Phoenix Healthcare Group Co. Ltd (Stock code : 1515) 2015 First Half Results Overview
2015 1H Results Overview The largest private healthcare group in China 1 No.1 in Beds in Operation No. 1 in Total Patient Visits Extensive hospital network serving whole of Beijing 1 13 Comprehensive hospitals 2 Specialty hospitals 42 Community clinics 2015 1H Revenue increased 18.8% to RMB602m (2014 1H: RMB507m) 2015 1H Net income increased 22.5% to RMB104m (2014 1H: RMB85m) EBITDA 2 increased 14.8% to RMB138m (2014 1H: RMB120m) Total no. of patient visits increased 10.5% to 1.87m (2014 1H: 1.69m patient visits) Capturing the growth opportunities brought by China's public hospital reform Operating beds increased 8.8% to 3,659 (2014 1H: 3,363 operating beds) 1 As of 30 June 2015 2 EBITDA calculated as profit before tax + finance costs + total depreciation and amortization - interest income on bank deposits and short-term investments 2
Innovative Business Model Capturing Multiple Parts of the Value Chain and Realizing Synergies Jian Gong Hospital IOT Hospitals Commercialize the Value Chain of Healthcare Service Identify key parts in the healthcare service value chain and transform them into commercial benefits Centralize procurement of supplies and equipments Economies of Scale Supply Chain Services and Ancillary Services Better Efficiency and Care Quality Standardize Practices and Information System at Group Level Adopt group-wide best practices Standardize and use of advanced information technology Improvement in quality of care Synergies and efficiency benefits Resources Sharing Share human resources and medical knowledge across in-network hospitals Commercializing other parts of the healthcare value chain 3
Operational Results Overview 13General hospitals 2 Specialty hospitals 42 Community clinics Total Out-patient and In-patient Visits Total Number of Beds in Operation ( 000) 3,049 3,423 3,803 3,228 3,323 3,355 3,363 3,659 1,693 1,871 Group Average In-patient Spending per Visit Group Average Out-patient Spending per Visit (RMB) (RMB) 14,809 15,413 16,218 15,929 16,834 372 399 407 404 411 4
Achieved Year on Year Improvement on All Fronts Jian Gong Hospital % change from 2014 2015 1H 1H Yan Hua Hospital Group % change from 2014 2015 1H 1H Mentougou Hospital % change from 2014 2015 1H 1H Jing Mei Hospital Group % change from 2014 2015 1H 1H MTG TCM Hospital % change from 2014 2015 1H 1H Total patient visits 361,869 5.8% 451,471 6.1% 300,578 3.1% 465,255 10.6% 235,643 10.4% In-patient visits 5,621 1.3% 7,990 5.4% 5,071 5.3% 10,176 6.3% 718 1.1% Average in-patient spend per visit (RMB) 17,893 2.1% 16,561 6.5% 15,577 11.1% 17,980 8.3% 10,152-10.6% Out-patient visits 356,248 5.9% 443,481 6.2% 295,507 3.0% 455,079 10.7% 234,925 10.4% Average out-patient spend per visit (RMB) Average length of stay (days) 440-0.7% 454 0.2% 330 1.5% 461 9.8% 335 5.0% 9.3-5.3% 15.3 2.8% 11.8-1.9% 30.4 11.0% 14.0-11.3% Beds occupancy rate (%) 71.7% -5.4% 101.5% 3.4% 73.4% 5.1% 99.3% 1.1% 45.6% -28.2% Number of beds in operation (beds) 405 0.5% 663 0.0% 453-1.3% 1,742 0.2% 120 20.0% 5
Industry Update Unprecedented opportunities for Phoenix Healthcare 2015 will be a year for further deepening reforms for the Chinese healthcare industry. Pilot schemes at both municipal and county public hospitals will be expanded, bringing in unprecedented opportunities of healthcare investment Document No. 40 by the State Council Summary of health care reforms, 18 th Third Plenary Session Multiple ministries and local governments announced their support to PPP model Summary of 2015 State Council Government Work Report By 2020, the total size of the health service industry is expected to reach more than RMB 8 trillion Active healthcare services development through: Encourage businesses, charities, foundations, commercial insurance institutions to actively invest in new projects, participate in restructuring, custody, joint private/public operation and other forms of investment. Strongly support private/social capital to run