Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg. Consolidated interim report

Transcription

1 Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Consolidated interim report as of 30 June 2010 according to International Financial Reporting Standards

2 Contents Interim group management report Interim condensed consolidated financial statements Consolidated statement of financial position Consolidated income statement Consolidated statement of comprehensive income Consolidated statement of cash flows Consolidated statement of changes in equity Selected notes to the consolidated financial statements Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 2

3 Interim group management report Key performance indicators First half of 2010 First half of /- Number of patients 814, , % Number of beds 17,996 18, % Employees % Net cash flow from operating activities EUR m >+100% Revenue EUR m 1, , % EBITDA EUR m % EBITDA margin as a % Consolidated net income EUR m % Return on sales as a % Investments in property, plant and equipment and intangible assets EUR m % of which subsidized EUR m % 30 Jun Dec /- Total equity and liabilities EUR m 1, , % Equity incl. subordinated capital EUR m % Equity ratio (including subordinated capital ) as % Equity excl. subordinated capital EUR m % Equity ratio (without subordinated capital ) as % Financial liabilities (excl. subordinated capital) EUR m % Cash and cash equivalents EUR m % Net debt EUR m % Net debt/ebitda* 1.1x 1.4x Financial liabilities (incl. subordinated capital) EUR m % Cash and cash equivalents EUR m % Net debt EUR m % Net debt/ebitda* 2.4x 2.9x Interest coverage (EBITDA/financial result) 7.3x 5.4x * EBITDA of the last twelve months in each case Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 3

4 Asklepios 2010 still on track for successful growth The development in the first half of 2010 showed a significant improvement compared to the first six months of the prior year. With a 12.6% increase in the number of patients treated at our facilities, revenue saw organic growth of 7.2% EBITDA increased significantly by 22.5%, with a current margin of 9.3% of revenue The positive development also improved compared to the first three months of the current year, with EBITDA up 10.4% compared to the prior quarter Group earnings increased by 51.8%; return on sales came to 4.7% (prior-year period: 3.3%) Asklepios turnaround expertise has been impressively showcased by the sustained positive development of Asklepios Kliniken Hamburg GmbH with revenue growth of 10.4% (EBITDA +46.1%) compared to the prior year comparative period. Asklepios is one of the largest privately managed hospital organizations in Germany. The focal point of activities is acute inpatient and outpatient care of patients at hospitals as well as the associated facilities such as medical centers for shared practices, medical centers or post-acute and rehabilitation clinics. With 66 hospitals in 13 federal states in Germany, Asklepios enjoys wide coverage, spreading its economic risk. None of our facilities contributes more than 10% to the cash flow or EBITDA of the whole Group. Recent economic turbulence also failed to make a mark on the development of our results of operations, confirming the robust and long-term gearing of our business model as well as the very steady nature of our cash flows. As a highly innovative major private operator of clinics, Asklepios already provides significant conceptual solutions for responsible, economic and patient-oriented inpatient care today and is thus ideally suited as a partner and influential market player for further developments in the healthcare sector. Together with the Kassenärztliche Vereinigung [German Association of Statutory Health Insurance Doctors] we will provide a solution for the pressing matter of care at the interface between outpatient and inpatient care. For this purpose, Patiomed AG was established. Its aim is to continue to offer physicians in private practice an attractive professional environment in self-employment. We are carefully following the current discussion on reform for financing of healthcare costs in Germany. The current savings proposal from the Ministry of Health requires providers of inpatient services to offer a further 30% efficiency discount on additional service not covered by agreements in Furthermore the customary increase in the budget (adjusted for inflation) for health insurers, which serves to cover the general cost development among other things, is to be cut by half in 2011 and As a private provider of healthcare services, we have shown in the past that we can boost productivity while still maintaining a high level of quality, especially compared to public-sector operators. Accordingly, we are Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 4

5 optimistic about these new challenges to limit remuneration. We are also confident about the development of the current fiscal year and therefore we confirm our sales target for 2010 of approx. EUR 2.3 billion with an increase in the operating result (EBITDA) of more than 10% and a ratio of net financial debt to EBITDA of less than 2.5x as of year-end. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 5

