Capio Year-End Report 2001

[ CAPIO YEAR-END REPORT] JANUARY - DECEMBER 2001 Strong growth for Group · Net sales rose by 60 per cent to SEK 5,382 M (3,357). Organic growth amounted to 12 per cent in local currencies. · Operating earnings before goodwill amortisation (EBITA), and excluding items affecting comparability, amounted to SEK 392 M (170), corresponding to an operating margin of 7.3 per cent (5.1). · Earnings after financial items amounted to SEK 205 M (310), including items affecting comparability totalling SEK 17 M (152). · The UK's fourth largest hospital group, Community Hospitals Group (name subsequently changed to Capio Healthcare UK), was acquired and successfully integrated. · Medocular, the Nordic region's largest private company in the eye healthcare field, was acquired. · Agreement signed to acquire Finnish radiology company Mediscan, Capio's first venture into Finland. · Radiology operations reported weak earnings due to the start-up of a number of new units and the restructuring of St. Göran Röntgen (X- ray) in Sweden. Several acquisitions were made by the Elderly Care business area, resulting in doubled net sales and properties were sold to a partly owned elderly care properties company. [REMOVED GRAPHICS] invitation to participate in tele-conference Capio will present its year-end report on operations in 2001 on Wednesday, February 6. In conjunction with this, the Company will arrange a tele-conference (in English) at 14:00 CET (13:00GMT). The conference will include presentations by Capio's CEO and President, Per Båtelson and Executive Vice President Martin Svalstedt. Journalists and professional members of the capital market are invited to participate. To link up to the conference, call +44 (0)20-8781 0577 just prior to the above starting time and specify "Capio." An overhead-slide presentation will also be available via www.capio.se It will be possible to listen to a recording of the conference immediately after it is concluded and up to February 12. Please call +44 (0)20-8288 4459 and specify 645942. Capio Group January - December 2001 The Group continued to expand strongly through a combination of acquisitions and good underlying organic growth. The largest single acquisition was that of the Community Hospitals Group (renamed Capio Healthcare UK), which is consolidated in Capio's accounts as of June 2001. The Group has maintained a healthy rate of organic growth, corresponding to 12 per cent in local currencies. All of the business areas reported favourable organic growth. Consolidated net sales increased by 60 per cent and amounted to SEK 5,382 M (3,357). EBITA, excluding items affecting comparability, amounted to SEK 392 M (170). The Group's operating margin, before items affecting comparability, was 7.3 per cent (5.1). EBITA included SEK 121 M in estimated gains from UK property operations, based on market rental levels. Earnings after financial items totalled SEK 205 M (310), including items affecting comparability of SEK 17 M (152). The Group now has sales of slightly more than SEK 7,000 M on an annual basis. Organisation The Group has operating units in Sweden, Norway, Denmark, the United Kingdom, Switzerland and Poland. As of February 2002, Capio will establish operations in Finland. [REMOVED GRAPHICS] Healthcare Services Net sales rose by 72 per cent to SEK 4,297 M (2,493). Expressed in local currencies, organic growth was 13 per cent. Excluding items affecting comparability, EBITA totalled SEK 284 M (140) and the operating margin increased to 6.6 per cent (5.6). The growth in earnings was due to the acquisition of CHG (now renamed Capio Healthcare UK) and to a number of improvements in operations. The business sector was reorganised during the year, whereby Nordic and UK healthcare operations are now conducted in the form of separate business areas. An individual Occupational Health business area has also been formed. Work to integrate Capio Healthcare UK has progressed efficiently and smoothly. The UK operation showed strong organic growth and a favourable trend of earnings. During the year, demand from the National Health Service in the UK increased and a first long-term healthcare contract was signed, among other developments. Annual price negotiations with the British insurance companies were held during the fourth quarter. For the first time, Capio secured a five-year agreement with the leading UK insurance company, BUPA. Demand for psychiatric care was very strong in the UK. Medocular, the largest private sector ophthalmological company in the Nordic region, was acquired in October. Each year, the company performs about 10 per cent of all cataract operations in Sweden and has annual sales of slightly more than SEK 70 M. Combined with