non profit-taking medical institutions or to provide basic health services. Further deregulate Sino-foreign JV and partnership conditions, and gradually expand pilot medical projects wholly-funded by qualified foreign investors Promote the development of professional and standardized healthcare services. Support clinical care services pricing adjustment to better reflect service cost and the value of skilled medical practitioners Deepen medical and pharmaceutical healthcare system Reduce / cancel overall medical cost being subsidized / paid for from drugs sales, rationalize pharmaceutical prices, and establish a scientific compensation mechanism. Accelerate and optimize medical insurance and subsidy system for serious illnesses Encourage medical services by private/social capital. Priority to be granted to non-profit-taking institutions. Private/social capital may directly invest into areas of scarce resources and diverse needs; Various forms of participation into public hospital restructuring and reorganization are accepted; Allow physicians to provide services at multiple sites/hospitals; Government health insurance reimbursement extended to cover private hospitals In 2015, Premiere Li, the State Council, MoF, NDRC, PBoC, NHFPC, Municipal Government of Beijing and many other ministries and local governments announced their support to promote and develop PPP model in public utilities sectors (including healthcare sector), especially in private public partnership and service procurement by the government etc PHG s IOT healthcare service model as one of the PPP models is highly recognized by the government. In its Implementation Opinion in Innovating Investment and Financing Mechanisms to Encourage Social Capital Investment in Key Areas (Jingzhengfa [2015] No 14) which listed Phoenix UMP GP Surgery project as a key healthcare service project for implementation, Beijing Municipal Government fully affirmed Phoenix Healthcare s success in PPP-based healthcare service reform with commitment to continue its support to the Group s expansion and growth Improve the fund-raising system under which governments, units and individuals to reasonably share basic medical insurance cost; for urban and rural residents, basic government medical subsidies to increase to RMB380 per capita Expand general reform/reorgansiation schemes to cover urban public hospitals Withdraw the system under which medical cost to be compensated by drugs sales, rationalize pharmaceutical pricing, innovate medical operation run by social capital Basic public services subsidies to be increased to RMB40 per capita Summary of Beijing Medical Institutions Setup Planning Increase medical resources utilization, number of beds to increase from 4.9 to 5.5 per thousand population. It is expected that Beijing will have an additional 10,000 to 20,000 beds over the next four years Key support for private institutions to invest and build medical facilities to meet the demand for higher-end and more comfortable medical services Within the 5 th -ring road in Beijing, new hospital construction and renovation will not be allowed so as to control the blind expansion of public hospitals 6
Latest Corporate Strategy 40% Cooperation Framework Joint cooperation of hospital, health cultivation and nursing network Asset contribution by Meitan General Hospital RMB250 mm cash 25% Zhongankang Healthcare Industry Investment Co., Ltd Holds safety supervision system & medical assets for reform & cooperation Meitan General Hospital 35% Shilong Hospital RMB350 mm Cash Other medical Institutions Reform framework of public hospitals in Baoding, Hebei Province All-cash contribution Phoenix (Baoding) Investment Pilot cooperation in various models (including ROT reform) Tier 3 hospital Supportive policy Tier 2 hospital Baoding government Cooperation Overview On Jan 6th 2015, Phoenix Healthcare entered into a non-binding cooperation framework agreement with the State Administration of Work Safety and CITIC Trust to jointly establish, with the