6 Results of operations January to June Change +/- Revenue 1,139,307 1,063, , % Other operating income 8,749 8, % Cost of materials 247, , , % Personnel expenses 679, , , % Other operating expenses 114, , , % EBITDA 106,241 86, , % Amortization, depreciation and impairment losses 32,073 30, , % Financial result -14,613-16,014-1, % Income tax expense -5,891-4, , % Consolidated net income 53,664 35, , % The dynamic development of the Company continued in the reporting period. With revenue up 7.2% to EUR 1,139.3m, all of which was attributable to organic growth, and a 22.5% improvement in EBITDA to EUR 106.2m (with the EBITDA margin up 110 base points to 9.3%), the first half of 2010 developed well thanks to earnings contributions from additional services in 2010 and our consistent endeavors to boost efficiency. In conjunction with savings with regard to the cost of capital, this led to a clear improvement in consolidated net income of EUR 53.7m and a return on sales of 4.7%. The Asklepios Kliniken Hamburg GmbH subgroup made a particularly positive contribution to Asklepios six-month figures, with an increase in revenue of 10.4% and a satisfactory EBITDA margin of 9.3% in the fifth year since privatization. The number of inpatients treated in the Group s clinics was raised by 6,959 compared to the prior year to 265,939; this is an overall increase of 2.7%. The number of outpatient cases increased by 84,459 to 548,777 in the first six months compared to the prior-year period (up 18.2%). Looking to our needs-oriented portfolio of services, the number of patients was increased from 723,298 in the prior-year period to 814,716 (up 12.6%). Consolidated revenue increased by EUR 76.1m to EUR 1,139.3m (up 7.2%) in the first half of 2010 compared to the prior-year period. The purely organic growth was increased by means of new medical offerings, occupancy management and performance-based compensation agreements. The development of the rest of the year will depend largely on whether additional services at acute-care clinics are agreed with the payers in budget negotiations. Of revenue, 92.7% (prior-year period: 92.6%) was generated in acute-care hospitals, 5.4% (prior-year period: 5.5%) in rehabilitation clinics and 1.9% (prior-year period: 1.9%) in other social facilities and in the other facilities. Despite the higher demands, non-personnel costs were maintained at almost the same level. This development is thanks to the transparency of purchasing conditions ensured by the Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 6

7 central group functions and an optimized portfolio policy. The quantities consumed are also managed locally in the individual clinics using internal budgeting methods. These are flanked by an internal group benchmark system used as a basis to identify further potential for improvement on a constant basis. The ratio of cost of materials to total operating performance saw an improvement of 0.4% from 22.1% in the prior-year period to 21.7%. Among other things, this reflects the results of the 12plus efficiency program. In absolute terms, cost of materials increased by EUR 12.4m on the prior-year period to EUR 247.9m. With performance figures up, significant cost drivers are variable expenses and general price hikes for energy, for example. Personnel expenses as a percentage of total operating performance fell to 59.7% (prior-year period: 60.5%) with personnel expenses of EUR 679.7m (prior-year period: EUR 643.3m). This decrease is particularly notable because Asklepios faced numerous contrasting effects. In absolute terms, the headcount increased by 2.1% (as a result of increasing the level of medical staff in particular). In terms of remuneration, the Group faced significant pay increases under collectively bargained wage agreements. The average expense per FTE rose by 3.7% compared to the prior-year period. Extending our maxim of providing premium quality medical care, it is particularly important for our newly acquired operating units that we set ourselves the priority target of improving productivity across the board, through concentrated HR management and expansion of services in line with demand. Other operating expenses rose by EUR 8.5m to EUR 114.2m (prior-year: EUR 105.7m). The increase is mainly due to higher repayment risks with health insurers as a result of increased risks from the MDK (medical review board). At EUR 106.2m (prior-year period: EUR 86.7m), EBITDA was up 22.5% despite the negative effects of external collectively bargained agreements and cost effects already described. At 9.3%, the EBITDA margin is likewise well above the level of 8.2% attained in the prior-year period. The depreciation ratio came to 2.8% (prior year: 2.9%) in the first half of 2010 and is thus at the level expected in the long term. Because a large proportion of investments are subsidized, the Group recognizes a relatively low level of depreciation and amortization in profit or loss. The financial result developed as planned. At EUR -14.6m, this is an improvement on the prior-year quarter (prior-year period: EUR -16.0m). As a consequence of the lower base interest rate, the repayment of part of a financing facility debt from cash and optimized liquidity management (cash pooling), interest expenses fell by EUR 3.0m or 15.5% in comparison to the prior-year period, which more than offset the drop in interest on the investment side. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 7

