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3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
CURANUM
Hold
www.curanum.de
PRICE: € 7.78
End of consolidation phase
REUTERS
WKN
Market cap.
Shareholder
structure
Index/segment
Sector
€ million
Revenue
EBITDAR
EBT
Earnings after tax
EPS (€)
CFS (€)
Div. (€)
P/E (x)
P/CF (x)
Yield
EV/rev.
EV/EBITDAR
Dates:
Q2/06:
Q3/06:
BOHG.F
524 070
€231m
Free float
100%
SDAX
Nursing homes
05
188.5
58.5
12.2
7.4
0.25
0.45
0.10
31.4
17.1
1.3%
3.4
11.1
06E
214.8
73.8
19.8
13.5
0.45
0.67
0.18
17.2
11.6
2.3%
3.5
10.3
07E
235.7
84.6
22.1
15.9
0.54
0.77
0.21
14.5
10.1
2.8%
3.4
9.4
08E
256.8
92.1
24.6
17.7
0.60
0.84
0.24
13.0
9.2
3.1%
3.4
9.4
With roughly 6.500 beds in the nursing area and
700 assisted living apartments. CURANUM
together with Marseille-Kliniken AG is
Germany’s leading listed nursing home operator.
The assessment has not changed since the last
Reports: the company has outstanding prospects.
and the successful consolidation phase up to the
end of 2005 was completed with the acquisition of
the Dr. Lohbeck Group effective 1 January 2006.
The valuation on the basis of the unchanged
forecasts from 2006 onwards has witnessed a
marked increase with the sharp rise in the share
price. For this reason the recommendation has
been downgraded to Hold.
•
Forecast unchanged
The figures for Q1/06 have posted substantial
gains with revenue and earnings rising 10% and
over 60% respectively. However. this was in line
with expectations. The forecasts are virtually
unchanged versus the Jan. /06 Report.
•
End of consolidation phase
The past high earnings growth rates were above
all attributable to the company’s consolidation
phase. It was completed at the end of 2005 and
with the growth currently being generated the
company is laying the groundwork for strong
earnings increases in future.
•
Outstanding prospects
As things now stand. the company has boundless
revenue and earnings prospects. The market has
entered a phase of consolidation and the
company will play a proactive part in shaping.
This gives it outstanding prospects for the future.
•
Recommendation downgraded to Hold
The recommendation. which has been
downgraded to Hold versus the Jan. /06 Report.
stems mainly from the current high valuation.
10 August 2006
9 November 2006
174
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
End of consolidation phase
Setting a share price for companies from the inpatient healthcare sector in
Germany in general and for CURANUM in particular was never an easy
task. and this is not about to change in future either.
Market consolidation
The positive thing for the sector is its unbounded growth potential. with
the market currently in a consolidation phase that will continue for a long
time. For example. the listed providers together currently account for only
16.000 out of 720.000 beds in Germany and the vast majority of facilities
suffer from earnings problems. CURANUM has therefore completed the
consolidation phase prescribed over the past years. took over the Dr.Lohbeck Group effective 1 January 2006 with 7 facilities in NRW. and
according to its own statements is currently in negotiations on various
potential acquisitions. This means that further organic growth will be
accompanied by rising external growth. which in turn will provide the
basis for future earnings.
The difficult explained above stems from the following considerations:
Political reforms
Criticism of balance sheet
1. German statutory nursing insurance is about to undergo (drastic)
changes that will affect the entire market. Temporary market setbacks
can therefore not be excluded.
2. According to the company’s targets. future growth will be generated
primarily by acquisitions. This means that temporary shifts in
earnings are possible. especially since it cannot be assumed that it will
be possible to integrate takeover candidates without major
restructuring efforts.
3. In the past many deals were done between the company and the
shareholder. including the sale and (after completed restructuring)
repurchase of facilities. These transactions. which are virtually
impossible to assess for outsiders. are generally to be seen as very
problematic.
4. In 2005 the company adopted IFRS accounting standards and
switched to the function of expense method. It will therefore no
longer be possible to compare the figures for 2005 with the past.
5. The auditors Ernst & Young objected to the 2005 IFRS financial
statements in a total of 11 items concerning. among other things. the
statement of goodwill in connection with no. 3 above. These are
further detailed in the chapter “Balance Sheet and P&L Analysis”.
175
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
Recommendation Hold
The recommendation. which is to be seen independent of the pros and cons
described above. was downgraded in the present Report from Buy to Hold.
This downgrade is based solely on the high valuation level reached. Since
the valuation is subjective. the reader at this point is urged to study the
entire analysis before making any investment decision and to determine
whether the opinion of this Report corresponds to the reader’s own
opinion.
DVF indicates € 7.2 – € 8.7
As in the past. the price target is calculated based on a combination of
DCF and peer group comparison. The DCF model values the future cash
flows that a company can generate on a sustained basis. The valuation
factor applied for this is the capital market interest rate (plus a risk
premium). Applied to the forecast of the present Report. a price range of
€ 7.2 - € 8.7 can be calculated.
€ million
DCF total
N. debt
DCF – n. debt
Per share in €
Peer group comparison
9.5%
391.2
-156.2
235.0
7.9
10.0%
370.6
-156.2
214.4
7.2
Source: HPS©
A comparison with the companies analysed in the present Report shows a
very high valuation of the share at its current price. From this it may be
concluded that the market has already largely priced in the good prospects.
