PRESENTATION TO NEW ZEALAND SHAREHOLDERS ASSOCIATION

Transcription

1 PRESENTATION TO NEW ZEALAND SHAREHOLDERS ASSOCIATION 24 March 2015

2 THE FUNDING OF NEW ZEALAND HEALTHCARE: A DEBATE WE HAVE TO HAVE

3 ESTIMATED HEALTH SPEND 2014 Figure 4.1: Aggregate real ($ million 2009/10) health expenditure, ,000 $ million Total healthcare spend 20,000 $19.9 billion 15,000 Total Govt health spend $16.5 billion 10,000 Total health 5,000 Publicly funded Privately funded Privately funded $3.4 billion Source: Ministry of Health

4 ESTIMATED HEALTH SPEND 2014 Figure 4.1: Aggregate real ($ million 2009/10) health expenditure, ,000 20,000 $ million Government healthcare costs now account for 20% of total Crown expenses and 11% of GDP 15,000 10,000 5,000 Free Healthcare introduced Cost and demand start to accelerate in the 1950s Total health Publicly funded Privately funded Source: Ministry of Health

5 FUNDING OF HEALTHCARE

6 FUNDING OF HEALTHCARE FACT: FACT: There is a growing number of baby boomers reaching 65+ years 80+ year olds use 10x more and 70+ year olds use 5x more healthcare dollars than a 50 year old FACT: FACT: FACT: FACT: We are living longer than ever before Medical advances mean we can now successfully diagnose and treat conditions that previously were terminal These medical advances are not free and often come with a high price tag No OECD country has free healthcare FACT: Xrays, MRI s, CT s, mammography, ultrasound, antibiotics,paracetamol, aspirin, 99% of all Pathology testing, heart surgery and organ transplants, did not exist when Seddon and Savage decided to give New Zealanders a free healthcare system

7 FUNDING OF HEALTHCARE In 2001 Right Hon David Lange said to me Every Government that has been formed in the last twenty years has had Treasury come to them on their first day in office with the aging population graph and say Minister, you need to look at this and understand the consequences for healthcare expenditure And every new Government has looked at these projections and said... I won t be in office by then so I do not have to deal with it!

8 FUNDING OF HEALTHCARE Hon Michael Cullen: (N.B.R. 23 June 2003) In 1993, Health took 15.6% of Government spending; in 2003 it will be about 18.4%. not a minor fiscal realignment. It is a massive structural shift. This is Projections are that by Health will be receiving 19.7% of total Government spending.. These are mind-boggling numbers and I offer my sympathies in advance to the Minister of Finance in 2051.

9 FUNDING OF HEALTHCARE Hon Tony Ryall, 10 August 2012, Addressing the Standing Council on Health with Australian State and Federal Health Ministers in Sydney In 2009/10, while other OECD countries were reducing health spending, New Zealand had a 3.4 per cent increase in real health spend, the third highest of 27 nations. As a result, New Zealand has risen to having the fifth equal highest spend on health as a proportion of its GDP.

10 ESTIMATED HEALTH SPEND 2014 Figure 4.1: Aggregate real ($ million 2009/10) health expenditure, ,000 $ million 20,000 15,000 Healthcare reforms initiated by previous governments 10,000 Total health Publicly funded 5,000 Privately funded Source: Ministry of Health

11 ESTIMATED HEALTH SPEND 2014 Figure 4.1: Aggregate real ($ million 2009/10) health expenditure, ,000 $ million 20,000 15,000 Health spend hesitated then grew even more strongly 10,000 Total health Publicly funded 5,000 Privately funded Source: Ministry of Health

12 Figure 4.1: Aggregate real ($ million 2009/10) health expenditure, ,000 $ million Total Govt health spend 2010 $16.5 billion 20,000 This 2026 projection was reaffirmed by Treasury in May ,000 10, : $14.5 billion 2016 Est: $15.1 billion 2026 Est: Between $12 and $14 billion Total health $14.0 billion $12.0 billion Publicly funded 5,000 Privately funded Source: Ministry of Health

