RHÖN-KLINIKUM AG | 04/28/2005

Interim Report Q1-2005

With its interim report for the three months ended 31 March 2005 submitted today, RHÖN-KLINIKUM Group reports a substantial rise in revenues to € 340.7 million (previous year: € 248.8 million / + 37%). Of this increase in revenue (+ € 91.9 million) versus the same period last year, € 88.4 million was contributed by the first-time consolidation of new hospitals in the first quarter and € 3.5 million from organic growth.

With the newly acquired hospitals, 2,625 beds are added to the Group. Since the publicly listed RHÖN-KLINIKUM AG mostly acquires hospitals with inefficient structures, turning these into profitable and viable facilities through investment and sound concepts applied over several years, the upside potential for earnings (EBITDA, EBT, net consolidated profit) in the initial post-acquisition phase is usually significantly lower compared with growth rates in revenues. Net consolidated profit grew by 15% (€ 2.9 million) to reach € 22.2 million (previous year: € 19.3 million) and thus in line with our expectations. This translates into earnings per share of € 0.81 (previous year: € 0.71). EBITDA* recorded a rise to € 48.9 million (previous year: € 42.9 million / + 14%), and the operating result (EBIT) stood at € 34.0 million, up 14.5% versus its pre-year level of € 29.7 million. 

Public grants account for only € 2.2 million of the Group’s investments totalling € 179.2 million (previous year: € 24.1 million) in the first three months of 2005. € 157.2 million was used for assets acquired on hospital takeovers and € 19.8 million for investment in the Group’s long-standing facilities (new and increased investments as well as equipment and facilities). Of this investment volume, € 37.3 million (previous year: € 32.5 million) was financed from the operating cash flow and € 80.2 million from borrowings as well as an increase in other interest-free short- and long-term loan capital. “Net debt rose sharply to € 303.8 million (from € 223.6 million last year), but is in line with our targets”, said Manfred Wiehl, CFO of RHÖN-KLINIKUM AG. “With the marked rise in assets and loan capital, the equity ratio declined from 48.9% to 41.8%. Despite these considerable, mainly acquisition-driven investments, we continue to enjoy sound financial structures”, Wiehl said. 

In the period January through March 2005, our hospitals treated 233,788 patients (previous year: 141,506/ + 65.2%) on an inpatient, day-case and outpatient basis. Of these, 93,684 patients were contributed by our facilities consolidated for the first time in 2005. Average per-case revenue declined from € 1,758 to € 1,457 (- 17.1%), also owing to the disproportionate rise in outpatient attendances. This continues the trend of the previous years.

By 31 March 2005, the Group's growth raised the number of employees to 20,381, thus resulting in a 20-member Supervisory Board pursuant to the provisions of German legislation on employee co-determination (large company) (headcount on 31 March: 13,804 / on 31 December 2004: 14,977). 

Currently we have 39 hospitals at 31 sites with 11,811 beds approved under federal state hospital requirement plans. On 15 April 2005 the contract negotiations with the district of Miltenberg were successfully concluded for the takeover of its hospitals in Erlenbach and Miltenberg. With combined revenues of € 39.5 million, 392 approved beds and a staff of 790, these facilities are to be consolidated from 1 July 2005. 

“We will continue this growth course in financial year 2005. Acquisition offers lacking the potential to meet our requirements for qualified growth will be refused without exception. Offers have also been refused pending the decision in the dispute with the Cartel Office so as to keep the potential for conflict and the resulting costs as low as possible", said Eugen Münch, chairman of the Board of Management of RHÖN-KLINIKUM AG.

Following the introductory phase for the system of case flat rates (DRGs), the entire hospital sector in Germany is gripped by planning uncertainty in the face of still outstanding remuneration negotiations with payers, and the prevailing opinion is that corrections to DRGs could still lead to considerable swings in revenues. The Group Management does not regard the potential for negative surprises as high given the broad basis acquired. The Management is also convinced that the hospital Group’s sound cost structure and flexibility will enable it to exploit the opportunities offered by the market in 2005 as well. Without taking account of possible further acquisitions, the forecast for revenues of € 1.4 billion and still conservative forecast for net consolidated profit of € 84 million (€ 80.0 million after taking account of minority interests) are confirmed. 

* Earnings before depreciation, interest and earnings taxes