Capio's other eye- care services, the company becomes a powerful driving force for further expansion within this specialised medical care segment. In September, Lundby Hospital secured a new five-year care contract, with a broader and more substantial clinical content, which corresponds to annual sales of approximately SEK 100 M. Svenska Cityklinikerna signed a number of care contracts that increased their annual volume, including the development of operations in Lund into a specialist hospital Demand for occupational health remains strong and created good volume growth during the year. A substantial number of new contracts were signed during the year and a new IT-based system was installed to support operations. The Healthcare Services business sector has sales of about SEK 5,600 M on an annual basis. Diagnostic Services Net sales for this operating sector amounted to SEK 893 M (658). In local currencies, organic growth was 13 per cent. EBITA totalled SEK 37 M (53) and the operating margin was 4.2 per cent (8.0). Demand for laboratory and radiology services remained strong. Production volumes in existing facilities increased sharply and in addition several new units were started during the year. The increase in sales was also affected by the transfer of the unprofitable St. Göran's X-ray clinic to this sector in January 2001. Losses were also incurred for the start-up during the year of the X-ray unit at Globen City in Stockholm. The restructuring activities initiated during the autumn in the radiology units in Stockholm progressed according to plan and are expected to show results during the second quarter of 2002. Sector operations were also affected by the low compensation levels for diagnostic services in Norway. A fully digitalised radiology unit was opened in Sandefjord, Norway, in September. During the year, two radiology units were also started up in Sweden. An agreement was signed in December regarding the acquisition of Finnish radiology company, Mediscan Oy. The acquisition was finalised on February 1, 2002. This is Capio's first acquisition in Finland, and is an important step in the company's continued expansion in the Finnish market. Operations in Laboratory Medicine showed satisfactory volume and earnings trends during the year. In August, Capio took over the laboratory medicine operations of a Warsaw hospital, the first time that such operations have been outsourced in Poland. The Diagnostic Services business sector has sales of about SEK 900 M on an annual basis. Elderly Care Services Net sales for elderly care operations amounted to SEK 340 M (249), reflecting organic growth of 11 per cent, expressed in local currencies. EBITA totalled SEK 14 M (26). The sector's operating margin narrowed to 4.0 per cent (10.5). Margins declined as a result of the sale of property operations and because of the substantial costs of integrating acquired operations. Operations were streamlined during the year and all elderly care properties and the minority share in Proffice Care were sold. During the year, the Rosengården, Crebona and Björnbo elderly care operations were acquired in the Stockholm area, as well as Borgmästaregården in Norrköping. In addition, a number of new care contracts were secured and several renewed. To meet current and future demand, the sector's organisation was strengthened. This temporarily affected the profitability of the sector's operations. The Elderly Care Services business sector now has sales of about SEK 600 M on an annual basis, in addition to contracts that will gradually become effective and which will bring annual sales up to SEK 750 M by year-end 2003. Significant events in the Capio Group during the period October-December 2001. Group sales totalled SEK 1,782 in the fourth quarter, nearly double the figure for the corresponding three months of 2000. Excluding items affecting comparability, EBITA amounted to SEK 164 M (60) for the quarter. Several of the expansion projects prepared before Capio's acquisition of CHG in the UK were started during the fourth quarter. Capio Healthcare UK conducted its annual negotiations with the insurance companies regarding pricing in 2002. For the first time, Capio secured a five-year agreement with the leading UK medical insurance company, BUPA. Many international study visits were made to St. Göran's Hospital in Stockholm to study work methods and care models. Capio also started a new unit, with responsibility for co-ordinating sales and brokering unutilised care capacity in the Group. An agreement in principle has been signed to acquire a radiology operation in Helsinki, Finland. A new price-setting system for MR rates in Norway has been approved by the Norwegian Government and came into force in January 