fy 2018 results presentation · global ivf expansion acquisition of outstanding minority interest...

FY 2018 Results Presentation

7th March 2019

2

Safe Harbour statement

3

Senior management presenting

3

Prashanth Shenoy

CFO

Prasanth Manghat

CEO

Asjad Yahya

Investor Relations

Hani Buttikhi

CIO

Michael Davis

COO

4

Agenda

4

4 Long term strategic initatives and outlook for 2019

1 2018 – Another year of records

2 Financial review

3 Operational overview

5

2018 - Another year of records

5

$2,057m

30%

FY 2018

5 year CAGR

Revenue

28% YoY growth

EBITDA

$487m

39%

FY 2018

5 year CAGR

38% YoY growth

$1,561m

$488mn

Revenue FY18

EBITDA FY18

Healthcare

37% EBITDA YoY growth

Number of Patients

7.5m

29%

FY 2018

5 year CAGR

30% YoY growth

Number of Beds

2,186

48%

FY 2018

5 year CAGR

42% YoY growth

Number of Doctors

1,735

28%

FY 2018

5 year CAGR

21% YoY growth

Distribution

$545m

$68m

Revenue FY18

EBITDA FY18

33% EBITDA YoY growth

6

2018 - Strategic initiatives

6

▪ Acquisition of 70% a

natural progression

following NMC

managing CosmeSurge

under an O&M contract

since September 2017

▪ Significant integration

benefits without broader

portfolio, e.g. Al Zahra

hospital

CosmeSurge

Acquisition

JV with GOSI in KSA

▪ Agreement signed to

form a new joint venture

to drive future expansion

plans

▪ JV formation complete

▪ Significant capacity and

capability expansion in

the coming years

Global IVF

Expansion

▪ Acquisition of

outstanding minority

interest in Fakih IVF

▪ Entry into attractive US

market with the

acquisition of a 70%

stake in Boston IVF

▪ Entry into underserved

sub-Saharan Africa

market

O&M Growth

▪ US$ 23 mn. revenues for

2018

▪ 81 assets managed

across 6 countries

▪ ADNOC Hospital Ruwais

amongst many

prestigious assets

managed by NMC

7

Key factors that differentiate NMC

7

International

collaborations

Portfolio

contribution

Ability

to adapt

Focus on

quality

Centralized

support

▪ Increase complexity

of offerings and

margin

improvement,

without insurance

pricing

▪ GCC-wide

collaborations

with Boston

Children’s

Hospital and

Cincinnati

Children’s

Hospital

▪ Enhanced

contribution from

cash-based

businesses, e.g.

▪ IVF

▪ Cosmetics

▪ Rapid adjustment to

any changes being

introduced in the

sector, translating

into capitalization of

new opportunities

▪ Designated

emergency

service

provision to the

private sector

▪ Constant focus on

quality

improvements

▪ Receiving CBAHI

accreditations in

KSA, which translate

into improved MoH

pricing a key

example

▪ Fully centralized

procurement

supports margin

improvement

through cost

reduction

▪ Data analytics

supported Revenue

Cycle Management

8

ResultsEnablers

KSA Joint Venture outlook

8

UAE leadership -

3 board seats in JV

Strong local

leadership in KSA

O&M revenues for

NMC from JV - 1.5%

Global Clinicians

World Class

Infrastructure

Specialized

services

Strong

management

team

Best

practice

transfer

Superior

quality

healthcare

9

Agenda

9

4 Long term strategic initiatives and outlook for 2019


2 Financial review


10

NMC 2018 at a glance

10

2018 Group revenues:

US$ 2.1bn

Reduction in days sales outstanding

98 days

2018 Group EBITDA

Margin 23.7%

+170bps yoy

2018 Group EBITDA:

US$ 487mn

FTSE 100 company

c. £6bn market cap

+28%

yoy

+38%

yoy

2018 Adjusted

Net Income:

US$ 284m

+20%

2019 Year End

Net Debt / EBITDA 2.2-2.4x

98

$

11

Group EBITDA up 37.9% y.o.y. to US$ 487m in FY 2018

11

▪ FY 2018 revenue reached US$ 2.1bn, up 28.3% YoY

▪ Another year of record revenues and profits on the

back of continued benefit of efficiencies at existing

facilities and successful integration of acquired

assets

▪ EBITDA increased by 37.9% to US$ 487.4m

▪ EBITDA margin reached 23.7%, increase of 170bps YoY

▪ Adjusted net profit reached US$ 283.5m, up 19.9% YoY

▪ Adjusted EPS 1.332, up 28.5% on FY 2017

▪ Healthcare division continues to drive NMC’s growth with

revenue and EBITDA up 34.4% and 37.3% respectively

▪ Distribution division also continues to grow with revenue

and EBITDA up 12.0% and 32.7% respectively

▪ Further enhancing our platform for growth through strategic

initiatives in 2018 including;

▪ expansion into Saudi Arabia

▪ integration of CosmeSurge

PerformanceFY 2018 consolidated overview

Revenue US$m and annual growth

EBITDA US$m and margin

1,221 1,603 2,057

38.6%

31.3% 28.3%

0%

10%

20%

30%

40%

50%

0

600

1,200

1,800

2,400

2016 2017 2018

Revenue ($m) Growth (YoY)

246 353 487

20.2% 22.0% 23.7%

0%

10%

20%

30%

0

100

200

300

400

500

2016 2017 2018

EBITDA ($m) EBITDA margin (%)

12

KSA Joint Venture structure

12

NMC to retain operational, Board and management control

JV Capitalization New structure

New JV

52% 48%

KSA Assets

New JV

38.9%

At SAR54 /

share

majority

KSA Assets

1

2

13

Receivables: Collections normalize in H2 18

13

100

107

98

103102

99

85

107

87

80

85

90

95

100

105

110

FY 2017 HY 2018 FY 2018

Total Receivables Days Healthcare Receivables Days

Distribution Receivables Days

Strong collections reduce days sales outstanding

Receivables

as % sales 27.5% 26.8%▪ Working capital-to-revenues ratio declined to

27.8% in 2018 (2017: 30.6%)

▪ The reduction in working capital-to-revenues

ratio was driven by:

▪ An improvement in days receivable

▪ A slight extension of days payable

▪ Strong collections have led to a decline in

receivables days outstanding for FY 2018 to

96

▪ Inventory days increased slightly from 61 in

2017 to 64 in 2018

▪ Days payable outstanding stood extended

slightly from 58 in 2017 to 60 in 2018

Working capital performance

29.3%

14

Receivables: Shift to Expected Credit Loss (ECL) Approach

14

▪ Adoption of IFRS 9 has

translated in more conservative

provisioning

▪ Additional provision of

US$17.2m provided for in 2018

due to implementation of new

regulation

▪ Excluding additional impact of

IFRS 9, days receivables

outstanding would stand at 99

Receivables Impact of IFRS 9 adoption

AR Ageing

Past due but not impaired

Total

Neither past

due nor

impaired

< 90 days 91-180 days181-365

days>365 days

Dec 18 (As Reported) 542,263 345,149 117,029 34,552 21,254 24,278

Dec 18 (Non IFRS 9) 542,263 347,210 123,749 39,817 21,855 9,632

Dec 17 440,146 279,343 86,363 34,302 24,435 15,703

Dec 18 (As Reported) 63.6% 21.6% 6.4% 3.9% 4.5%

Dec 18 (Non IFRS 9) 64.0% 22.8% 7.3% 4.0% 1.8%

Dec 17 63.5% 19.6% 7.8% 5.6% 3.6%

15

Capex

15

31

101 10033

64 3% of revenues

0

50

100

150

200

2017 2018 2019e

Growth Maintenance

2018 capex breakdownSignificant growth and acquisition

capex spend in 2018 (US$m)

▪ Key projects completed during the year:

▪ Opening of IVF clinic in Kenya

▪ Establishment of new Fakih IVF facility in

Oman

▪ Upgradation of facilities in Oman acquired

last year

▪ Key expansion projects underway:

▪ 60-bed brownfield expansion of NMC Royal

DIP

▪ 150-bed brownfield expansion of NMC

Specialty Dubai

▪ 100-bed hospital being established in

Mirdiff Hills

16

Cash Flow Summary

16

Cash Flow Adjusted for Growth Capex (%)Cash Flow Summary

Significant portion of operational beds in ramp-up

phase 2019E

US$’000 31-Dec-15 31-Dec-16 31-Dec-17 31-Dec-18

Profit for the year before tax 85,357 151,575 210,426 256,852

Add/(Less): Net Working

Capital Movement(64,908) (73,796) (82,579) (100,228)

