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Hello and welcome to today's investor briefing with Healthia's CEO, Wesley Coote. It's terrific to see that we've already got so many people online. My name is Alfred Chan, and I'm from Principal Investor Relations, and I'll be hosting the session today for Wes, who has prepared a brief presentation on Healthia's FY '20 results, plans for FY '21, and we'll also be running a Q&A session at the end.For anyone not familiar with Wes, he has extensive experience leading industry consolidation companies like Healthia, having previously been the CFO at Greencross, which he oversaw to become Australia's largest vet and pet supplies business. Following Greencross' sales to TPG Capital in 2018, Wes teamed up with Glen Richards again, the original founder of Greencross to form Healthia where Wes has led the business to grow extensively across clinic numbers, financials and growth initiatives since listing on the ASX.Along with Wes and Glen's experience growing these businesses, their management team also includes some of the best-known physios and podiatrists in Australia.I'll just have to put this slide up regarding future statements made throughout this presentation.But since Wes and the team at Healthia listed on the ASX in 2018, Wes has been very generous with his time for shareholders. So I won't take up any more of Wes' time. Wes, I'll hand over to you.
Excellent. Thanks, Alfred, and good morning to -- I can see some fellow Healthia team members on there, Healthia shareholders, ladies and gentlemen, welcome to Healthia FY '20 Results Call. Calendar year 2020 has been challenging to say the least. It started with bushfires affecting large portions of Australia. And then we -- as we all know, we've rolled into a global pandemic with the coronavirus.At the start of the year, we had some small impacts in some of our clinics from the bushfires that were in affected regions. And then we started to see some effects of COVID around the end of March. By the time the Prime Minister imposed restrictive lockdowns on Australians in early April, we started to see trading come off about 30% of normal. By the end of May, we then started to see trading recover. And by June, we were back to pre-COVID trading levels.The trading through April and May period saw us qualify for JobKeeper Payments. And the JobKeeper Payments were very beneficial for us. And it allowed us to really focus on 3 main areas during that period. The first being, trying to keep continuity of patient care. If we didn't -- if we had to start changing rosters for staff and closing clinics and messing with hours, patients wouldn't have been able to come and see us in those periods of time. So keeping patient care and continuity of patient care was very important through that period because people don't come to us for social outing. They come to us because they've got an acute issue or they're in pain. So keeping patient care and the ability for people to come see us was very important.The second point was taking pressure off frontline workers and frontline health services. So if we're not open and we can't see those patients, they'll fall back into primary care or into hospitals. And they were the people seeing the waves of patients for COVID. So we played our part in the communities ensuring that we took pressure off frontline workers.And then the last one was just to ensure that we didn't change rosters, and we didn't change take-home pay for our team members. So Healthia as a family, we wanted to get through this pandemic together. And part of that was ensuring stability of rostering across the group to make sure take-home pay for our teams was minimally affected during that period. So I'm pleased to say that JobKeeper helped us hold the line through what was a very uncertain period of April and May. But holding the line has allowed us to emerge from that period stronger than we went into it. So I'll touch on some organic growth post-May shortly. But it's helped us to come through this quite strong.So with that in mind, I'm pleased to go over the results for FY '20, and if we just flip to the next slide. Some of the key highlights of FY '20 was organic growth of 5.3%. So leading up into the April period and taking out April and May, but leaving in June, organic growth for the group was 5.3%. Our cash conversion, so our pretax, pre-geared normalized operating cash flow to our underlying EBITDA was 113%, so nearly $15 million of operating cash flow delivered by the business in the period. We acquired another 31 allied health businesses. We increased our finance facility with the Bank of Queensland and ANZ from $37 million to $50 million. We've got $27 million drawn with headroom of $23 million to use for future acquisitions. And we opened a print hub in North America. So we opened a print hub in New York, where we've taken our 3D printed orthotic technology up to North America, and that business is going along nicely as well.As I mentioned at the start, I'd touch on some organic growth post-COVID. So organic growth of 5.3% for FY '20 was a great result. June through to August, we're seeing that same high single-digit organic growth. So that's including the effects on the 24 Victorian clinics. So that's not normalizing those out. So the portfolio as a whole has