Presentation of the Company January 2012

Transcription

1 MAGELLAN S.A. Presentation of the Company January 2012

2 Disclaimer This presentation is of solely informative nature and is aimed at presenting selected information about MAGELLAN Spółka Akcyjna (hereafter referred to as: MAGELLAN). This presentation uses sources of information MAGELLAN considers reliable and accurate; however, it cannot be guaranteed that they are complete and fully reflect the actual state of affairs. This study may contain statements relating to the future which can lead to investment risk or become a source of uncertainty and may be significantly different from the actual results. MAGELLAN is not responsible for any effects of decisions made on the basis of the present study. This responsibility is borne by those who are using this study. This presentation is subject to copyrights protection and the related laws. Copying, publishing or distribution of the present study requires a prior written consent from MAGELLAN. MAGELLAN is not responsible for any consequences of decisions made based on this presentation. The investors are solely responsible for investment decisions made on the basis of this presentation. 2

3 Group Overview A market leader in financial services for health care institutions; Ongoing activity in three sectors of the healthcare financing market: current operations financing, current and future receivables financing, investment financing; Unparalleled relations with more than 500 regular clients (hospitals, pharmaceutical concerns, medical equipment providers etc.) backed by a unique scoring system; Operating on the dynamically developing Polish market (and select foreign ones) where there is a clear path of further growth; Led the creation of the Polish market since 1998 with the two largest competitors (operating since 2003 and 2004 respectively) largely market followers of Magellan; Marginal role of bank financing in the health care sector; Broad offer of both traditional and innovative products; Diversified sources of capital - credit facility agreements with nine banks and two flexible bond issue programs; Excellent management team with deep sector knowledge and an impressive growth track record bound to the Company effectively since its foundation. 3

4 Attractive valuation ratios and solid shareholder base Current valuation ratios Based on 2010A results MCap (PLNm) P/E P/BV Magellan x 1.7x MWTrade x 2.7x Kruk x 5.2x 5.1% 1.4% 12.0% Shareholder structure as at 31 December 2010 Average x 3.2x Magellan discount to average -25% -40% 6.6% Source: Bloomberg, Note: ratios calculated on the basis of 2010 financial results, market price as of Consistently outperforming the market Share price performance 7.2% 67.7% 300% 275% 250% 225% 200% 175% 150% 125% 100% 75% +61.9% p.a % p.a % p.a. Polish Enterprise Fund IV, L.P. PKO TFI S.A. Pioneer Pekao Investment Management S.A. PZU Asset Management S.A. Company Management Board Others Shareholders Source: Bloomberg MAG WIG-BANKS WIG 4

5 Experienced management team - bound to the Company virtually since its foundation highly-qualified average 8-10years employment with MAGELLAN continuously increasing staff number with low turnover successful stock option program for key staff (up to 6% of shares) Management Board: Krzysztof Kawalec President of the Board, CEO over 13 years experience in management with Magellan since 2001 ( CFO, COO, since 2008 CEO) from 1998 to 2001 executive with IFFP Sp. z o.o. MBA from University of Maryland Graduate of Łódź Technical University Grzegorz Grabowicz Vice-President of the Board, CFO over 13 years professional experience in finance with Magellan since 2003 (since 2004 CFO) from 1998 to 2003 consultant in Deloitte & Touche Audit Department MBA from Nottingham Trent University certified auditor Graduate of Łódź University Urban Kielichowski Member of the Board, COO over 14 years professional experience in banking with Magellan since 2009 previously at Bank Pocztowy (Director, Corporate Clients Department) and BRE Bank (Bank Affiliate Director) Graduate of Łódź University 5

