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Fresenius Helios

2011 was a successful year with strong sales and earnings growth. Our established clinics achieved excellent operating results. With the acquisition of the maximum care hospital Katholisches Klinikum Duisburg and the announced acquisition of Damp Group, we continue our growth path within the German hospital market and strengthen our clinic network.

Key data of Fresenius Helios

  2011 € in millions 2010 € in millions Change
1 Net income attributable to HELIOS Kliniken GmbH
Sales 2,665 2,520 6%
EBIT 270 235 15%
Net income1 163 131 24%
Operating cash flow 294 311 -5%
Capital expenditure/acquisitions 202 179 13%
Employees (December 31) 37,198 33,321 12%

  2011 € in millions 2010 € in millions Change
1 Net income attributable to HELIOS Kliniken GmbH
Sales 2,665 2,520 6%
EBIT 270 235 15%
Net income1 163 131 24%
Operating cash flow 294 311 -5%
Capital expenditure/acquisitions 202 179 13%
Employees (December 31) 37,198 33,321 12%

Fresenius Helios is one of the largest German private hospital operators. The HELIOS Group operates 65 proprietary clinics. In addition to 45 acute care hospitals, including 6 maximum care clinics in Berlin-Buch, Duisburg, Erfurt, Krefeld, Schwerin, and Wuppertal, the HELIOS Group has 20 post-acute care clinics. 30 medical care centers and 10 nursing homes are also affiliated with HELIOS. The Group has more than 20,000 beds and treats more than 2 million patients – including approximately 700,000 inpatients – each year. HELIOS had more than 37,000 employees at the end of 2011.

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

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

BUSINESS DEVELOPMENT

In 2011, Fresenius Helios increased its sales by 6% to €2,665 million (2010: €2,520 million). Organic growth was 4%. Acquisitions contributed 2%.

The acute care clinics accounted for 88% of sales (2010: 88%), while the post-acute care clinics accounted for 8% of sales (2010: 9%). 4% was attributable to other revenues (2010: 3%).

These figures reflect the high confidence that patients and doctors place in us. They are also evidence for the successful restructuring of the acquired clinics.

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

€ in millions 2011 2010 Change
1 Net income attributable to HELIOS Kliniken GmbH
Sales 2,665 2,520 6%
thereof acute care 2,354 2,229 6%
thereof post-acute care 220 222 -1%
EBITDA 369 318 16%
EBITDA margin in % 13.8 12.6  
EBIT 270 235 15%
EBIT margin in % 10.1 9.3  
Net income1 163 131 24%

€ in millions 2011 2010 Change
1 Net income attributable to HELIOS Kliniken GmbH
Sales 2,665 2,520 6%
thereof acute care 2,354 2,229 6%
thereof post-acute care 220 222 -1%
EBITDA 369 318 16%
EBITDA margin in % 13.8 12.6  
EBIT 270 235 15%
EBIT margin in % 10.1 9.3  
Net income1 163 131 24%

EBITDA increased by 16% to €369 million (2010: €318 million). The EBITDA margin rose to 13.8% (2010: 12.6%). Fresenius Helios achieved an excellent EBIT growth of 15% to €270 million (2010: €235 million). The EBIT margin also improved, climbing by 80 basis points to 10.1% (2010: 9.3%). Net income1 was €163 million, and surpassed the prior-year figure by 24% (2010: €131 million).

Fresenius Helios’ business exhibits stable cash flows: The cash flow margin was 11.0% (2010: 12.3%). In 2011, days sales outstanding were 39 days (2010: 38 days). Bad debt as percentage of sales was again low at 0.2% (2010: 0.2%).

EXPANSION IN THE HOSPITAL MARKET

HELIOS’ business model is based on growth through acquisitions on the one hand, and growth in admissions and treatment services on the other. One element of our acquisition strategy is the regional proximity of hospitals – 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 hospital. Moreover, patients benefit from the bundling of medical expertise from the HELIOS clinics in – and also outside – the region.

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

The restructuring plan of our acute care clinics includes all clinics within the Group according to their years of consolidation. In 2011, we were once again able to exceed our target EBITDA.