8 Composition of net assets, capital structure and financing structure Summarized statement of financial position 30 Jun Dec 2009 Non-current assets 1,392, % 1,400, % Current assets 547, % 501, % ASSETS 1,940, % 1,901, % Equity 579, % 526, % Subordinated capital 283, % 290, % Non-current liabilities and provisions 635, % 668, % Current liabilities and provisions 441, % 415, % EQUITY AND LIABILITIES 1,940, % 1,901, % Our assets and finance structures are sound. As already the case as of 31 December 2009, non-current assets are more than covered by equity or non-current liabilities. The equity ratio improved further compared to 31 December 2009 through retention of the consolidated profit for the first half year and now stands at 29.9% (31 December 2009: 27.7%). Rating agencies generally classify the pro rata share of subordinated capital as equity. Taking the subordinated capital into account, the economic equity ratio of the Group rose to 44.5% (31 December 2009: 43.0%). Asklepios also has permanent interest-free and redemption-free access to subsidies totaling EUR 1,138.4m (prior year: EUR 1,131.8m). As these subsidies only fall due for repayment in the hypothetical case of the Group leaving the hospital plan, they are for all intents and purposes equivalent to equity funds. Basically, high liquidity levels for the long-term and extensive undrawn lines of credit offer Asklepios a considerable degree of independence from financial markets and refinancing risks and provide flexibility with regard to future investment projects. In addition to cash and cash equivalents of EUR 140.3m, the Group also has access to an undrawn credit line of EUR 330.8m, bringing the total of highly liquid financial reserves to more than EUR 471.1m. The internal financing power (measured against EBITDA adjusted for non-cash factors) increased significantly by 22.3%. In addition, the gradual refinement of the cash management system led to repayment of the variable portion of financial liabilities, with interest expenses also optimized further. The summary below shows how cash and cash equivalents generated in operating activities were used: Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 8

9 January to June EUR m EUR m EBITDA Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Change in cash and cash equivalents Cash and cash and cash equivalents as of 1 January Cash and cash and cash equivalents as of 30 June The significant increase in cash flow from operating activities stems from the sharp growth in EBITDA combined with an improvement in working capital; measures were implemented across the Group for the purpose of this optimization. For the sake of completeness, it should be noted that the comparative prior-year period was characterized by non-recurring special effects as a result of settlements which fell due for payment and low base rates at individual hospitals. The debt ratio - measured as net debt/ebitda - improved once again. On account of internal guidelines, this quotient (not including subordinated capital) may not exceed 3.5x to 4.0x. The following table illustrates how the indicator was calculated in the reporting period: 30 Jun Dec 2009 EUR m EUR m Excluding subordinated capital Financial liabilities (excluding subordinated capital) Cash and cash equivalents Financial liabilities (excluding subordinated capital) EBITDA (of the last four quarters in each case) Net debt/ebitda 1.1x 1.4x This means that, at 1.1x (31 December 2009: 1.4x), this indicator is well within the stipulated range in the reporting period. Even taking into account subordinated capital, the indicator comes to 2.4x (31 December 2009: 2.9x). 30 Jun Dec 2009 EUR m EUR m Including subordinated capital Financial liabilities (including subordinated capital) Cash and cash equivalents Net debt (including subordinated capital) EBITDA (of the last four quarters in each case) Net debt/ebitda 2.4x 2.9x Compared to the German industrial sector and the relevant competitors within the industry, this leverage can been considered moderate. Furthermore, the interest coverage factor (including interest on participation capital) stands at 7.3x (31 December 2009: 6.0x). As a conservative company in terms of finance, our financing strategy is, on principle, long term in nature and contains hardly any short-term refinancing risks. The credit volumes are Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 9

10 correspondingly hedged against interest risks in the long term. Our investments on the assets side also pursue a conservative risk diversification policy via various banks within the three major German deposit protection systems. In January 2010, the external rating agency Euler Hermes Rating GmbH, a subsidiary of the international credit insurance firm Euler Hermes and a member of the Allianz group, confirmed the external rating of BBB for the Asklepios Kliniken Verwaltungsgesellschaft mbh subgroup, with a stable outlook. The rating agency assesses Asklepios Kliniken Verwaltungsgesellschaft mbh as being above average in comparison to the economy as a whole and within the industry. In addition, Euler Hermes attests to the Group s transparent and forward-looking approach and very good risk management system, putting it in a good position in comparison to the main competitors in the private hospital market in Germany. One of the central elements of the Group s financing strategy consists of maintaining and fostering an investment grade standard in order to optimize our capital costs at a low level in the long run. The starting point for this is the long-term limitation of financial risks in the organization of the operating business. Correspondingly, sound financial structures are considered one of the fundamental secondary conditions for all stages of growth. Capital expenditures and maintenance After deducting the subsidized capital expenditures, net investment totals EUR 40.8m (prioryear period: EUR 41.8m) or 3.6% (prior-year period: 3.9%) of revenue; this was a year-onyear decrease of EUR 1.0m as scheduled. Capital expenditures were financed completely from the cash flow from operating activities of EUR 107.6m and came to EUR 89.3m (prior-year period: EUR 86.7m) before deducting subsidies; this is equivalent to 7.8% as a percentage of revenue (prior-year quarter: 8.2%). Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 10

