Capio Interim Report January - September 2002
10/22/2002 4:28 AM EST
CAPIO INTERIMREPORT
JANUARY - SEPTEMBER 2002
* Net sales for the period as a whole rose 51 per cent to SEK
5,431 M (3,600). Organic growth amounted to 15 per cent (12) in local
currencies.
* Operating earnings before goodwill amortisation (EBITA) rose to
SEK 386 M (244), corresponding to an operating margin of 7.1 per cent
(6.8).
* Earnings before tax for the third quarter, excluding items
affecting comparability, amounted to SEK 33 M (24), up 37 per cent
compared with the corresponding quarter of the preceding year.
* Earnings per share, after dilution, increased 65 per cent to
SEK 1.91 (1.16). Earnings per share excluding items affecting
comparability and nonrecurring tax items increased by 55 per cent to SEK
1.52 (0.98).
* Access was gained to the French healthcare market through the
acquisition of Clininvest - the second largest private hospital group in
France.
* The acquisition of Scandinavian Heart Center in Gothenburg
signals the start of a broader focus on cardiovascular surgery for
Capio.
INVITATION TO ATTEND A TELEPHONE CONFERENCE
On Tuesday 22 October 2002, Capio will present their nine-months 2002
Interim Report. In conjunction with this, we will be arranging a
telephone conference in English at 14:00 CET, 13:00 GMT. The meeting
will include a presentation of Capio's Report by President and CEO Per
Båtelson and CFO Staffan Carlson. An overhead-slide presentation will
also be available via www.capio.se
This invitation is extended to journalists and professionals active in
the capital market. To connect to the conference, please dial +44 (0)20
8240 8247 just before the conference, and specify "Capio".
You may listen to an Instant Replay directly after the conference and
until October 28, please dial +44 (0)20 8288 4459 access code 444722.
January - September 2002
Capio Group
Capio continued to expand very strongly, with organic growth of 15 per
cent (12), expressed in local currencies. The third quarter is, as
always, a weak quarter in terms of earnings. Seasonal variations also
affect the Group's UK operations, albeit to a lesser extent than the
Group's Nordic region units.
Consolidated net sales rose 51 per cent compared with the first nine
months of 2001 and amounted to SEK 5,431 M (3,600). Including items
affecting comparability of SEK 7 M (16), EBITA amounted to SEK 386 M
(244).The Group's operating margin was 7.1 per cent (6.8). Earnings
after financial items totalled SEK 211 M (124).
Closure costs of SEK 9.6 M were incurred in the third quarter and these
are reported among items affecting comparability. Commencing in 2003,
the estimated
annual effect of the measures on earnings will be approx. SEK 16 M.
Alecta has decided to freeze the payment of client-company funds. The
decision will affect Capio's receivable from Alecta by a maximum amount
of SEK 16 M.
Capio has decided to implement a project to co-ordinate purchasing and
payment routines in the Group. The objective of the project, which is
expected to extend over several years, is to reduce the total number of
suppliers and decrease administration and purchasing costs.
Through the acquisition of Clininvest, the second-largest private
healthcare provider in France, Capio has taken another step towards its
goal of becoming the leading private supplier of healthcare services in
the European market. After Germany, France is the largest healthcare
market in Europe.
Operations in France will be grouped within a separate new business
area, Capio Healthcare France, which will become part of the Group's
Healthcare Services Sector, effective November 1.
Clininvest, which is being renamed Capio Santé, consists of 16
hospitals. The company provides specialist services, particularly in the
field of surgery, but also in psychiatry, medicine, rehabilitation,
chemotherapy and dialysis.
Clininvest has sales of about SEK 1,300 M on an annual basis. A plan for
restructuring and improving the efficiency of operations has been
prepared.
Healthcare Services
Net sales amounted to SEK 4,332 M (2,848), reflecting organic growth of
14 per cent in local currencies. EBITA amounted to SEK 309 M (161), with
an operating margin of 7.1 per cent (5.7).
Nordic healthcare operations continued to develop well. Demand is strong
in the Swedish market. The introduction of a care guarantee has resulted
in greater patient mobility and increased revenues for a number of Capio
units.
Capio Occupational Health was reorganised during the period and no
longer exists as a separate business area. Today, Previa in Sweden and
Norway are part of Capio Healthcare Nordic business area, while Previa
in Britain is part of Capio Healthcare UK business area. The operating
focus of the Previa units has not been changed, however. The
deterioration in economic conditions and staff shortages in certain
specialist groups, especially company doctors, continued to have an
adverse effect on earnings in recent quarters.
In September, Scandinavian Heart Center in Gothenburg was acquired. This
step was taken to develop cardio-vascular surgery to a leading-edge area
of business within Capio. The company has annual revenues of approx.
SEK 65 M and a care-services contract to carry out 550 heart operations
per year. A sister unit is already in existence today within the
Yorkshire Clinic in the UK.
The rebuilding of the emergency care unit at St. Göran's Hospital is
underway and is expected to be completed by the end of the year. This
will reduce patient waiting times, improve the work environment and
increase the unit's capacity to accept the steadily growing volume of
patients seeking emergency care. The hospital has also conducted
geriatric care operations in Stockholm since the beginning of the year.
