Managing Director and Chief Executive Officer Mr Robert Cooke summarised, "It is very pleasing that Symbion Health has continued to perform strongly despite the ownership uncertainty surrounding the company for the past twelve months."
Key financial information for the continuing business in 1H08 includes:
· A 14.1% increase in sales revenue to $2,140.7 million;
· A 13.1% increase in EBIT (before significant items) to $106.3 million;
· An 11.3% increase in net profit after tax (NPAT) before significant items to $52.2 million;
· A 43.7% increase in cash generated from operations, with EBITDA to cashflow conversion of 98%.
In commenting on the first half performance, Mr Cooke said "The Pathology, Pharmacy Services and Consumer divisions delivered strong results in 1H08, successfully leveraging organic revenue growth into stronger earnings growth. The Imaging division, which only represents around 10% of Symbion Health's earnings, faced a challenging period due to industry pressures.
"It has been a key priority to keep the divisions focussed on maintaining the momentum that has been created since the demerger, despite the ongoing ownership uncertainty at the corporate level. I think the results announced today demonstrate that this has been successfully achieved," said Mr Cooke.
In summarising the divisional performance Mr Cooke said "Symbion Pathology, the Company's largest division, achieved revenue growth in line with market, and incremental margin improvement. Pharmacy Services produced another outstanding result with above market revenue growth and strong margin uplift. Revenue growth in the Consumer division benefited from the Carlson acquisition and combined with a tight focus on costs resulted in this division recording strong margin growth."
In terms of the performance of the Imaging division, Mr Cooke said "Imaging was the only division to underperform in the first half, with minimal revenue growth and margin deterioration, reflective of the current challenging industry conditions, in particular the impact of rising radiologist salaries."
In commenting on the outlook for the second half, Mr Cooke said "As of today, Symbion Health is on track to deliver on the guidance previously provided to the market of FY08 EBIT growth of at least 10% (pre-significant items)."
In commenting on progress since the demerger, Symbion Health's Chairman, Mr Paul McClintock said "As this may be Symbion's last result, I would like to reflect on the excellent progress that has been made since the demerger. Underlying business performance has improved significantly, with the Company successfully leveraging organic revenue growth into stronger earnings growth.
"Symbion Health's reputation amongst the medical community has improved, and relationships with our customers are at an all time high. It is this combination of factors that has positioned Symbion to be a key participant in industry consolidation. I would like to congratulate the management team and staff on all that has been achieved over the last two and half years."
In relation to Primary's takeover offer, Mr Paul McClintock said "Following Primary obtaining a relevant interest in Symbion Health of greater than 50.1% and Primary declaring its offer unconditional, the Symbion Health Board now recommends that Symbion Health shareholders accept Primary's offer.
"In reaching this recommendation, the Symbion Health Board considered a number of factors that have changed since the Board's original recommendation. These include, amongst other things, the continued volatility of equity markets and its impact on relative value, effective control of Symbion Health passing to Primary, and that it is now considered unlikely that a superior offer will emerge for Symbion Health in the foreseeable future."
Continuing business group results (refer table 1)
Sales revenue and earnings
Symbion Health reported a 14.1% increase in continuing business sales revenue to $2,140.7 million in 1H08. EBIT (before significant items) increased 13.1% to $106.3 million over the prior corresponding period, driven by an increase in earnings from the Pathology, Pharmacy Services and Consumer divisions.
Symbion Health recorded NPAT (before significant items) of $52.2 million in 1H07, an 11.3% increase on 1H07. The increase in earnings from operations was partially offset by a higher net interest expense and an increase in the securitisation charge. The combined net interest and securitisation costs increased by $3.8 million in 1H08, due to rate increases and higher average debt levels across the period.