Add: Dep & Amortisation 34,826 55,999 70,883 100,363

Less: Total Capex (79,843) (60,044) (64,861) (164,987)

Growth Capex (61,313) (31,631) (31,392) (101,228)

Maintenance Capex (18,530) (28,413) (33,469) (63,759)

Add: Transaction Cost -

Acquisition4,131 4,603 5,969 4,976

Add: Non cash charge to PL 12,506 18,912 33,625 54,618

Free Cash Flow (7,931) 97,250 173,463 151,594

Free Cash Flow (Adjusted for

Growth Capex)53,382 128,881 204,855 252,821

35.5%

52.4%

58.0%

51.9%

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

2015 2016 2017 2018

EBITDA to FCF ratio

37%

63%

Beds in ramp up phase

Mature Beds

YoY decline due to:

• Investment in early stage

assets

• Higher maintenance capex

17

Intangible assets: A closer look

17

▪ Given the active acquisition strategy adopted by NMC in recent years, Goodwill represents a significant portion of NMC’s asset

base (US$1.4bn out of total assets of US$3.9b in 2018)

▪ The five largest acquisitions to date account for 66.4% of total goodwill as at 31 December 2018: Al Zahra (28.9%), Fakih IVF

(12.9%), CosmeSurge (9.0%), Provita (8.4%) and Clinica Eugin (8.0%)

▪ Each of the above mentioned assets continue to serve as key drivers of NMC’s growth and have performed in line with, or

better than, forecasted prior to their acquisitions

▪ Al Zahra completed NMC’s hub and spoke model in Sharjah with the Group now maintaining the leading position in the

emirate

▪ Commencing its venture into IVF market through acquisition of Clinica Eugin and following up with the addition of Fakih IVF

to the portfolio, NMC has now become one of the Top 2 IVF players in the world

▪ With limited CapEx NMC managed to grow its Long Term Care vertical from 90 beds to 554 beds

▪ The underlying assumptions for impairment testing remain conservative, as a result of which, management remains comfortable

with the amount of Goodwill on the balance sheet:

▪ Explicit forecasts are made over a 5-year period, based on financial budgets

▪ Cash flows from the 6th to 10th year are extrapolated at 3% growth rate (2017: 3%), significantly below the current annual

growth rates being realized across the business

▪ 0% growth rate is applied to cash flows beyond the 10th year

▪ The pre-tax discount rate applied to cash flows is 9.71% (2017: 8.23%), based on the Group’s WACC

Goodwill

18

Agenda

18



2 Financial review


19

NMC 2018 at a glance

19

21% Emirati Patient Base

Boston Children’s and

Cincinnati Children’s

Hospital Collaborations

NMC Health patients in 2018:

>7.5m

FTSE 100 company

c. £6bn market cap

Growth in patient volume

in Dubai (y.o.y.):

+22%

#1 and most diverse global

IVF provider

+30% yoy

150 new beds in

Dubai in 2019

2020

NMC UAE Business Continues to Achieve Year over Year Growth

OMANUNITED ARAB EMIRATES

Abu Dhabi

Dubai

Sharjah

Sharjah

▪ Expansion of long-term

care (ProVita) and

cosmetic (CosmeSurge)

business

▪ Phenomenal 20% y.o.y.

