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Fresenius Helios

2012 was an excellent year. We continued to achieve strong organic sales growth and increased our net income significantly. We also substantially raised the EBIT margin in our established hospitals. We continued to successfully integrate Damp Group and the hospitals of Klinikum Duisburg.

Fresenius Helios


  2012 US$ in millions 2011 US$ in millions Change
1 Net income attributable to the parent company of the respective business segment
Sales 3,200 2,665 20 %
EBIT 322 270 19 %
Net income1 203 163 25 %
Operating cash flow 240 294 -18 %
Capital expenditure/acquisitions 759 202 --
Order intake n/a n/a  
Employees (December 31) 42,881 37,198 15 %

  2012 US$ in millions 2011 US$ in millions Change
1 Net income attributable to the parent company of the respective business segment
Sales 3,200 2,665 20 %
EBIT 322 270 19 %
Net income1 203 163 25 %
Operating cash flow 240 294 -18 %
Capital expenditure/acquisitions 759 202 --
Order intake n/a n/a  
Employees (December 31) 42,881 37,198 15 %

Fresenius Helios is one of the largest German private hospital operators. The HELIOS Group operates 72 proprietary hospitals. In addition to 50 acute care hospitals, including 6 maximum care clinics in Berlin-Buch, Duisburg, Erfurt, Krefeld, Schwerin, and Wuppertal, the HELIOS Group has 22 post-acute care hospitals. 35 medical care centers and 13 nursing homes are also affiliated with HELIOS. The Group has more than 23,000 beds and treats over 2.9 million patients – including more than 770,000 inpatients – each year. HELIOS had more than 42,000 employees at the end of 2012.

HELIOS’ medical and commercial success is based on four strategic goals:

  • enhancing patient benefits and HELIOS’ leading position in quality management
  • safeguarding the existence and further development of the hospitals on a sustainable basis
  • building HELIOS into a knowledge enterprise
  • selective growth and consolidation of HELIOS’ market position

BUSINESS DEVELOPMENT

In 2012, Fresenius Helios increased its sales by 20% to €3,200 million (2011: €2,665 million). Organic growth was 5%. Acquisitions contributed 17%. Divestitures reduced sales growth by 2%. Also in 2012, HELIOS’ Swiss post-acute care clinic was sold to Fresenius Vamed and retrospectively deconsolidated as of January 1, 2012.

The acute care hospitals accounted for 88% of sales (2011: 88%), while the post-acute care hospitals accounted for 9% of sales (2011: 8%). 3% was attributable to other revenues (2011: 4%).

The excellent financial figures reflect the high confidence that patients and doctors place in us. They are also evidence of the successful restructuring of the acquired hospitals.

As the table shows, both sales and earnings were much improved:

€ in millions 2012 2011 Change
1 Net income attributable to HELIOS Kliniken GmbH
Sales 3,200 2,665 20%
thereof acute care 2,814 2,354 20%
thereof post-acute care 274 220 25%
EBITDA 432 369 17%
EBITDA margin in % 13.5 13.8  
EBIT 322 270 19%
EBIT margin in % 10.1 10.1  
Net income1 203 163 25%

€ in millions 2012 2011 Change
1 Net income attributable to HELIOS Kliniken GmbH
Sales 3,200 2,665 20%
thereof acute care 2,814 2,354 20%
thereof post-acute care 274 220 25%
EBITDA 432 369 17%
EBITDA margin in % 13.5 13.8  
EBIT 322 270 19%
EBIT margin in % 10.1 10.1  
Net income1 203 163 25%

EBITDA increased by 17% to €432 million (2011: €369 million). The EBITDA margin was 13.5% (2011: 13.8%). Fresenius Helios achieved EBIT growth of 19% to €322 million (2011: €270 million). The EBIT margin was at the previous year’s level of 10.1% despite the consolidation of Damp Group and the hospitals of HELIOS Klinikum Duisburg. Net income1 was €203 million, and surpassed the prior-year figure by 25% (2011: €163 million).

Sales of the established hospitals (consolidation > 1 year) grew by 5% to €2,743 million (2011: €2,623 million). EBIT improved by 18% to €321 million (2011: €271 million). The EBIT margin increased to 11.7% (2011: 10.3%). Sales of the acquired hospitals (consolidation < 1 year) were €457 million, EBIT was €1 million. The restructuring of these hospitals is on track.

Fresenius Helios’ business exhibits stable cash flows. The cash flow margin was 7.5% (2011: 11.0%). In 2012, days sales outstanding were 43 days (2011: 39 days). Bad debt as a percentage of sales was again low at 0.4%.

