Stewardship

Total Revenue

Our total revenue for the year rose by a healthy 7.3%, notwithstanding the sale of our pathology division to Crescent Capital Partners in October 2016. The rise in revenue in large part resulted from the full year impact of our St John of God Midland Public and Private Hospitals, opened in November 2015, and our Hawkesbury District Health Service contract, taken over in November 2015.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) percentage

While our EBITDA was relatively flat compared with last year, our revenue grew significantly, primarily through low margin growth in public hospital revenue. Our public hospital revenue was 107.9% higher than prior year whereas our private hospital revenue grew by 3.7%. As a result of the low margin high growth in public revenue, our EBITDA margin dropped to 6.9%.

Social Justice Expenditure

Our total expenditure on social justice initiatives rose by 7.3% ($4.5 million) in part due to the acquisition of the Marillac Services from the Daughters of Charity in Melbourne in May. Our commitment of St John of God Health Care funds to social justice initiatives remained at a very significant level ($21.2 million), representing 1.3% of total revenue.

Obstetric Deliveries

As one of Australia’s leading providers of obstetrics services, it was pleasing to see 3.9% growth in obstetric deliveries. However growth in our private hospitals, consistent with industry statistics, was negative 7.3% whereas growth in our public hospitals was 94.1% in part due to the full-year impact of St John of God Midland Private and Public Hospitals and Hawkesbury District Health Service.

Capital Expenditure

Hospitals are capital intensive, through upgrades and expansions where demand warrants. Facility development expenditure this year was equivalent to last year as we move toward the end of the current capital expenditure cycle. Major capital development projects in Victoria were at St John of God Berwick Hospital (new 190-bed hospital), St John of God Geelong Hospital (new 20-bed ICU/CCU and refurbishment), St John of God Bendigo Hospital (additional 40 beds and refurbishment) and in WA were at St John of God Murdoch and Mt Lawley Hospitals (both refurbishments).

Bank Debt

Due to ongoing very significant capital investment of $147 million in a year that achieved EBITDA of $116 million, we increased our bank debt level by $21.2 million. Managing our cash flow, bank debt and gearing in a private hospital environment that has changed from high to low growth will be a major focus in 2017-18 and beyond.

Separations

The full-year impact of our St John of God Midland Private and Public Hospitals and our Hawkesbury District Health Service contract led to an 8.7% growth in total patient separations. Overnight separations were up 9.1%, due to public overnight separations growing 85% (from 15,197 to 28,178). Private overnight separations dropped by 0.7%. Our day separations grew 8.4% with our public separations up 104% and private separations up 2.8%. Our private separations’ growth was well below long term trend, reflecting changes in industry dynamics nationally.

Emergency Department Presentations

Our five emergency departments, of which two are publicly funded and three privately funded, dramatically increased their activity in 2016/17 due to the full-year impact of St John of God Midland Private and Public Hospitals and Hawkesbury District Health Service. Total presentations were up 40.1%, reflecting our public hospital increase of 72.6% and private hospital increase of 0.2%. St John of God Midland Public Hospital is, within 18 months of opening, one of the busiest public emergency departments in Australia, having had 66,619 presentations during the year.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)

Whilst EBITDA increased by $1.3 million to $115.9 million, this was a disappointing result which emphasised the difficulties of achieving strong financial performance at public hospitals, the time it takes to get greenfield hospitals fully functioning in all their aspects, and the downturn in the private hospital sector in terms of activity and revenue growth.

Operational Revenue – Geographic Analysis

The changes in our geographic segment revenue have arisen through the sale of our pathology division (affecting Victoria more than WA) and the full year impact of St John of God Midland Private and Public Hospitals in WA and Hawkesbury District Health Service in NSW. As a result of these changes, WA has risen (by 11.1%) to be 67.6% of revenue, NSW has risen significantly (by 31.3%) to be 6.9% of revenue and Victoria has fallen (by 6.1%) to be 24.8% of revenue.

Procedures

Overnight patient procedures grew 3.3%, much lower than separations growth of 8.7% because our public hospitals have a much lower proportion of procedures for overnight patients (29% of public overnight separations have procedures as compared with 63% of private overnight separations). Day patient procedure growth was 7.4%. An equivalent proportion of private and public same day patients have procedures (61% private, 60% public).