6 Constant growth Insufficient spending on health care. Hospital debt growth Poor professional standard of partners Liquidation of Sickness Funds and establishment of the National Health Fund Medical centres get more interested in financial products Ban on liability rights assignments in deals between hospitals and suppliers Introduction of Debt Write-off Act Debt Write-off Act improves health sector s liquidity Market liquidity stabilises, demand for financial products grows Government s project of legal changes of health care entities Financial crisis Continuation of Government programme We Save Polish Hospitals Limitation in foreclosures value December 2010 restriction on hospitals receivables transfer More active competition - lower margins, further market development GDP 3.8% 5.3% 3.5% 6.2% 6.5% 4.8% 1.7% 3.8% 1998 Consolidated results ASSETS ACQUIRED (mn PLN) Increase +18.6% +12.4% +26.0% +80.5% +56.5% +11.5% +8.7% +70.0% PORTFOLIO VALUE (mn PLN) Increase +48.8% +2.3% +13.2% +68.7% +55.0% +23.0% +22.0% +61.6% NET PROFIT (mn PLN) Increase +8.3% +15.1% +87.2% +18.0% +23.0% +26.3% +10.4% +28.3% NET MARGIN 25.1% 26.9% 44.0% 44.5% 40.6% 40.7% 40.5% 35.6% New products factoring liabilities refinancing loans payment guarantee full-scale financing of restructuring projects revolving loans equipment delivery financing, private hospital financing investment financing, advisory services, costs and insurance 6 audit

7 Magellan Capital Group 6 elements to this unique investment opportunity 6 Magellan a unique opportunity for investment in non-standard financial assets 1 Health care financing market in Poland - a unique opportunity for accelerated growth among developed economies 2 The clear market leader in hospital liabilities and financing of current operations with 50% market share 5 Superb operating and financial management with a prudent approach to risk management 4 Medical investment financing and foreign market expansion expected additional sources of further dynamic growth for the company 3 Sustainable high growth in financial results 7

8 6 1 Magellan a unique opportunity for investment in non-standard financial assets Health care financing market in Poland - a unique opportunity for accelerated growth among developed economies 2 Clear market leader in hospital liabilities and financing of current operations with 50% market share 5 Superb operating and financial management with a prudent approach to risk management 4 Medical investment financing and foreign market expansion expected additional sources of further dynamic growth for the company 3 Sustainable high growth in financial results 8

9 Norway Switzerland Luxembourg 1 Netherlands Austria Ireland Germany France Belgium 2 Denmark Sweden Iceland United Kingdom OECD Finland Spain Italy Greece Portugal Czech Republic Slovak Republic Hungary Poland Financial services for the health care sector in Poland a unique opportunity for continuous growth USD PPP Health expenditure per capita in European members of OECD, US$ PPP, 2008 (or latest year available) Public expenditure on health Private expenditure on health Other Still low expenditure despite continual growth: CAGR %* Present state: lowest health expenditure per capita among 22 European OECD members permanent liquidity issues and PLN 10 bln of debt of health care entities as both reservoir and drivers of financial services development; 2000 Future requirements: convergence to OECD levels of expenditure per capita driver of future growth; 0 1. Refers to insured population rather than resident population. 2. Current expenditure. Source: OECD Health Data Data are expressed in US dollars adjusted for purchasing power parities (PPPs), which provide a means of comparing spending b etween countries on a common base. PPPs are the rates of currency conversion that equalise the cost of a given basket of goods and services in different countries. EU regulations to equalize health care standards source of extensive current and future investment (ca. PLN bln until 2016). Source: OECD Health Data 2010 * Per capita total expenditure on health at average exchange rate (US$), Source: WHO, World Health Statistics 2010 High potential for Poland in the growing European financial services market due to the giant gap still to be filled 9

10 Polish health care system - financing model National Health Fund and State Treasury financing Health care system in Poland is publicly financed, mainly via the social security system. Only a small part of the national health care budget is financed by the State Treasury and Local Governments. No significant changes are expected to this system; Inadequacy of cash flows A great discrepancy between inflows and expenditures in the public health care system. Inflows are vastly inadequate. Financing via credit has become an integral part of the market; Strong demand for financial services and products The mismatch of inflows to expenditure in the health care system creates significant demand for financial services and products tailored to the specific needs of this sector, both for financing current and future operating activities; Clients for financial services There are two main client groups on the health care services market: - hospitals and suppliers of services and materials for the health care entities; Banks and other typical financial institutions are not interested in the market Most financial institutions (e.g. banks, leasing, factoring companies) are not directly interested in the health care services market due to: the specific market niche, PR issues, relatively small market for the biggest financial institutions, lack of know-how. 10

11 Government Regulations - Factors affecting the market New National Health Service Regulations act from 1 July 2011 Opportunity: introduction of financing products for Local Governments Risk: potential bankruptcy risk when a public hospital becomes a commercial law entity Restriction on transfer of hospital receivables Opportunity: new, more sophisticated product development and strengthening of competitive advantage over traditional loan financing Risk: extension to process of acquiring assets Necessity to upgrade hospital equipment to comply with EU standards Opportunity: growing demand for investment financing products Risk: higher competition for investment financing 11

