GHG financial performance overviewghg.com.ge/uploads/files/Investor Day 2019 - GHG... · 2019. 6....
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GHG Investor DayTbilisi, Georgia | June 2019
ghg.com.ge
GHG financial performance overview
Speaker: Irakli Gogia, CFO
2
Contents
Q&A
GHG | Financial performance overview
GHG | From Capex to cash flow
GHG | Capital allocation strategy
Annexes
3
(GEL '000)mn11Q19 1Q18
Change,
Q-o-Q2018 2017
Change,
Y-o-Y
GHG
Revenue 235,211 207,689 13.3% 849,917 747,750 13.7%
EBITDA(1) 37,409 31,399 19.1% 132,274 108,148 22.3%
ROIC normalised(2) (%) 14.4% 13.5% 0.9% 13.9% 12.8% 1.1%
Net Profit(1) 18,273 16,012 14.1% 53,239 45,940 15.9%
EPS(1) 0.09 0.08 16.4% 0.27 0.23 18.0%
Hospitals (referral hospitals)
Revenue 74,774 64,290 16.3% 268,270 235,426 14.0%
EBITDA(1) 19,162 17,100 12.1% 70,665 65,021 8.7%
EBITDA margin(1) (%) 25.6% 26.6% -1.0% 26.3% 27.6% -1.3%
EBITDA margin without roll-outs(1) (%) 27.8% 28.9% -1.1% 29.6% 30.0% -0.4%
Clinics (policlinics and community clinics)
Revenue 11,107 9,434 17.7% 38,321 29,576 29.6%
EBITDA(1) 2,076 1,375 51.0% 5,203 3,904 33.3%
EBITDA margin(1) 18.7% 14.6% 4.1% 13.6% 13.2% 0.4%
Pharmacy and distribution Business
Revenue 145,779 126,868 14.9% 518,578 450,315 15.2%
Gross margin 26.3% 24.7% 1.6% 25.5% 24.5% 1.0%
EBITDA(1) 15,561 12,644 23.1% 52,215 38,854 34.4%
EBITDA margin(1) (%) 10.7% 10.0% 0.7% 10.1% 8.6% 1.5%
Medical Insurance Business
Revenue 17,493 13,302 31.5% 55,112 53,710 2.6%
Combined ratio(1) (%) 97.9% 100.0% -2.1% 94.0% 102.5% -8.5%
Diagnostics
Revenue 1,154 696 65.8% N/A N/A N/A
EBITDA(1) 48 77 NMF N/A N/A N/A
* The above figures include allocation of head office costs to segments
(1) Excluding IFRS 16 effect
(2) Return on invested capital (“ROIC”) adjusted to exclude newly launched hospitals and polyclinics that are in roll-out phase
Progress towards major KPI’s
4
7.09.4
11.1
6.8
10.07.6
8.9 8.210.0
29.6
38.3
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
1Q
17
1Q
18
1Q
19
2Q
17
2Q
18
3Q
17
3Q
18
4Q
17
4Q
18
20
17
20
18
59.3 64.374.8
59.467.8
56.064.1 60.7
72.0
235.4
268.3
0.0
50.0
100.0
150.0
200.0
250.0
300.0
1Q
17
1Q
18
1Q
19
2Q
17
2Q
18
3Q
17
3Q
18
4Q
17
4Q
18
20
17
20
18
186.4207.7 235.2
184.6211.8
179.1202.9 197.6
227.5
747.8
849.9
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
900.0
1Q
17
1Q
18
1Q
19
2Q
17
2Q
18
3Q
17
3Q
18
4Q
17
4Q
18
20
17
20
18
GHG Hospitals
GE
L m
illi
on
s
GE
L m
illi
on
s
Clinics (community clinics and polyclinics)
GE
L m
illi
on
s
13.3%
11.4% 14.7% 13.3% 15.1%
13.7%
16.3%
8.4% 14.1% 14.4% 18.8%
14.0%
17.7%
35.0%47.2% 17.2% 21.9%
29.6%
Double digit revenue growth in all GHG segments
5
14.0 13.3 17.5
13.4 13.7 14.0 14.2 12.4 13.9
53.7 55.1
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
1Q
17
1Q
18
1Q
19
2Q
17
2Q
18
3Q
17
3Q
18
4Q
17
4Q
18
20
17
20
18
111.4 126.9
145.8 110.9
127.3 106.6
123.3 121.4 141.0
450.3
518.6
0.0
100.0
200.0
300.0
400.0
500.0
600.0
1Q
17
1Q
18
1Q
19
2Q
17
2Q
18
3Q
17
3Q
18
4Q
17
4Q
18
20
17
20
18
Pharmacy and distribution Medical Insurance
GE
L m
illi
on
s
GE
L m
illi
on
s
14.9%
13.9% 14.8% 15.7%16.2%
15.2%
31.5%
-4.7%2.2% 2.0%
12.1%
2.6%
Double digit revenue growth in all GHG segments
6
12.6 15.6
38.9
52.2
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
1Q18 1Q19 2017 2018
1.4 2.13.9
5.2
0.0
5.0
10.0
15.0
20.0
25.0
30.0
1Q18 1Q19 2017 2018
17.1 19.2
65.070.7
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
1Q18 1Q19 2017 2018
31.437.4
108.1
132.3
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
1Q18 1Q19 2017 2018
GHG Hospitals
Clinics
Pharmacy and distribution
Medical insurance
(1) EBITDA excluding IFRS 16 effect
EBITDA
margin
EBITDA
margin
EBITDA
margin
EBITDA
margin
Without
roll outs
26.6% 25.6% 27.6% 26.3%
28.9% 27.8% 30.0% 29.6%
14.6% 18.7% 13.2% 13.6%
23.1%
34.4%
10.0% 10.7% 8.6% 10.1%
0.2 0.6 -0.4
4.1
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