EXPANSION IN THE HOSPITAL MARKET

HELIOS’ business model is based on growth through admissions and treatment services, on the one hand, and growth through acquisitions, on the other. One element of our acquisition strategy is the regional proximity of hospitals, being sufficiently close to one another to form networks (clusters). Regional clustering enables cost savings, especially by concentrating non-medical services (for example, laundry or catering) in one site. Moreover, patients benefit from the bundling of medical expertise and offerings from the HELIOS clinics in, and also outside, the region.

We have defined a five-year clinic development plan for the acquired acute care hospitals. Our goal is to increase the EBITDA margin of an acute care hospital to 15% within five years following acquisition. To achieve this goal, we implement the following initiatives upon completing an acquisition. Besides structural improvements, this also includes alterations – in some cases even the construction of completely new buildings – and investment in medical-technical equipment. We also reorganize the hospital’s internal processes and implement the proven HELIOS quality management system. This ensures earnings-driven, quality-oriented management of the hospital according to the HELIOS standard.

CLINIC DEVELOPMENT PLAN ACUTE CARE HOSPITALS 2012


  Years in portfolio
  < 1 1 2 3 4 5 > 5 Total
Reported figures according to IFRS
Number of hospitals 6 2 1 - 6 4 31 50
Sales in million € 227 155 36 - 192 294 1,910 2,814
Target    
EBITDA margin in % - 3.0 6.0 9.0 12.0 15.0 15.0  
EBITDA in million € - 4.7 2.2 - 23.0 44.1 286.5 360.5
Reported    
EBITDA margin in % - -3.3 7.4 - 11.0 15.4 17.5 14.1
EBITDA in million € -1.1 -5.2 2.7 - 21.2 45.1 334.8 397.5
Number of clinics > target - 1 1 - 3 3 19 27
Number of clinics < target - 1 - - 3 1 12 17

  Years in portfolio
  < 1 1 2 3 4 5 > 5 Total
Reported figures according to IFRS
Number of hospitals 6 2 1 - 6 4 31 50
Sales in million € 227 155 36 - 192 294 1,910 2,814
Target    
EBITDA margin in % - 3.0 6.0 9.0 12.0 15.0 15.0  
EBITDA in million € - 4.7 2.2 - 23.0 44.1 286.5 360.5
Reported    
EBITDA margin in % - -3.3 7.4 - 11.0 15.4 17.5 14.1
EBITDA in million € -1.1 -5.2 2.7 - 21.2 45.1 334.8 397.5
Number of clinics > target - 1 1 - 3 3 19 27
Number of clinics < target - 1 - - 3 1 12 17

The clinic development plan of our acute care hospitals includes all hospitals within the Group according to their years of consolidation. In 2012, we achieved an EBITDA margin of 17.5% in our established hospitals (2011: 16.9%). With that, we once again were able to exceed our target EBITDA margin of 15%.

HELIOS AS PRIVATIZATION PARTNER

HELIOS is one of the most experienced hospital operators in Germany. This applies both to hospitals providing basic and general care, some of which we have been operating for more than 18 years, as well as to maximum care hospitals. With its six maximum care hospitals, HELIOS has a leading position in the privatization of hospitals of this size in Germany.

HELIOS carried out new construction and modernization with a total volume of €1.5 billion so far. Our investment capacity enables us to rebuild and restore hospitals as well as perform new construction swiftly and professionally. Bundling the ordering and selection of medical devices, particularly large ones, allows us to ensure that our hospitals are above-averagely well equipped. By optimizing the processes as well as by improving performance and quality we safeguard the condition of the hospitals we acquire.

Our goal is to continue to add approximately €150 million in sales from acquisitions each year on a multi-year average.

Acquisitions

In November 2012, HELIOS agreed to acquire the 194-bed St. Joseph hospital in Wipperfürth. The hospital achieved sales of approximately €20 million in 2011, and has about 500 employees. HELIOS plans to invest at least €8 million in the hospital’s modernization by the end of 2017. HELIOS expects to close the transaction at the end of the first, or at the beginning of the second, quarter 2013.

HELIOS further advanced the integration of Damp Group and the hospitals of HELIOS Klinikum Duisburg. During 2012, we transferred the Damp hospitals’ facilities into the regional structures of the HELIOS Kliniken Group. A new HELIOS region Northwest was set up following the principle of decentralized management structures, one of HELIOS’ principal success factors. We also completed the legal integration of the Damp hospitals; as of October, HELIOS Kliniken GmbH owns 100% of Damp Group.

One of the immediate steps taken following the takeover of a total of four hospital sites in Duisburg was the restructuring of the Central Emergency Ward at the HELIOS St. Johannes hospital. Critically ill and post-operative patients are now being treated in the new, most up-to-date Intermediate Care Unit. We carried on with the planning of two new central buildings and an investment volume of approximately €175 million.

