Primary Health Care Limited Primary Health Care Limited Takeover offer for Takeover offer for Health Communication Network Limited Health Communication Network Limited 10 December 2004 10 December 2004
Important Notice Important Notice DISCLAIMER This presentation contains information regarding the proposed offer by Primary Health Care Limited (Primary) of fully paid ordinary shares (Shares) as part of a proposed institutional placement (Placement). This presentation is for distribution only under such circumstances as may be permitted by applicable law and ASX listing rules. The distribution of this presentation and disclaimer in jurisdictions outside Australia may be restricted by law and any such restrictions should be observed. This presentation, including the information contained in this disclaimer, does not constitute an offer, invitation or recommendation to subscribe for or purchase any security and neither the presentation, disclaimer nor anything contained in them forms the basis of any contract of commitment other than in respect of the obligations or parties who agree to accept firm allocations. This presentation does not take into account your individual investment objectives, financial situation or particular needs. You must not act on the basis of any matter contained in this presentation, but must make your own assessment of the Shares subject of the Placement and conduct your own investigations and analysis. No representation or warranty express or implied, is made as to the fairness, accuracy, completeness or correctness of information contained in this presentation, including the accuracy, likelihood or achievement or reasonableness of any forecasts, prospects, returns or statements in relation to future matters contained in the presentation. It is not intended to be a complete statement or summary of the business or securities referred to in the material. To the maximum extent permitted by law, neither Primary or UBS AG (Australia Branch), their related corporations, directors, employees or agents, or any other person, accepts any liability, including, without limitation, any liability arising form fault or negligence, for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it. 2
Index Index � Transaction overview � Combination – discussion – Summary of transaction – Natural owners of business – Benefits of transaction – Business development � Overview of HCN – PRY => HCN – Industry leader – HCN => PRY – Financial and operational – Timing leverage – Core product discussion � Financial / funding impact – Stand alone growth � Bid structure and bookbuild prospects attractive � Primary Health Care 3
Transaction overview Transaction overview
Overview Overview � Primary has secured a 19.8% shareholding in Health Communication Network (HCN) and will announce a takeover offer for HCN at $1.75 per share, implying an EV of $100.7m (1) � HCN’s Board will recommend shareholder acceptance of the Primary offer in the absence of a superior offer and the Board has indicated that they intend to accept the Primary offer for their own shareholdings on the same basis � To finance this takeover offer, Primary is undertaking an equity placement of 13.3 million shares, underwritten by UBS and a SPP of $5,000 per shareholder (2) subject to ASX approval � The transaction is expected to be 5% (3) EPS accretive in 2006 (1) Diluted EV and assuming $12.1 million of surplus cash (2) Maximum 0.9 million shares (3) Assuming 100% ownership of HCN, $1.75 acquisition cost per HCN share and Primary shares are issued at $7.93 (ex entitlement to interim dividend of 11cps 5
Combination highlights Combination highlights � HCN and Primary are a natural fit: – Same core markets – Both act as service companies to medical professionals – Both are leaders in their respective fields � HCN and Primary afford each other significant new business development opportunities � HCN and Primary together further strengthen each company’s service delivery to the gatekeepers of the health care industry 6
Overview of HCN Overview of HCN
HCN: Industry leader HCN: Industry leader � HCN is a clear Australian market leader in the provision of electronic desktop services to medical practitioners, medical practices, and hospitals � Products: – Clinical software for general practitioners: – 16,000 doctors use Medical Director. Market share 80-85% – Approximately 70 million consultations, 25 million diagnostic tests, 90 million scripts are generated using Medical Director – Practice Management Software for doctors: – 3,500 practices use HCN’s software. Market share 35-40% – Online content and applications for hospitals: – 80% of large Australian hospitals use HCN’s knowledge resources 8
HCN: Strategic position HCN: Strategic position � HCN have leading positions in the “gateway” applications: – Gateway to health care transactions – Gateway to Government online health record – Gateway to knowledge sources – Gateway to decision support – Gateway to enhance and manage patient health and associated cost of doing so � The HCN businesses are surrounded by strong protective moats: – Functionality and clinical utility of Medical Director, difficult and expensive to replicate – Users develop deep seated preferences for clinical applications 9
Strong leverage to revenue growth Strong leverage to revenue growth Strong sales growth expected in 2005F 28.9 30 26.4 20 A$m 10 0 2003 2004 Strong growth in NPAT 5.5 6 3.5 4 A$m 1.0 2 0 2003 2004 2005F Source: Company accounts / announcements Note: Financials have been normalised for discontinued UK business 10
Sales revenue 2004 Sales revenue 2004 Product / revenue Main customer Total $28.9m Subscription revenue from products 28% 34% including Medical GPs Director and the Practice Management Systems Sponsorship, research, Corporates and transactions, Governments diagnostics 38% Online health State resources Governments Source: Company accounts / announcements Note: Financials have been normalised for discontinued UK business 11
HCN: Stand alone prospects HCN: Stand alone prospects � Examples of HCN’s stand alone prospects include: – Integration with the Government’s EPR (Electronic Patient Record) – Improved diagnostics transaction fees – Take-up of auto report on paper transactions 12
Primary Health Care Primary Health Care
Primary Health Care Primary Health Care � Primary is a service company to medical and paramedical practitioners: – Developed out of need – Effective and efficient – Development of IT platform critical to efficient, scalable, stable and profitable delivery of service 14
Combination - - discussion discussion Combination
Primary + HCN = natural fit Primary + HCN = natural fit � Primary and HCN are service companies to medical professionals and have leading positions in the key GP market: – GP market - the gatekeepers of health care delivery � Primary understands the customer and the market � Both companies have the same key function: – Offering products/services that offers clinical and financial benefits to medical professionals and in turn their patients – Deriving additional value from “add ons” to core functionality � HCN offers suppliers an unrivalled position for distribution of services to medical practitioners � Desktop solutions and practice management services already key component of service delivered by Primary to medical professionals 16
Going forward Going forward � HCN to operate as stand alone business with same stakeholder relationships: – Open access – Encourage and enhance existing relationships � HCN to continue to execute its own existing plans � HCN to develop and roll out relevant products into Primary centres and to its users � Primary to provide new product/service lines to HCN customers 17
Combined growth prospects Combined growth prospects � HCN provides the platform that enables Primary to provide “other services” to stand-alone medical practitioners � Development of Primary’s common software gateway project: – Enable Primary to provide “other services” to stand-alone practices – Billing, collection and admin services – Medical and other consumable ordering and management – Payroll management – CME, accreditation services – demand for this type of service is apparent 18
Combined growth prospects Combined growth prospects � Primary adds another 1,000 professionals and another 3-4 million consultations to the HCN customer base: – Enhanced transactional, sponsorship and other income – New segment of market not currently accessed � Enhance the HCN iRIS product (radiology booking and workflow) – add in DDI (radiology image transmission) � HCN provides opportunity for providing decision support to Primary Health Care doctors – improved health outcomes for patients 19
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