Earnings per share (before significant items) increased 11.4% in 1H08 to 7.8 cents. The Symbion Health Board has declared a 2008 fully franked interim dividend of 5.0 cents per share, representing growth of 17.6% over the 2007 interim dividend. The dividend growth reflects strong confidence in the businesses going forward. The record date for the dividend is 7 March 2008. All shareholders will receive this dividend, irrespective of whether or when they accept Primary's takeover offer. The consideration received under Primary's takeover offer will be reduced by the amount of the dividend, in line with the terms of the offer.
Significant items
The only significant item recorded in 1H08 was the write back of costs associated with the Healthscope transactions that did not proceed ($6.2 million pre-tax, $6.1 million post-tax). The costs expected to be incurred in relation to the Healthscope scheme were fully accrued for as at 30 June 2007 on the assumption that the proposed merger with Healthscope was likely to proceed.
At 30 June 2007 it was indicated that if the merger with Healthscope did not proceed, approximately $16.8 million (pre-tax) of the costs accrued would be reversed. The actual amount of costs reversed in 1H08 of $6.2 million was less than $16.8 million due to the additional costs incurred with the revised transactions with Healthscope and the IAC Consortium (which also did not proceed).
Additional costs incurred in relation to the Primary takeover offer since 31 December 2007 are estimated to be less than $0.5 million.
Cashflow and gearing
Cashflow from operations increased 43.7% in 1H08 to $129.3 million, driven by improved working capital management compared to the prior corresponding period. After adjusting for net cash outflows of $1.8 million in relation to prior period significant items, cash generated from operations amounted to $131.1, representing 98% EBITDA to cashflow conversion.
Net debt as at 31 December 2007 was $413.2 million, compared to $423.4 million as at 31 December 2006. Gearing (net debt / net debt plus equity) stood at 31.6% as at 31 December 2007, compared to 33.1% as at 31 December 2006.
Average net debt across 1H08 was $574.3 million, compared to average net debt in 1H07 of $532.0 million. Average securitisation was $261.8 million in 1H08, compared to $245.8 million in 1H07. The increase in average net debt and average securitisation in 1H08 reflects increased net investment in Pharmacy Services working capital due to the significant growth across this division.
Continuing business divisional results (refer Table 2)
Symbion Pathology
Symbion Pathology (including Medical Centres) recorded revenue growth of 9.2% to $346.0 million in 1H08, and EBIT growth of 9.4% to $49.0 million. The EBIT margin improved to 14.2% compared to 14.1% in the prior corresponding period.
In commenting on the performance of the Pathology division in 1H08, Mr Cooke said "The Pathology division recorded revenue growth broadly in line with market growth in 1H08. New South Wales and Victoria were the stand-out performers, with service enhancements delivering business benefits.
"Excluding medical centres, the pathology division recorded margin improvement of 20 basis points in 1H08. This is the fifth consecutive period of margin growth in the Pathology division since the demerger. The margin improvement was driven by revenue growth, the benefits of scale, combined with improved work flow and front end automation efficiencies.
"As well as focussing on improving the bottom line, Symbion Pathology is committed to the development and training of pathologists. In the last six months there has been greater involvement of pathologists in the strategic, clinical and operational decision-making of the business. In addition, Symbion Pathology remains committed to ensuring workforce supply, and is the largest private provider of registrar training positions in Australia, with 22 full time positions.
In relation to the medical centres business, Mr Cooke said "The medical centres business delivered solid revenue growth in 1H08, however margins were impacted by a number of contract renewals resulting in increased fee splits."
Symbion Imaging
Symbion Imaging recorded revenue growth of 0.7% to $154.5 million in 1H08, and a 21.3% reduction in EBIT to $11.5 million. The 1H08 EBIT margin decreased by 210 basis points to 7.4%.
In reflecting on the disappointing performance of the Imaging division in 1H08, Mr Cooke said "The performance of the Imaging division was impacted by rising radiologist costs in a flat revenue environment. Revenue was impacted by the continued loss of market share in the lower modalities of general X-ray and ultrasound, the closure of a further five underperforming sites, offset by a further increase in the average fee per examination.