Fresenius made a voluntary public takeover offer to RHÖN-KLINIKUM AG’s shareholders in May 2012. The offer was subject to the fulfillment of a number of completion conditions, including a minimum acceptance threshold of 90% of RHÖN-KLINIKUM AG’s share capital by the end of the offer period. 84.3% had been tendered by the deadline. Fresenius then tried to find constructive solutions to meet the strategic and financial targets of combining RHÖN-KLINIKUM AG and HELIOS with an equity stake in RHÖN-KLINIKUM AG of less than 90%. However, there was no viable way to achieve this goal. In September 2012, Fresenius announced that it had decided not to submit a new takeover offer to the shareholders of RHÖN-KLINIKUM AG for the time being.

Fresenius acquired a total of 5.0% of RHÖN-KLINIKUM AG’s subscribed capital until September 5, 2012. This position will preserve the company’s strategic options in the consolidating German hospital market.

HOSPITAL ADMISSIONS AND TREATMENTS

Due to the broadening of services being offered and our high treatment quality, we were able to again increase the number of inpatients and outpatients treated:

  2012 2011 Change
Inpatient and semi-inpatient admissions 778,817 665,108 17%
Acute care hospitals 729,673 632,778 15%
Post-acute care hospitals 49,144 32,330 52%
Outpatient admissions 2,118,112 1,726,704 23%

  2012 2011 Change
Inpatient and semi-inpatient admissions 778,817 665,108 17%
Acute care hospitals 729,673 632,778 15%
Post-acute care hospitals 49,144 32,330 52%
Outpatient admissions 2,118,112 1,726,704 23%

As the table below shows, our other structural data and performance indicators also improved:

  2012 2011 Change
Acute care hospitals 50 45 11%
Beds 18,701 16,690 12%
Length of stay (days) 6.7 6.7 0%
Post-acute care hospitals 22 20 10%
Beds 4,585 3,422 34%
Length of stay (days) 27.0 29.6 -9%
Occupancy 85% 78%  

  2012 2011 Change
Acute care hospitals 50 45 11%
Beds 18,701 16,690 12%
Length of stay (days) 6.7 6.7 0%
Post-acute care hospitals 22 20 10%
Beds 4,585 3,422 34%
Length of stay (days) 27.0 29.6 -9%
Occupancy 85% 78%  

INVESTMENTS IN HOSPITAL BUILDINGS

In 2012, Fresenius Helios invested €836 million (2011: €306 million). Own investments were €180 million (2011: €157 million), equivalent to 6% of sales. These were mainly used for hospital modernization. The most significant individual projects were the HELIOS hospitals in Hamburg, Siegburg, and Krefeld.

Our investments ensure the continued operation of the hospitals and the high standards of medical quality they provide over the long-term. The level of public subsidies was 40% (2011: 42%).

€ in millions 2012 2011 Change
1 Total of purpose-related public investment subsidies according to Section 9 of the Hospital Funding Act (KHG)
Investments 836 306 173%
Own investments in property, plant and equipment 180 157 15%
Subsidies1 77 104 -26%
Acquisitions 579 45 -

€ in millions 2012 2011 Change
1 Total of purpose-related public investment subsidies according to Section 9 of the Hospital Funding Act (KHG)
Investments 836 306 173%
Own investments in property, plant and equipment 180 157 15%
Subsidies1 77 104 -26%
Acquisitions 579 45 -

GROUP AGREEMENT

Another round of negotiations is due under the HELIOS Group wage agreement in 2013. HELIOS and ver.di entered into these negotiations in the first quarter of 2013.

QUALITY OF MEDICAL RESULTS AND PATIENT CARE

HELIOS’ goal is to provide the highest standards of medical and nursing care. We not only offer state-of-the-art medical treatment but also play a major role in advancing it. We have created committees and platforms that enable physicians and nursing staff to participate in the Company’s development. The medical advisory board and our groups of specialists have been consulting management for many years. Each new hospital is integrated into these structures. Our focus on medical quality allows our hospitals to provide superior medical care.

In 2013, HELIOS continued its program for further improving the quality of its medical results. A unique quality management system, developed in-house, ensures continuous improvement in the standards of patient care. With its focus on treatment quality based on administrative data, HELIOS has had a pioneering role in quality management. More information on quality management can be found in the Management Report.

HELIOS strives to let transparency continuously improve its medical quality: It was the first hospital group in Germany to publish the occurrence of the 17 most important infectious agents in the Group’s acute hospitals. More information is available here or at www.helios-kliniken.de/hygiene (German only).

Another integral part of patients’ benefits, besides the quality of the medical outcome, is the quality of the nursing care, which is also a factor of strategic relevance for HELIOS. Our patients’ satisfaction is critically important for us. We therefore conduct continuous patient surveys and evaluate the outcomes.

For further information, please see HELIOS’ website at www.helios-kliniken.de (German only).

Please see the Management Report for the 2013 financial outlook of Fresenius Helios.

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