12 Magellan positioning liquidity creator and intermediary National Health Fund, State Treasury, Local Government Medical services market Hospital Hospital Hospital Suppliers for medical services market Pharmaceuticals and medical materials and equipment Outsourcing services Utilities /electricity, water, gas/ 12

13 First choice company for health care sector entities number of clients share in 2010 acquired assets value Medical entities Independent health care institutions In particular public hospitals, including the biggest hospitals of key importance to the system Private health care entities 314 cooperating hospitals in 2010 including 49 newly acquired 31.7% S U P L I E R S Producers and distributors of pharmaceuticals and medical materials and equipment Outsourcing companies Utility and media providers Polish branches of large international pharmaceutical companies Leading Polish companies in the medical sector Entities providing comprehensive services to hospitals Local companies, National companies Electricity plants Water provision enterprises Telecommunication companies 125 cooperating companies, 47 acquired in 2010 relations with >80 outsourcing companies, 40+ acquired in 2010 c.20 utility and media providers served in 2010, more than half newly acquired 54.8% 11.0% 2.5% cooperation with over 400 clients at the end of

14 Product offer Liabilities / receivables SUPPLIERS Supply of goods and services HOSPITALS Product offer Financing receivables Financing current operations Loans Refinancing liabilities Guarantee Factoring Financing current and future receivables Guarantee Factoring Financing long-term receivables Investment financing Leasing Long-term loans Hospitals main clients of the Company Increasing role of financing for health care market suppliers 14

15 6 Magellan a unique opportunity for investment in non-standard financial assets 1 Health care financing market in Poland - a unique opportunity for accelerated growth among all developed economies 2 Clear market leader in hospital liabilities and financing of current operations with 50% market share 5 Superb operating and financial management with a prudent approach to risk management 4 Medical investment financing and foreign market expansion expected additional sources of further dynamic growth for the company 3 Sustainable high growth in financial results 15

16 PLN bln Magellan s competitive position on the Polish hospital liabilities financing market Hospital liabilities financing market and market potential in ,0 3, ,0 Others (estimation) MW Trade (Getin Group) Market potential 9.95 Electus (IDM Group) Magellan Still enormous market potential to capture Magellan unchallenged leader on the health care liabilities financing market; low share of assets portfolio in public hospitals liabilities (9.3% in 2010) as the basis for further intensive development on the market; 9.5 2, ,0 1, , , ,0 72.6% 66.6% 68.3% xx.x% gross margin 9.3% of overall market potential 50% 31% 13% total liabilities * 35.6% 33.4% 22.1%** * market share in the public hospital liabilities *** one-off corrected Electus profit margin Source: Ministry of Health, Financial Statements, Magellan Capital Group estimations xx.x% profit margin unique market position of MAG due to longest experience in the business and the sophisticated approach to its product portfolio; MAG s product offering, tailored to the volatile demands of the market, ensures its position as market leader will be strengthened in future significant increase (32.4% yoy) in the number of signed agreements in 1Q 2011 (almost 450 agreements signed in 1Q 2011 vs. 340 in 1Q 10); average agreement value of PLN 370 ths in 1Q 11 vs. PLN 320 ths in 1Q 10 (agreement value range from PLN 50 ths 20 mil). 16

18 PLN bln Investment financing expected additional source of further dynamic growth for the company Hospital investment financing market and market potential in ,0 3, , , ,0 1, ,0 Others (estimation) Magellan mn PLN assets acquired by Magellan due to recent start of the operations in this segment Siemens Finance Market potential investment financing market consistent direction of Company development; only ca. 30% of investment financing demand satisfied in 2010 mainly by special EU funds; marginal participation in the estimated market value by current competitors - estimated demand fulfillment less than 5% in 2010; majority of EU funds already allocated uncertain resources from the EU budget; 2010 EU regulations requiring Poland to upgrade its treatment standards to EU standards by 2016; ca. PLN bil estimated hospital investment expenditure to 2016 (icw fulfillment of EU standards) investment financing fastest growing business line of the Company to , ,0 75% investment financing* * financed investments as a share of medical entities demand for medium and large investment financing Source: Financial Statements, Magellan Capital Group estimations 18

