Sydney, Aug 27, 2007 AEST (ABN Newswire) - IBA Health Limited (ASX: IBA)(PNK: IBATF) - Australia's largest listed eHealth company, today announced a profit after tax (after minorities) of $22.9 million for the year to 30 June 2007, up 50 per cent from FY2006. Revenue increased by 26% per cent to $74.7 million.
Executive Chairman of IBA Health Gary Cohen said, "We are delighted with this strong result especially as we have topped the earnings guidance issued in our half year report.
"The results reflect the continuing success of our acquisition strategy and our ability to unlock the value of these acquisitions to generate organic growth.
"IBA is now established in five Asian countries as well as in the Middle East, Africa, Australia and New Zealand. With our world class solutions, our low cost infrastructure, our centre of excellence in Bangalore and our network of offices throughout the region we are well positioned to capitalise on major opportunities as these countries upgrade their health infrastructure".
Results for the period ending 30 June 2007 are:
-------------------------------------------------------------- 30/06/07 30/06/06 %Change $'000 $'000 --------------------------------------------------------------Revenue from ordinary activities 74,776 59,204 UP 26%EBITDA 32,269 18,956 Up 70%Profit before tax and amortisation 31,296 18,443 Up 70%EBIT 25,017 15,537 Up 61%Profit after tax (after minorities) 22,943 15,266 Up 50%Earnings per share (basic) 6.8 cents 5.8 cents Up 17% Cash at end of period 152,528 37,136 Net cash provided by operating activities 38,121 421--------------------------------------------------------------
OPERATIONS
The ongoing realisation of our core international expansion strategy and the increasingly regionalised focus of our operating units led to another growth year for IBA as we continue to win and deliver systems in all selected markets.
A few of the larger sales opportunities that were due to complete in 2007 have seen their procurement timelines extend into 2008. These ongoing opportunities remain competitive but help to underpin the sales pipeline for the coming year, particularly in Australia, Middle East and SE Asia.
AUSTRALIA & NEW ZEALAND (ANZ)
ANZ revenues are down following on from some one off wins in 2006 (FY07 $23 million, FY06 $36 million) This is a reflection of the flat nature of health information technology spend in ANZ and the procurement timescales of the larger government opportunities being pushed out to 2008. Notwithstanding this we are currently short listed in one state wide procurement and a large private hospital group procurement.
The ANZ business has a very strong position in the private healthcare market and has continued to perform well in this sector winning new and upgrade business with a range of customers including the newly emerging groups Cabrini Health and Healthe Care and a range of independent hospitals including Bay of Plenty, Friendly Society, Sportsmed, St Andrew's Toowomba, St Lukes Care, St Vincent's Lismore, St Vincent's Mercy Private and Western Hospital. Sportsmed purchased an integrated hospital and clinics solution whilst St Luke's Care acquired both hospital and aged care software. We also secured orders for Pharmacy upgrades from three of our New Zealand District Health Board clients.
The work undertaken in the claiming and payments business to extend our solution capability to additional care providers, and the investments we made in 2006 in our sales function are starting to show results. We have experienced a strong growth in ancillary care customers, which we expect to start to have a positive impact on recurring revenue. The Medicare component of this business remained fairly flat despite the Easyclaim initiative between Medicare and the banking sector.
SOUTH EAST ASIA
Our major sales growth came from South East Asia, particularly, Malaysia, where our Joint Venture partner (SPK) secured further orders for the roll out of IBA solutions to Ministry Of Health and Ministry of Defence hospitals. The delivery programme for the Ministry of Health and Defence is progressing ahead of our initial expectations. We now expect all contracted hospitals to be live during the 2008 financial year.
At the end of last financial year IBA came to an arrangement with SPK to assist them in the financing of their Health IT subsidiary, Solutions Protocol, including the option to acquire Solutions Protocol. In order to do this in a manner consistent with Malaysian Government ownership (Bhumi) requirements, we established a joint venture with SPK for this purpose.
Now that the delivery stage of the contract with the MOH is nearing completion we decided to deal with the option we had and acquired Solution Protocols Health IT business and assumed 100% control over the Joint Venture. This acquisition will allow IBA to have direct control over service delivery for existing Ministry of Health and Ministry of Defence clients, and access to recurring support and maintenance revenues which will provide an annualised contribution of over $5 million and provides IBA with an enlarged team of over 170 qualified health and information technology professionals. It also provides the opportunity for IBA to work with other partners in the region.
As a result of the acquisition IBA is Malaysia's largest health IT provider and is able to directly service the ongoing requirements of its growing customer and prospect base across South East Asia.
In Thailand we made significant progress with our delivery at Siriraj Hospital, one of Bangkok's leading and largest teaching hospitals where our integrated suite of hospital software is due to go live during 2008. The system we are delivering is making use of the Thai language user interface and will provide comprehensive facilities for all clinical, administration and billing services. The IBA solution will be integrated with the SAP solution that provides back office functionality for the hospital.
In the primary care sector we commenced, and made excellent progress with, the international expansion of our primary care clinic business and we are now experiencing strong interest from international markets. We secured first sales in each of Malaysia, Singapore and Hong Kong. These early adopter clients will provide points of reference for further sales with the corporate clinic market that is well suited to our enterprise solution.
