Sydney, Nov 6, 2008 AEST (ABN Newswire) - IBA Health Group Limited (ASX:IBA) - Australia's largest listed health information technology company, will today host their 2008 Annual General Meeting.
A copy of the Executive Chairman & CEO's address and presentation is attached.
Live audio webcast access
In the event that you are unable to attend the AGM, the IBA directors invite you to join them via the live audio webcast which can be accessed on the following link:
http://www.brr.com.au/event/53058
To listen, simply click on the Windows Media Player, QuickTime or MP3 icon.
Video webcast access
In addition a video webcast of the presentation by Chairman Gary Cohen will be available from 5 pm on 6 of November and can be accessed on the following link:
http://www.brr.com.au/asx/IBA/iba-health-group-limited/
The video webcast will also be archived for future on-demand listening.
It has been a truly transformational year for IBA Health Group.
A year ago, we were delivering healthcare solutions primarily in the Asia-Pacific region. As I speak to you today, IBA Health is one of the largest providers of healthcare solutions worldwide, with more than 13,000 customers in 35 countries and over 3800 employees with annualised revenue in excess of $500 million.
Our operations now span five continents and our business now generates 85 per cent of its revenue from outside our traditional markets in Australia and South-East Asia.
In the past year we have been focused on delivery. We have successfully completed the integration of iSOFT, delivered our target synergies, cut costs, and significantly enhanced the financial strength and cash flows of our operations. At the same time LORENZO, our ground breaking suite of healthcare products, has gone live in key sites in the UK and in Continental Europe. We will have more news to update you with in regard to LORENZO over the next few days.
The results which were announced at the end of August included only an eight-month contribution by the iSOFT businesses. In those results our revenues were up 381 per cent to $361 million. Our underlying EBITDA increased by 228 per cent to $105 million and our underlying net profit was up 113 per cent to $49 million. The underlying NPAT of $49 million incorporates the add back of one-off costs, such as the amortisation of intangibles on acquisition, to give a more representative picture of the profitability of our operations. This is a sterling performance by any measure.
We have built a solid management team, attracting senior industry figures that bring a wealth of experience in healthcare IT to the business, and most importantly, share our vision of the future of healthcare.
I include in this group, Andrea Fiumicelli our chief operating officer who has more than 20 years experience of working for major companies across international markets. Andrea, who is based in our European Headquarters in Banbury in the United Kingdom, is here today and will speak about our operational improvements, other key initiatives within the business, and the opportunities we enjoy for continued growth.
Our ability to attract leading industry executives like Andrea is confirmation of the quality of our strategy and our leadership position in the market place.
We have restored customer confidence in iSOFT. This is evidenced by many customers entering into long term contracts, which in turn has contributed to our financial results for the year. In a recent survey of customers in Germany, 92 per cent said they would buy from iSOFT again, while 86 per cent said they actively recommend iSOFT to others. This is a vindication of our strategy to focus upon building close connections with our customers. In practice this is driven by the efforts of our customer facing personnel. In England, we have strengthened our relationships at the strategic and operational levels with the National Health Service, including Connecting for Health, the group responsible for the world's largest civilian IT project, and where together with our partner Computer Sciences Corporation (CSC) the LORENZO solution is being deployed to serve some 30 million English citizens.
The significance of these steps cannot be under-estimated. In 2008, we have laid the foundations for significant growth.
TODAY'S ECONOMIC ENVIRONMENT
It would be an understatement to say that the broader economic climate is poor. News coverage in recent weeks has been monopolised by stories of the global banking system in crisis and consumer confidence sinking fast. However, healthcare remains relatively immune from the wider economic crisis. For obvious reasons, demand for healthcare does not track stock market indexes. Additionally, governments worldwide remain under pressure from citizens to spend more on healthcare, not less... and to spend it more effectively.
Paradoxically, the relative weakness of the Australian dollar is good news for IBA. Over 75 per cent of our revenues are generated in Sterling (c50%) or Euros (c25%). If, there is continued strength of these currencies against the Australian dollar, it would result in higher than expected profits than were forecast at the time of our initial guidance.
Our position therefore remains strong.