11 Investing projects are mainly allocable to the following locations: Jan to Jun 2010 EUR m St. Georg, Hamburg 4.6 Alsbach-Hähnlein 2.7 Service und Einrichtungen, Hamburg 2.7 Westklinikum, Hamburg 2.7 MVZ Nord GmbH, Hamburg 2.6 Altona, Hamburg 1.4 Brandenburg 1.4 Seligenstadt 1.2 Harburg, Hamburg 1.1 Seesen 1.1 Wiesbaden 1.1 Langen 1.0 Göttingen 0.9 Bad Abbach 0.8 Sebnitz 0.8 Barmbek, Hamburg 0.7 Medilys GmbH, Hamburg 0.7 Südpfalzkliniken 0.7 Bad Salzungen 0.7 St. Augustin 0.7 Westerland 0.7 Other locations 10.5 Total 40.8 Compared to the prior-year period, expenses for maintenance and servicing were relatively stable at EUR 36.7m. As a percentage of revenue (which increased), 3.2% (prior-year period: 3.4%) was invested in ongoing maintenance. In total, 6.8% of revenue was used for internally-funded capital expenditure and maintenance. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 11

12 Outlook Our healthcare system faces the challenges arising from demographic change and progress in medical technology. This means that for many years spending by public health insurance funds has been rising more rapidly that the income from statutory contributions. Under the current reform of public health insurers, both service providers and health insurers must contribute their part towards consolidation. The increase in the contribution rate of health insurers has a direct effect on employer contributions and thus also on hospitals. Hospitals in particular are affected by the savings measures; they are to offer a further 30% efficiency discount on additional service not covered by agreements. Furthermore the customary increase in the budget (adjusted for inflation) for health insurers is to be cut in half. In light of this, our short-term focus for 2010 is on discussions on collectively bargained wage agreements as well as on the outcome of budget negotiations with payers. We have gained planning certainty with regards to this, but it also means that personnel expenses will increase in the second half of the year. The hospital employers association (KHAV), Hamburg, and the trade union Verdi concluded a new collectively bargained agreement effective 1 July 2010 and with a term of 20 months. The agreement provides for remuneration tables to increase at the same rates agreed in the spring for those in public service. Furthermore, agreements were reached on improved remuneration for night shifts and to reward particular qualifications. Based on further efficiency boosts, we are of the opinion that our expectations of operations were correct and look to the future development of the fiscal year with confidence. As of 1 July 2010 we acquired three clinics in the Schwandorf district. In Nabburg our future focus will be on competence in internal medicine. We want to set up a specialist clinic for cardiology and, among other things, offer a station for left heart catheterization. In Oberviechtach we will expand our services in general surgery and restructure our geriatric care. In Burglengenfeld we want to offer a facility with highly modern medical care for the internal and surgical areas. In addition to internal medicine and surgery, we also want to expand the ENT department for the use of SHI physicians with inpatient authorization. We are currently investing in fire protection, emergency exits and escape routes at this facility. We are confident about the development of the current fiscal year and are positive about the operating business in Therefore we confirm our sales target for 2010 of approx. EUR 2.3b with an increase in the operating result (EBITDA) of more than 10% and a ratio of net financial debt to EBITDA of less than 2.5x as of year-end. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 12

13 Interim condensed consolidated financial statements Consolidated statement of financial position as of 30 June 2010 Note 30 Jun Dec 2009 ASSETS Non-current assets Intangible assets VI , ,974 Property, plant and equipment, VI. 2 1,000, ,186 Investments accounted for using the equity method Financial assets Trade receivables Other assets Deferred tax Total non-current assets ,400,208 Current assets Inventories Trade receivables Current income tax assets Other assets Cash and short-term deposits VI , Total current assets Total ASSETS ,901,237 EQUITY AND LIABILITIES Equity attributable to the parent company Issued capital 1,022 1,022 Reserves 455, ,835 Consolidated profit 46,448 78,255 Non-controlling interests 77,055 70,424 Non-current liabilities Total equity VI , ,536 Trade payables 1,069 1,011 Subordinated capital VI , ,308 Financial liabilities 344, ,705 Finance lease liabilities 4,298 4,506 Pensions and similar obligations 62,418 65,745 Deferred tax 15,275 15,828 Other provisions 41,299 36,383 Other liabilities 166, ,455 Total non-current liabilities 915, ,941 Current liabilities Trade payables 49,104 49,925 Subordinated capital VI. 4 3,200 0 Financial liabilities 31,093 32,135 Finance lease liabilities Pensions and similar obligations 1,691 1,574 Other provisions 52,265 54,435 Current income tax liabilities 10,148 9,517 Other liabilities 297, ,449 Total current liabilities 445, ,760 Total EQUITY AND LIABILITIES 1,940,132 1,901,237 Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 13