reliance on the medical institutions and nursing facilities within the system of the Work Safety Authority, a healthcare network in Beijing and other cities in the PRC that can provide general healthcare, nursing and ambulance services to the employees of the Work Safety Authority and citizens The JV Company will cooperate with Meitan and Shilong hospital through asset restructuring and the Public-Private-Partnership/Reconstruction-Operation-Transfer ( PPP-ROT ) work model to establish a healthcare network providing healthcare, nursing and ambulance services On Jan 5th 2015, PHG entered an agreement with Baoding government in Hebei Province to jointly develop an integrated healthcare industrial cluster for Beijing, Tianjin and Hebei; the healthcare services system will focus on medical healthcare but will also cover elderly care, nursing and medical education Two Phase plan: Manage 2-3 hospitals (including at least 1 tier III hospital covering at least 1,000 beds) within 2015; expand to include medical institutions of different levels and types in Baoding, with an objective to supply approximately 5,000 hospital beds before 2019 Other government-sponsored medical institutions Overall reform framework of Beijing Coal Group Hospital On Dec 30 th 2014, Phoenix Healthcare entered into a framework agreement with Beijing Jing Mei for the reform of Beijing Jing Mei Cash contribution 70% Jointly originate & establish 30% Asset contribution by Beijing Jing Mei The whole reform process is expected to be completed by 2H 2015, which means the company will make a vital progress from IOT trust management to overall hospital management Beijing Coal Group Hospital Co., Ltd Hold hospital assets Reform for profitability Beijing Coal Group Hospital Co., Ltd 7
Latest Corporate Strategy (Con t) Cooperation Framework Cooperation Framework for Community Healthcare System Management Eastern Shunyi Cooperation Shunyi # 2 Hospital (Class I Level A Comprehensive) 4 Social Service Stations Joint Construction Financing Western Shunyi Cooperation Government of Shunyi District Shunyi Konggang Hospital (Class II Level A Comprehensive) 7 Social Service Stations Framework for Jointly Setting up Beijing-wide GP Surgery Network Strategic equity investment for 20% stake at 12xPE Jointly establish(50:50) GP Surgery Management JV Cooperation Overview In December 2014, Phoenix and the Government of Shunyi District entered into an indicative cooperation to assist the government in building up community healthcare and rehabilitation nursing network and creating a cooperative healthcare system covering primary care, intensive treatment and rehabilitation nursing functions, with a healthcare reform target of community hospital coverage of minor illness, community hospital coverage of initial diagnosis and tiered diagnosis and treatment plus two-directional diagnosis and treatment In 2014, Phoenix Healthcare and Hong Kong-based UMP Group conducted in-depth preparation to establish a preliminary cooperation framework with regards to the setup of GP surgery network in Beijing According to the cooperation plan, UMP is responsible for providing world class GP surgery training, technology know-how, management and personnel support etc, coupled with Phoenix Healthcare s integrated surgery network and system, to create a full value chain of residential healthcare service Invest and Establish GP Surgery Network Across Beijing 8