2006e
*06/07
Curanum2
Eifelhöhen
Marseille*
Maternus
MediClin
Rhön
Average3
EBITDA x 9 – net debt
= € 5.2 per share
9.0%
414.1
-156.2
258.0
8.7
Mkt.cap. EV1 PBV P/E P/CF Yield
EV1/
EV1/ EV1/bed
€m
€m
X
X
X
%
rev. (x) EBITDAR (x) (€‘000)
231
760 4.9 17.2 11.6 2.3%
3.5
10.3
103.7
10
58 0.7 11.5 3.4 2.2%
1.5
8.8
71.4
187
722 2.0 13.7 7.7 3.3%
2.9
9.8
75.5
37
248 1.4 -37.0 5.5 0.0%
2.2
10.6
60.4
124
531 1.3 13.2 6.9 2.3%
1.4
9.3
68.7
1,806 2,383 2.7 18.1 10.4 1.4%
1.2
10.0
156.1
2,395 4,701 2.2 6.1 7.6 1.9%
2.1
9.8
89.3
1
incl. capitalis. rent. 2actual price.3unweighted (mkt. cap./EV is the total). Source: HPS©
Based on the simple (static) valuation criterion “share price = (EBITDA x
9 – net debt)/number of shares”, a price of € 5.2 can be calculated based on
the forecast for 2006.
176
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
SWOT
As in the past. the SWOT analysis (Strengths Weaknesses Opportunities
Threats) has been developed using the following six parameters which are
decisive for the future share price trend. With the exception of the item
“IR/PR work” (now ranked “strong” instead of “average”). the profile has
not changed since the Jan. /06 Report.
Basis
1
Earnings
strength
1
Strategy
1
Financial
strength
2
IR/PR work
Ownership structure
1
2
1) strong; 2) average; 3) weak. Source: HPS©
Strong basis
Building on the consolidation year 2004. the current basis is strong. The
weaknesses of the past have now been purged and internal structures have
been geared to buoyant growth.
Earnings strength very good
After earnings surged in 2005 and Q1/06. earnings strength improved
significantly. also thanks to the consolidation achieved in 2004. At roughly
5% after tax in Q1/06. profitability in terms of revenue has reached a very
high level.
Growth strategy
The mainstay of the strategy is controlled growth via the acquisition of
operations of existing nursing homes and newly built facilities. This makes
sense. ensures low capital tying. and unlocks considerable synergies in the
area of services.
Financial strength average
Financial strength is still only average despite the high profitability. the
reason being that past adjustments to integrate Bonifatius put a
considerable strain on the company’s resources. Only 23% of existing
assets. 24% of which is accounted for by goodwill. is covered by equity.
IR/PR work very good
Despite its small size. the company takes a very offensive stance to IR/PR
work. A glance at the share price trend shows why the assessment for
IR/PR work was raised from “average” to “strong” versus the last Report.
100% free float
According to the Deutsche Börse definition. 100% of the shares are held by
the free float. Of this. 10.13% are attributed to Go Capital Asset
Management B.V. According to the company. though. large blocks of 5%
each are held by the management. Against this background. the capital
structure does not deserve the rating “very good”.
177
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
Forecasts for 2006 onwards unchanged
Forecasts unchanged
The forecasts for 2006 and thereafter are virtually unchanged since the
sharp downward correction in the Jan. /06 Report. The adjustments to the
actual figures for 2005 were minor and do not need any further
explanation. The main drivers of revenue and earnings for 2006 onwards
are:
-
-
in 2006. further growth in earnings on the existing basis and the
acquisition of the Dr.-Lohbeck Group effective 1 January 2006. The
Dr. Lohbeck Group with its seven facilities generates revenue of
roughly €23m and an EBITDA of roughly €2m.
from 2007 onwards. increasing synergy effects through the Dr.
Lohbeck Group whose facilities are located in NRW. the focus of
CURANUM’s activities. To exploit these synergies optimally. a new
logistics centre is currently being built on the site of the large laundry
centre in Kaiseresch near Koblenz that was acquired at the end of
2005.
Quarterly trend
The following diagrams show the quarterly trend of the last two years. The
values for Q2-4/06E were calculated as the difference between the
revenue/EpS forecast and the actual figures of the first three months. and
Q1-Q4/07E represent the 2007 forecast values spread equally over the
quarters. The shape of the EpS curve shows that in Q4/05 (IFRS-induced)
only an EpS of € 0.01 was achieved and that no significant growth is
needed in order to meet the forecast targets for 2006 and 2007.
Forecast < target
The earnings forecasts of this Report fall short of the company’s.
especially since the forecasts include acquisitions. The forecast model is
presented in the next chapter. and the difference between the forecast and
the company’s target on the following page.
Quarterly trend in revenue and EpS
0,06
40 42
0,02
43
0,04
45
0,02
43
0,05
46
0,04
46
0,06
0,05
49
0,10
0,09
46
47
48
0,09 0,12 0,13
59
55
47 51
0,4
0,01
0,2
sales
Q1-Q4/07e
Q2-4/06e
Q1
Q4/05
Q3
Q2
Q1
Q4/04
Q3
-0,4
Q2
0
Q1
-0,2
Q4/03
20
Q3
0,0
Q2
40
EpS €
60
0,01
Q1
sales €m
80
EpS
Source: HPS©
178
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
Revenue target. CURANUM
Revenue forecast. Report
8.000
220
250
213
211
200
180
6.000
5651
6.000
6.541
5.641
150
sales €m
6.520
189
7.141
189
184
beds
sales €m
200
184
8.000
236
215
5.651
beds
Diagrams 1 and 2
4.000
100
5641
2.000
50
4.000
sales
0
beds
07e
06e
05
0
04
07p
06p
05
04
160
sales
beds
Source: CURANUM. HPS©
EBITDA/EBIT target. CURANUM EBITDA/EBIT forecast. Report
12,5%
13,6%
8,9%
10,4%
15,7%
17,4%
13,0%
20%
37,0
33,1
35
25,6
22,9
25
12%
27,4
15,7%
17,0%
10,4%
12,7%
14,1%
45
20%
40,0
19,6
8%
16,3
33,7
35
30
25
20
15
13,7%
8,9%
40
16%
30
12,5%
25,8
4%
5
16%
12%
27,3
20
19,6
8%
16,3
15
10
33,1
22,9
10
4%
5
EBIT
RoS EBITDA
RoS EBIT
0%
EBITDA
EBIT
07e
07p
06p
05
04
EBITDA
0
06e
0%
0
05
40
04
Diagrams 3 and 4
RoS EBITDA
RoS EBIT
Source: CURANUM. HPS©
EpS target. CURANUM
0,6
EpS forecast. Report
7,3%
0,52
6,4%
0,45
8%
7%
0,6
0,54
6,8%
5%
5%
3,9%
0,17
4%
0,3
0,2
EpS
RoS (EAT)
07p
06p
05
0%
2%
0,1
1%
0%
0,0
04
0,0
3%
0,17
2%
1%
0,25
2,7%
EpS
RoS (EAT)
07e
3%
06e
4%
0,25
05
0,2
6%
0,45
0,4
4,0%
2,7%
8%
7%
6,3%
0,5
6%
0,4
04
Diagrams 5 and 6
Source: CURANUM. HPS©
179
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
Forecast Model
Model unchanged
The difficulty of the forecast due to
-
the market consolidation.