increase in IP and OP

Patient Volume

▪ 1.5m patients seen across

the Northern Emirates in

2018

Dubai

▪ +22% y.o.y. growth in patient

volume

▪ DIP facility recorded a staggering

y.o.y. growth in EBIDTA

▪ Robust business model catering

to all segments of population

within the same facility has

proven successful

Abu-Dhabi

▪ 31% y.o.y. revenue

growth

▪ 700 pediatric OP visits

per day

▪ Emirati Thiqa business

continues to grow

UAE

▪ 540,000 pediatric visits

per day

▪ 95% occupancy of

pediatric beds

2121

Long Term Care O&M CosmeSurge

20% y.o.y. EBITDA

growth and 42%

increase in bed capacity

Home health care

patient census has

increased by 75%

Five additional

Cosmesurge Units

Opened

MOPA: Exceptional

performance with 96%

KPI achievement

Reinforces NMC’s

capabilities in O&M

contracts

NMC Global Healthcare – 2018 Overview

NMC Fertility Aspen

21% y.o.y. growth in

number of cycles

globally

The largest and most

diverse global IVF

provider

Provides vehicle for UK

entry of NMC’s IVF &

Cosmetics Businesses

Skills in Oncology and

Orthopedics can be

shared internationally

LTC, Homecare and

Rehab remains easy to

replicate across GCC

ADNOC Provides for

expansion of LTC, IVF

and CS into Ruwais

Low capital/ high return

model easy to replicate

across NMC portfolio

Continued expansion of

IVF business into new

geographies

Quick wins through

additional service lines

and improved margins

Relaunch of brand in

2018 has proven

successful

2222

NMC Healthcare KSA: The Current Success Story

Ha’il

Najran

Jeddah

Riyadh

Al Khobar

Al Qadhi Specialty

Chronic Care

▪ Total patient count increased from 50 to 125

patients in 2018

▪ Positive EBITDA after 1 year of operation

▪ CBAHI pre-survey ranking of 95%, #1 LTC

hospital and top 60 hospitals in KSA

▪ Exclusive contracts signed

▪ CBAHI accreditation received in January 2019 with score of 92%

▪ Three times Increase in Bariatric surgeries performed

▪ Plans implemented for addition of IVF services to clinical offerings

Al Rashid Hospital

▪ CBAHI pre-survey improved from 40% to 80%

with accreditation expected in Sep 2019

▪ Obtained exclusive contract with Hail

University to treat staff in December 2018

▪ MOH program makes patients acceptance /

admissions quick and efficient

Al Salam Medical Group

▪ 400% sustained increase in patient census in Q4

2018/ Q1 2019

▪ Occupancy in December - 70%

▪ LTC service line introduced and new contracts

signed with ARAMCO and SABIC to treat 1000

and 5000 employees + dependents

▪ CBAHI accredited with rating of 95.6 increasing

MOH reimbursement prices by 17%

As Salama Hospital

▪ Contract with Saudi Electric to treat 33,000

employees + dependents in December 2018

▪ Began a cash based new service line, Clinical

Patient Escort Program, generating approximately

SAR 250k per month

▪ CBAHI survey complete with results expected in

April 2019

23

NMC Healthcare KSA: The Current Success Story

23

▪ NMC Saudi Healthcare has been successful in streamlining revenue cycle and weekly collections have substantially increased

due to focus on:

▪ Physician documentation

▪ Coding and Billing

▪ Measuring initial rejection rates

▪ Timely Resubmissions

▪ Aggressive Collections

▪ Key leadership from UAE has been deployed to aid in the ramp up and integration of support services across the KSA portfolio

including operations, RCM, finance, and procurement

▪ KSA leadership team remains strong - Country head has been on board for a year and a half and is performing well

▪ AQSH became the first private hospital in

Najran to offer bariatric surgery, spinal

surgery, nerve revision, maxillo-facial

surgery, corneal transplant and vascular

surgery

▪ CCSHM now provides Nephrology,

Hemodialysis and home healthcare. The

facility has also increased it’s ICU bed

capacity and 20% of the beds are critical

care equipped

▪ Al Salam Hospital upgraded the NICU to

accept Level 3 patients

New Service Lines

▪ AQSH saw 115% growth in surgery

cases and 82% growth in Emergency

department visits

▪ Al Salam Hospital has had significant

inpatient growth due to new relationship

with GlobeMed

▪ CCSMC census continues to grow with

each round of licensing additional beds

Patient Volume Growth

▪AQSH: IVF facility to be set up in 2019

▪CCSHM: Increasing patient volume through

3 major government contracts from King

Faisal Specialist Hospital (28 patients),

National Guard Health Affairs (30 patients),

King Fahad Armed Forces (50 patients)

▪NMCH-Hail: Tie-ups with small medical

centers to develop the hub and spoke

referral model

▪With the revised management and

organization structure, the KSA

management has been successful in

developing key corporate leadership

positions that aid in consolidation,

integration and to support KSA’s sustained

growth

Growth plans

24

Aspen Healthcare: A Natural Fit into NMC’s Global Portfolio

24

▪ Aspen Healthcare facilities demonstrate exceptional performance in Quality and Nursing care and have received a Good or Outstanding rating from the CQC

