Healthscope (HSO) 2015 AGM Report

Company/ASX Code : Healthscope Limited (HSO)
Venue :
9.30am Grand Hyatt Hotel (Mayfair Room)
123 Collins St
Melbourne, Victoria
Monitor : Mr Claudio Esposito
AGM Details / NoM : Monday 23rd November, 2015
# of Attendees : 48 shareholders plus 20 visitors
# Holdings represented by ASA : 98
Value of Proxies : $4.2 million
# Shares Represented by ASA : 1.6 million
Market Capitalisation : $4.6 billion

A strong pipeline of growth for the future

This year was Healthscope’s inaugural AGM with a modest show of people attending with 42 shareholders/proxyholders and 6 non-voting shareholders as well as executive staff.

The meeting started with a rundown of Australian and international operations by Chairman Paula Dwyer covering financial performance and growth prospects for the future. In addition, a very impressive slide show was delivered of the upcoming hospital in Sydney ‘Northern Beaches Private Hospital’, the facilities, design and overall appearance upon completion in 2018.

The Chairman also spoke about the trends in the healthcare system saying that the government healthcare expenditure is set to continue rising over the next 10 to 20 years underpinning Healthscope plans for future growth. The government has plans on reforming the medical benefits schedule, primary care interaction with acute care and improving the overall attractiveness of private health insurance. Healthscope believe that the right outcomes will assist in boosting the business’s success from greater administrative efficiency, improved outcomes particularly for patients attending medical centres and improvements in the quality of Private Health Insurance.

At the conclusion of her address, the Chairman stated the need to replenish the board in anticipation of moving away from Private Equity ownership which subsequently ‘continue to hold 17.8% ownership’. Interestingly the following day it was announced via the ASX that the private equity group had sold off their holdings.

During question time, ASA asked about the future drivers of growth for medical centres which have not had any significant revenue growth (0.8%) but an improvement in EBITDA (16.8%) which is reflected in their cost and procurement savings initiatives. We also asked if they would address the issue of doctors fee split which had off set cost savings within the medical centres. The response was too vague to elucidate in this report.

Another question was asked in relation to a pending Supreme Court hearing. Only the ASA and one other person asked all the questions.

ASA had also asked about the government’s recent proposal to freeze indexation of private health rebates however, the Chairman had responded by saying that much of government’s decisions have not been made and that matters are still unclear. We had also commented on their current remuneration with their STI and LTI exceeding 100% of total fixed remuneration, a vesting period of only three years with no holding lock on rights vested.

The remuneration report is set to change in 2016 with a reduced STI payable (200% to 150%) compared with fixed remuneration from FY2015. The STI incentive will consist of 30% awarded as performance rights which will have a deferral period of 2 years. Both STI and LTI will have no holding lock after vesting.

The results of the voting intentions were in Healthscope’s favour however the re-election of Simon Moore, the remuneration report and the approval of the LTI rights to the CEO all received an ‘against’ vote of 13.95% , 10.49% , 14.7% respectively.

Simon Moore will continue to serve Healthscope’s board until he and fellow representative of the private equity owners Aik Meng Eng are both transitioned out as per proposal indicated in the recent ASX announcement.

In conclusion, Healthscope are poised for a lot of growth over the next five years through their hospital expansion program and growth in overseas markets but need to be proactive in maintaining strong relationships to enhance good government reform and private health insurance pay outs.