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Medsi Group of Companies Financial Results for 1H12 11 September 2012

Tatyana Sergeyeva President of Medsi Group Maxim Vladimirov Vice-President of Medsi Group, Head of Finance


Disclaimer Certain statements in this presentation may contain assumptions or forecasts with respect to forthcoming events within the Medsi Group of Companies and its subsidiaries (“Medsi” or “the Group”). The words “expect”, “estimate”, “intend”, “will”, “could” and similar expressions identify forward-looking statements. We wish to caution you that these statements are only predictions and that actual events or results may differ materially. We do not intend to update these statements to reflect events and circumstances occurring after the abovementioned date or to reflect the occurrence of unanticipated events. Many factors could cause the actual results of Medsi to differ materially from those contained in our projections or forward-looking statements. Among others, these include deteriorating economic conditions, our competitive environment, risks associated with operating in Russia, rapid technological and market change in our industries, and many other risks specifically related to the Group and its operations.

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Contents

1. Overview of results for 1H12 2. Trends on the private healthcare market in 1H12 3. Financial results for 1H12 4. Key facts about Medsi

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Main events in 1H12 Start of the process to merge the assets of Medsi and the Medical Center for the Mayor and Government of Moscow (MCMGM)

Exit from the loss-making in-patient clinic Tsentrosoyuz

Start of the process to create a single system of full-cycle medical services that will ensure high standards and deliver high-tech care to patients

Sergei Polyakov is appointed vice president of Medsi. Mr Polyakov is a professor, a candidate of medical science, a correspondent member of the Russian Academy of Natural Sciences, and an Honoured Doctor of Russia.

Medsi has begun the first public-private partnership project in Russia’s medical 4 sector


Key indicators* Indicator

1H12

1H11

Change

Visits, „000s

2,206.3

2,075.4

+6.3%

Services provided, „000s

3,895.4

3,824.1

+1.9%

43.4

48.4

-10.4%

1,363.0

1,369.1

-0.4%

Revenues, US$ mln

95.7

100.4

-4.7%

OIBDA, US$ mln

10.9

13.3

-17.9%

OIBDA margin, %

11.4

13.2

-1.8 pps

Net profit, US$ mln

-3.4

4.5

n/a

Average ticket, US$ Revenues per m2, US$

* Unaudited consolidated US GAAP results, based on the management accounts

In 1H12, the Group increased its client base and the number of services provided. 5 Its financial indicators fell due to the MCMGM integration and the FX effect


Contents

1. Overview of results for 1H12 2. Trends on the private healthcare market in 1H12 3. Financial results for 1H12 4. Key facts about Medsi

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Private healthcare market in Russia Forecast for the private healthcare market in Russia RUB bln*

* Figures from BusinesStat for 2012

Breakdown of the market by services in 2011**

• In 2011, BusinesStat estimates that the market will expand by over 20% • Over the next three years, average growth is forecast at 12% annually, while the share of the „gray‟ sector is expected to shrink • In the next few years, the amount of „gray‟ payments in clinics is expected to fall: BusinesStat estimates that their share will be 3.8% of the total by 2016. The forecast share for 2012 is 4.8%

** Figures from BusinesStat for 2012

Most of the demand for private healthcare services will come from insurance 7 companies


Main market trends in 2012 Growth in demand

Evolution of the market

Positive regulatory changes

Greater competition

• Annual spending on medical services by individuals is approaching the prices of annual corporate policies • A rise in the birth rate is increasing the demand for private healthcare from mothers expecting or with children

• Possibility of housing private clinics in state facilities • Possibility for patients to choose which clinic and doctor • Switch to paying full tariff for mandatory medical insurance

• Healthcare providers have been granted a 0% profit tax rate under certain conditions. In 2012, Medsi will be eligible to apply this

• • • •

Launch of new medical centers in Moscow and the regions Improvement in medical equipment used in state facilities Greater competition on the market for in-patient services with state facilities Increased interest in the sector from investment funds

Economic and positive regulatory changes are stimulating growth on the private healthcare market and greater competition

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Contents

1. Overview of results for 1H12 2. Trends on the private healthcare market in 1H12 3. Financial results for 1H12 4. Key facts about Medsi

9


Main financial results for 1H12 -4.7% 100.4

95.7

Revenues, US$ mln

1H11

1H12

• Group revenues fell 4.7% year-on-year due to a review of the product portfolio and Medsi‟s sales strategy, as well as a change in the ruble-dollar rate. In ruble terms, revenues equaled RUB2,932.8 million, up 2.0% year-on-year • OIBDA was down 17.9% due to a rise in expenses relating to the integration of MCMGM, as well as a change in the Group‟s reserve requirements

