recycling program, free 1,150 cash flow generation and capital raise in 2H 2018 1,050 1,098 • Cash usage at near-term peak including Montserrat and investment in strategic initiatives. 950 Spend is gated and monitored. Will deliver future operating cash flow 850 750 • Continual balance of competing demands: dividends, investment in strategic initiatives and 821 771 optimal gearing 650 652 550 1H16 1H17 1H18 1H19 1 Bank gearing ratio is calculated based on underlying EBITDA before the impact of AASB 15 10 1H 2019 Results

Results and Divisional Strategies

Pathology - results Underlying 1H 2019 1H 2018 Better/ $m $m (worse) % Revenue 534.0 3.3 551.5 EBITDA 59.0 67.0 (11.9) Depreciation (10.0) (9.7) (3.1) Amortisation (4.4) 13.6 (3.8) EBIT 45.2 52.9 (14.6) Total capital expenditure 7.9 n.a. 16.7 • Revenue: Soft volume growth (2.1% overall) due to external factors inc. benign flu season. Expected to improve throughout remainder of 2H and to o normalise to long-term averages of 4-5% Good fee growth and strong increases in specialties such as genetics, where NIPT revenue up 32% (EBIT 46%) o • EBIT: Loss of bowel screening contract (FOBT), to cycle out in 2H o Dorevitch labour cost increase, with mitigation in 2H o Normalised for these two events, EBIT growth above revenue growth o Consumables savings despite growth in high-value tests (NIPT and HPV testing) o • Continued good cash flow, increased investment in growth capex • 2H 2019: productivity programs to mitigate Dorevitch impact and deliver improvements with $20m+ annual benefit targeted ($7.5m+ in 2H 2019) 12 1H 2019 Results

Pathology - strategy • Optimise portfolio of ACCs and laboratories – closure of ACCs during the period • SWA contracts signed = upgrade in testing capabilities • Core LIS platform development. Final stages of negotiation LIS / SWA benefits Brand and reputation - attract and retain best pathologists Referrer / clinical Deliver greater pre-analytical accuracy benefits Increase share in higher margin and faster growing advanced genomics, complex and personalised testing Efficiencies through standardisation of work flows and no duplication between states Operational benefits Improve testing capabilities of core instrumentation and reduce costs Better consumer experience with digital results reducing consultation turn-around times LIS expected net benefit of ~$20 million p.a. once embedded in the business through automation, standardisation and FTE efficiency Financial benefits Material revenue uplift opportunity 13 1H 2019 Results