13 ESTIMATED HEALTH SPEND 2016 Core Crown Expense Tables 2014 $ Million Actual Actual Actual Actual Actual Actual Actual Forecast Forecast Forecast Forecast Forecast Health Budget Total Core Crown Expenses Percentage 19.1% 19.8% 19.3% 20.5% 19.5% 20.4% 20.6% 20.9% 20.8% 19.9% 19.4% 18.8% Source: The Treasury During the mid to late 2000s, Vote Health operating spending grew very rapidly, at an average rate of almost 9% per annum. However, according to Treasury forecasts, this growth will decrease from 2015 onwards with a prediction that total health spend will reduced to 18.8% of expenditure by 2018.

14 Figure 4.1: Aggregate real ($ million 2009/10) health expenditure, ,000 $ million 20,000 This 2026 projection was reaffirmed by Treasury in May ,000 10, : $14.5 billion 2016 Est: $15.1 billion 2026 Est: Between $12 and $14 billion Total health $14.5 billion $14.0 billion $12.0 billion Publicly funded 5,000 Privately funded Source: Ministry of Health

15 NZ s AGEING POPULATION 30% Percentage of Population 25% 20% 15% 10% 5% 0% Over 65 Over 80 Over 75

16 HEALTH SPEND BY AGE GROUP Per Capita by Age Group Expenditure on Healthcare (1996 data) $14,000 $12,000 $10,000 $8,000 5x $6,000 $4,000 3x $2,000 $0 Under Amount $849 $1,190 $3,261 $6,144 $12,105 10x Age Group

17 000's NZ s AGEING POPULATION Actual Numbers to 84

18 Figure 4.1: Aggregate real ($ million 2009/10) health expenditure, ,000 $ million 20,000 15,000 Spending hesitated then grew even more strongly 10,000 Total health Publicly funded 5, s reforms 1970 reforms Privately funded Source: Ministry of Health

19 Figure 4.1: Aggregate real ($ million 2009/10) health expenditure, ,000 $ million 20, reforms 15,000 Spending hesitated then grew even more strongly 10,000 Total health Publicly funded 5, s reforms 1970 reforms Privately funded Source: Ministry of Health

20 Figure 4.1: Aggregate real ($ million 2009/10) health expenditure, ,000 $ million 20, reforms 15,000 Spending hesitated then grew even more strongly 10,000 Total health Publicly funded 5, s reforms 1970 reforms Privately funded Source: Ministry of Health

21 Really?

22 FUTURE FUNDING OF HEALTHCARE How do we stop the growth in Government healthcare expenditure? Constant cost cutting and reforms of the public health system have not produced sustainable results DHBs are still underfunded and still constantly tendering services hoping for a better price We need to stop doing the same things, which are not working, and take a fresh approach While our expenditure as a percentage of our GDP is the fifth highest in the OECD, the price paid for our healthcare services is a fraction of the price paid for the same services in Australia and the G8

23 FUTURE FUNDING OF HEALTHCARE Our public health system is NOT broken It is not inefficient It is not wasteful Cost is not the problem Funding is the problem

24 FUTURE FUNDING OF HEALTHCARE The concept of free Government funded healthcare for all New Zealanders is unsustainable and unaffordable Government policy formed in the 1920s does not work in 2015 So How do we move on? Should we ration healthcare services? Overseas and our own 1980s experience shows that defining a set of core medical services to be funded is impossible

25 FUTURE FUNDING OF HEALTHCARE New Zealand has an expanding private health insurance industry If employers and individuals were encouraged by Government to re-introduce healthcare and medical insurance plans With appropriate and targeted incentives such as tax deductibility and the removal of FBT for employers who give healthcare insurance policies to their staff and for individuals who elect to take out a policy we would relieve the funding burden on the state In Australia if you do not have a healthcare insurance policy you pay between 1.0% and 2.0% more in federal tax