Future Strategy and Development Plan Innovation and the development of clinical service have been the major driving force behind our success, during the 2 nd half of 2015, we plan to focus on our core hospital management service business while exploring innovative healthcare service model to ensure our steady development 1 Deepen public hospitals reforms efforts Leverage on PHG s core operational and management expertise to capture the opportunities that arise from the deepening of public hospitals reforms Actively promote the implementation of our strategic cooperation to further expand PHG s hospital management service network Further participate in public hospitals reforms and accelerate PHG s investment and control of its core resources, to build up PHG as a large-scale healthcare medical group in the Beijing-Tianjin-Hebei region 2 3 Improve collaborative healthcare system and establish tiered diagnosis and treatment system Further explore innovative healthcare service model Improve the integration between the community clinics and the general hospitals to create an integrated medical system Continue to further enhance the capacity and quality of PHG s clinical care, so as to provide patients with better treatment experience as well as expand the number of patients receiving PHG s service Further expand the community-based clinical network to promote the cooperative medical model in Beijing- Tianjin-Hebei region, building HMO medical network with tiered diagnosis and treatment system via all-round cooperation with local governments, insurers and medical service institutions Develop innovative models covering medical services, operations and management, including but not limited to doctor partnership, doctor free practice and IT-based medical treatment, and follow medical service practices in the overseas market to stimulate doctors and hospital management teams to deliver market-based operations for the ultimate purpose of improving the medical service level within the Group s network 9
Our Revenue Model Innovative Business Model Revenue Model Provide healthcare services Jian Gong Hospital General Healthcare Service Revenue Patients Pay fees IOT Hospitals Management Fee Procurement of pharmaceuticals, medical devices and medical consumables Supply of pharmaceuticals, medical devices and medical consumables Supply Chain Business Supply Chain Revenue 10
Financial Performance Overview Revenue Gross Profit and Gross Profit Margin 1,206 758 887 507 602 24.4% 24.0% 24.7% 298 213 185 23.5% 23.5% 119 142 EBITDA 1 & Margin Net Income Attributable to Shareholders & Margin 26.9% 204 28.0% 248 26.0% 314 23.7% 22.9% 120 138 13.3% 101 15.6% 139 19.1% 230 16.3% 16.9% 82 102 2012 2013 Adjusted 2014 2014 1H 2015 1H 2 2 1 EBITDA calculated as profit before tax + finance costs + total depreciation and amortization - interest income on bank deposits and short-term investments 2 Exclude IPO related expenses 2012 2013 Adjusted 2014 2014 1H 2015 1H 11
Revenue of each Segment 2015 1H Revenue by Segment Segment Revenue Growth Total revenue: RMB 602 million General Healthcare Services 403 470 540 247 259 Supply Chain Business 52.2% General Healthcare Services 42.9% Hospital Management Services 60 40 41 29 17 Supply Chain Business Hospital Management Services 4.9% 431 480 116 104 315 376 782 176 606 401 310 87 68 243 314 External revenue Inter-segment revenue 12
General Hospital Services General Hospital Services Segment Performance General Hospital Services Segment Revenue Reported segment revenue 403 470 540 247 259 540 COGS (329) (385) (454) (206) (221) 470 Gross profit 74.3 85.5 86.5 41.8 37.7 403 Gross profit margin 18.4% 18.2% 16.0% 16.9% 14.6% Segment results 40.8 43.3 1 64.0 19.7 18.1 247 259 Segment margin 10.1% 9.2% 1 11.9% 7.9% 7.0% 1 Restated in 2014 13
Hospital Management Services Hospital Management Services Segment Performance Segment Revenue of Each Hospital Reported segment revenue 40.3 40.8 60.1 16.7 29.2 60.1 5.5 9.1% COGS (Amortisation charges) (12.4) (14.1) (14.6) (7.2) (7.9) Gross profit 27.9 26.7 45.5 9.6 21.3 Gross profit margin 69.3% 65.5% 75.7% 57.1% 72.8% Segment results 26.6 19.6 1 61.6 12.5 33.4 40.3 40.8 3.8 12.2 30.3% 12.3 5.4 13.4% 3.4 22.6 56.2% 21.2 9.2% 30.2% 8.5% 52.1% 20.9 3.7 30.1 34.7% 6.2% 50.0% 16.7 1.4 6.0 1.7 7.6 8.5% 35.8% 10.1% 45.6% 29.2 1.7 13.2 14.4 5.7% 45.2% 49.1% Segment margin 66.0% 48.1% 1 102.4% 74.9% 114.4% Yanhua Hospital Group Mentougou Hospital Jingmei Hospital Mentougou Traditional Chinese Medicine Hospital 1 Restated in 2014 14