"A number of radiologist contracts were due for renewal in 1H08. Whilst almost all radiologists were re-contracted, market rates resulted in significant increases in radiologist salaries, leading to margin erosion in 1H08. Importantly, other costs (other than radiologist salaries) were well controlled during the period.
"As with pathology, Symbion Imaging places a strong emphasis on training key technical staff and radiologists through conferences and offshore training on the latest imaging technologies. These initiatives are important in retaining and developing key staff, as well as ensuring that Symbion Imaging remains at the forefront of evolving imaging techniques.
Symbion Pharmacy Services
Symbion Pharmacy Services recorded revenue growth of 17.0% to $1,525.0 million in 1H08, and EBIT growth of 36.7% to $31.5 million. The EBIT margin improved to 2.07% compared to 1.77% in the prior corresponding period.
In commenting on the strong performance of Pharmacy Services division Mr Cooke said "The double-digit revenue growth across the Pharmacy Services division reflects an upturn in industry conditions, combined with continued strong momentum across both the core pharmacy and hospital channels. Core pharmacy sales recorded growth of 15.3%, due to increased brand compliance and new account wins, supported by robust headline PBS growth of 8.2%. Sales across the hospitals channel grew by 24.1%, which was also well above market growth.
"The Pharmacy Services division recorded its third consecutive period of margin improvement in 1H08, with an increase of 30 basis points. The EBIT margin improved due largely to the tight control of operating costs against a backdrop of strong sales growth.
"Despite the significant growth recorded during the period, supplier relationships remain very strong and service levels continue to be maintained. Furthermore, Symbion Pharmacy Services' two key pharmacy brands, Terry White Chemists® and Chemmart®, performed very strongly during the period, with a number of new store openings.
Symbion Consumer
Symbion Consumer recorded revenue growth of 12.6% to $115.1 million in 1H08, and EBIT growth of 15.8% to $21.0 million. The EBIT margin improved to 18.3% compared to 17.8% in the prior corresponding period.
In relation to Consumer's first half performance, Mr Cooke said "Symbion Consumer's revenue growth was supported by the Carlson acquisition in 1H08. Organic revenue growth was impacted by increased competition across the key product of glucosamine, and a slowing of market growth.
"Margin performance was very strong due to tight control of operating costs and the continued benefits of increased volume spread over a large fixed cost base. The two key projects implemented in the prior year, the enterprise resource planning system and centralised distribution facility, are delivering the targeted savings.
"The Carlson acquisition has been a success, with synergies realised faster than expected. With the addition of Microgenics® to the portfolio (a health food store only brand), Symbion Consumer now has a leading presence across all major channels.
Outlook for FY08
As of today, Symbion Health is on track to deliver on previously provided guidance of FY08 EBIT growth of at least 10% (pre-significant items). The broad trends from 1H08 are expected to continue in 2H08, with the exception of:
· Imaging is expected to record a slightly stronger second half than the first half; and
· Pharmacy revenue and margin growth is not expected to be quite as strong in the second half as the first half.
About Symbion Health:
Symbion Health Limited is a leading Australian wellness and diagnostic company. It provides diagnostic and wellness services through its pathology, diagnostic imaging, medical centres and pharmacy divisions, as well as health-related products through its consumer division.