14 Consolidated income statement January to June Note Revenue V.1 1,139,307 1,063,229 Other operating income V.2 8,749 8,081 1,148,056 1,071,310 Cost of materials 247, ,481 Personnel expenses 679, ,347 Other operating expenses V.3 114, ,728 Operating result EBITDA 1) 106,241 86,754 Amortization, depreciation and impairment of intangible assets and property, plant and equipment 32,073 30,891 Operating result EBIT 2) 74,168 55,863 Earnings from investments accounted for using the equity method 911 1,380 Interest and similar income 885 2,040 Interest and similar expenses -16,409-19,434 Financial result V.4-14,613-16,014 Earnings before income taxes 3) 59,555 39,849 Income taxes V.5-5,891-4,492 Consolidated net income 53,664 35,357 of which attributable to the parent company 46,448 31,718 of which attributable to minority interests 7,216 3,639 1) Operating result before financial result, taxes and depreciation and amortization 2) Operating result before financial result and taxes 3) Corresponds to the result from ordinary activities Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 14

15 Consolidated statement of comprehensive income January to June Consolidated net income 53,664 35,357 Change in fair value of cash flow hedges Securities marked to market 0-5,182 Other comprehensive income -48-5,027 Total comprehensive income (total earnings and earnings after taxes and other comprehensive income) 53,616 30,330 of which attributable to the parent company 46,400 26,691 of which attributable to minority interests 7,216 3,639 Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 15

16 Consolidated statement of cash flows January to June Note Gross cash flow (EBITDA) 106,241 86,754 Other non-cash transactions Changes in inventories, receivables and other assets -26,642-58,824 Changes in liabilities and provisions 30,970 7,597 Income taxes paid V.5-3,552-2,960 Net cash flow from operating activities 107,610 32,968 Investments in property, plant and equipment and intangible assets (less disposals) VI.1,2-40,810-41,260 Acquisitions of subsidiaries, equity investments and financial assets ,804 Interest income V ,427 Dividends received Payments in connection with AKHH transaction -8,540 0 Cash flow used in investing activities -48,298-66,041 Repayment of financial liabilities -24,950-8,219 Hospital financing -3,505-7,652 Interest expenses V.4-14,054-16,323 Distributions Compensation payment obligations VI Cash flow from financing activities -43,094-32,610 Change in cash and cash equivalents 16,218-65,683 Cash and cash equivalents at beginning of the period 124, ,100 Cash and cash equivalents at the end of the period VI.5 140, ,417 Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 16

17 Consolidated statement of changes in equity 2010 Equity attributable to the parent company Subscribed capital Revenue reserves Reserve for marking to market Consolidated profit Total Noncontrolling interests Equity As of 1 January , , , ,112 70, ,536 Consolidated net income ,448 46,448 7,216 53,664 Hedging reserve Distributions Compensation payment obligations Transfer to reserves 0 78, , As of 30 June , , , ,512 77, , Equity attributable to the parent company Subscribed capital Revenue reserves Reserve for marking to market Consolidated profit Total Noncontrolling interests Equity As of 1 January , , , ,902 61, ,541 Consolidated net income ,718 31,718 3,639 35,357 Securities marked to market 0 0-5, , ,182 Hedging reserve Distributions Compensation payment obligations Changes in the consolidated group Transfer to reserves 0 46, , As of 30 June , ,967-4,114 31, ,593 64, ,329 Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 17