RESTRUCTURING PLAN ACUTE CARE CLINICS 2011


Reported figures according to IFRS
  Years in portfolio
  < 1 1 2 3 4 5 > 5 Total
Number of clinics 1 1 - 6 4 7 25 43
Sales in million € 16 34 - 183 271 172 1,662 2,336
Target                
EBITDA margin, in % - 3.0 6.0 9.0 12.0 15.0 15.0  
EBITDA in million € - 1.0 - 16.4 32.5 25.7 249.2 324.8
Reported                
EBITDA margin, in %   -2.6 - 2.9 13.2 11.2 16.9 14.4
EBITDA in million € -3.2 -0.9 - 5.3 35.7 19.2 280.3 336.4
Number of clinics > target - - - 3 2 3 15 23
Number of clinics < target - 1 - 3 2 4 10 20

Reported figures according to IFRS
  Years in portfolio
  < 1 1 2 3 4 5 > 5 Total
Number of clinics 1 1 - 6 4 7 25 43
Sales in million € 16 34 - 183 271 172 1,662 2,336
Target                
EBITDA margin, in % - 3.0 6.0 9.0 12.0 15.0 15.0  
EBITDA in million € - 1.0 - 16.4 32.5 25.7 249.2 324.8
Reported                
EBITDA margin, in %   -2.6 - 2.9 13.2 11.2 16.9 14.4
EBITDA in million € -3.2 -0.9 - 5.3 35.7 19.2 280.3 336.4
Number of clinics > target - - - 3 2 3 15 23
Number of clinics < target - 1 - 3 2 4 10 20

In 2011, HELIOS successfully continued the expansion in the German hospital market: In October, the company agreed to acquire 94.7% of the share capital in the privatelyowned hospital operator Damp Group.

Damp operates 7 acute care hospitals and 4 post acute care hospitals with a total of 4,112 beds (thereof 2,649 in acute care) and is among the 10 largest private hospital operators in Germany. In addition, Damp operates 8 outpatient medical care centers, 2 nursing care facilities with a total of 606 beds and a wellness resort.

The acquisition of Damp is an excellent geographic fit with the HELIOS hospital network in the north and northeast of Germany. In 2010, Damp achieved sales of €487 million and operating profit (EBIT) of €21 million. Due to the geographic proximity of the HELIOS hospital Schwerin, HELIOS had to divest the Damp hospital Wismar (505 beds, sales of approximately €60 million) to secure regulatory clearance of the transaction. Adjusted for this divestiture, the Damp Group achieved sales of approximately €427 million in 2010. HELIOS anticipates closing the transaction at the end of the first or at the beginning of the second quarter 2012.

In December, HELIOS completed the acquisition of 51% of the share capital of Katholisches Klinikum Duisburg hospital (KKD), North-Rhine Westphalia, Germany. The acquisition strengthens HELIOS’ position as the largest private hospital operator in the state of North-Rhine Westphalia. KKD operates now as HELIOS Klinikum Duisburg.

HELIOS Klinikum Duisburg operates a maximum care hospital with 4 locations in Duisburg and a total of 1,034 beds as well as a post-acute care clinic with 220 beds and 2 nursing care facilities. In 2010, HELIOS Klinikum Duisburg’s hospitals provided inpatient care for about 30,000 patients (thereof 26,500 in acute care). KKD has about 2,200 employees and achieved 2010 sales of approximately €134 million.

HELIOS will consolidate the acute care hospitals into two locations and build two new hospitals. The total investments will be approximately €176 million, over five years. The new locations will offer full inpatient care as well as additional medical specializations.

HELIOS acquired the St. Marienberg district hospital in Helmstedt/Lower Saxony in early 2011. The hospital has 267 beds and achieved sales of about €34 million in 2011. It is being consolidated as from January 1, 2011. The acquisition of the municipal hospital in Rottweil, southwestern Germany, is being consolidated as from July 1, 2011. The hospital generated sales of about €31 million in 2011.

As an experienced privatization partner, HELIOS is in an excellent position for further acquisitions and will continue to focus on expanding its market position in Germany.