A dispute with the prime contractor responsible for the implementation of a total hospital information system at the University Malaya Medical Centre (UMMC) project (announced in April 2006) has resulted in a provision being made in this years accounts of $1.3 million to cover all booked revenue and debt associated with the contract.
Procurement timescales in South East Asia for larger government opportunities have caused projects originally scheduled for 2007 to be pushed out to 2008. For the majority of these opportunities initial tenders have been responded to and IBA has delivered initial evaluation briefings to relevant government executives.
CHINA
One of the major initiatives of the year was IBA's entry into the Chinese market. China offers one of our best growth opportunities - simply due to the scale of the population and its ageing nature. The potential target market is over 200,000 community centers, 65,000 hospitals and a population of 1.3 billion people.
Government policies at a national level have substantially accelerated funding for the development of infrastructure and information systems that deliver healthcare to an urban and rural community. These policies are increasingly focused on improving access and the quality of care to a population of over 900 million rural people.
Policies at the city, local and municipal government level are funding infrastructure, communications and information systems to improve clinical collaboration between health professionals at local, community centres and major urban hospitals. The sheer cost and the volumes of patients seeking care at major urban hospitals is creating significant issues around access to appropriate levels of care and highlighting quality of care issues.
In order to position the company to benefit from these initiatives IBA acquired two businesses in Shanghai, which have strategic positions in the hospital sector as well in the telemedicine and healthcare information services. The main business trades under the name Shanghai People's Health Information Technology Co ("People's Health"). and is a 51% subsidiary with our partner Anthony Liu, who has also assumed the position of CEO China.
Our core market strategy in China is geared to meet the growing need for a solution that offers customers and patients the opportunity to manage their healthcare with as little time as possible spent at the larger acute facilities. One of our key solutions makes use of the internet and IPTV to deliver patient records into the home to facilitate patient and care consultations. This new service is designed to bring the health professional into the consumer's living room and enable consultations involving both doctors and specialists, as well as access to patient records.
YuYuan District hospital and Changning District Health Bureau are the first to sign contracts with People's Health for various components of the new electronic health record functionality that will support the IPTV initiative. We expect on line transactions to start flowing in FY2008 and sales plans are well advanced to add other districts to the network.
Since acquiring People's Health we have secured ten new Level 1 and Level 2 hospital customers in the Shanghai region. All of these hospitals ordered the software product that is specifically geared to meet their administration and billing requirements bringing the number of user installations to over 200. For this market in Shanghai approximately 90% of the Community Hospitals (tier 1A hospitals) and approximately 20% of the Tier 2A hospitals in the Shanghai district are now using IBA's solutions.
INDIA, MIDDLE EAST & AFRICA
During 2007 we strengthened the sales capability in these regions and started to develop and respond to a growing list of opportunities. We were able to secure our third contract for delivery in the growing Indian private hospital market, Artemis Health Institute who has recently gone live. We are currently short listed for two other opportunities in India.
In the Middle East we completed the planned upgrade work at the Ministry of Defence in Oman who implemented the latest version of our software and won further business at Medinat Zayed hospital and four clinics in the UAE. These customers are very supportive of our solution and will act as good reference sites for ongoing tender activity throughout the region.
The Middle East is one of the regions where large scale government procurements are underway but have extended their timetables. These include the Ministry Of Health in the UAE, and Bahrain where we are working with partners to try and secure large multi hospital / multi clinic contracts. We are also pursuing opportunities in Saudi Arabia where the market is moving forward with a regional procurement strategy. In the interim we are continuing to drive upgrade business with the installed customer base.
IBA's regional implementation team in the South African Province of Limpopo completed the initial implementation of IBA's hospital solutions in 30 of Limpopo's regional and district hospitals. Setting a new industry standard, the team completed in 90 days the delivery and implementation of the infrastructure and core systems that provide the backbone for the creation of a province wide, patient based electronic record in all 30 hospitals.
Whilst we were unsuccessful in South Africa for a region wide laboratory information system, having made the short list against a panel of international vendors, we are continuing to respond to a range of opportunities in South Africa market, notably Gauteng Province where a new procurement is underway and Kwa Zulu Natal Province where a new procurement is imminent.
ACQUISITIONS
On 29 August 2006 we acquired 100% of the issued capital of HealthLogic Sdn Bhd. With this acquisition we acquired Ying Shen Infocomm in Shanghai, China. The purchase consideration was $4.6 million.
On 13 February 2007 we acquired 51% of the issued capital of People's Health thus completing stage two of our China strategy. The consideration was $193k together with an earn out over two years and options issued to a value of $537k.
On 27 June 2007 we acquired 51% of the joint venture company that we established in Malaysia from its owner Sharikat Permodalan Kebangsaan Berhad ("SPK") for a consideration of $26.5 million making it a wholly owned subsidiary of IBA. Immediately before the acquisition the joint venture acquired the health IT business of Solutions Protocol.
CASH RESERVES
Cash and cash equivalents stand at $152.5 million for FY07 compared to $37 million in FY06.