20 Consistent, dynamic growth of Magellan Capital Group (PLN mn) assets acquired financial assets portfolio 537,9 621, , , Q Q 2011 Magellan vs. Bank sector Magellan Bank sector Difference financial assets portfolio (5Y CAGR) 44.7% 22.0% 22.7 pp Source: Company financial statements, Polish Financial Supervision Authority Dynamic growth despite market conditions and market liquidity constraints 20

21 Consistent, dynamic growth of Magellan Capital Group (PLN mn) ,9 sales revenue * net profit , ,7 22, Q Q 2011 * Sales revenue form interests, discounts, commissions Magellan vs. Bank sector Magellan Bank sector Difference net profit (5Y CAGR) 21.0% 5.1% 15.9 pp Source: Company financial statements, Polish Financial Supervision Authority Dynamic growth despite market conditions and market liquidity constraints 21

23 Assets financing 3Q 2011 vs. 3Q 2010 Debt financing (PLN mn) as at the end of the period 537,9 466,4 Equity and liabilities structure(pln mn) short-term liabilities long-term liabilities equity 184,7 100,6 301,4 156,3 143,7 171,7 3Q Q 2011 Debt financing (PLN mn) as at the end of the Quarter 414,4 3Q Q 2011 Cost of financing (PLN mn) 21,9 230,3 12,5 3Q Q Q Q

24 Assets vs. equity and liabilities structure(pln mn) as at the end of 3Q ,0 301,3 48% short-term liabilities short-term assets 67% s-t assets 1.5x higher than % s-t debt 156,3 25% long-term liabilities long-term assets 33% 208,4 fixed capital 1.5x higher than l-t assets 171,7 27% equity Assets Equity and Liabilities Safe structure of assets and equity and liabilities 24

25 External financing regular cooperation with 9 banks with access to > PLN 190 mn in bank credit limits medium-term (BRE Bank) and short-term (Raiffeisen Bank, Alior Bank) bond issue programs, comfortable capital investment direction for debt market investors: PLN 301 mn own bonds issued in 2011 in the same year PLN 126mn of bonds matured and repaid PLN 934 mn own bonds issued since the beginning of program significant diversification of investors buying bonds continuously falling cost of debt as a result of better financing conditions achieved due to successful negotiations low level of debt/equity ratio ca. 2,67 25

26 Liquidity risk Credit risk Effective system of portfolio risk management Magellan S.A. financial assets portfolio structure based on legal status of debtors (according to portfolio value) 2% 1% Magellan S.A. financial assets portfolio structure based on legal status of debtors (according to number of debtors) % 2 94% public hospitals local governments private hospitals others public hospitals local governments privat hospitals others Agreement negotiation phase Signing a contract Contract realization phase scoring analysis; track record of cooperation; legal analysis; concentration factors analysis. elaborated and solidified agreement solutions; transfer of National Health Fund receivables (if needed); ability of fixed collateral security establishing (if needed). constant payment and collateral monitoring; interest rate and fx risks transferred to client. opening reservation of financial resources adjusted to specific product. financing fitted into assets maturity; introduction of payment schedule to integrated IT system supporting liquidity management. constant matching of maturity of assets and liabilities; safe balance structure relatively prevailing long term liabilities. Strategic oriented portfolio risk management a source of key competitive advantage for the Company Effects: highest portfolio value, widest scope of business partners, future payment safety preserved 26

28 Magellan Capital Group investment rationale Market operating on a constantly growing market segment, leader on the health care financing market first choice company, broad offer of tailored solutions both for health care market entities and suppliers, CEE region activity proven business model adjusted to specific needs of relevant country, Company proven business model (flexibility, high competences in creating solutions adjusted to market specifications), experienced management board, know-how, background and successful track record of cooperation with various customers, broad, consistently evolving customer data base (suppliers and hospitals), Finances highly diversified capital sources diminished sensitivity to changes in credit policy of financial institutions, non-dividend policy as the basis for a dynamic increase in the value of the financial assets portfolio, extraordinary annual EPS growth, expected to be maintained in the coming years, Growth pillars rapid market development with still a low level of market penetration, foreign market expansion as an amplifier of future performance, low level of debt:equity ratio significant potential for further portfolio growth without equity contribution, investment financing new market segment with excellent growth potential. Company competences and superb operational performance Unique opportunity for investment in non-standard financial assets 28