political influences. and
the problems associated with the IFRS valuation
were presented in the introductory chapter. These must be taken into
account when considering the following model on which the forecasts are
based. The model itself is essentially unchanged. The balance sheet and
P&L are based on the assumptions made with regard to
450
1,4
1,2
1,0
0,8
0,6
0,4
0,2
0,0
-0,2
300
150
sales
15e
14e
13e
12e
11e
10e
09e
08e
07e
06e
05
04
03
02
01
0
EpS €
Trend in revenue and earnings 1998 to 2015E
00alsob
EpS +18% p. a.
The result of the model is shown in the following diagram of the trend in
revenue/EpS from 1998 to 2015E. Compared with the Jan. /06 Report. the
EpS curve is somewhat steeper which is essentially attributable to the
basis effect that resulted in a better-than-forecast operating result in 2005.
According to the model assumptions. growth in revenue and EpS will be
roughly 8% and 18% p.a.. respectively. over the next few years.
99alsob
Revenue +8% p. a.
capacities.
occupancy.
nursing rates.
operating and investment costs.
sales €m
-
EpS
Source: HPS©
180
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
The forecast is based in particular on the following assumptions:
Capacities +7% p. a.
1. Acquisition and/or opening of 890 beds in 2006 and 600 beds p.a.
from 2007
This expansion assumption for 2007 onwards has not changed since
the Jan. /06 Report. 600 beds correspond to around 5 to 6 facilities
p.a. In 2006 this expansion target was already achieved with the
acquisition of the Dr. Lohbeck Group (890 nursing places).
The statement of the last Report that this assumption is very
conservative against the background of the sweeping market changes
and market growth has to be wholly maintained. The assumed
expansion by 600 beds p.a. corresponds to volume growth of roughly
7% p.a. Here it is assumed that. as already in the past. nursing homes
that include an assisted living area (ratio of nursing beds to assisted
living apartments roughly 10:1) are added to the portfolio and that a
nursing home has around 100 – 120 places.
Nursing rates +1 – 2% p. a.
2. Growth in revenue from 2006 +8% p.a.
As in the past. it is forecast that growth in revenue will outstrip that of
volume due to increases in the nursing rates (1 – 2% p.a.). The
assumption of persistently high occupancy in the existing facilities of
>90% (2004 roughly 93%) is unchanged versus the Jan. /06 Report.
This translates into revenue growth of roughly 8% p. a. This
assumption is very conservative given that roughly 20% – 30% of the
market is set to be redistributed in the coming years.
Trend in revenue and capacities
15.000
300
10.000
150
5.000
beds
450
sales
15e
14e
13e
12e
11e
10e
09e
08e
07e
06e
05
04
03
02
01
0
00alsob
0
99alsob
sales €m
Revenue +8% p. a.
beds
Source: HPS©
181
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
3. Growth in earnings from 2006 >+18% p.a.
Given the conservative assumption for growth and the strategy of
qualitative growth. the forecasts assume that the trend in EpS will be
disproportionate to growth in revenue. In this connection. the
diagram showing growth in EpS and RoR on the following page is
based on the following assumptions:
Mounting price pressures
a. Moderate decline in EBITDAR margin (cf. grey line in
Diagram 2). The decline is based on the assumption that growth in
operating expenditure will outstrip that of revenues as price
pressures mount in existing facilities. However. this assumption is
conservative as it does not take into account. among other things.
the effects of fixed cost degression from the takeover of new
facilities.
b. Reduced investment expenditure (cf. black line of Diagram 2).
This assumption stems from the fact that
Attractively priced nursing homes
-
a downward trend in prices will emerge as more and more
nursing homes are put on the market.
Rising credit standing
-
the company’s persistently good earnings position and the
resulting improvement in its credit standing will be
accompanied by a gradual improvement in lease and interest
terms.
Rising FCF
-
interest expenditure will rise disproportionate to revenues on
the back of the buoyant rise in FCF (free cash flow). The FCF
curve is shown in Diagram 3. It is based among other things
on the assumption that NWC (net working capital) will rise in
line with revenues and that investment will remain moderate
since no property will be acquired.
Negotiations on rent levels
-
the company is in negotiations with its lessors for a reduction
in rents. The odds of it succeeding are not bad. especially
since the standing of the operator CURANUM with investors
has improved markedly.
c. Tax / pay-out rate 28%/40% from 2006. The pay-out rate was
revised downwards by 10% versus the Jan. /06 Report. This was
done in line with the reduction in the dividend in 2005 by € 0.04
to € 0.10 per share. € 0.10 corresponds to 40% of EpS of € 0.25.
