Asklepios: Solid results in a challenging 2018 financial year

Asklepios Kliniken GmbH & Co. KGaA posted economically solid growth in the 2018 financial year. The stable development in patient numbers, with higher average care case income, had a positive impact on revenue. A high level of investment in employees, the development of new business areas and the effects of the regulatory environment had an influence on consolidated net profit (EAT).

In the 2018 financial year, Asklepios generated revenue of EUR 3,407.9 million (2017: EUR 3,261.9 million). The revenue increase was 4.5% and was largely organically driven as in the previous years. Earnings before interest, taxes, depreciation and amortisation (EBITDA) improved slightly to EUR 397.6 million (2017: EUR 396.4 million). At 11.7%, the EBITDA margin was down on the previous year (2017: 12.2%). Consolidated net profit and earnings after taxes (EAT) decreased to EUR 171.1 million with a margin of 5.0% (2017: EUR 194.1 million, 6.0%). As at the end of the reporting period, the number of full-time equivalents increased to 35,327 (2017: 35,097). Without deducting subsidies, capital expenditure amounted to EUR 341.9 million in the 2018 financial year (2017: EUR 275.7 million). Of this amount, EUR 251.6 million was financed from the Group’s own funds (2017: EUR 195.6 million), corresponding to an own funds ratio of 73.6% (2017: 70.9%). Capital expenditure was fully financed by cash flow from operating activities.

“2018 was a challenging year for Asklepios. Our economic development was marked in particular by preparations for new regulatory requirements, which will gradually take effect from the beginning of 2019. This especially related to changes to the Krankenhausstrukturgesetz (KHSG – German Hospital Structure Act), the fixed cost degression discount and in the MDK’s review process,” says Kai Hankeln, CEO of the Asklepios Group. “Against this background, we are satisfied with the results achieved. At the same time, we initiated key strategic impulses in the past financial year to make Asklepios even more viable for the future. We are systemically developing Asklepios into an integrated and digitally integrated healthcare group.”

Asklepios sees digitisation of the healthcare sector as a great opportunity to improve the quality of treatment outcomes and patient safety and has already made significant progress in 2018. The Group has taken a major step forward, in particular with regard to the introduction of electronic patient records, online appointments and discharge management. The significant increase in total investment compared to the previous year by 24% to EUR 341.9 million resulted, among other things, from investments in new business areas and digitisation of processes.

“From our position of financial strength, we will continue this course and continuously invest in our employees and healthcare facilities. We are prepared for the changes in the regulatory environment to continue to meet our supply contract. In the new few years, Asklepios will continue to invest in digitisation as part of its transformation into an integrated healthcare companion, both in terms of existing processes and new business areas in healthcare,” commented Hafid Rifi, CFO of Asklepios.

The financing structure of the Asklepios Group is healthy with a balanced maturity profile. As at the end of the reporting period (31 December 2018), equity amounted to EUR 1,494.5 million (2017: EUR 1,416.6 million). Thus, the Asklepios Group has an equity ratio of 36.9% (31 December 2017: 34.4%). Cash funds amounted to EUR 351.6 million (31 December 2017: EUR 612.3 million) and unused credit facilities to EUR 450.7 million as at the end of the reporting period (31 December 2017: EUR 461.1 million). The company’s ratio of net debt to EBITDA was 2.6x (2017: 2.2x). Cash flow from operating activities increased to EUR 299.9 million (2017: EUR 289.3 million).

Outlook

“Asklepios’ future is based on digitalisation and across a wide range of offers. We will continue to appropriately respond to the challenges of the regulatory environment and advancing digitalisation of our industry with future investments,” says CEO Kai Hankeln. “In 2019, we would like to build on the positive sales growth and slightly increase our earnings after taxes slightly but sustainably. However, the current financial year will be even more challenging. Necessary additional investment in digitisation as well as the impact of the Pflegepersonal-Stärkungsgesetz (PpSG – German nursing staff reinforcement act) and the Pflegepersonaluntergrenzen-Verordnung (PpUGV – German regulation for the threshold for nursing staff) must be funded. In addition, we still expect earnings to be negatively influenced by structural assessments of the MDK.”

Asklepios will therefore continue to invest in the training of its employees in 2019. With more than 2,600 trainees, Asklepios is already one of the largest training centres in the German healthcare sector. At the same time, the healthcare group is pressing ahead with the training and deployment of foreign nursing staff from the Philippines and Mexico, counteracting the lack of qualified staff.

Forecast

For the 2019 financial year, Asklepios forecasts organic revenue growth in a range of 2.5% to 3.0%. Group management expects a stable development in terms of cost weights. A slight but sustained increase in EAT compared to the previous year is also expected to be achieved. However, Asklepios expects earnings margins to be affected as a result of the German regulation for the threshold for nursing staff in hospital departments where intensive nursing care is provided. On the basis of these targets, the development in Asklepios’ equity ratio will remain stable in the 2019 financial year compared to the previous year.