-17.9% 13.3

OIBDA, US$ mln

10.9

1H11

OIBDA margin, %

13.2%

1H12 11.4%

• The OIBDA margin was 11.4%, 1.8 percentage points lower than in 1H11, due to the lower OIBDA • Medsi reported a net loss for 1H12, compared with a net profit in 1H11. This was caused by higher expenses relating to the integration of MCMGM, as well as costs linked to the closure of the loss-making Tsentrosoyuz inpatient clinic

4.5

Net profit /(loss), US$ mln -3.4 1H11

1H12

Medsi’s financial indicators fell due to the effect of the MCMGM integration and the FX effect

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Operating expenses -1.8% 15

SG&A, US$ mln

14.7

14.4

• 1H12, amid an intensive integration process, the Group managed to reduce SG&A by 1.8% by cutting its marketing expenses

10

• In addition, the share of SG&A in revenues remained virtually unchanged at 15.1%

5

0

1H11

1H12

-7.1%

70

69.5

64.6

• The cost of sales was down 7.1% thanks to improved terms with suppliers, the closure of inefficient clinics, and lower rental rates • The cost of sales/revenues ratio was 67.5%, 1.7 percentage points lower than the 69.2% in 1H12

60

Cost of sales, US$ mln

50 40 30 20 10 0 1H11

1H12

Medsi is maintaining control over expenses: cost of sales and SG&A fell in 1H12

11


Debt 3.8

80

4 3

60

Net debt, US$ mln

1.9

40

2

71.9

55.5

20

• Net debt was down 22.8% in 2012 thanks to a restructuring of the debt portfolio and planned repayments

1 0

0 1H11

1H12

Net debt/OIBDA

Net debt, US$ mln

23.2

• Medsi‟s financial stability increased substantially, net debt/OIBDA halving to 1.9

24.6

• All of the debt is long-term and denominated in rubles 12.6 10.0

Debt redemption schedule 3.0

II/2012

2013

2014

2015

2016

US$ mln

Medsi’s debt/OIBDA has halved to 1.9, a comfortable level for the Group

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Breakdown of revenues in 1H12 6.9%

• As in 1H11, most of the revenues came from the healthcare business Healthcare

Division

Fitness

93.1%

• Insurance companies remain the main sales channel for medical services. In 1H12, their share in revenues dropped by 1.8 percentage points to 53.6%

9.7%

Insurance companies

Sales channel

53.6%

36.7%

Legal entities Individuals

• Revenues are diversified across clinic formats. In 1H12, the share of both first-aid clinics and clinics and diagnostic centers rose

9,4%

9,6% 10,7% 6.9% Clinics and diagnostic centers

40.2%

First-aid clinics

Fitness clubs

Format 52.9%

Medsi has maintained a stable, diversified breakdown of revenues 13


Healthcare/Moscow and the regions Revenues and average ticket -4.1%

100

48.1 42.9

50

80

40

60

30

40

92.9

89.1

20

20 10

0

• 18 clinics and 1 medical post in Moscow and the surrounding region • 11 clinics and 81 medical posts in other regions • 50,210 square meters of healthcare space • 4,120 employees, including over 1,000 doctors

Main events

0 1H11

1H12

Average ticket, US$

Revenues, US$ mln

Visits and services provided, ‘000 +2.1% +7.6% 3,857.0

3,776.7

1,931.3

1H11 Visits

• Medsi has finalized ownership rights for MCMGM‟s real estate • The Group has revised its product portfolio and sales strategy: it closed two small clinics and launched a new medical center, the Clinic on Prechistenka, its largest family clinic in the capital

2,079.0

1H12 Services provided

The number of visits and services provided is rising steadily. Revenues and the average ticket are falling due to the revision of the sales strategy and a slowdown on the market in Moscow

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Healthcare/Moscow and the regions (continued) Breakdown of revenues, 1H12

Breakdown of space, 1H12

12.3% 31.0% 43.1% 56.9% 69.0% 87.7%

Moscow and region

Regions

Clinics and diagnostic centers

Moscow and region

First-aid clinics

Regions

Average ticket, US$

Revenues per m2, US$ -17.7%

-31.6%

-2.4%

-5.4% 2,304.8

54.3

2,249.0

51.3

28.8 853.5

19.7

1H11 Moscow and region

1H12 Regions

702.7

1H11 Moscow and region

1H12 Regions

The average ticket and revenues overall are under pressure from the policy of insurance companies to reduce the number of premium services

