In the 2019 financial year, Asklepios Kliniken GmbH & Co. KGaA increased its revenue and the number of patients treated despite a challenging regulatory environment. The company’s high capital expenditure on medical equipment and its workforce are the foundation for a solid business performance once the coronavirus pandemic is over. Asklepios is proving a reliable pillar of support for the healthcare system in the current exceptional circumstances triggered by the coronavirus pandemic.
In the past financial year, the Asklepios Group’s consolidated revenue rose by 3.8% compared with 2018 to EUR 3,537.3 million (previous year: EUR 3,407.9 million). This growth was predominantly organic and was higher than the guidance of 2.5% to 3.0%.
EBIT decreased to EUR 240.8 million (previous year: EUR 244.2 million). Consolidated net income (EAT) amounted to EUR 172.3 million (previous year: EUR 171.1 million). The EAT margin remained virtually the same at 4.9% (previous year: 5.0%). The first-time application of the new IFRS 16 “Leases” standard means that the earnings figures are not fully comparable with the previous year.
A total of 2,497,095 patients visited the Asklepios Group’s facilities in the 2019 financial year, which equates to an increase of 10.2% (previous year: 2,265,603 patients). This trend was driven by a considerable rise of 14.6% in outpatient case numbers to 1,822,406 patients (previous year: 1,590,377). The number of inpatients, on the other hand, stayed practically the same, with 674,689 inpatient cases in 2019 compared with 675,226 in the previous year (down 0.1%).
“The 2019 figures show that Asklepios is on a good trajectory despite the regulatory headwind. The company is generating stable earnings in a difficult environment and has a sound financial footing. What is particularly pleasing is that more and more people are placing their trust in us and we are seeing double-digit growth in case numbers. This is where our high level of capital expenditure in the hospitals, state-of-the-art medical equipment and our staff is paying off,” said Kai Hankeln, CEO of the Asklepios Group. “The fact that Asklepios has a sound operating business and is backed by a committed and courageous team is an invaluable asset in the current exceptional circumstances triggered by the spread of COVID-19.”
A high level of capital expenditure in the operating business meant that Asklepios was well-equipped to withstand the effects of the coronavirus pandemic and for the time thereafter. Asklepios invested EUR 325.8 million (previous year: EUR 341.9 million) in innovative technical equipment and digitalisation of healthcare in particular in 2019. Around three quarters of this investment (74.5%) was financed with internal funds in the past financial year, compared with 73.6% the year before. Asklepios also increased the number of full-time equivalents by 938 to a total of 36,265 (previous year: 35,327).
“Asklepios has a sound financial footing. However, regulations in the healthcare sector and the coronavirus crisis are having an impact on our healthcare facilities. Our operating business is sufficiently financially secured for the time being through strategic cash flow measures and committed lines of credit. We will continue to make appropriate investments, while constantly keeping an eye on our liquidity. The last few weeks have shown just how important financial flexibility and capacity for action are,” explained Hafid Rifi, CFO of the Asklepios Group.
As at the 31 December 2019 reporting date, equity amounted to EUR 1,577.3 million (31 December 2018: EUR 1,494.5 million). This puts the Asklepios Group’s equity ratio at 33.5% (31 December 2018: 36.9%). As at the reporting date, cash and cash equivalents amounted to EUR 265.0 million (31 December 2018: EUR 351.6 million) and unused credit facilities totalled EUR 435.2 million (31 December 2018: EUR 450.7 million). The company’s ratio of net debt to EBITDA adjusted for IFRS 16 effects was 2.8x (31 December 2018: 2.6x). Operating cash flow went down to EUR 260.8 million (previous year: EUR 293.8 million).