Net proceeds from the recent rights issue has been included in the cash balance and amount to $144.6 million as at 30 June 2007.
Cash from operations was $38.1 million, representing in excess of 100% EBITDA ($32.3 million).
BALANCE SHEET
NTA is $28.1 million being 8.1cents a share.
Through IBA's recent rights issue approximately 138.5 million shares were issued on 3 July 2007.
A Provision has been made for UMMC ($1.3 million) and Advanced Healthcare Group ($920k) to cover the potential loss of contracts and any potential right off.
DIVIDEND
The company paid an interim 1 cent dividend in March 2007. Due to the iSOFT offer the company is unable to make a final dividend payment at this time.
OFFER FOR ISOFT
On the 22 August 2007 IBA announced a revised cash offer for iSOFT Group plc (iSOFT) for 69p a share, valuing the company at Pounds166m (A$410m). The revised offer has a scrip alternative of 1.65 IBA shares for 1 iSOFT share. The offer follows an offer for iSOFT by CompuGROUP for 66p a share.
We also announced that Allco Equity Partners (ASX:AEP) agreed to make a strategic cornerstone investment in IBA of up to $300 million, by way of shares and convertible notes conditional on completion of the revised offer for iSOFT.
IBA has acquired 25.6% of the issued capital of iSOFT.
The IBA revised offer is higher than that of CompuGROUP. Whilst the Board of iSOFT has reserved their position until it gets some clarity from CompuGROUP, it is important to understand that the current CompuGROUP proposal requires at least 75% of shareholders to approve it. This is no longer possible as IBA has indicated to iSOFT that it will not support the CompuGROUP proposal.
Moreover, the arrangement that CompuGROUP has with CSC requires the disposal of a key element of its business which again is contingent on the Scheme becoming effective. This is now no longer possible without IBA's support for the Scheme. CompuGROUP's proposal seeks to break the company up and allow it to have access to the LORENZO intellectual property for integration in its operations in Europe. This is also unlikely to be possible without IBA's support. Finally CompuGROUP's funding is likely to have been contingent on acquiring iSOFT. With IBA owning 25.6%, full access to iSOFT's cash flows to support an acquisition no longer seems possible.
We believe these matters put IBA into a commanding position and whilst the iSOFT board has signalled that the takeover process may move to an auction so as to bring certainty of outcome over the coming weeks, this would require CompuGROUP to restructure its bid and reconsider the rationale and assumptions supporting its current bid.
The strategic logic for the acquisition to IBA remains compelling and the merits of the transaction are further endorsed through AEP's cornerstone investment. The combination of IBA and iSOFT is expected to significantly increase IBA's FY2008 earnings per share before amortisation of acquisition related intangibles . The two companies have complementary geographical footprints and product portfolios, and it is expected that considerable revenue growth opportunities can be created through cross-selling a larger product portfolio to a broader customer base. The combined group will also be able to benefit from its increased offshore IT development resources and other economies of scale, which are expected to enable it to improve margins. Unlike the CompuGROUP offer, IBA retains the core IP of LORENZO and the key staff involved in its development.
The combined group will hold a key position in the NPfIT, one of the world's largest civilian IT projects with a total value of A$31 billion over the next 10 years. Contractual amendments to iSOFT's supply agreement to CSC in June 2007 has reduced the risk of NPfIT for iSOFT and strengthened its financial position over the next three years with approximately two thirds of CSC's licence payments to iSOFT being guaranteed through calendar based payments.
IBA VALUATION
IBA is currently trading at a significant discount to its international peers. IBA is currently trading at a
EV/ EBIT historical multiple of 13. With the acquisition of iSOFT we will create one of the largest providers of health IT solutions in the regions from Europe through to Australasia. We would expect that the market will recognise this and accordingly re-rate the company towards that of its international peers.
OUTLOOK
IBA started the FY2008 year with recurring and contracted revenue of over $34m. The pipeline of sales is strong with IBA currently short listed on a number of large sales and tenders. We would accordingly expect to continue to experience revenue growth.
As we remain in an offer period where we are offering IBA scrip for iSOFT we are presently unable to issue guidance for the year ending 30 June 2008.
APPENDIX 4E
A copy of the appendix 4E issued to the ASX today.
RESULTS BRIEFING
IBA's Annual Results Briefing will be held on Monday, 27 August 2007 at 11:00am EST. at the Intercontinental Hotel, Fort Macquarie Room Second Floor, corner Bridge and Phillips Street, Sydney.
A live webcast of the results presentation will be available via the following link:
http://www.brr.com.au/event/IBA/642/27557/wmp/rvlidwzg5i.
The webcast will include a copy of the presentation together with a live audio transmission and an archived version will remain accessible after the event through the same link.
A copy of the presentation will be available on IBA's web site http://www.ibahealth.com
and the ASX www.asx.com.au 27 August 2007.
Contact
Gary Cohen
Chairman
IBA Health Limited
Phone: +61-2-8251-6700
Email: gary.cohen@ibahealth.com
Media
Greg King
Communications and Business Development Director
IBA Health Limited
Phone: +61-413-621-111
Email: greg.king@ibahealth.com
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