2002. Although, this will not have any direct effect on the earnings of Capio's radiology operations in Norway in 2002, it will improve the competitive situation, since private and public sector players will compete on a more equal footing. Actica Omsorg has established itself in Stockholm by taking over the Rosengården elderly care operation and its subsidiary Crebona. At the same time, Actica has sold all of its eight elderly care properties to Bokbacken through a non-cash issue in return for a 38 per cent ownership stake in Bokbacken Vårdfastigheter. Parent Company sales and earnings The Group Parent Company, Capio AB, reported net sales of SEK 24 M (21) for 2001 and an operating loss of SEK 65 (loss: 57) before goodwill amortisation and excluding items affecting comparability. Earnings before appropriations and taxes amounted to SEK 132 M (loss: 8). The Parent Company reported net investments of SEK 2 M (2) for the period. At year-end, Capio's shareholders' equity was SEK 2,341 M, corresponding to an equity/assets ratio of 84 per cent. Liquid funds amounted to SEK 7 M on December 31, 2001. Financial position The Group's financing situation has changed significantly during the year. The acquisition of Capio Healthcare UK was financed through a new share issue in a net amount of SEK 1,381 M, including the issue costs, and through the raising of a long-term loan amounting to SEK 3,451 M. The loan, which also covers the refinancing of all of the Capio Group's earlier loans, was placed in a consortium of international banks during the year and extends until 2006. Work is in progress to refinance the UK property portfolio with completion scheduled for mid-year 2002. The Group has pledged assets and contingent liabilities totalling SEK 4,558 M (435). At year-end, the equity/assets ratio was 31 per cent (39). Interest-bearing net indebtedness was SEK 3,244 M and the Group had liquid funds of SEK 218 M. Significant events since the close of the report period Within the Diagnostic Services sector, the Laboratory Medicine and Radiology business area have been merged to form a new business area, Capio Diagnostics. The purpose of the merger is to create a stronger market position to meet future demands and secure international expansion. The objective is to become the leading private player in this area in Europe. Capio Diagnostics has signed a five-year mammography services care contract in Södra Älvsborg, Sweden, effective in April 2002. The acquisition of the Finnish radiology company, Mediscan, has been implemented and the company will be consolidated in the Group's accounts as of February 2002. The Capio share The last paid price in 2001 was SEK 71.50 (70) per share, corresponding to a market value for the Company of SEK 5,548 M (4,141). As at December 31, 2001, Capio had a total of 16,960 shareholders. The non-swedish proportion of the share capital was 56 per cent. A private placement of 19 million shares was made to institutional investors in June, to partly finance the acquisition of Capio Healthcare UK. The total number of shares outstanding is 77,590,177. On February 4, 2002, the last paid price per Capio share was SEK 68. As of January 1, 2002, the share is quoted on the Attract40 List on the Stockholmsbörsen. Personnel At the end of 2001, the number of full-time Group employees was 8,085. The average number of employees during the year totalled 6,432 (4,480). The total number of employees amounted to approximately 11,800. At year- end, the Parent Company had 30 (21) employees. Future development The healthcare market in Europe is characterised by an underlying strong demand, regardless of general economic conditions. In an increasing number of countries, public purchasers have increased their co-operation with private care providers and this is opening up a number of new markets. Capio's strong position in the market is creating a platform for continued favourable growth. Dividend The Group's operations have good prospects for continued expansion, and thus the greater part of its cash flow will be used to support such expansion. As in previous years, the Board proposes that no dividend be paid for the 2001 financial year. The 2002 Annual General Meeting The Capio Annual General Meeting will be held on March 21, 2002 in Gothenburg. The Annual Report will be available at Capio's head office and on the Group website no later than March 4, 2002. The Annual Report will be distributed to shareholders in mid-March. Gothenburg, February 6, 2002 Capio AB (publ) Board of Directors ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/02/06/20020205BIT01060/bit0002.doc The full Year-end report http://www.waymaker.net/bitonline/2002/02/06/20020205BIT01060/bit0002.pdf The full Year-end report