182
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
EpS
15e
14e
13e
12e
11e
0%
10e
0,0
09e
2%
08e
0,3
07e
4%
05
0,6
06e
6%
04
0,9
03
8%
02
1,2
01
10%
00alsob
1,5
RoS after tax %
Trend in EpS and RoR after tax
EpS €
Diagram 1
RoS after tax
Source: HPS©
Trend in revenue. EBITDAR and investment costs
sales €m
450
40%
35%
300
30%
150
25%
sales
EBITDAR
15e
13e
11e
09e
07e
05
99alsob
03
20%
01
0
EBITDAR/investm. costs %
Diagram 2
investm. costs
Source: HPS©
Trend in FCF and FCF/revenue
10%
0%
-20%
FCF
15e
14e
13e
12e
11e
10e
09e
08e
07e
05
06e
04
03
02
-30%
FCF/sales
-10%
01
40
35
30
25
20
15
10
5
0
-5
-10
00alsob
FCF €n
Diagram 3
-40%
FCF/sales
Source: HPS©
183
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
Profile. Strategy
Profile
With at total of 52 facilities. 6.756 nursing places and 693 assisted living
apartments. CURANUM is Germany’s biggest listed nursing home
operator. The business is focused on the federal state of North RhineWestphalia and the market share is below 1% in Germany.
The sites of the facilities operated today are shown in the following
diagram and the table on the following page. The facilities of the Dr.Lohbeck Group in Schwelm acquired at the end of 2005 with a total of
890 nursing places as well as the home to be opened in Bad Lauterberg.
Lower Saxony in the autumn of 2006 are marked in grey in the table.
With the exception of the underlined homes. the facilities work together
closely in regional clusters.
A glance at the following diagram shows that the new capacities fit in
well with the existing business regionally. To exploit synergies optimally.
the company is currently establishing a central material and laundry
logistics centre on the site. acquired in 2005. of the large laundry centre in
Kaisersesch near Koblenz south of North Rhine-Westphalia. shown as a
grey point.
Sites of CURANUM facilities
1 Altötting
2 Karlsfeld
3 Germering
4 Landshut
5 Fürth
6 Augsburg
7 Pfronten
8 Bessenbach
9 Bad Dürrheim
10 Bad Hersfeld
11 Großalmerode
12 Frankfurt/Main
13 Jena
14 Merseburg
15 Halle
16-18 Berlin
19 Barth
20 Bad Schwartau
21 Dornum
22 Bad Nenndorf
23 Uelzen
24 Hameln
25 Wolfenbüttel
26 Vienenburg
27 Bad Lauterberg
28 Bielefeld
29 Geseke
30 Liesborn
31-32 Werl
33-34 Gelsenkirchen
35- 37 Ennepetal
38 Düsseldorf
39 Oberhausen
40 Neuss
41 Sieglar
42 Hennef
43-45 Nettetal
46 Mönchengladb.
47 Gevelsberg
48-49 Schwelm
50 Hagen
51 Iserlohn
52 Wuppertal
53 Remagen
● Logistics centre
20
19
21
23
16-18
22
25
24
28-52
26
27
15
14
11
13
10
53
12
8
5
4
9
2
3
6
1
7
Underlined: stand-alone facilities; Source: CURANUM. HPS©
184
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
Name
Site
F. state/country
Nursing
Apartments
Seniorenzentrum St. Georg
Altötting
Bavaria
165
B. Seniorenresid. u. Pflegeztr. Münchhausen
Karlsfeld
Bavaria
166
Seniorenresidenz "Am Kreuzlinger Feld”
Germering
Bavaria
157
61
Seniorenresidenz Nikolastr.
Landshut
Bavaria
166
3
B. Seniorenresidenz Rosenstr. Fürth
Fürth
Bavaria
189
24
B. Seniorenresid. u. Pflegeztr. Am Mühlbach
Augsburg
Bavaria
161
16
Seniorenpflegezentrum "Alpenpark"
Pfronten
Bavaria
90
Seniorenzentrum "Am Spessart"
Bessenbach
Bavaria
100
Seniorenzentrum Hirschhalde
Bad Dürrheim
Baden-Wuerttemb.
136
61
Bad Hersfeld
Hesse
125
Haus Wendeberg
Großalmerode
Hesse
89
Seniorenzentrum Großalmerode
Seniorenzentrum "Am Wasserpark"
Frankfurt
Hesse
173
Seniorenzentrum Jena
Jena
Thuringia
80
Altenpflegeheim Merseburg
Merseburg
Saxony-Anhalt
214
Halle
Saxony-Anhalt
111
Pflegeheim Halle Heide-Nord
Alten- und Pflegeheim Jungfernstieg
Berlin
Berlin
48
Berlin
Berlin
90
Alten- und Pflegeheim Boothstr.
Ruhesitz am Wannsee
Berlin
Berlin
85
Pflegeheim Barth
Barth
Mecklenburg-W. P.
