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Bupa demonstrates resilience at half year28 August 2008Highlights
Commenting on today’s results, Bupa chief executive, Ray King, said:"Bupa’s underlying performance continued to show good momentum in the first half of 2008, with organic growth in revenues of 10.2 percent and insured customers up by 30 percent since 31 December. "In line with the guidance for 2008 given in March, underlying surplus decreased by 9.2 percent mainly reflecting the exit from Ireland in 2007 and initial dilution from recent acquisitions. Excluding Bupa Ireland and a weaker investment performance from the alternative asset portfolio, underlying surplus was nine percent higher than in the comparative period. "We are making good progress in integrating our recent major acquisitions. These new businesses will enhance our capabilities and scale in key markets, providing a valuable source of future growth. "While we cannot expect the group to be immune to the growing economic weakness in major economies, we expect Bupa to demonstrate resilience due to its breadth of activities in terms of geography and sector, and focus on health. "The health and care markets that we serve remain very attractive and Bupa’s main businesses have leading market positions. Our strong cash generation will enable us to continue to invest in our existing businesses and in new areas, such as our recently-announced health insurance joint venture in India. "Bupa has a bright future with excellent prospects for long term growth whilst focusing on our key aspiration of helping our customers to lead longer, healthier and happier lives." Group overviewHealth and care company Bupa today reported a pre-tax surplus for the half year to 30 June 2008 (‘the period’) of £165million. Excluding one-off items, the Irish business exited in 2007 and the performance of the alternative asset portfolio, underlying surplus before tax increased nine percent to £156.5m. The period has seen steady growth in the group’s major businesses. Total insured customer numbers have risen by almost a third to nearly 10 million since 31 December driven by consistent organic growth and a number of key strategic acquisitions. Group revenues have risen 28 percent to nearly £2.7 billion, including the recent acquisitions. The group is highly cash generative with cash flow from operating activities up 23.2 percent to £252.7 million in the period and leverage at a comfortable level and falling. Bupa continues to invest in capital expenditure and business development across the group. In the period, Bupa has focused on integrating its recent acquisitions. In May, the Federal Court of Australia approved MBF’s change of status, the final step required to clear the way for the merger with Bupa Australia. This transaction has made Bupa the largest provider of health insurance in Australia. During the period, Bupa also acquired Health Dialog, a US-based company that focuses on improving health outcomes, as well as The Bupa Cromwell Hospital in West London. Towards the end of 2007, the group bought Bupa Aged Care Australasia (formerly DCA Aged Care Group), a business with 94 homes and almost 7,000 beds in the Australian and New Zealand care homes market. In the period, 48 percent of group revenues and operating surplus were generated outside of the UK and this percentage is expected to rise to over 50 percent when the full year effect of acquisitions is taken into account. UK InsuranceBupa is the leading provider of private medical insurance in the UK. Revenues in the group’s UK Insurance division were up 1.1 percent to £967.6 million in the period. Excluding the effect of exiting the Irish market, revenues increased by 9.1 percent , with particularly strong growth in UK Membership, Bupa Health Assurance and Bupa International. Customer numbers grew organically by two percent since the end of 2007. Over the six-month period, UK Insurance has continued to offer its customers choice and good value for money while at the same time ensuring they get the best outcome from their treatment. To this end, Bupa has enhanced its MRI network, extending it by a third, and at the same time reducing the cost of scans. The group’s continued focus on efficiencies in the business allows Bupa to contain premium increases. International InsuranceBusinesses in the international insurance segment provide private medical insurance in Spain, Australia, Saudi Arabia, Denmark, the US, Hong Kong and Thailand. Bupa’s Spanish business, Sanitas, also has hospitals and clinics that primarily serve its private medical insurance customers. Bupa’s successful international growth has continued with revenue increasing by 46 percent to £1,079.1 million, including a contribution from MBF since its merger with Bupa Australia in May. Organic growth in revenue is also strong at 11 percent across all the International Insurance businesses. Total customer numbers increased to nearly six million, including two million customers acquired as a result of the MBF transaction. The underlying organic growth in customer numbers since 31 December was over seven percent. In Australia, where Bupa now covers over three million people, the trading performance has been strong, with surplus reinvested in growing market share in many parts of the country. In Spain, Sanitas continues with the construction of a hospital for the Valencian government, a project that is on time and on budget, and due to open in spring 2009. It is also extensively refurbishing the La Zarzuela hospital in Madrid. Care HomesBupa is a leader in aged care, providing nursing and residential care to almost 31,000 people in the UK, Spain, Australia and New Zealand. Care Homes revenue grew by 40 percent to £434.9 million, with an increase in surplus of 14 percent to £62.9 million, reflecting the acquisition of Bupa Aged Care Australasia (BACA) at the end of last year. Organic growth in revenues was six percent driven by an increase in bed capacity coupled with modest rises in fee rates from local authorities in the UK. The group owns the freehold of 80 percent of its care homes and has much lower gearing than many of its direct competitors, which provides significant flexibility. The UK care homes business, which serves 18,700 residents in 303 homes, has stable occupancy and is performing in line with our expectations. The integration of BACA has been successfully completed and it is performing in line with the group’s expectations. In Spain, Sanitas Residencial has grown significantly since the acquisition of Euroresidencias last year and whilst overall occupancy has increased the growth in surplus was lower than expected. OutlookBupa's business continues to show positive momentum with growth in revenues, underlying surplus and customer numbers. In March, the group indicated that its underlying surplus for the full year 2008 would be lower than for 2007 due to the dilutive impact of recent acquisitions, the exit from Ireland, and one-off gains in 2007. Whilst Bupa believes that trading conditions will be less favourable as it moves toward 2009, historically, healthcare services have proven to be more resilient than many other areas of the economies in which operate. Bupa has recently made a number of strategic acquisitions that provide a solid platform for future growth and when coupled with the group's strong balance sheet allow Bupa to be confident about its future prospects. For further information, please go to www.bupa.co.uk/about/html/financial Back to the latest press releases
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