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Healthcare/Moscow and the regions (continued)

Visits, ‘000

Services provided, ‘000

+19.7%

+12.0%

+3.8%

-0.8% 1,520.9

1,465.0

2,907.6

2,883.6

558.1

466.4

1H11

1H12

Moscow and region

Regions

973.4

869.1

1H11 Moscow and region

1H12 Regions

CAPEX

CAPEX, US$ mln +110.4% 3.8

• In 1H12, the Group continued to boost investment in developing and equipping clinics • Most of the CAPEX went on buying new equipment and upgrading existing clinics and medical posts

1.8

1H11

1H12

Medsi is successfully capturing the growing demand for medical services in the regions

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Fitness centers Revenues and average ticket -11.6%

8

51.8

60

51.8

7 6 5 4 3 2 1 0

• 3 fitness clubs in Moscow • 19,997 m2 of space • 350 employees

50

Main events

40 30

7.5

6.6

20 10 0

1H11

1H12

Average ticket, US$

• A new sales strategy was adopted, and its effect is expected to be seen in 2H12 • The Temp fitness club was closed

Revenues, US$ mln

Visits and services provided, ‘000

Space and revenues per m2

-18.8% -13.6%

-11.6% 25000

144.0 127.3

20000

350

23,153 322.6

19,997 330.0

15000

47.4

150

10000 38.5

100 50

0 Visits

1H12 Services provided

250 200

5000

1H11

300

0 1H11 Revenues/m2, US$

1H12 Space, m2

The fall in this division’s revenues was caused by the closure of the Temp club and the FX effect

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Contents

1. Overview of results for 1H12 2. Trends on the private healthcare market in 1H12 3. Financial results for 1H12 4. Key facts about Medsi

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About Medsi Medsi is a leading national provider of medical and healthcare services in Moscow and other regions. • Number one on the Russian market • 4.8% of the commercial medical market in Moscow* • 1.4% of the commercial medical market in Russia** • 29 clinics, 82 medical posts and 3 fitness centers • Presence in 18 cities in Russia • Developed range of formats • Over 1,000 qualified doctors

• Quality medical service • Over 50,000 m2 of medical space Дятьково

Радужный

* Figures from BusinesStat for 2011, excluding the „gray‟ segment ** Figures from BusinesStat for 2011, share of clinics excluding mandatory medical insurance

Medsi has leading positions on the private healthcare market in Moscow and Russia

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Integration with MCMGM

Integration of Medsi and MCMGM

The deal has opened for the Group a new segment of in-patient services, where there is no competition with commercial players, and strengthened its positions in outpatient care. Medsi is becoming a full-cycle provider of medical services.

The Group has never been better positioned for substantial growth. This will require investment in the quality of medical care and service, efficiency, technology and qualified personnel.

The MCMGM integration will enable Medsi to enter new markets of in-patient care and rehabilitation, which will reinforce its leading positions

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Strategic significance of the MCMGM deal

Preventative treatment and early diagnosis Wellness and healthcare services

First aid and specialist care Care for the terminally ill – hospice Gerontology Emergency assistance Neurological care

Rehabilitation First aid

Specialist medical care at home

In-patient treatment

Medsi before 2012 Medsi after the deal with MCMGM Target areas for development

The deal has made Medsi a full-cycle provider of medical services and enabled it to begin developing new areas

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Development plans Development plans • Complete the integration of Medsi and MCMGM by the end of 2012 • Enhance the quality of service provided • Implement a new HR policy aimed at cultivating an ethic of sought-after doctors, and attract “stars” of medicine to the Group

• Attract new clients rapidly by updating the sales system and launching the major “New Medsi” marketing campaign •Streamline the management of the business by rolling out an integrated platform and simultaneously introducing a unified multi-functional information system and progressively modernizing the IT infrastructure •Стандартизация

Medsi’s long-term aim is to create a world-class company with a team of internationally renowned medical experts

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Thank you!

For more information, please contact: Medsi Group of Companies Svetlana Ponkratova Tel: +7 (495) 737 0722, ext. 137 ponkratova@medsigroup.ru Sistema Head of Russian Press Service Julia Belous Tel: + 7 (495) 730 1705 belous@sistema.ru

IR Department Evgeniy Chuikov Tel: +7 (495) 692 1100 ir@sistema.ru 23


Финансовые результаты Группы компаний «Медси» за первые шесть месяцев 2012 года