18 Selected notes to the consolidated financial statements I. Basis of the consolidated financial statements The Company is named Asklepios Kliniken Gesellschaft mit beschränkter Haftung, (hereinafter also referred to as AKG, the Company or the Group ), Rübenkamp 226, Hamburg (Germany), and is entered in the commercial register at the Hamburg district court, HRB The Company was formed on 19 June Asklepios Kliniken Gesellschaft mit beschränkter Haftung and its subsidiaries operate primarily on the German market in the clinical acute care and rehabilitation as well as to a very limited extent nursing business segments. The purpose of the Company is the acquisition and operation of as well as the provision of consultation services for healthcare institutions. We operate institutions in numerous federal states in Germany. The operating entities are mainly equity investments of the two subgroups included in the consolidated financial statements of Asklepios Kliniken Verwaltungsgesellschaft mbh, Königstein (100% equity investment, AKV ), and Asklepios Kliniken Hamburg GmbH, Hamburg (74.9% equity investment, AKHH ), included in the consolidated financial statements. In addition, we also have selected foreign operations, with a focus on Greece (Athens Medical Center S.A., Athens). II. Accounting policies These interim consolidated financial statements on the results for the second quarter ended 30 June 2010 were prepared in abbreviated form in accordance with the provisions of IAS 34, applying the provisions of Sec. 315a HGB [ Handelsgesetzbuch : German Commercial Code] and pursuant to the version of the International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board that is valid on the reporting date and endorsed by the European Union in the version of IFRSs mandatory for application for fiscal years beginning in Various figures from the prior-year period were restated in these financial statements. The restatements made, which serve the better presentation of the financial position, financial performance and cash flows, do not have any material effect. The interim condensed consolidated financial statements do not include all of the information required for consolidated financial statements as of year-end and must therefore be used in conjunction with the consolidated financial statements for the year ending 31 December With the exception of the following IFRS mandatory for fiscal years beginning on or after 1 January 2010, the accounting policies set out in detail in the consolidated financial statements for 2009 were carried over unchanged for the preparation of these interim condensed consolidated financial statements. For details please refer to our notes on these. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 18

19 In April 2009 the IASB issued an omnibus of amendments to its standards, with a view to removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. Most of the amendments apply for fiscal years beginning on or after 1 January The application of these amendments did not have a significant effect on the interim consolidated financial statements. The following revisions or adjustments to IFRS standards and interpretations have come into force, but, other than the description of accounting policies, they do not have any impact on the figures or disclosures in the Company s interim consolidated financial statements as of the date of first-time application. IFRS 1 First-time Adoption of International Financial Reporting Standards (revised 2008) Amendments to IFRS 2 Group Cash-Settled Share-Based Payment Transactions IFRS 3 Business Combinations (as revised in 2008) IAS 27 Consolidated and Separate Financial Statements (as revised in 2008) Amendments to IAS 39 Eligible Hedged Items IFRIC 12 Service Concession Arrangements IFRIC 15 Agreements for the Construction of Real Estate IFRIC 16 Hedges of a Net Investment in a Foreign Operation IFRIC 17 Distributions of Non-Cash Assets to Owners IFRIC 18 Transfers of Assets from Customers Various smaller changes to standards made in the course of the IASB s annual improvements projects published in 2008 and 2009 According to IFRS 8 Operating Segments, the segment information on operating segments must be presented in the way internal reporting is made to the chief operating decisionmaker (management approach). An operating segment is a group of assets and operating activities that provides products or services, that is subject to risks and returns that are different from those of other operating segments. A geographical segment provides products or services within a particular economic environment and is subject to risks and returns that are different from those of other economic environments. In our group, the chief operating decision-maker is group management. This body makes the strategic decisions for the Group. It receives regular reports on the figures for the hospitals and entities. Based on our understanding of offering integrated healthcare services, we do not make a distinction in terms of control between services allocable to the inpatient or outpatient sector or rehabilitation or care sector as defined by the SGB [ Sozialgesetzbuch : German Social Code]. Based on this approach, we still have one reportable operating segment. All revenue for all of our activities is recorded in Germany and (with the exception of our service companies, which also exclusively generate internal, consolidated revenue) with external customers or payers. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 19

20 Basis of consolidation In addition to AKG as the ultimate parent, the consolidated group also includes the subsidiaries in which AKG exercises control, either directly or indirectly (generally voting right > 50%). Subsidiaries are included in the consolidated financial statements by way of full consolidation from the date on which the Group obtains control, directly or indirectly, which means control with respect to financial and operating policy. Associates are entities over which the Group has significant influence but no control. Investments in associates are generally accounted for using the equity method. 90 accounting entities are included in the interim consolidated financial statements of the Company prepared by us. We also include the investments in the Greek subsidiary Athens Medical Center S.A., and in MediClin AG, Offenburg, using the equity method. The Group acquired three clinics in the Schwandorf district in January The clinics will strengthen the Group in the region, but individually and in sum they are immaterial for the Group s structure. We assumed control on 1 July No economic effects have therefore been included in these interim financial statements. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 20