Supply Chain Business Supply Chain Segment Performance Supply Chain Revenue from Each Hospital 1 Adjusted Gross Profit 2 and Adjusted Gross Profit Margin (RMB million) 2012 2013 2014 2014 1H2015 1H Reported segment revenue 431 480 782 310 401 777 176 22.6% 14.4% 15.3% 15.7% 208 16.0% 16.1% COGs (348) (379) (616) (242) (319) Gross profit 82.6 100.5 165.7 68.0 82.5 Gross profit margin 19.2% 20.9% 21.2% 21.9% 20.6% Adjusted gross profit 2 111.0 159.2 207.8 89.1 104.9 Adjusted gross profit margin Segment results 14.4% 15.3% 15.7% 16.0% 16.1% 103.0 142.2 194.6 83.4 94.7 431 116 2 110 32 7.4% 76 171 27.0% 0.5% 25.5% 39.6% 480 104 20 135 145 4.1% 30.3% 230 29.6% 111 28 83 74.4% 159 59 36.9% 100 63.1% 42 20.2% 166 79.8% Segment margin 23.9% 29.7% 24.9% 26.8% 23.6% Yanhua Hospital Group Jingmei Mentougou Hospital Hospital Segment Gross Profit Fee income Mentougou Hospital Mentougou Traditional Chinese Medicine Hospital Mentougou Traditional Chinese Medicine Hospital Adjust Profit Margin 1 Reported segment revenue before inter segment elimination 2 Adjusted segment revenue = segment revenue + pharmaceuticals purchased by Jian Gong Hospital, Yan Hua Hospital and Jing Mei Hospital from suppliers other than Beijing Wanrong; Adjusted gross profit = segment gross profit + fee income; Adjusted gross profit margin = adjusted gross profit / adjusted segment revenue Source: Company 15 41 215 27.7% 21.7% 28.1% 114 14.7% 15.8% 5.3% 310 69 16 86 50 89 22.3% 5.1% 27.8% 16.1% 28.7% 401 89 26 116 29.0% 58 22.1% 6.4% 14.4% 113 28.2% 25.6% 89 21 68 23.7% 76.3% 105 22 83 21.3% 78.7%
Why Invest in PHG? Largest Private Hospital Group in China with Unparalleled Growth Prospects Industry Reform with Significant Growth Potential 1 Fast-Growing Healthcare Service Market 2 Key Competitive Advantages and Track Record 1 Largest Private Hospital Group in China 2 Huge Potential for Public Hospital Reform, Supported by Government Policy 3 Beijing: The Leading Healthcare Service Market in China Successful Track Record in Hospital Reform and Management Well positioned to capture huge growth potential for healthcare service in China and become the leading hospital group in Asia 3 Innovative Business Model 4 Strategic Focus on Beijing, the Largest Healthcare Market in China 5 Experienced Management Team and Professional Experts 16
Appendix: Jian Gong Hospital Operation Overview Out-patient Visits In-patient Visits Operational Beds ('000) ('000) 598 685 747 11.5 10.8 11.6 399 401 403 403 405 336 356 5.5 5.6 Average Out-patient Spend Average In-patient Spend Average Length of Stay (RMB) (RMB) (Day) 17,667 17,521 17,893 10.5 10.0 9.8 9.8 9.3 417 439 449 443 440 15,558 13,127 17
Appendix: Yan Hua Hospital Operation Overview Out-patient Visits In-patient Visits Operational Beds ('000) ('000) 778 844 932 13.5 14.2 16.0 663 663 663 663 663 418 443 7.6 8.0 Average Out-patient Spend Average In-patient Spend Average Length of Stay (RMB) (RMB) (Day) 459 444 453 454 15,747 15,553 16,561 15.4 15.8 15.0 14.9 15.3 423 14,230 14,862 18
Appendix: Mentougou Hospital Operation Overview Out-patient Visits In-patient Visits Operational Beds ('000) ('000) 482 552 619 8.8 9.1 10.0 414 421 459 459 453 287 296 4.8 5.1 Average Out-patient Spend Average In-patient Spend Average Length of Stay (RMB) (RMB) (Day) 312 346 353 325 330 14,715 15,577 12.1 12.0 11.8 12.0 11.8 13,947 14,027 13,110 19
Appendix: Jing Mei Hospital Operation Overview Out-patient Visits In-patient Visits Operational Beds ('000) ('000) 791 892 981 16.3 19.1 19.5 1,618 1,738 1,738 1,738 1,742 411 455 9.6 10.2 Average Out-patient Spend Average In-patient Spend Average Length of Stay (RMB) (RMB) (Day) 390 415 420 461 17,823 16,746 16,910 16,600 17,980 41.5 36.6 29.8 27.4 30.4 332 20
Appendix: Mentougou Traditional Chinese Medicine Hospital Operation Overview Out-patient Visits In-patient Visits Operational Beds ('000) ('000) 349 396 466 1.2 1.2 1.4 100 100 100 100 120 213 235 0.7 0.7 Average Out-patient Spend Average In-patient Spend Average Length of Stay (RMB) (RMB) (Day) 293 324 319 335 10,589 10,758 11,356 10,152 15.8 16.4 15.5 15.8 14.0 259 8,843 21