26 FUTURE PROOFING HEALTHCARE The Government cannot afford to keep paying for our increasing healthcare demands Cost cutting and another 40 years of healthcare reforms is not the solution - there is no fat, inefficiency or excess. Private sector provision can and currently does supply capital and expertise and it removes the pressure on public facilities providing capital, expertise and sharing the risk Private payment and healthcare insurance would free up the public system for those that most need it If they can afford to insure or pay then encourage them to do so

27 FUNDING OF HEALTHCARE REMEMBER THESE

28 ESTIMATED HEALTH SPEND 2014 Figure 4.1: Aggregate real ($ million 2009/10) health expenditure, ,000 $ million Total healthcare spend 20,000 $19.5 billion $19.9 billion 15,000 Total Govt health spend $16.5 billion 10,000 Total health 5,000 Publicly funded Privately funded Privately funded $3.4 billion Source: Ministry of Health

29 NZ s AGEING POPULATION 30% 25% 20% 15% 10% 5% 0% Over 65 Over 80 Over 75

30 000's NZ s AGEING POPULATION Actual Numbers to 84

31 FUNDING OF HEALTHCARE NOW OVERLAY THESE

32 HEALTH SPEND BY AGE GROUP Per Capita by Age Group Expenditure on Healthcare (1996 data) $14,000 $12,000 $10,000 $8,000 5x $6,000 $4,000 3x $2,000 $0 Under Amount $849 $1,190 $3,261 $6,144 $12,105 10x Age Group

33 FUNDING OF HEALTHCARE Heath Expenditure By Sex and By Age Source: Ministry of Health

34 FUNDING OF HEALTHCARE USE OF PATHOLOGY TESTING BY AGE Source: Ministry of Health

35 FUNDING OF HEALTHCARE NOW WORRY BECAUSE MORE OF THE SAME WILL SIMPLY NOT WORK

36 A GROWING SUCCESS STORY

37 Abano Healthcare Group Limited is an investor in and operator of healthcare businesses, in New Zealand, Australia and South East Asia. Our strategy is to invest into scalable, growth businesses in the private healthcare market that are compatible with a corporate owner and offer attractive and sustainable long term value for our shareholders.

38 ABANO BOARD Trevor Janes - Independent Chair Susan Paterson - Independent Deputy Chair Danny Chan - Independent Director Ted van Arkel Independent Director Pip Dunphy Independent Director Murray Boyte Independent Director Alan Clarke - Managing Director and CEO

39 OPERATING STRUCTURE Dental Diagnostics Audiology Lumino The Dentists Insight+Ascot Radiology Bay Audio Australia Dental Partners Aotea Pathology Bay Audio Asia

40 $ Millions $ Millions GROSS REVENUE AND UNDERLYING EBITDA 300 Gross Revenue Underlying EBITDA

41 Underlying Net Profit After Tax $M Net Profit After Tax $M NPAT AND UNDERLYING NPAT GROWTH Exit from ElderCare New Zealand Exit from Bay Audiology NZ Sale of NHC Holding

42 Nov- 14 SHAREHOLDER RETURNS Cumulative dividends/returns and year end share value Internal Rate of Return = 55.5% pa Compound Annual Growth Rate = 32.9% pa Investment - 1,000 shares valued at $970 as at 31 May 2006 $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 Received $4,912 in both capital returns and dividends between 2006 and 15 November 2014 Total value of investment including dividends and capital returns received as at 15 November 2014 of $8,477 $3,000 $2,000 $1,000 Returned over $87 million in cash to shareholders since 2006 $- FY14 Total Shareholder Return of 23.8% compared to NZX50 return of 14.8%

43 CHANGE IN REVENUE SOURCE Private Revenue Percentage has increased from 25% to 81.2% of total gross revenue Private MOH/DHB ACC Private MOH/DHB ACC

44 Percent OFFSHORE REVENUE Offshore Revenue - FY14 52% % Gross Revenue FY Rest of world % Off shore 48% New Zealand New Zealand Australia Asia

45 ABANO IN NEW ZEALAND Generated 48% of group gross revenue in FY14 New Zealand s largest private dental network with 90 practices nationwide Five Auckland sites offering state of the art modalities for diagnostic radiology services Medical laboratory and 20 community and medical collection rooms in Wellington region