101
Seniorenresidenz Geertz
Bad Schwartau
Schleswig-Holstein
121
50
Pflege- und Betreuungsztr. Dornum
Dornum
Lower Saxony
99
Bad Nenndorf
Lower Saxony
103
127
Residenz Bad Nenndorf
Seniorenzentrum St. Viti
Uelzen
Lower Saxony
132
Hameln
Lower Saxony
77
36
Seniorenzentrum Weserbergland
Altenpflegeheim Wolfenbüttel
Wolfenbüttel
Lower Saxony
150
Pflegeheim Vienenburg
Vienenburg
Lower Saxony
181
Pflegeheim Bad Lauterberg
Bad Lauterberg
Lower Saxony
131
18
Ravensberger Seniorenzentrum
Bielefeld
NRW
85
25
Seniorenzentrum Geseke
Geseke
NRW
169
Seniorenzentrum Liesborn
Liesborn
NRW
168
Seniorenzentrum Haus Mozart
Werl
NRW
68
Seniorenzentrum Haus Amadeus
Werl
NRW
232
Gelsenkirchen-Buer
NRW
77
Seniorenwohnstätte Franziskus-Haus
Seniorenwohnanlage Bismarck
Gelsenkirchen
NRW
140
Seniorenzentrum Ennepetal
Ennepetal
NRW
142
Seniorenresidenz Concordia
Ennepetal
NRW
82
Seniorenresidenz Pax
Ennepetal
NRW
67
Seniorenresidenz Düsselhof
Düsseldorf
NRW
132
28
Seniorenwohnstätte Haus Katharina
Oberhausen
NRW
99
Neuss
NRW
102
Altenpflegeheim Neuss
Alten- und Pflegeheim Sieglar
Troisdorf
NRW
168
Hennef
NRW
118
93
Residenz Hennef
Seniorenzentrum Kaldenkirchen
Nettetal
NRW
60
Nettetal
NRW
80
Altenpflegeheim Breyell
Residenz Lobberich
Nettetal
NRW
50
52
Seniorenzentrum Lindenhof
Mönchengladbach
NRW
155
58
Seniorenzentrum Vogelgesang
Gevelsberg
NRW
162
12
Seniorenresidenz Am Ochsenkamp
Schwelm
NRW
368
Seniorenresidenz Augustenstraße
Schwelm
NRW
107
Seniorenresidenz Hagen-Emst
Hagen
NRW
139
Seniorenresidenz Iserlohn
Iserlohn
NRW
47
Seniorenresidenz Wuppertal an der Oper
Wuppertal
NRW
80
Residenz Remagen
Remagen
Rhineland.-Pal.
130
39
Boldface: stand-alone facilities (facilities for which no regional clusters yet exist). marked in grey: facilities of the Dr. Lohbeck Group
taken over at the end of 2005; Source: CURANUM. HPS©
185
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
Group created in 2000
The group was created at the end of 2000 from the merger of the then
non-listed CURANUM and listed Bonifatius by way of non-cash
contribution. For Bonifatius the merger was a question of survival. The
management board of CURANUM AG is comprised of three persons:
CEO Halhuber
-
Growth strategy…
The company’s strategy is geared to qualitative growth on the back of:
-
Hans-Milo Halhuber. CEO.
Bernd Scheweling. indirect major shareholder. COO. And
Jens Spitzer. COO
acquisition of existing nursing homes.
construction of new homes.
disposal of unprofitable homes that do not fit the regional strategy.
formation of regional clusters to optimise overheads. and
sale of all non-operating assets.
Among other things. this strategy led to:
-
-
the disposal of the Lehrte facility at the end of 2004.
the acquisition of the managed Franziskushaus-GmbH facilities at the
end of June 2004 and of the Dr.-Lohbeck Group at the end of 2005.
and
the planned construction of a logistics centre south of NRW.
Further moves like these are expected to follow from 2006 onwards with
the goal. firstly. of making the balance sheet “lighter” and secondly. of
forming clusters.
The company is targeting average growth of 15% p.a. To reap synergies
above all in the catering area. the company’s regional approach here will
be to aim for an even closer network (also via management contracts)
around the existing sites. Given the increasing number of (private)
operators looking to sell their facilities. the company now – breaking with
its past strategy – is planning to generate an increasing part of its growth
via the acquisition of nursing homes. The company’s use of SAP R/3 in
all facilities enables swift integration of newly acquired facilities.
…without properties
To keep the capital requirement low. growth is achieved exclusively via
the operation of the facilities. The properties of new facilities are taken
over by external financiers (property funds. etc.). which in turn are
refinanced via banks and other sources of funding. Since the operation
side has to pay rent to the owner side. the earnings situation will stand or
fall on the terms of the lease agreements.
186
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
Balance Sheet & P&L Analysis
2005 marked a new era for the company with the switch from HGB to
IFRS accounting rules and from the nature of expense method to the
function of expense method: whereas the function of expense method
assigns “only” the various expenditure items to their source (production.
distribution. administration.…). IFRS results in serious changes. This is
shown in Diagrams 1 and 4 on the following page illustrating the following
substantial changes:
Recognition of goodwill
1.
Recognition of leasing contracts
2.
Deferred tax
3.
Transfers within the P&L
4.
Goodwill previously set off against equity was recognised. As a result
equity capital rose in 2004 by roughly €15m. The rise in goodwill in
2005 vs. 2004 in Diagram 2 is explained by the takeover of two
divisions by the major shareholder. which previously were operated
under a management contract.
Lease agreements under which the economic risk remains with the
lessor must be recognised on the balance sheet. As a result. assets and
debt rose by roughly €65m.
Deferred tax claims and debts must be carried as assets and liabilities
respectively. since tax is calculated from the tax statement which
deviates temporally from the IFRS financial statements. This resulted
in assets rising by roughly €12m.
Due to point 2. rents will become depreciation and interest
expenditure items (roughly €10m). In addition. goodwill amortisation
no longer applies under IFRS (2004 roughly €1m).
The following factors are also to be considered:
1. In 2005 the item “Other non-current assets” rose by €10m by reason of
advance rent payments as part of the purchase price agreement for the
acquired Dr. Lohbeck Group.
2. In 2005 current assets diminished due to the recovery of a receivable
owed by the shareholder as well as the purchaser of two Curanum
facilities.
3. The 2004 and 2006 items “Other expenditures” each contains a charge
of roughly €2m as a result of the facility sold in Vienna Austria. This is
an old burden that resulted from the misguided expansion of Bonifatius
in Vienna. The facility has a new operator. but CURANUM is liable to
the banks for the financing costs.