seen good organic growth for the last 3 months. We'd hope to see that continue with the bulk of the portfolio still outside of Victoria.In terms of recruitment and retention, our clinic engagement strategies were -- we've continued to refine those. And it's pleasing to see that our clinician retention rates are up at 85% from 83% in the prior year. We continue to work on that, and we want to continue to improve that over time. We expanded our clinic ownership program, so our local ownership program. We put an additional 25 clinicians into that program during FY '20. All of those additional clinicians have helped, as well as our existing clinic partners, to assist us through the COVID period and now post-COVID with our strong organic growth. We recruited 45 new graduates at the start of the year as well. And we've got a wave of new grads that we will see hit the ground in January next year as well.Our education programs were further developed. We -- as I mentioned, our 45 new graduates went through the training program. We also extended our programs to a clinical leadership and a business leadership program. So clinical leadership, increasing our clinicians' clinical reasoning skills to put them into various specialized streams as they push through their career. And our business leadership program is setting people up to be future clinic partners and future clinic leaders.We also held our first Healthia conference on the Gold Coast, which was attended by 437 team members. We plan to hold another one this year in October, but COVID's put a stop to those plans. So we'll hold another -- our next conference next year in October.And then we've just continued to work on our operational efficiencies. And we've seen all of our clinics centralized, using our support services now, integrated into our IT platforms. And we've got a nice slick way of bringing on newly acquired clinics into that process as we push forward as well.The underlying results of the business, we can see there. Revenue was up 40%, so up to $92 million from $65 million. Inside that, we have normalized the period of April and May by adding back $4.1 million of the $7.9 million in JobKeeper Payments that we received during the period to get us back to where we would have been trading but for COVID. That helped us deliver an underlying net PATA to shareholders of $4.6 million, which is up 37% on prior year. You can see we've achieved margin improvement from 13.6% to 14.3%, largely driven by improvements in our physiotherapy division and better efficiencies from our support office team as well.Our underlying NCI, so our noncontrolling interest from our clinic class shareholders, also grew during the period from 22% to 31%. So that's largely due to putting in the extra 25 clinic partners during the period as well as some of the acquisitions that were made, people took part consideration of these clinic class shares. We think that, that number will normalize around that 35% to 30% mark in the medium to long term. So we're about where we believe that noncontrolling interest will sit in the medium to long term.The final part on that slide is we announced the payment of a fully franked dividend of $0.02. That dividend is fully underwritten and -- by Canaccord, and we'll ensure that we preserve that cash reserves as we push through into the year. So the fully franked dividend is due for payment on the 28th of September, but it's fully underwritten by Canaccord.So just -- we've just shown the map of Australia, where the business is currently set and broken down into each of the divisions. You can see that 15% of the portfolio sits in Victoria, with the rest of it outside. We're still quite Queensland-centric with 62% of the portfolio there. Other highlight on that page is to show that at listing, we were at 104 clinics. So within less than 2 years, we've grown to 152, so about 46% growth in the portfolio over that period of time.As we push forward, we will continue to focus on our pillars of growth, which are our organic growth. As I mentioned earlier, we're still experiencing nice strong single-digit organic growth through the June to August period of this year. We continue to refine various parts of that, whether it be our clinic retention program or our local clinic ownership program, our education programs, the way that we better manage the business from a back-end through to how we engage our teams. We continue to work on those to ensure organic growth as we push forward. We will look to roll out or open up new allied health businesses as we go along, and I'll touch on a couple in the outlook when we get to there. We're looking to continue to improve our vertically integrated strategy. So we've got our orthotics business and our DBS business. But on top of that, it's also in introducing new services into existing businesses. So taking physiotherapy clinic and extending hand therapy or podiatry services into those businesses. And obviously, new acquisitions.And if we flip to the next slide, new acquisitions is a central pillar of our growth, and as you can see from this slide, our addressable market of $4.4 billion, we're less than 3% of that addressable market, and we've got plenty of growth run rate to go.And last year, our acquisitions, we deployed $18 million worth of new capital at an average of 4.3x