46 ABANO IN AUSTRALIA Generated 50% of group gross revenue in FY14 Network of 82 dental practices across Australia Network of 36 audiology clinics, plus multiple mobile locations

47 ABANO IN ASIA Generated 2% of group gross revenue in FY14 Small test markets with 14 stores in Taiwan plus 3 in Singapore and 2 in Malaysia

48 $188.4m $22.1m $m $m DENTAL SECTOR Gross Revenue Underlying EBITDA Gross Revenue Split FY Dental 69%

49 LUMINO THE DENTISTS SIGNIFICANT MARKET POTENTIAL; LEADERSHIP POSITION; GROWTH STRATEGY Located in New Zealand 100% ownership by Abano Accelerated Growth Strategy - By Acquisition Revenue is predominantly private payment Largest private dental network in New Zealand with 90 practices as at end-february 2015 Over 700 staff including 310 clinicians NZ Market worth between NZ$550 million and $735 million per year There are 2,741 registered dentists and approximately 1,000 individual clinics

50 DENTAL PARTNERS HUGE MARKET POTENTIAL; SECOND LARGEST CONSOLIDATOR; HIGH GROWTH STRATEGY Located in Australia 100% ownership by Abano Accelerated Growth Strategy By Acquisition Revenue is predominantly private payment Second largest dental network in Australia with 82 practices as at end-february 2015 Over 970 staff with 270 clinicians Australian market worth approx. $9.1 billion. More than 20,000 registered dentists and approx. 13,000 dental practices

51 TRANS-TASMAN DENTAL MARKET Trans-Tasman Market Ownership Estimated revenue ~NZ$10 billion Corporate Consolidators Estimated number of practices ~14,000 Corporate consolidators own less than 5% of practices and have less than 10% of revenues Growing acceptance and popularity of corporate dental model Huge pool of practices for acquisition and ongoing expansion of Abano s dental networks on both sides of the Tasman Other

52 $ m $31.6m $ m $(2.8)m AUDIOLOGY SECTOR Gross Revenue Underlying EBITDA Gross Revenue Split FY Audiology 11% Negative foreign exchange impact of $3.4m in FY14 Negative foreign exchange impact of $0.1m in FY14 Abano has 50% ownership in Bay International. Charts show Bay International figures only. Exclude NZ audiology which was divested in FY10 and FY11

53 BAY AUSTRALIA SOPHISTICATED AND MATURE MARKET; EXPANDING RETAIL FOOTPRINT; TARGETED GROWTH Located in Australia 50:50 joint venture Growth strategy through organic expansion and greenfield development Revenue is primarily private payment with some public funding top-up payments High end hearing solutions provider 176 staff including 41 clinicians 36 stores across Australia, with 31 of these in retail malls PLUS mobile locations Sophisticated market with approx. 408,000 hearing devices fitted in 2014/15.

54 BAY ASIA SIGNIFICANT UNTAPPED MARKET POTENTIAL; SMALL INVESTMENTS TO TEST OFFER INTO MARKET Located in Taiwan, Malaysia and Singapore Very small part of Bay International group Seeding strategy to test market Revenue is through private payment Introducing a new way for consumers to access hearing health in Asia 73 staff with 3 audiologists 14 stores in Taiwan plus 3 in Singapore and 2 in Malaysia Unsophisticated market with no large groups or corporate presence

55 $42.7m $7.8m $ m $ m DIAGNOSTICS SECTOR Gross Revenue Underlying EBITDA Gross Revenue Split FY Diagnostics 16%

56 INSIGHT+ASCOT RADIOLOGY GROWTH OPPORTUNITY Located in Auckland, New Zealand 70:30 partnership with radiologist partners Growth strategy through organic expansion of services and clinics Revenue 65% private or private insurance and remainder through MOH and ACC World class clinics, leading edge imaging technologies and a team of expert, highly respected radiologists 84 staff including 15 radiologists Five leading edge clinics located across Auckland Market dominated by multiple, private practice groups

