RHÖN-KLINIKUM AG | 07/19/2006

Annual General Meeting

2005: Revenues € 1.416 billion / net consolidated profit € 88.3 million / investments € 291 million / operating cash flow € 156 million / earnings € 1.61 per ordinary share / shareholders’ equity according to IFRS € 642 million / 949,376 patient treatments / 21,226 employees / dividend pay-out of € 0.45 per ordinary share

2006: First half – revenues of € 938.1 million in line with targets / net consolidated profit € 45.6 million / earnings per share € 0.84 / cash flow € 78.1 million / investments € 276.3 million / 677,615 patient treatments / 30,785 employees / 45 hospitals (of which 43 acute care and 2 rehab) at 34 sites

Outlook: Company continues to target qualified growth / development of promising future-oriented concepts, strategies and technologies for further long-term growth in value 

Bad Neustadt a.d. Saale/Frankfurt am Main, 19 July 2006 ----- At today’s Annual General Meeting of the listed hospital group Rhön-Klinikum, the figures of the past financial year played only a subordinate role: The most important key figures had already been presented and discussed at the end of April at this year’s Results Press Conference and can also be found on the Group’s website ( there were 58.6% more patient treatments ( = 350,891; previous year: 598,485 patients), revenues rose by 35.5% to reach € 1.416 billion (previous year: € 1.045 billion), net consolidated profit rose by 10.1% to € 88.3 million (previous year: € 80.2 million), earnings per ordinary share stood at € 1.61 (previous year: € 1.47), the equity ratio declined to 39.5% (previous year: 49.2%) with the debt financing of the numerous acquisitions and investments, operating cash flow recorded a rise to € 155.6 million (previous year: € 137.8 million, = + 12.9%). 

On the whole the Management are pleased to have met their own forecasts and those of analysts who have been following the Company’s development for many years. “We have delivered on our promises”, declared Wolfgang Pföhler, chairman of the Board of Management of RHÖN-KLINIKUM AG since the 2005 Annual General Meeting, to shareholders represented at this year’s AGM. Nine new hospitals consolidated from the beginning of 2005, two in the further course of the year, as well as two further “acquired” hospitals (consolidated on 1 January 2006) bear witness to the buoyant growth. This strategically planned and thus anticipated growth was eclipsed in December 2005 by the decision of the Hesse State Government to sell to RHÖN-KLINIKUM AG the university hospitals Universitätsklinikum Gießen und Marburg GmbH, in which legal ownership was transferred in February of this year. 

The Annual General Meeting approved the dividend proposal of the Management whereby a total of € 23.328 million of the net distributable profit will be paid out as a dividend of € 0.45 per ordinary share with dividend entitlement (€ 51,840,000 shares). 

Half-year results confirm forecast for full-year 2006 

As in previous years RHÖN-KLINIKUM AG presented to the Annual General Meeting its half-year report for 2006. 

In the first half, revenues increased 36.3% to reach € 938.1 million (previous year: € 688.3 million) and net consolidated profit rose by € 1.2 million to reach € 45.6 million (previous year: € 44.4 million) – corresponding to € 0.84 per share (previous year: € 0.81 adjusted /+ 3.7%) – which according to Group Management meets their internal expectations. “The result in the first half of 2006 was burdened in particular by the loss at Universitätsklinikum Gießen und Marburg of € 5.6 million, but this was offset by improvements at the other hospitals”, said Dietmar Pawlik, who has been on the Board of Management since the beginning of the year with responsibility for Financing, Investor Relations and Controlling. “We are convinced that we will confirm our own forecasts also at the end of the year”, added Wolfgang Pföhler. “We continue to expect revenues of € 1.9 billion and a net consolidated profit of € 93 million.”

In the first six months of 2006 a total of 677,615 patients (previous year: 487,835) were treated in the Group’s hospitals. At 30 June 2006, the Group employed 30,785 persons (31 December 2005: 21,226). 

Four central questions demonstrate continuity and renewal in the Company’s development 

The chairman of the Board of Management answered four questions to explain to those present where he sees the strengths of RHÖN-KLINIKUM Group and where in his view its future prospects lie. These were the questions as well as the answers he gave:

1. Where have we come from, what is our success story?

Pföhler : In the past we were the first to implement the flow principle; we pressed ahead with the application of industrial production technologies to hospitals, introducing four-stage patient care which is now emulated by many other hospital operators. In the present we are opening up new markets through substantial investments each year and by moving ahead with innovative models for healthcare delivery such as teleportal clinics, medical care centres (MVZs) and the building and commissioning of the combined proton/heavy ion unit in Marburg. 