(Care Quality Commission)

▪ The quality, nursing, and clinical leadership teams have decades of experience working under the UK model and have demonstrated exemplary knowledge in

implementation and monitoring of the regulatory standards

▪ In 2018, the UAE regulators began to shift to a more UK based model, with particular interest in the CQC (Care Quality Commission) regulation’s. We have been

able to address this through Aspen’s expertise combined with NMC’s experience by strengthening of our corporate quality framework

Strength of Quality and Nursing

▪ The Cancer Centre London is nationally recognized for its exemplary care of cancer patients, including state of the art radiation therapy and chemotherapy

infusion

▪ Oncology related diagnosis fall within the top 10 DRGs for NMC in Abu Dhabi, therefore providing a natural pathway for sharing and transfer of knowledge across

the organization

▪ In addition, Parkside Hospital and Wimbledon Orthopedic Group operates in the shadow of the legendary Wimbledon Tennis Club. The practice supports

physicians with vast NHS, academic and private hospital experience across a variety of orthopedic diagnosis

▪ With busy orthopedic practices in all of NMC’s facilities this is a natural pipeline to share skills and experience internationally throughout the group

Transfer of knowledge across the organization

▪ NMC plans to capitalize on the fertility business and addition of fertility services at Aspen in 2019 is being considered

▪ CosmeSurge will expand its services by setting up a unit at Aspen to provide comprehensive aesthetic and cosmetic services

▪ NMC IPC is working towards referring patients from KSA to the UK for specialized Orthopedics, Oncology and Comprehensive Health Check-ups

Accreditation and Certifications

Growth Plans

▪ Claremont Hospital and Highgate Hospital both received the JAG (The Joint Advisory Group in GI

Endoscopy) accreditation

▪ Aspen Healthcare was recognized by the UK CXA Customer Service Awards for its commitment to the

patient and customer experience

▪ All of the Aspen facilities have received the Worldhost Customer Care Accreditation

▪ Aspen operating theaters are accredited by the Association of Perioperative Practice (AfPP)

25

Pediatrics – Positioned to become a strong Strategic Vertical

25

Ideal candidate for vertical status with a strong potential for growth

▪ 45,000 pediatric outpatients per month

▪ Over 540,000 pediatric outpatients per year

▪ Over 1,500 pediatric patients treated daily in UAE

alone

▪ 23% increase in deliveries across the group

▪ Over 162 Pediatricians and Pediatric Consultants

▪ International collaborations with the #1 and #2

hospitals in the USA assisted to increase volumes

▪ Ramp up of over 200% in patient volume for the

international collaboration program

Given the shortage of pediatric healthcare services in the GCC in general and the UAE in particular, NMC

Pediatrics represents strong potential for growth, and hence an upgrade to a vertical status

26

2019 – Way Forward

26

▪ Achieved 2018 strategy to drive growth with increased capacity, addition of subspecialty

services and expansion across multiple geographies and this model will continue

through 2019

▪ Strengthened operational leadership by attracting talent and improving employee

satisfaction through enhanced HR structure across the organization

▪ Verticals-based structure continues to serve NMC well across its rapid growth and new

verticals will be announced in 2019

▪ Clinical Governance model will remain strong with emphasis on improved outcomes,

patient safety, and standardization of clinical best practice across the organization

▪ Saudi Arabia business will continue to rapidly grow in 2019 with additional bed capacity

and the addition of more sub-specialty services

▪ Strong growth expected in 2019 driven by sustained ramp-up, integration and expansion

of acquisitions and continued operational excellence

27

Agenda

27



2 Financial review


28

NMC follows a structured process for a COE to transition

into a vertical

28

29

Under Evaluation

2014

▪2010

Growth strategy

29

Centre of Excellences are and would continue to be the building blocks of our

growth strategy

Cardiology

Orthopedics

Ophthalmology

Maternity

Urology

Oncology

Neurology

Pediatric

Bariatric surgery

Neonatology

Psychiatry

30

Growth strategy

30

NMC is a well oiled engine churning out globally recognized independent verticals -