21 Accounting policies 1) Goodwill and investments accounted for using the equity method Goodwill and investments accounted for using the equity method are tested for impairment annually (as of 31 December) and when circumstances indicate that the carrying value may be impaired. The underlying assumptions for calculating the recoverable amount are explained in more detail in the consolidated financial statements as of 31 December The market capitalization of equity investments accounted for using the equity method was less than the carrying amount of equity disclosed in some cases. No triggering event was established in impairment testing. 2) Sensitivity relating to changes in assumptions made There were no major changes compared to year-end 2009 with regard to the determination of value in use and the underlying assumptions for the calculation of provisions. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 21

22 III. Selected notes to the interim consolidated income statement 1) Revenue Revenue breaks down by business segment and region as follows: January to June EUR m EUR m Business segments Acute-clinic treatment 1, Post-acute and rehabilitation treatment Social facilities Other Total 1, ,063.2 Regions State of Hamburg State of Hesse State of Brandenburg State of Lower Saxony Free State of Bavaria State of Schleswig-Holstein Free State of Saxony State of North Rhine-Westphalia State of Rhineland Palatinate State of Mecklenburg-Western Pomerania Free State of Thuringia State of Saxony-Anhalt State of Baden-Württemberg Total 1, ,063.2 Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 22

23 2) Other operating income Other operating income breaks down as follows: January to June EUR m EUR m Income from insurance claims Income from the reversal of provisions/liabilities Royalties Income from training seminars Income from childcare Income from the disposal of assets Other Total Other income comprises various items from current business operations. These include income from other refunds. 3) Other operating expenses Other operating expenses relate to: January to June EUR m EUR m Maintenance and servicing Repayment risks with health insurers Office supplies, postage and telephone charges Contributions, consulting and audit fees Taxes, dues and insurance Rent expenses Training expenses, schools Expenses relating to other periods Advertising and travel expenses IT expenses Other administrative expenses Contract workers Recruiting costs Waste disposal expenses Other Total Other expenses comprise various items from current operations. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 23

24 4) Financial result The financial result breaks down as follows: January to June EUR m EUR m Earnings from investments accounted for using the equity method Interest and similar income Interest and similar expenses of which interest and expenses from subordinated capital Financial result ) Income taxes Income taxes break down as follows: January to June EUR m EUR m Current income taxes Deferred income taxes Total The taxes paid in the fiscal year amount to EUR 3.6m (prior-year period: EUR 3.0m). Due to utilization of unused tax losses and various effects without effect on taxes, the tax rate in the reporting period came to 9.9% (prior-year period: 11.3%). Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 24

25 IV. Selected notes to the interim consolidated statement of financial position 1) Goodwill and other intangible assets 2010 Goodwill Franchises, industrial rights acquired Prepayments for intangible assets Cost As of 1 January ,649 33, ,057 Additions 443 3, ,235 Disposals Reclassification As of 30 June ,092 36, ,173 Accumulated amortization and impairment As of 1 January ,565-21, ,083 Additions 0-2, ,137 Disposals As of 30 June ,565-23, ,823 Residual carrying amounts As of 31 December ,084 11, ,974 As of 30 June ,527 13, ,350 2) Property, plant and equipment 2010 Cost As of 1 January 2010 Land and buildings including buildings on thirdparty land Plant and machinery Furniture and fixtures: Payments on account and assets under construction Finance lease property, plant and equipment Total Total 1,089,820 56, ,751 41,360 3,070 1,416,592 Additions 2, ,822 21, ,582 Disposals ,324-1, ,520 Reclassification 1, ,204-3, As of 30 June ,093,113 57, ,453 58,516 3,070 1,448,369 Accumulated depreciation and impairment As of 1 January ,153-25, , ,406 Additions -15,427-2,033-12, ,936 Disposals , ,559 As of 30 June ,320-27, , ,783 Residual carrying amounts As of 31 December ,667 31, ,019 41,312 3, ,186 As of 30 June ,793 29, ,703 58,468 2,779 1,000,586 Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 25