All estimates point to continued increases in healthcare spending. In modern economies, the issue of healthcare is rapidly moving up political agendas amid escalating costs and growing demand from people for better quality healthcare. In these circumstances it is not surprising that recent studies also point to comparable increases in demand for healthcare IT solutions.
As a business IBA is resilient in the face of recessionary pressures. Our customers are largely public sector organisations, with obligations and priorities to their citizens. Consequently, we expect to be relatively unaffected by the downturn in other sectors.
The UK Government has already made a substantial commitment to investing in IT to improve the way the British healthcare system functions. Now other governments around the world are also looking at ways they can improve their country's healthcare delivery systems using IT. Australia is looking at this very matter and it is likely we will see the introduction of an electronic health record to connect our geographically dispersed population with its healthcare providers. We believe this will be a positive development for the Australian healthcare system and one we will look to contribute towards in the coming months.
As I have said, we have a loyal and stable customer base, comprising mainly public sector clients. About 65 per cent of our forecast revenues in FY09 will be generated through recurring and contracted business. This provides a very stable and strong foundation upon which to build our future revenues. When we add to this, those customers with whom we are already well advanced in contract discussions, we have forward visibility of 85 percent of our FY09 forecast revenues.
During the past four months we have continued to secure a good inflow of customer orders, and we have won major business with a value of over $50 million. We have signed over $30 million of new contracts, from China to Spain, from Australia to Honduras and from the Netherlands to Hungary. We have also had a number of major contract renewals with several of our major Hospital Trusts in the United Kingdom. Currently we are in the middle of negotiating a further $20 million of new business in Australia, Central & Southern Europe, and the UK and Irish regions. In some of these areas we have already been selected by Regional Governments as the preferred supplier for health IT solutions.
Furthermore we have encouraging signs in our new business pipelines, both in established markets where we have a strong foothold and also in new markets, such as those in Latin America and Eastern Europe, where we are beginning to make significant new inroads.
THE GROWTH OPPORTUNITY
There is a huge potential growth opportunity for IBA and our focus is to seize this opportunity.
Healthcare systems worldwide face major challenges related to chronic disease, ageing populations, nursing shortages, medical liabilities and costs. Whilst medical science has progressed in the diagnosis and treatment of disease, the way healthcare has been delivered has not progressed at anywhere near the same pace. Until now.
Going forward, all the indications are that governments will increasingly spend more on healthcare to improve the quality of care and quality of life of its citizens. As economies mature, as wealth increases and as education improves, we are becoming increasingly sensitive about the provision of healthcare and increasingly vocal in our demands for quality healthcare services.
These challenges and the need for access to high quality, safe and cost-effective medical care at the point of care, call for a new healthcare delivery model based on preventative and person-centred health systems. This can only be achieved through the effective use of healthcare IT. Our solutions like LORENZO are helping to introduce an entirely different healthcare landscape in which individuals are at the centre of healthcare processes and play an active role in their care.
This rapid change in the healthcare model is happening now- and it is the engine which will drive IBA's future growth.
Building upon these foundations, our target is an almost two fold increase in revenues over the next four years.
Most of this growth will be achieved organically. However, you may also see some acquisitions to drive the consolidation of providers which is occurring in some markets, and due to the need for additional products and services, particularly in our new Financials and Consumer Divisions.
THE ORGANIC GROWTH STORY
As I have said, most of our growth will be achieved organically. Based on this outlook, we are forecasting a 20 per cent increase in revenues in FY09 alone.
We are beginning to achieve critical mass, with a truly global operation spanning five continents. We supply systems in over 35 countries and have offices in 16 countries. These local offices provide invaluable local knowledge, expertise and local support and services, all tailored to local needs.
We now trade under the global brand of iSOFT. Consolidation around this brand has simplified our marketing operations, amplified our message and will over time generate maximum impact for our marketing investments. Next week we will communicate a clearer, stronger global branding initiative which will create excitement around our vision of healthcare and our manifesto for change. It will also strongly differentiate us from our competitors.
We have achieved success in cross-selling our core products into new markets. Since we launched this strategy earlier this year we have seen considerable success with our Laboratory and Radiology solutions in the Netherlands, Hungary, Austria, Russia, United Kingdom, Australia and Asia. We have also had success with our Financials solution in Australia and with our Spanish hospital solution in Mexico and Honduras.