187
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
Diagrams 1 and 2
2004 balance sheet. HGB vs. IFRS
assets 2004:
HGB: 92 €m
IFRS: 168 €m
-40%
lease
long term -55%
-20%
-25%
-38%
-20%
-43%
short term
equity
1%
2%
liquid.
38%
46%
14%
9%
25%
21%
deferred tax
21%
22%
04 HGB
goodwill
04 IFRS
04 IFRS
©
Revenue Q1/06
lease
2004 P&L. HGB vs. IFRS
sales HGB/IFRS: 182/184 €m
assets Q1/06:
164 €m
-38%
2,7%
2,9%
EAT
long term
-2,2%
-2,3%
tax
-56%
short term
-21%
equity
-23%
EBT
-7,5%
other invest.
short term
4,9%
5,1%
-0,4%
20%
-17,5%
rent
29,9%
-23,7%
4%
liquid.
05IFRS
Source: HPS©
Source: HPS
Diagrams 3 and 4
21%
23%
long term
9%
goodwill
1%
1%
liquid.
46%
43%
long term
deferred tax
assets:
'04: 168 €m
'05: 165 €m
-39%
-40%
long term -54%
-55%
-24%
short term
-25%
-23%
equity
-20%
short term
lease
23%
32%
short term
2005 vs. 2004 balance sheet
EBITDAR
39%
long term
-19,9%
-21,1%
-50,1%
personell
-49,6%
GJ04HGB
29,3%
other operative
deferred tax
13%
24%
goodwill
Source: HPS©
2005 vs. 2004 P&L
Q1/06 P&L
Source: HPS
Diagrams 5 and 6
3,9%
2,7%
EAT
rent
-2,9%
EBT
sales €m:
2004: 184
2005: 189
-7,2%
-7,5%
-17,4%
-17,5%
-18,3%
-19,9%
8,1%
other invest.
rent
31,0%
29,9%
EBITDAR
other operative
5,1%
tax
6,5%
4,9%
EBT
other invest.
EAT
-2,6%
-2,2%
tax
GJ04IFRS
©
-6,5%
-20,0%
EBITDAR
34,6%
other operative
-50,7%
personell
-50,1%
personell
GJ04IFRS
05IFRS
Source: HPS©
188
sales €m:
Q1/06: 51
-14,7%
-50,7%
Source: HPS©
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
The analysis of the figures allows for the following conclusions:
Declining assets
Goodwill > equity
Sound financing
High earnings strength
1. Assets are declining slightly as a result of the small expansion on the
one hand and the recovery of receivables in 2005 on the other.
2. Goodwill exceeds balance sheet equity by one percentage point.
3. Assets are financed at matching maturities. and in the near term no
liquidity shortages are expected judging from the balance sheet. Current
assets exceed current debt capital. and over 100% of non-current assets
are financed long-term.
4. Earnings strength is rising continually. above all due to a sharply rising
operating EBITDAR margin. It latterly stood at over 34%; this is very
high and will make it difficult to achieve further significant gains.
Maturity of convertible bonds
2007 will see the repayment of the convertible bonds. the last relict of the
Bonifatius past. It amounts to €12.3m. a volume that the company could
not pay out of own funds as things now stand. An external solution such as
raising debt capital would not pose any problems today.
Qualified auditor’s opinion
As already mentioned. the auditors had a number of objections to the 2005
balance sheet which are recorded in the auditor’s opinion. They relate to a
total of 11 items on which the company published extensive opposing
opinions. This is surprising in view of the fact that the auditor advised the
company comprehensively ahead of the adoption of the IFRS. The
criticism of the auditor. which has now been changed. for the most part
concerned matters that are to be regarded as irrelevant. For example. it was
objected that depreciation on property. plant and equipment was fully
reflected in the costs of revenue and that there was no assignment to
functions. To a certain extent the objections are contradictory. as shown by
the criticism relating to the valuation of interest derivative transactions: the
auditor criticises that no valuation of interest swaps was performed.
although this valuation is explained on pages 55/56 of the Management
Report. The auditor also expresses criticism of the omission to disclose the
earnings position of nursing facilities. which inter alia were taken over by
the management. which CURANUM meets by reference to the potentially
negative impact this would have on nursing rate negotiations. This is
understandable. but since the separation between the private and corporate
spheres with listed companies is always to be viewed with suspicion. it is
to be hoped that
-
in future the company will refrain from engaging in such transactions
that are to be recognised under IFRS rules.
the purchase prices paid for the acquisitions carried out in the past were
fundamentally justified.
189
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
P&L. €m
99profo 00profo
01
02
03
04
05
06E
07E
08E
09E
10E
Revenue
121.9
139.1
140.4 164.0 170.2
183.7
188.5
214.8 235.7
256.8
278.1 299.6
Adjusted revenue
121.9
139.0
140.4 164.0 170.2
183.7
188.5
214.8 235.7
256.8
278.1 299.6
Material*
-45.9
-49.0
-52.9
-59.3 -62.7
-32.1
-32.7
-40.1 -44.6
-49.1
-53.6
-58.1
Personnel*
-63.1
-74.9
-74.2
-89.3 -86.8
-92.1
-95.5 -106.7 -115.8 -126.0 -136.0 -146.1
Other
-7.3
-10.6
-5.4
-4.7
-8.5
-36.6
-34.5
-34.4 -35.4
-38.7
-42.1
-45.6
EBITDA
5.6
4.5
7.9
10.6
12.2
22.9
25.8
33.7
40.0
43.0
46.3
49.8
Depreciation./amort.
-6.6
-1.3
-1.4
-2.3
-2.7
-6.6
-6.1
-6.4
-6.8
-7.3
-7.7
-8.2
EBIT
-1.0
3.3
6.5
8.4
9.4
16.3
19.6
27.3
33.1
35.7
38.6
41.6
Financial result
1.6
1.0
-0.5
-2.2
-3.4
-7.3
-7.4
-7.4 -11.0
-11.1
-10.3
-9.3
EBT
0.6
4.2
5.9
6.2
6.0
9.0
12.2
19.8
22.1
24.6
28.3
32.2
E.o.