During spring 2002, Lundby Hospital signed an agreement to extend its
dialysis operations. Patients will gradually be transferred to the
hospital from other units during the autumn, which will make Lundby
Hospital one of the largest dialysis units in Sweden.
During the year, Volvat Medisinske Senter signed agreements with four of
the five new healthcare companies in Norway.
UK healthcare operations continued to develop well and were able to meet
the rent increases deriving from the sale of the UK properties, which
raised costs by about
SEK 10 M during the quarter, compared with the preceding year.
Discussions regarding closer co-operation between Capio and the NHS are
in progress and to date have led to several small care contracts.
Including the French operations, Capio's Healthcare Services sector
currently has revenues of approx.
SEK 7,300 M on an annualised basis.
Diagnostic Services
Net sales for Diagnostic Services amounted to SEK 723 M (650). EBITA
amounted to SEK 27 M (28). Expressed in local currency, organic growth
was 9 per cent.
Laboratory medicine operations in Denmark continued to show weak
development. An action plan has been formulated and restructuring
measures were initiated during the third quarter. Further activities
will be decided and implemented before the end of the year.
The flow of patients at Globen Radiology continued to increase but has
yet to reach a satisfactory level. The unit has a positive cash flow.
The Norwegian Department of Health unexpectedly, and at short notice,
decided to cut payment levels for radiology services in Norway by 13 per
cent, effective October 8. This will decrease the profitability of Capio
Diagnostics in Norway during future quarters. Since the cuts also affect
public sector care providers, Capio and public sector units will jointly
work to bring about negotiations and influence the authorities, with the
aim of achieving better compensation levels next year.
Preparations are underway to launch Capio Diagnostics' operations in the
UK. Equipment is currently being installed to meet the start-up date of
January 1, 2003. Activities during the initial stage will focus on
taking care of the patient volumes currently outsourced by Capio
Healthcare UK.
It is estimated that new projects in the UK and the program of measures
in Denmark will generate a positive effect on earnings in 2003.
Capio Diagnostics will continue to focus clearly on the development of
profitable operations.
Diagnostic Services currently has revenues of approx.
SEK 1,000 M on an annualised basis.
Elderly Care Services
Net sales for elderly care operations amounted to SEK 500 M (208). EBITA
amounted to SEK 1.3 M (13.4). Much of the business sector's earnings in
2001 derived from the now divested properties for elderly care. There is
substantial demand for elderly care services but management is focusing
mainly on developing profit and the manning situation. Expressed in
local currency, organic growth was 47 per cent.
Difficulties in recruiting trained personnel led to a nurses' pool being
started in Stockholm.
Currently, Capio Elderly Care Services has revenues of about SEK 800 M
on an annualised basis.
Financial position
The Capio Group's financial situation changed significantly with the
divestment of the hospital properties in the UK in June. In conjunction
with the sale, loans totalling approx. SEK 3,200 M were repaid.
At the end of the third quarter, the Group's interest-bearing net assets
totalled SEK 335 M. Liquid funds amounted to SEK 392 M. The financial
net for the quarter was
SEK 6.7 M, an improvement of SEK 56 M compared with the corresponding
quarter of 2001.
The Group has pledged assets and contingent liabilities totalling SEK
388 M. Corresponding figure for year end 2001 was SEK 5 647M. On
September 30, the equity/assets ratio was 56 per cent.
During the fourth quarter, the Capio Group will again have external
financing of approx. SEK 700 M as a result of the acquisition of
Clininvest.
Investments
During the year, the Group has invested SEK 243 M, of which SEK 86 M
related to expansion investments. A total of SEK 63 M was invested in
properties in the United Kingdom, in all essential respects prior to
their sale.
Items affecting comparability
Items affecting comparability amounted to SEK 6.8 M during the first
nine months of 2002. Of this, a total of
SEK 24.1 M was attributable to a capital gain on the sale of properties
in the UK. The write-down of operating systems amounted to SEK 7.7 M and
expenses of SEK 9.6 M were posted for the termination of operations.
Tax expenses
Group tax expenses for the period were affected by substantial changes
in deferred taxes, mainly resulting
from the sale of properties. The effect of the changes in deferred taxes
led to tax expenses for the period being reduced by SEK 26 M. The tax
effect on items affecting comparability is estimated to be negative in
an amount of SEK 2 M.
Personnel
At the end of the period, the number of Group employees was 8,811
(7,339). The average number of employees during the period totalled
8,436 (5,917).
Parent Company sales and earnings
The Group's Parent Company, Capio AB, reported net sales of SEK 4 M (15)
for the period and an operating loss of SEK 50 M (loss: 49) before
goodwill amortisation and items affecting comparability. Profit before
appropriations and taxes amounted to SEK 39 M (113). The Parent
Company's investments amounted to SEK 2 M (1) for the period.
Per Båtelson
President and Chief Executive Officer
Gothenburg, October 22, 2002
Capio AB (publ)