Investor and media enquiries:
Caroline Ingham
Investor Relations Manager
Symbion Health Limited
Ph: +61 3 9918 2802
Mob: +61 419 526 355
Table 1: Continuing business results
|
(A$ millions) |
1H08 |
1H07 |
% movement |
|
Sales revenue |
2,140.7 |
1,876.5 |
+14.1% |
|
EBIT |
106.3 |
94.0 |
+13.1% |
|
Securitisation charge
Net interest |
(9.7)
(21.1) |
(8.7)
(18.3) |
+11.5%
+15.3% |
|
Profit before tax (before significant items) |
75.5 |
67.0 |
+12.7% |
|
Tax |
(23.2) |
(20.1) |
+15.8% |
|
NPAT (before significant items)1 |
52.2 |
46.9 |
+11.3% |
|
Significant items (after tax) |
6.1 |
- |
n/a |
|
NPAT (after significant items)1 |
58.3 |
46.9 |
+24.4% |
|
EPS (before significant items)1 (cents) |
7.8 |
7.0 |
+11.4% |
|
Invested capital2 |
1,712.2 |
1,609.4 |
+6.4% |
|
ROIC3 |
12.4% |
11.7% |
+70bp |
1. Before minority interests share of profit of $1.3 million in 1H08 and $2.1 million in 1H07
2. Invested capital = Average net assets per segment note (assets - liabilities) + average net debt + average debtors securitisation balance
3. ROIC = (1H08 EBIT x 2) / invested capital
Table 2: Continuing business divisional results
|
Continuing business segment revenue |
|
(A$ millions) |
1H08 |
1H07 |
% |
|
Pathology
Imaging
Pharmacy Services
Consumer
Unallocated |
346.0
154.5
1525.0
115.1
0.1 |
317.0
153.5
1,303.8
102.2
0.0 |
+9.2%
+0.7%
+17.0%
+12.6%
n/a |
|
Continuing business revenue |
2,140.7 |
1,876.5 |
+14.1% |
|
Continuing business segment EBIT |
|
(A$ millions) |
1H08 |
1H07 |
% |
|
Pathology
Imaging
Pharmacy Services
Consumer |
49.0
11.5
31.5
21.0 |
44.8
14.6
23.0
18.2 |
+9.4%
-21.3%
+36.7%
+15.8% |
|
EBIT before unallocated |
113.0 |
100.6 |
+12.3% |
|
Unallocated |
(6.7) |
(6.5) |
+2.1% |
|
EBIT |
106.3 |
94.0 |
+13.1% |
Table 3: Reported group results
|
|
|
1H08 |
|
|
1H07 |
|
|
(A$ millions) |
Cont. |
Discont |
Total |
Cont. |
Discont |
Total |
|
Sales revenue |
2,140.7 |
- |
2.140.7 |
1,876.5 |
0.- |
1,876.5 |
|
EBIT before significant items |
106.3 |
-0.5 |
105.8 |
94.0 |
0.5 |
94.5 |
|
Significant items (before tax) |
6.2 |
- |
6.2 |
- |
- |
- |
|
EBIT |
112.5 |
(0.5) |
112.0 |
94.0 |
0.5 |
94.5 |
|
Securitisation charge
Net interest |
(9.7)
(21.1) |
-
- |
(9.7)
(21.1) |
(8.7)
(18.3) |
-
- |
(8.7)
(18.3) |
|
Profit before tax |
81.7 |
(0.5) |
81.1 |
67.0 |
0.5 |
67.5 |
|
Tax |
(23.3) |
0.2 |
(23.1) |
(20.1) |
11.7 |
(8.4) |
|
NPAT1 |
58.3 |
(0.3) |
58.0 |
46.9 |
12.2 |
59.1 |
|
EPS1 after significant items (cents) |
8.8 |
0.0 |
8.8 |
7.0 |
1.8 |
8.8 |
|
|
|
|
|
|
|
|
|
Significant items (after tax) included in NPAT2 |
6.1 |
- |
6.1 |
- |
11.7 |
11.7 |
|
NPAT before significant items1 |
52.2 |
(0.3) |
51.9 |
46.9 |
0.5 |
47.4 |
1. Before minority interests share of profit of $1.3 million in 1H08 and $2.1 million in 1H07
2. 1H08 significant items (after tax) comprise:
|
(A$ millions) |
1H08 |
|
Net write back of costs of the proposed Healthscope transactions / Primary offer |
6.1 |