-0.5
-0.7
-1.0
-1.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Tax
-1.6
-1.7
-0.2
-1.0
-2.4
-4.0
-4.8
-6.3
-6.2
-6.9
-7.9
-9.0
Tax rate
0.0%
40.6%
4.2% 23.5% 40.6% 44.1% 36.0% 32.0% 28.0% 28.0% 28.0% 28.0%
Earnings after tax
-1.5
1.8
4.7
3.4
3.6
5.0
7.4
13.5
15.9
17.7
20.4
23.2
Adjustments
0.4
0.5
0.0
0.0
0.0
-0.1
0.0
0.0
0.0
0.0
0.0
0.0
DVFA earnings
-1.2
2.3
4.7
3.4
3.6
5.0
7.4
13.5
15.9
17.7
20.4
23.2
CF
5.1
3.0
6.1
5.7
6.3
11.6
13.5
19.9
22.8
25.0
28.1
31.4
No. of shares (m)
29.70
29.70
29.70 29.70 29.70
29.70
29.70
29.70 29.70
29.70
29.70 29.70
DVFA/share (€)
-0.04
0.08
0.16
0.11
0.12
0.17
0.25
0.45
0.54
0.60
0.69
0.78
CF/share (€)
0.17
0.10
0.21
0.19
0.21
0.39
0.45
0.67
0.77
0.84
0.95
1.06
Div./share (€)
0.21
0.14
0.18
0.08
0.14
0.10
0.18
0.21
0.24
0.27
0.31
* from 2005 cost of materials will only be comprised of rents. From then on operating expenditures will be carried under “Other
expenditure”
P&L. %
99profo 00profo
01
02
03
04
05
06E
07E
08E
09E
10E
Adjusted revenue
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Material*
-37.6%
-35.2% -37.7% -36.2% -36.8% -17.5% -17.4% -18.7% -18.9% -19.1% -19.3% -19.4%
Personnel
-51.8%
-53.9% -52.8% -54.5% -51.0% -50.1% -50.7% -49.7% -49.1% -49.1% -48.9% -48.8%
Other*
-5.9%
-7.6%
-3.8% -2.9% -5.0% -19.9% -18.3% -16.0% -15.0% -15.1% -15.2% -15.2%
EBITDA
4.6%
3.3%
5.6%
6.5%
7.2% 12.5% 13.7% 15.7% 17.0% 16.7% 16.7% 16.6%
Deprec./amortisation
-5.5%
-0.9%
-1.0% -1.4% -1.6%
-3.6% -3.2% -3.0% -2.9% -2.8% -2.8% -2.7%
EBIT
-0.8%
2.3%
4.6%
5.1%
5.5%
8.9% 10.4% 12.7% 14.1% 13.9% 13.9% 13.9%
Financial result
1.3%
0.7%
-0.4% -1.3% -2.0%
-3.9% -3.9% -3.5% -4.7% -4.3% -3.7% -3.1%
EBT
0.5%
3.0%
4.2%
3.8%
3.5%
4.9%
6.5%
9.2%
9.4%
9.6% 10.2% 10.8%
E.o.
-0.4%
-0.5%
-0.7% -1.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Tax
-1.3%
-1.2%
-0.2% -0.6% -1.4%
-2.2% -2.6% -3.0% -2.6% -2.7% -2.8% -3.0%
Earnings after tax
-1.3%
1.3%
3.3%
2.1%
2.1%
2.7%
3.9%
6.3%
6.8%
6.9%
7.3% 7.8%
Adjustments
0.3%
0.4%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
DVFA earnings
-1.0%
1.6%
3.3%
2.1%
2.1%
2.7%
3.9%
6.3%
6.8%
6.9%
7.3% 7.8%
Cash flow
4.2%
2.2%
4.3%
3.5%
3.7%
6.3%
7.1%
9.3%
9.7%
9.7% 10.1% 10.5%
* from 2005 cost of materials will only be comprised of rents. From then on operating expenditures will be carried under “Other
expenditure”
190
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
Balance Sheet. €m
Fixed assets
o.w. PP&E
Current assets
o.w. liquidity
Equity
o.w. share capital
Provisions
o.w. pensions
Liabilities
o.w. convert. bond
o.w. financial
Balance sheet total
99profo
27.5
5.5
39.5
9.2
29.5
29.7
6.5
0.0
31.0
12.3
1.7
67.0
00profo
30.1
12.4
38.9
7.6
30.5
29.7
7.7
0.0
30.9
12.3
1.0
69.1
01
45.8
18.8
33.4
1.5
32.5
29.7
7.4
0.0
39.6
12.3
6.1
79.1
02
53.0
24.9
44.2
0.4
34.9
29.7
8.4
0.0
54.6
12.3
11.7
97.3
03
56.6
26.5
45.0
3.2
33.4
29.7
11.3
0.0
57.7
12.3
12.1
101.6
04
127.3
90.6
40.7
1.9
33.9
29.7
6.7
0.0
127.4
11.9
87.4
168.0
05
127.6
85.4
37.2
2.2
37.1
29.7
9.0
0.0
118.8
12.0
146.3
164.8
06E
131.5
84.2
41.9
4.3
47.6
29.7
7.9
0.0
117.9
12.0
140.1
173.4
07E
141.3
83.2
45.6
7.1
58.1
29.7
8.3
0.0
120.5
12.0
144.4
186.9
08E
143.7
82.2
49.7
10.3
69.5
29.7
9.1
0.0