We are using our global footprint to expand into many markets that offer significant growth potential in the short, medium and long-term. These opportunities are in regions such as Eastern Europe, Latin America and China.
In Russia for instance, we have successfully installed Labcenter at Gemotest, one of Moscow's largest private laboratory groups. This was quickly followed by a sale to KDL Test, another private laboratory chain, for its laboratories in Moscow, Omsk, Perm, and Krasnodar.
iSOFT Spain successfully won a contract with the state government in north-eastern Mexico for an integrated care system, our second major contract in Mexico. We have completed major implementations in Malta and in the Limpopo Province of South Africa. Our plans to open new operations in Dubai are well-advanced. This office will be fully operational by the second half of FY09.
In China we have successfully deployed eHealth - our community health network in the Changing District and have signed another two Shanghai districts since February 2008. The number of subscribers visiting our healthcare channel on the IPTV network in Shanghai has grown by over 50 per cent since June 08, a fivefold increase over the past 12 months. From January 2009 we will start to receive subscription fees from these users, together with our first contract for advertising and sponsorship revenues. Cooperation agreements have also been signed to use the IPTV & eHealth infrastructure to deliver in-hospital doctor and patient education. An initial cooperation agreement has been signed with China Mobile - China's largest mobile operator. We are now concluding a pilot to jointly deliver mobile messaging to patients within a hospital environment.
LORENZO'S TRANSFORMATIONAL EFFECT
Whilst 80 per cent of our business comes from our core products, the biggest opportunity for growth will come from LORENZO. Next week we will be launching LORENZO and its applications for acute care to the Australian and New Zealand markets.
In simple terms, LORENZO is a next-generation IT application based on the latest technology called service-oriented architecture or SOA. This type of SOA application is becoming commonplace in other industries, such as banking and retail, where there is a need to manage complex transactions and integrate myriad business functions. Healthcare faces similar issues of complexity and integration of medical and business functions. LORENZO is a SOA application, specially designed around a patient centric model, with a unique layer of services and applications that help ensure an electronic health record is across the healthcare environment and at every touch point in the patient's journey.
One way of thinking about LORENZO is like a LEGO kit with an agreed platform on which to plug the LEGO blocks. Depending on which LEGO blocks (care activities) one uses you can assemble different applications - depending upon whether the user is a large acute hospital, a specialist department, an outpatient clinic or a primary care provider. Furthermore, depending on the country and their particular needs, specific building blocks of national relevance can be used to resolve different national practices and, of course, issues of language. In this way LORENZO fills a void that has plagued healthcare application companies around the world - it provides a method of coping with the countless different ways of delivering healthcare across national and international boundaries.
At iSOFT, the ongoing development of LORENZO is underpinned by the largest civilian IT project in the world; England's National Programme for Health IT (NPfiT). Under the current contract terms, the LORENZO Regional Care solution (LRC) will be deployed to at least 60 per cent of all NHS hospitals in England - with potential for more.
LORENZO is designed so that it can work as a single instance on a data centre - servicing millions of records across the country. Our partner in the NPfiT project, CSC operates the data centre and is responsible for the implementation of LRC throughout the Hospital Trusts. For LRC to work, all the core building blocks of the system have to be in place. For this reason, although we have to date installed LRC version 1 in just one department in South Birmingham Primary Care Trust and implementation is advanced at another (the Morecambe Bay hospital in Lancashire), this nonetheless represents an important and strategic milestone in the rollout of LORENZO under the NHS national programme.
Another LORENZO solution, LORENZO Acute Care, is already live today at an early adopter site in the Aachen University Hospital in Germany.
Last month we also announced our first southern hemisphere customer; Sydney's Macquarie University Private Hospital - a joint venture development between Macquarie University and Dalcross Private Hospital.