HOSPITAL ADMISSIONS AND TREATMENTS

The introduction of Diagnosis Related Groups (DRG), with standardized base rates in each federal state, means hospitals in Germany face increasing competition for patients. The HELIOS clinics have successfully adjusted to the changed reimbursement and competitive conditions. 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:

  2011 2010 Change
Inpatient and semi-inpatient admissions 665,108 640,296 4%
Acute care clinics 632,778 606,880 4%
Post-acute care clinics 32,330 33,416 -3%
Outpatient admissions 1,726,704 1,696,919 2%

  2011 2010 Change
Inpatient and semi-inpatient admissions 665,108 640,296 4%
Acute care clinics 632,778 606,880 4%
Post-acute care clinics 32,330 33,416 -3%
Outpatient admissions 1,726,704 1,696,919 2%

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

  2011 2010 Change
1 Germany only
Acute care clinics 45 42 7%
Beds 16,690 15,097 11%
Length of stay (days) 6.7 6.9 -3%
Post-acute care clinics 20 20 0%
Beds 3,422 3,467 -1%
Length of stay (days)1 29.6 29.5 0%
Occupancy1 78% 80%  

  2011 2010 Change
1 Germany only
Acute care clinics 45 42 7%
Beds 16,690 15,097 11%
Length of stay (days) 6.7 6.9 -3%
Post-acute care clinics 20 20 0%
Beds 3,422 3,467 -1%
Length of stay (days)1 29.6 29.5 0%
Occupancy1 78% 80%  

INVESTMENTS IN HOSPITAL BUILDINGS

In 2011, Fresenius Helios invested €306 million (2010: €268 million). Own investments were €157 million (2010: €166 million), equivalent to 6% of sales. About €49 million of this was invested in new buildings under construction at two hospitals in Krefeld. A first building, a 654-bed hospital, was completed as scheduled in 2011. A total of €180 million will be invested there by 2014.

€ in millions 2011 2010 Change
1 Total of purpose-related public investment subsidies according to Section 9 of the Hospital Funding Act (KHG).
Investments 306 268 14%
Own investments in property, plant and equipment 157 166 -5%
Subsidies1 104 89 17%
Acquisitions 45 13 -

€ in millions 2011 2010 Change
1 Total of purpose-related public investment subsidies according to Section 9 of the Hospital Funding Act (KHG).
Investments 306 268 14%
Own investments in property, plant and equipment 157 166 -5%
Subsidies1 104 89 17%
Acquisitions 45 13 -

Our investments assure 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 42% (2010: 43%).

GROUP AGREEMENT

In April, HELIOS signed a new wage agreement both with the Marburger Bund and with ver.di. The wage agreements are part of the group-wide wage agreements that HELIOS had already signed with the two unions at the end of 2006 and beginning of 2007, respectively.

The wage agreement entered into with the Marburger Bund stipulates for physicians at HELIOS an initial average salary increase of 3%. A further increase of 2.4% will follow in March 2012. According to the wage agreement with ver.di, employees in non-medical staff services will initially receive a salary increase of 2%. A further increase of 3% will follow as per May 1, 2012. For employees returning to their job earlier from parental leave, the bargaining parties agreed on an increase of the monthly childcare subsidy from €100 to €150 per child. Once again, HELIOS emphasizes its desire to promote a healthy work-life balance.

HELIOS SERVICE SPECTRUM

The HELIOS Group offers patients competent services in acute and outpatient care as well as post-acute care and residential care for the elderly. Our goal is to provide high standards of medical care in all areas and at all levels.

Acute care is the Group’s core focus. 45 acute care clinics cover virtually the whole medical spectrum, with a broadbased portfolio ranging from basic and standard care hospitals through to maximum care hospitals with over 1,500 beds.

The total medical care we provide for our patients also includes relevant outpatient care after hospital treatment. Possibilities for treatment at either the clinic itself or our medical care centers and the collaboration with numerous external doctors enable a seamless integration of outpatient and inpatient care within the HELIOS network.

Our acute and outpatient care concept is supplemented, both regionally and medically, by our post-acute care clinics.

At our nursing homes, the mission is to provide quality residential care with dignity and respect.

QUALITY OF MEDICAL RESULTS AND PATIENT CARE

In 2011, HELIOS continued its program for further improving the quality of its medical results. A unique quality management system, developed in-house, assures continuous improvement in the standards of patient care. With its focus on treatment quality based on administrative data, HELIOS owns a pioneering role in quality management. More information on quality management and the “Initiative of Quality Medicine” (IQM) co-founded by HELIOS can be found in the Management Report.

Another integral part of patients’ benefit, besides the quality of the medical outcomes, 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.

We want to achieve standards of treatment quality that are better than the German average or other customary international benchmarks in all important areas in 2012.

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

Please see the Management Report for the 2012 financial outlook of Fresenius Helios. Information on the German hospital market can be found in the Management Report under Health Care Industry and under Outlook.

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