Takeover offer to RHÖN-KLINIKUM AG
Despite the challenges associated with the coronavirus pandemic, Asklepios is pressing ahead with its strategic orientation involving the takeover offer to the shareholders of RHÖN-KLINIKUM AG (RKA). On 28 February 2020, Asklepios announced that it would be combining the shareholdings of RHÖN founder Eugen Münch and Asklepios in RKA in a joint venture company. Mr Münch will contribute around 7.6% of his RHÖN shares directly to the joint venture and is selling around 12.4% of his RHÖN shares to Asklepios, which is also contributing these shares to the joint venture. On 8 April 2020, Asklepios published the offer document accompanying the voluntary public takeover offer for all outstanding shares in RHÖN-KLINIKUM AG.
Even before the offer phase commenced, the Asklepios-Münch joint venture secured the voting rights majority in RHÖN of just over 50%. Due to the decision of RHÖN’s Management Board to convene an Extraordinary General Meeting, the acceptance period for the takeover offer will probably run until 17 June 2020. At the same time, RHÖN’s Management Board did not include B. Braun’s demand for an advance dividend of approximately EUR 134 million on the agenda of the Extraordinary General Meeting. Asklepios welcomes this decision, as such an advance dividend would have been very detrimental to RHÖN and only B. Braun would have gained from it. Notwithstanding this, B. Braun is apparently still attempting to enforce a corresponding legal resolution at an Annual General Meeting and has filed an application to this effect with the Schweinfurt Local Court. Since, with the exception of the request for an advance dividend, all other B. Braun issues will be dealt with at the Extraordinary General Meeting, this motion can only serve to retain the dividend.
B. Braun’s demand for a regulation that would enable B. Braun, with its good 25% stake, to block all AGM resolutions in the future also serves only the particular interests of B. Braun. Such a blockade position would only prolong the long-standing stalemate at RHÖN. In addition, the appointment of a separate Chairman of the Meeting that has been legally applied for is apparently intended to prepare for the non-recognition of Asklepios voting rights at the Annual General Meeting. It is obvious that all these measures and legal plans of B. Braun have the sole aim of enriching itself at the expense of RHÖN, its employees and patients through an irresponsible advance dividend and increase in value of its own investment.
It is therefore also to be welcomed that the RHÖN Management Board has put Asklepios’ motions for the premature dismissal of Supervisory Board members Dr. Annette Beller and Dr. Katrin Vernau on the agenda of the Extraordinary General Meeting, which appear to support the one-sided demands of B. Braun and thus accordingly neglect RHÖN’s interests.
There is no minimum acceptance threshold for completion of the takeover offer and it is subject solely to merger control clearance by the German Federal Cartel Office.
The coronavirus crisis will remain the defining issue for the healthcare sector in 2020. The financial implications are still impossible to gauge in any detail. Planned operations have been postponed to keep intensive care beds free for potential coronavirus cases. This is also having an impact on cash flow in addition to the regulatory requirements that have not been lifted. “The current financial year will definitely be more challenging than 2019. It is therefore all the more important that we are in a good position strategically and are collectively making the right decisions. The investments we made in previous years will provide a solid foundation for the times to come. As a private healthcare group, Asklepios is playing its part in managing the coronavirus crisis and built up additional intensive care capacity at short notice. This gave us the capacity to treat European patients as well and allowed us to send an important signal of European solidarity. Nevertheless, Asklepios too will feel the effects of the coronavirus crisis on its earnings as the provisions adopted in the COVID-19 Hospital Relief Act will not be enough to offset these cuts,” emphasized CEO Kai Hankeln.
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Asklepios Kliniken is one of the leading private operators of hospitals and healthcare facilities in Germany. The hospital group stands for highly qualified care for its patients, with a clear commitment to medical quality, innovation and social responsibility. On this basis, Asklepios has grown dynamically since it was founded almost 35 years ago. The Group currently has around 160 healthcare facilities throughout Germany, including acute care hospitals for all levels of care, specialist clinics, psychiatric and forensic facilities, rehabilitation clinics, nursing homes and medical service centres. In the 2019 financial year, 2.5 million patients were treated at the Asklepios Group’s facilities. The company has more than 49,000 employees.