MAKING HEALTHCARE PERSONAL
Around the globe all countries are experiencing massive increased pressures on the cost of healthcare as an increased percentage of GDP. We live in a society where there is a huge economic value placed upon pharmaceuticals, medical equipment and the provision of healthcare by providers. We have a society where we penalise or even litigate medical professionals - for medical negligence or misconduct, increasing the costs and pressures on the industry and governments. In many countries there has been little or no reward, other than professional satisfaction/pride, for delivering high-quality healthcare. Consequently many governments and countries are faced with increasing costs and a poor delivery of healthcare, resulting in a waste of national resources and talent. There is also the personal cost to patients that may suffer through a poor healthcare system. People represent each nation's greatest resource, and governments are now beginning to understand that for economic and social reasons they need to manage and sustain this critical human resource, just like any other national asset, through better provision and management of healthcare.
Indeed, governments need to measure healthcare performance, so that they are better able to manage the health of their populations and, as a consequence, to influence and improve national prosperity. They will increasingly see good healthcare management as a social and economic imperative.
LORENZO makes the delivery of healthcare patient centric. All participants agree that this is clearly the way healthcare should be delivered, rather than the more industrialized model of large scale healthcare provision which evolved in the twentieth century as healthcare services were required to massively scale up. In this way LORENZO provides the ideal platform for managing, measuring and auditing healthcare of a country. In essence for taking the pulse of the nation.
OUTLOOK
At the time of our results presentation we provided guidance of $540 - 560 million in revenue and $120 - 130 million in EBITDA for FY09. Our pipeline remains strong and the currency effect is positive for us. Our revenue and EBITDA guidance remains on track and we continue to expect to pay a dividend for FY09.
Regarding our balance sheet and gearing, our senior facility is secured for a four year term, the first year of which has just passed. We expect our gearing ratio to reduce from 42 per cent, as it was at the end of FY08, to around 34 per cent at the end of FY09. Interest cover is also expected to improve from 3.9 times at the end of FY08, to approximately 6 times at end FY09.
CORPORATE GOVERNANCE
As indicated at the half year announcement I stated that we intended to conduct a review of the Board. Under the stewardship of one of our independent directors, Peter Wise, this review was conducted by a subcommittee of the Board and included amongst other things detailed questionnaires of the Board and senior management. External assistance was also sought from Ian Pollard, acting in a consultative capacity.
The Board intends to adopt the recommendations of the Committee, so as to ensure the Board has the right composition as the Company expands, and also that we strengthen further our corporate governance principles. One recommendation the Board intends to adopt will be the appointment of a lead independent non-executive director.
BOARD CHANGES
Prior to the start of today's AGM we were advised that Don Conway has resigned as a representative of Allco Equity Partners (AEP) on the IBA Board. We accept Don's resignation with considerable regret as over the past twelve months he has been a strong contributor to the Board. We wish him well with his new career opportunity.
Robert Moran, the current Managing Director of AEP, and until now an alternate director for Messrs Conway and Tsicalas, has agreed to become a director. Robert has also headed up the Remuneration Committee and has been very supportive of the company. The Board intends to appoint Robert Moran as a director following the AGM.
As advised yesterday AEP has terminated the management agreement with Allco Finance Group (AFG), following the appointment of an Administrator to AFG and its subsidiaries. AEP has advised that Robert Moran and the AEP management team will join AEP. As AEP is a separate and independent entity we do not see this development affecting our relationship with AEP or its management team.
Whilst the IBA staff and management team have performed superbly over the past twelve months, their efforts would not have achieved the truly excellent results without the assistance and support of our Board. With a large international presence we have held two of our meetings offshore - one in our European Headquarters in Banbury in March and the other recently in Chennai and Bangalore in India. The additional issues and pressures our company places on our Board means that they need to invest more time and work even harder to keep up with all that we are doing and in multiple time zones. We sincerely appreciate their contribution and their commitment to building a world class company.
Finally, to all our shareholders, the efforts of the past few years and particularly the last twelve months are now beginning to bear fruit. We thank you for your confidence and continued trust in us.
Contact
Gary Cohen
Executive Chairman & CEO
IBA Health Group Limited
Phone: +61 2 8251 6700
Email: gary.cohen@ibahealth.com
Media
Martin Deda
Group Finance Director
IBA Health Group Limited
Phone: +61 2 8251 6700
Email: martin.deda@ibahealth.com
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