114.8
0.0
148.2
193.4
09E
146.1
81.3
51.5
11.1
82.8
29.7
10.1
0.0
104.7
0.0
135.5
197.6
10E
148.5
80.5
53.3
12.0
97.8
29.7
11.1
0.0
92.9
0.0
121.0
201.9
Balance Sheet. %
Fixed assets
o.w. PP&E
Current assets
o.w. liquidity
Equity
o.w. share capital
Provisions
o.w. pensions
Liabilities
o.w. convert. bond
o.w. financial
Balance sheet total
99profo 00profo
01
41.1% 43.6% 57.8%
8.2% 17.9% 23.7%
58.9% 56.3% 42.2%
13.7% 11.1%
1.9%
44.0% 44.1% 41.1%
44.3% 43.0% 37.5%
9.7% 11.2%
9.4%
0.0%
0.0%
0.0%
46.3% 44.7% 50.1%
18.3% 17.8% 15.5%
2.5%
1.5%
7.7%
100.0% 100.0% 100.0%
02
03
04
05
06E
07E
08E
09E
10E
54.5% 55.7% 75.8% 77.4% 75.8% 75.6% 74.3% 73.9% 73.6%
25.6%
26.0% 53.9% 51.8% 48.6% 44.5% 42.5% 41.2% 39.9%
45.5% 44.3% 24.2% 22.6% 24.2% 24.4% 25.7% 26.1% 26.4%
0.4%
3.2%
1.1%
1.3%
2.5%
3.8%
5.3%
5.6%
5.9%
35.9% 32.8% 20.2% 22.5% 27.4% 31.1% 35.9% 41.9% 48.5%
30.5%
29.2% 17.7% 18.0% 17.1% 15.9% 15.4% 15.0% 14.7%
8.7% 11.1%
4.0%
5.4%
4.6%
4.4%
4.7%
5.1%
5.5%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
56.1% 56.7% 75.8% 72.1% 68.0% 64.5% 59.4% 53.0% 46.0%
12.6%
12.1%
7.1%
7.3%
6.9%
6.4%
0.0%
0.0%
0.0%
12.0%
11.9% 52.0% 88.8% 80.8% 77.3% 76.6% 68.6% 59.9%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
CF Statement. €m
Net profit
Deprec.
Other CF
CF DVFA/SG
Chg. in NWC
Other
CF operations
Net investment
FCF
Capital increase
Dividend
Chg. in n. liquid
99profo 00profo
1.8
6.3
-5.0
3.0
0.0
1.7
4.7
-3.9
0.9
0.0
0.0
0.9
01
4.7
1.4
0.0
6.1
2.8
-6.3
2.5
-8.9
-6.3
0.0
-6.2
-12.6
02
3.4
2.3
0.0
5.7
-6.1
7.4
7.0
-9.6
-2.6
0.0
-4.2
-6.7
03
3.6
2.7
0.0
6.3
6.1
1.7
14.1
-6.3
7.8
0.0
-5.3
2.4
191
04
5.0
6.6
0.0
11.6
13.2
-21.5
3.3
-77.3
-73.9
0.0
-2.4
-76.3
05
7.4
6.1
0.0
13.5
-50.6
52.8
15.6
-6.1
9.5
0.0
-4.2
5.4
06E
13.5
6.4
0.0
19.9
-2.8
4.5
21.6
-10.3
11.3
0.0
-3.0
8.3
07E
15.9
6.8
0.0
22.8
-3.3
1.1
20.6
-16.7
3.9
0.0
-5.4
-1.5
08E
17.7
7.3
0.0
25.0
1.0
1.5
27.5
-9.6
17.8
0.0
-6.4
11.5
09E
20.4
7.7
0.0
28.1
1.0
1.7
30.8
-10.2
20.6
0.0
-7.1
13.5
10E
23.2
8.2
0.0
31.4
1.0
1.7
34.1
-10.7
23.5
0.0
-8.2
15.3
3 July 2006
Health Report July 2006
Hartmut Schmidt
Tel. 06152/91 14 88
CURANUM AG
Summary information
P&L. %
Revenue split (Q1/06)
05
-17.4%
-50.7%
31.0%
10.4%
6.5%
3.9%
3.9%
7.1%
40.4%
Material
Personnel
EBITDAR
EBIT
EBT
Earnings after tax
DVFA
CF
Pay-out rate
06E
-18.7%
-49.7%
34.3%
12.7%
9.2%
6.3%
6.3%
9.3%
40.0%
07E
-18.9%
-49.1%
35.9%
14.1%
9.4%
6.8%
6.8%
9.7%
40.0%
08E
-19.1%
-49.1%
35.9%
13.9%
9.6%
6.9%
6.9%
9.7%
40.0%
Others
2%
ass. lvg.
5%
nursing
93%
Key ratios
Capacities (Q1/06)
05
45.2
14.0
19.8%
53.0%
427%
24.9%
2.9
39%
9.5
Rev./employee (€‘000)
EBITDAR/Emp. (€’000)
RoE after tax (%)
RoCE (%)
Gearing
NWC/revenue (%)
N. debt/revenue
Inv./CF (%)
FCF (€m)
06E
46.5
16.0
28.3%
57.3%
320%
23.2%
2.9
48%
11.3
07E
47.3
17.0
27.4%
57.0%
269%
22.5%
2.9
81%
3.9
08E
47.6
17.1
25.5%
51.4%
213%
20.3%
2.8
35%
17.8
apparte.
686
beds
5.641
60
50
8%
50
40
40
30
30
20
20
10
10
0
sales
RoS after tax
CF DVFA/SG
192
FCF
15e
13e
01
-10
11e
0
15e
13e
11e
09e
07e
05
0%
03
0
09e
2%
07e
150
05
4%
03
6%
CF DVFA/SG €m
10%
RoS
300
01
sales €m
450
FCF €m
Trend in revenue. RoR. CF and FCF

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