2. Where do we want to go from here, what are our goals?

Pföhler : We want to maintain our position as the innovation leader and trendsetter on the German hospital market. Looking long-term we, RHÖN-KLINIKUM AG, want to become a network provider with classic infrastructure and service character: every patient in Germany is to have no more than a 60- to 90-minute journey to reach one of our Group facilities. In order to ensure such national coverage in Germany, we will have to raise our market share in the long term to over eight per cent from currently just under three per cent.

3. What makes the classic Rhön approach stand out, how will we achieve our goals?

Pföhler : We begin by taking over increasingly loss-making public hospitals. With rationalisation investments and restructuring measures, we then turn these facilities into profitable units. The investments not only relate to buildings but also involve purchases of new medical technology and equipment. By consistently restructuring all processes – with our focus of interest always being the patient as well as high-quality but cost-efficient treatment – we are able to cut costs significantly. 

4. What challenges does our Company face?

- Cartel Office: Validity of the takeover of the hospitals from the district of Rhön-Grabfeld was suspended by the prohibition by the Federal Cartel Office. The appeal of RHÖN-KLINIKUM AG is still ongoing before the Düsseldorf Court of Appeals. We expect the Court to reach a decision in the fourth quarter of 2006.

- Collective bargaining with the Marburger Bund: Pföhler emphasised that Universitätsklinikum Gießen/Marburg had seen only one strike, which however was more symbolic than anything else, affecting only two departments and lasting only half a day – doctors continued their work at all other hospitals of the Rhön Group. So no real strike took place at any of the Group’s hospitals. At the moment negotiations are under way with the Federal State of Hesse and Marburger Bund to reach an agreement for Gießen/Marburg. “We believe these constructive negotiations are making good progress”. Rising salaries for doctors were not an advantage for any hospital; that said, privately run facilities were in a better position to turn things around and successfully adapt to new situations. As a result, the whole problem of the demands being made by the Marburger Bund in collective bargaining weighed far less heavily on RHÖN-KLINIKUM Group than it might on competitors from the public sector, Pföhler went on to explain.

Looking to the future Pföhler outlined how division of labour for doctors at a hospital will have to develop in future to meet the needs of an aging society by using resources sparingly and thus preserving and even enhancing quality. Moreover, the Group would more than ever exploit the possibilities of having certain medical tasks performed by healthcare professionals other than doctors, thus lowering personnel costs and achieving sustained value growth.

- General framework conditions: According to the chairman’s statements, no conclusive assessment can be given of current political developments (notably healthcare reform). The planned VAT increase and the general lowering of hospital budgets as contemplated in the German government’s white paper would not make things easy for RHÖN-KLINIKUM AG nor for other hospitals.

The Board of Management therefore has adopted a package of measures (“10-point programme”) and has already started implementing some of these measures so as to offset any negative effects as early and as fully as possible. “The healthcare reform measures which are currently being considered and which will put a squeeze on margins in the short term are being countered on the operative side but will not deter RHÖN-KLINIKUM AG from its long-term strategy of sustained growth in earnings,” Pföhler said.

Conclusion and word of thanks 

“Particularly in times of tight finances, mounting debt and steep tax hikes, there is a moral duty to work economically or, more precisely, efficiently. In other words, in the present day there could be hardly anything more unethical than to waste resources. Efficiency does not mean reduction or cheap medicine", Pföhler said.

“We see today’s totally fragmented German hospital market in an ever quicker-paced privatisation wave. Our growth story is intact and enjoys a solid foundation. Our tried and proven dual strategy of acquisition and hospital integration is geared towards proactively pursuing further takeover activities. The German hospital market is being redistributed now, not in five years. We are therefore prepared for further acquisitions already today. But we don’t want growth at any cost. We want profitable growth alone. We carry through our acquisitions exercising the caution of a prudent businessman”.

Pföhler then extended a word of thanks to patients for attending the Group’s hospitals in reliance on their medical quality and good treatment, to employees for their performance and commitment, to the members of the Works Council for their valued and trusted work, to the members of the Supervisory Board and Advisory Board for their constructive contribution, and last but not least to the shareholders for their trust in the future viability and value of the share.