57 AOTEA PATHOLOGY RELIANT ON PUBLIC CONTRACT; HOLD AND MAINTAIN Located in Wellington, New Zealand 55% ownership in partnership with Sonic Healthcare Providing community pathology services to the Wellington, Hutt Valley and Kapiti Coast regions Currently operating under $26 million, one year contract extension which expires end October staff including 148 clinicians Medical laboratory and 20 community and medical collection rooms across Wellington In February 2015, announced withdrawal from DHB contract negotiations as it was felt the process, changes in timing and conditions would result in an outcome that was clinically unsound and financially unsustainable, and with all risk being transferred to the provider.

58 Thank you DISCLAIMER This company presentation to the New Zealand Shareholders Association dated 24 March 2015 provides additional comment on the 2014 financial year end results media statement and financial materials released by Abano Healthcare Group on 28 July As such, it should be read in conjunction with, and subject to, the explanations and views provided in that material.

59 GLOSSARY Revenue excludes any audiology revenues, as this is a joint venture and is therefore equity accounted, and only includes Australian dental revenues after the payment of dentists commissions. Gross revenue is reported within the segment note in the Financial Statements and includes audiology revenues and Australian dental revenues before payment of dentists commissions. Earnings Before Interest, Tax, Depreciation and Amortisation ( EBITDA ) is reported within the segment note in the Financial Statements and is Net Profit After Tax ( NPAT ) excluding GAAP compliant net finance expenses, gains/losses arising on sale of businesses, equity accounted investments, non-controlling interests, tax, depreciation and amortisation costs. Particularly, it excludes profit/losses generated by the Bay Group, in which Abano holds a 50% shareholding. Due to this being a joint venture, the results for the Bay Group are equity accounted and therefore not included in the consolidated EBITDA. Underlying earnings are reported for both NPAT (a GAAP compliant measure) and EBITDA (a non-gaap financial measure) and excludes gains/losses arising on sale of businesses, IFRS adjustments and impairments, including their tax effect. Both measures are reconciled back to reported NPAT. It is the measure used within the Company to evaluate performance, establish strategic goals and to allocate resources. More information on gross revenue and underlying earnings, which are non-gaap financial measures and are not prepared in accordance with NZ IFRS, is available on the Abano website at

60 DISCLAIMER This Company presentation dated 24 March 2015 includes comment on Abano s financial performance including financial results for the year ended 31 May 2014, which were released by Abano Healthcare Group on 28 July As such, it should be read in conjunction with, and subject to, the explanations and views provided in that material. The information in this presentation is an overview and does not contain all information necessary to make an investment decision. It is intended to constitute a summary of certain information relating to the performance of Abano Healthcare Group ( Abano ). The information in this presentation does not purport to be a complete description of Abano. This presentation is not investment advice or financial advice. Abano, its directors and employees do not give or make any recommendation or opinion in relation to acquiring or disposing of Abano shares. In making an investment decision, investors must rely on their own examination of Abano, including the merits and risks involved. Investors should consult with their own legal, tax, business and/or financial advisors in connection with any acquisition of securities. The information contained in this presentation has been prepared in good faith by Abano. No representation or warranty, express or implied, is made as to the accuracy, adequacy or reliability of any statements, estimates or opinions or other information contained in this presentation, any of which may change without notice. To the maximum extent permitted by law, Abano, its directors, officers, employees and agents disclaim all liability and responsibility (including without limitation any liability arising from fault or negligence on the part of Abano, its directors, officers, employees and agents) for any direct or indirect loss or damage which may be suffered by any recipient through use of or reliance on anything contained in, or omitted from, this presentation. This presentation is not a prospectus, investment statement or disclosure document, or an offer of shares for subscription, or sale, in any jurisdiction. This presentation includes non-gaap financial measures in various sections. This information has been included on the basis that management and the Board believe that this information assists readers with key drivers of the performance of Abano which are not disclosed as part of the financial statements.