1Q18 1Q19 2017 2018
175.5%
1.5% 3.2% -0.8% 7.4%
GE
L m
illi
on
s
19.1%
22.3%
12.1%
8.7%
51.0%33.3%G
EL
mil
lion
s
EPS,
GEL0.08 0.09 0.23 0.27
Double digit EBITDA growth in all GHG segments
7
Q&A
GHG | Financial performance overview
GHG | From Capex to cash flow
GHG | Capital allocation strategy
Annexes
Contents
8
PPE + goodwill & intangibles
Deleveraging
321.1 280.5
329.2 360.5 367.9 363.4
384.7 390.4 373.7
2.6 2.6
2.8 2.7 2.8 2.8 2.82.6 2.5
0
0.5
1
1.5
2
2.5
3
100.0
200.0
300.0
400.0
500.0
600.0
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19
Debt Net debt to EBITDA
648.0
786.5 850.3
200.0
400.0
600.0
800.0
1,000.0
1,200.0
2016 2017 2018
Goodwills and intangibles PPE, without IFRS 16
+21.4% +8.1%
GE
L m
illi
on
sG
EL
mil
lion
s
Gross debt
EBITDA based on last 12 months
Reduced investments and debt
9
1Q192016
▪ Added 6 new polyclinics
▪ Started renovation works at the
Regional Hospital and Tbilisi
Referral Hospital
▪ Launched 64 new services in 14
different referral hospitals
▪ Added 2 new polyclinics
▪ Acquired Khashuri Referral
Hospital and Kareli Community
Clinic
▪ Launched 54 new services in 11
different referral hospitals.
▪ Opened Tbilisi Referral Hospital
▪ Added 1 new polyclinic
▪ Completed our largest development and renovation
project and launched the flagship Regional Hospital with
306 newly-renovated beds
▪ Launched 26 new services in 15 different referral
hospitals
▪ Opened Mega Lab, the largest diagnostics laboratory in
the entire Caucasus region
3.8% 3.6% 3.6% 3.7%Hospitals maintenance
Capex % of revenue
20182017
101.6 79.7
52.6
6.3
9.4
9.6
11.1
3.2
111.0
89.3
63.7
9.5
-
20.0
40.0
60.0
80.0
100.0
120.0
2016 2017 2018 1Q19
Development Capex Maintenance Capex
Steadily decreasing Capex
10
Favorable effective rate dynamics
(% Share in Total)
Maturity breakdown of borrowings
12.6% 12.8%12.3% 12.0% 12.0% 11.9% 11.8% 11.8% 11.7% 11.2%
6.50% 6.75% 7.00% 7.00% 7.25% 7.25% 7.25% 7.00% 7.00% 6.50%
5%
7%
9%
11%
13%
15%
4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19
GHG average cost of funding (effective) NBG rate
c.55% of our debt
is linked to NBG
Ref. rate
16.1%
28.4%55.5%
less than 1 year 1-3 years more than 3 years
Decreasing average cost of funding
11
30.3% 27.7%
12.1%13.2%
-5.8%
-10.6%-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
2017 2018
Healthcare services
Pharmacy and distribution
Medical Insurance
Net working capital need
49.4% 50.6% 50.7%
47.2% 47.2%
30.0%
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19
Receivables from
government as % of
revenues from state
Room for the improvement
Improved working capital need trend in healthcare is supported by state receivables
Decreasing working capital need
12
GEL thousands, unless otherwise noted FY18 FY17Change,
Y-o-Y
EBITDA 132,274 108,148 22.3%
Net cash flows from operating activities 99,580 58,239 71.0%
EBITDA to Cash Conversion 75% 54%
Net cash used in investing activities, of which (85,347) (128,748) -33.7%
Purchase of PPE and intangibles (70,123) (93,808) -25.2%
Net cash flows from financing activities (26,917) 96,647 -127.9%
Effect of exchange rate changes(2) (537) -99.6%
Net increase (decrease) in cash and cash equivalents (12,686) 25,601 NMF
Cash at period, beginning 48,840 23,239 110.2%
Cash at period, ending 36,154 48,840 -26.0%
Bank deposits, beginning 14,768 23,876 -38.1%
Bank deposits, ending 11,807 14,768 -20.1%
Cash and bank deposits, beginning 63,608 47,115 35.0%
Cash and bank deposits, ending 47,961 63,608 -24.6%
2H18
1H18
70.6%
79.5%
Targeting +80% EBITDA to cash conversion ratio
Improved cash generation
13
Q&A
GHG | Financial performance overview
GHG | From Capex to cash flow
GHG | Capital allocation strategy
Annexes
Contents
14
Investing in new opportunities
• Strategic acquisitions of already revenue generating assets
• 20%+ marginal ROIC investments
Capital expenditures