26 3) Equity According to IAS 1 (revised 1997), the development of equity is presented in a statement of changes in group equity which is a separate component of the interim consolidated financial statements. 4) Subordinated capital In total, the Company has issued subordinated participation certificates equivalent to EUR 158m with an average term to maturity of about nine years. These are subordinated to all non-subordinated creditors but have the same standing as other participation certificate holders and rank above the shareholders, including shareholder loans made in lieu of equity. A portion of EUR 3.2m is due within one year. The holder of the participation certificates can exercise the right to demand a rating for a portion of the participation capital if certain financial covenants are not complied with over a prolonged period of time. If the requested rating results in a lower rating, the interest rate charged increases in line with the new rating. Participation capital is subject to nominal and effective interest within a range of 6% to 10%. The rating has not been lowered since issuing the participation certificates. The other subordinated capital essentially concerns a subordinated loan amounting to EUR 74.9m and a subordinated shareholder loan of EUR 57.4m. The maturity dates depend on contractually defined terms and conditions. Interest was set at a rate equivalent to the Euribor plus a margin. 5) Cash and cash equivalents Cash and short-term deposits in the statement of financial position comprise short-term, highly liquid monetary deposits with an original maturity of less than three months from the date of acquisition. Cash and cash equivalents correspond to the cash and cash equivalents in the consolidated statement of cash flows. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 26

27 Other notes 1) Annual average number of FTEs As of 30 June 2010 the number of employees came to 33,565. Compared to the prior year figure which came to 32,874 the number of employees rose by 2.1% or 691 employees. An average of 26,344 full-time equivalents were employed in the first months of 2010 compared to 25,866 full-time equivalents in the prior year period, an increase of 1.8%. 2) Contingent liabilities and other financial obligations The Company has a guarantee obligation of EUR 45,429k from Hamburgische Versorgungsfonds for loan obligations and ancillary payments from the construction of the new hospital in Barmbek for the period from 1 January 2010 to 31 December Other financial obligations break down as follows: 30 Jun Dec 2009 Capital expenditure commitments 89,987 93,016 Long-term lease agreements 65,776 66,113 Rental and lease agreements 31,143 30,924 Maintenance and supply agreements 25,194 26,509 Purchase obligations 25,176 20,944 Insurance contracts 2,356 3,114 Other 3,185 9,985 Total 242, ,605 All other financial obligations are stated at nominal value and are due as follows: Less than one year 55,133 Between two and five years 102,475 More than five years 85,209 Total 242,817 3) Related parties For Asklepios Kliniken Gesellschaft mit beschränkter Haftung, related parties within the meaning of IAS include entities controlled by the Group and/or entities over which the Group has a significant influence and vice versa. In particular, subsidiaries and equity investments are therefore defined as related parties. Transactions with these entities are carried out at arm s length. The resulting revenue is not material for the Group. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 27

28 Dr. Bernard gr. Broermann, Königstein-Falkenstein, is the sole shareholder of Asklepios Kliniken Gesellschaft mit beschränkter Haftung. AKG and an indirect 100% investment of Dr. gr. Broermann with registered offices in the USA have entered into loan agreements of USD 8.5m which are securitized and subject to interest rates customary on the market. Translation at the closing rate resulted in an amount of EUR 6.9m. The loans of EUR 3.8m were in turn financed by special-purpose loans provided by Dr. gr. Broermann as lender to AKG as the borrower. All loans are securitized and subject to interest rates customary on the market. There were no differences in the related parties or the transactions with such parties in terms of type or pro rata business volume compared to the consolidated financial statements as of 31 December With the exception of the relationship to Dr. gr. Broermann described above, the same is true for financial receivables from and liabilities to related parties. There has been a fiscal unity for VAT purposes at AKG level since 1 May 2010.This development simplifies the group internal transactions considerably and should result in significant savings in the medium term. 4) Consolidated statement of cash flows Cash and cash equivalents increased by EUR 16.2m to EUR 140.3m in the first six months of The cash flow from operating activities amounts to EUR 107.6m (prior-year period: EUR 33.0m). The significant increase stems from the increase in EBITDA coupled with an improvement in working capital. For the sake of completeness, it should be noted that the comparative prior-year period was characterized by non-recurring special effects as a result of settlements which fell due for payment and low base rates at individual hospitals. The cash flow from operating activities is offset by cash flow from investing activities of EUR 48.3m (prior-year period: EUR -66.0m), meaning that it was possible to finance all capital expenditures from the cash flow from operating activities in the first half of In the reporting period, the cash flow from investing activities stems from obligations arising from purchase agreements as well as from purchase price payments for an acquisition. The cash flow from financing activities came to EUR -43.1m (prior-year period: EUR -32.6m), as planned, primarily due to debt servicing. Asklepios Kliniken Gesellschaft mit beschränkter Haftung, Hamburg Page 28