Cosmetics & Pediatrics are in the making

Maternity &

IVF

Mental healthOncology

Long term

& home careCosmetics Pediatrics

Ophthalmology

31

Growth strategy - U.A.E

31

▪ White spaces

▪ Market entry in Ras Al Khaimah,

Fujairah & Ajman

▪ Knowledge inversion

▪ Orthopedics from Aspen

▪ Cosmetics from CosmeSurge

▪ Strategic associations

▪ Boston Children's

▪ Cincinnati children’s

▪ Bolt On M&A

▪ Royal Medical Centre, RAK

▪ A Home Healthcare center & two

medical centers in Abu Dhabi

FOOTFALL

GAPS IN KEY

MARKETS1

CARE COMPLEXITY

NEED FOR

SPECIALIZED CARE2

FOOTFALLC

AR

E C

OM

PL

EX

ITY

32

Growth strategy - K.S.A (1/3)

32

▪ Capacity Creation and M&As

▪ Multispecialty

▪ Al Salam Medical Group

▪ 1 hospital of 100 beds and 2

medical centers

▪ NMC Hail - 60 beds

▪ Al Qadi Specialty Hospital

▪ Increased stake from 60% to

80%

▪ Privatization Program

▪ Active participation in government

RFPs for healthcare services

▪ Specialized Verticals

▪ Opened Long Term care facility

AVAILABILITY

LACK OF

AVAILABILITY OF

FACILITIES

1

SPECIALIZED CARE

NEED FOR

SPECIALIZED CARE2

SP

EC

IAL

IZE

D C

AR

EAVAILABILITY

33


33

Established market leader

with 1000 to 1200 beds by

2022

Revenues of US$ 300mn.

by 2022

• Focus on a Tier 1 city

penetration strategy

• Higher complexity &

higher reimbursements

Top 3 players by 2022

Revenues of US$ 600mn.

by 2022

• Focus on a Tier 2 city

penetration strategy

• Focus on Tier 1 city for

super sub specialties

I.V.F services to be

launched in the short to

medium term

High value cosmetic

services to start

immediately

International affiliations

like Boston children &

Cincinnati children

Multispecialty OthersLong Term Care

NMC TO SCALE TO 3000 BEDS IN 3+ YEARS AND 6000 IN 5+ YEARS

3434


INITIATIVES

▪ Diversification of revenue

▪ Improving quality of earnings by

adopting scientific RCM

techniques

▪ Centralized procurement

▪ Integration with NMC specialized

verticals

▪ Hub & Spoke model deployment

across KSA

▪ Increasing complexity of care

*9month FY18 audited number from the website

Increasing EBITDA margins to KSA peer levels

2hospitals

725beds

15clinics

*$36mnEBITDA

500kpatients

330doctors

35

Growth strategy - I.V.F

35

▪ New Markets

▪ Boston IVF in US

▪ Market entry in Kenya

▪ New clinics in Oman, Sharjah and Al

Ain

▪ Singular IT Platform

▪ Phase 1 to launch with all Spanish

clinics in June 2019

▪ Unification of R&D, SOPs etc.

▪ M&A

▪ Boston IVF

▪ Nordic IVF

▪ Stockholm IVF

▪ AVA Clinic Latvia

▪ Clinics in Milan & Taranto

▪ Clinic in Copenhagen

NO. OF CYCLES

GLOBAL FOOTPRINT1

SCIENTIFIC ACUMEN

WORLD CLASS

SCIENTIFIC

PLATFORM

2

SC

IEN

TIF

IC A

CU

ME

NNO. OF CYCLES

36

Outlook for FY 2019

36

▪ Complexity of offerings will continue to rise, enhancing its unique offeringNMC Royal

▪ Enhancing participation in new government initiatives

▪ Designation of NMC Royal as the only private sector hospital included in the list of 8

hospitals offering emergency services in Abu Dhabi a good example

Government

initiatives

▪ Anticipate positive developments on mandatory insurance roll-out in Northern

Emirates this year

Mandatory

insurance

▪ Completion of JV terms sets ground for rapid implementation of KSA strategy

▪ Foundations of a solid management structure already in place

▪ Sharp focus on bringing quality and complexity to KSA healthcare market

KSA

developments

supporting future

growth

Strong start to 2019 reinforces our outlook for the year - Remain comfortable with

guidance provided for the year

fy 2018 results presentation · global ivf expansion acquisition of outstanding minority interest...

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