C.GEL 15-20 million growth capex to support organic growth:
• Adding new pharmacies, outpatient centres
• Adding new services
• Software development
C.GEL 15-18 million maintenance capex:
• 3%-3.5% of revenue in hospitals
• under 1% of revenue in pharmacy and distribution
Growth oriented capital allocation strategy
15
Disposal of low ROIC assets
Low performing assets
Minority buyouts
• Pharmacy and distribution business minority share – 33% Exercisable in 2023
• HTMC hospitals minority share – 50%
• KNMC hospitals minority share – 33%
Unused assets
Transforming the asset / Disposing the asset
Growth oriented capital allocation strategy
16
Dividend policy
Deleveraging
• Adopted a new dividend policy: 20%-30% of annual profit attributable to
shareholders will be distributed as dividends
• GHG will pay its first dividends of GEL 0.053 per share on 12 July 2019, in
respect of the 2018 financial year.
• The Group targets managing the Group balance sheet, on an
ongoing basis, at an average less than 2.0 times net debt to EBITDA
from the end of 2020
Growth oriented capital allocation strategy
17
EBITDA to cash conversion ratio
Target
80%+
Cash conversion ratio improved from 54% in
2017 to 75% in 2018
Reduced Capex c.35 million
1Q19 Capex stood at GEL 9.5 million
Cost of funding 10.5%-
Cost of funding improved from 12.6% in 4Q16
to 11.2% in 1Q19
Marginal ROIC investments 20%+
ROIC improved from 10.6% in 1Q18 to 12.3%
in 1Q19
Revenue growth Double digit
Revenue CAGR comprised 41% in 2016-2018
years
Disposal of low ROIC assets
Cash generating assets acquisition
Strong free cash flow
generation
ROIC 15%+
Double digit EPS
growth
Summary Next 5-year targets
Questions?
GHG Investor DayTbilisi, Georgia | June 2019
ghg.com.ge
19
Disclaimer
This presentation contains forward-looking statements, including, but not limited to, statements concerning expectations, projections, objectives, targets, goals, strategies, future
events, future revenues or performance, capital expenditures, financing needs, plans or intentions relating to acquisitions, competitive strengths and weaknesses, plans or goals
relating to financial position and future operations and development. Although Georgia Healthcare Group PLC believes that the expectations and opinions reflected in such forward-
looking statements are reasonable, no assurance can be given that such expectations and opinions will prove to have been correct. By their nature, these forward-looking statements
are subject to a number of known and unknown risks, uncertainties and contingencies, and actual results and events could differ materially from those currently being anticipated as
reflected in such statements. Important factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements, certain of which are
beyond our control, include, among other things: business integration risk; compliance risk; recruitment and retention of skilled medical practitioners risk: clinical risk; concentration
of revenue and the Universal Healthcare Programme; currency and macroeconomic; information technology and operational risk; regional tensions and political risk; and other key
factors that we have indicated could adversely affect our business and financial performance, which are contained elsewhere in this document and in our past and future filings and
reports, including the “Principal Risks and Uncertainties” included in Georgia Healthcare Group PLC's Annual Report and Accounts 2018. No part of these results constitutes, or
shall be taken to constitute, an invitation or inducement to invest in Georgia Healthcare Group PLC or any other entity, and must not be relied upon in any way in connection with any
investment decision. Georgia Healthcare Group PLC undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or
otherwise, except to the extent legally required. Nothing in this document should be construed as a profit forecast