EBITDA. We've always said that we will continue to deploy a minimum of $15 million worth of capital each year. And I'm pleased to say that we still expect to do that this year. And we announced the acquisition, the binding agreements of 3 physiotherapy acquisitions in Central Queensland with the results. Those clinics, along with the one in South Australia, sees us deploying $5 million or 1/3 of that $15 million by the end of October. So pleased to note that our acquisition program is well underway. We are seeing a lot of inbound inquiries at the moment as we emerge from COVID with a number of clinic owners seeing the benefits of being part of a larger group in these uncertain times. So we see the $15 million of capital being deployed is something that we can achieve this year.We'll fund the acquisition program again through the $23 million of undrawn debt facility. As I mentioned earlier, our cash conversion rate of 113% or that $15 million worth of normalized operating cash flow. So we'll continue to use that to help fund the $15 million, deferred vendor payments and our clinic class share model.So the outlook. As we push forward, look, we're not providing guidance to the market at the moment as everyone can understand. Things are still a little uncertain. But look, our focus at the moment is really to provide safe environment for our patients and our team members as we push through COVID. We're taking all recommended measures in our clinics to ensure that safety of everyone. With only 24 of our 154 clinics in Victoria, our geographic diversification has helped us to continue to deliver good organic growth as we push through these challenging period. We expect, as I mentioned, to deploy that $15 million of capital. So we expect to do that in the next 12 months. We have a multidisciplined allied health clinic that's due to open in Bundaberg. We did release this at the half year. Things have been pushed back due to COVID. But it's scheduled now to open in October.We've just relocated this week our My FootDr podiatry clinic in the Brisbane CBD to a new multidisciplined allied health clinic inside the CBD as well. So that's expanding the services provided by us in the Brisbane CBD location. And we'll continue to focus on our 4-tiered growth strategy. So continue with our patient-focused outcomes, our organic growth will continue to deliver outcome there, future acquisitive growth and our vertically integrated business units.That's all I had for today. Is there any questions?
Excellent. Wes, thank you very much for that informative presentation. It's really great to see Healthia emerging from such testing times in good order. We have had a few questions emailed in from people that weren't able to jump on the session. [Operator Instructions]I can see a few questions have already started coming in. The first question comes from [ Jared ]. How has the Stage 4 lockdowns in Victoria impacted any of your acquisition targets?
And I can see the second question is around the operations there as well. Look, I'll try to wrap them all into one. Our acquisition targets in Victoria have been affected, but we monitor them as we push through to whether it be a deal or whether it's to a settlement. However, our portfolio in that area, when -- as with the rest of the portfolio through April and May, we were down 30% on normal trading. The last 4 weeks, we were being down 16%, so when -- we haven't seen trading come off as large as it did in the first wave or the first lockdown. So the growth there, we expect to rebound as Melbourne and Victoria come out of lockdown as the other parts of the portfolio did in the first wave. We've held the line. We've kept clinics open, and we've kept people in their normal hours as much as possible.
Terrific, Wes. I've got a question here from [ Andrew ] regarding organic growth. What are the key drivers of this? Is it price increases, HI utilization or space utilization?
Look, it's not price increases. We don't do large price increases across the group. I think we've ticked it up about 2.5% over the period. A lot of it is utilization of workforce or 45 additional practitioners during -- that we -- graduates that we recruited during the year. So they deliver the organic growth as well. And it's yes, utilize of space. So putting in additional services into clinics that we haven't been in before. On the podiatry side, we've refined our recall and reminder process as well. So a little bit of a marketing initiative on the podiatry side as well.
Wes, we're just following on from that. We've got a question from [ Andrew ], just asking what your general demographic profile is of your clients?
Yes. Look, it's quite diverse. But look, that 35- to 45-year-old female is our largest patient. But we see you through to the elderly. So it's actually quite a diverse. We do full ranges of services through the business. So where we had older demographics in some of the clinics, they were the ones that came off the most during the first set of lockdowns because, obviously, they were less likely to leave the house. But we've got a good diverse range of patients across the group.
Very good. Question from [ John ]. Is there a strategy around becoming less Queensland-centric?
Yes, look, it is. I think it's where the history of the business really started. So the My FootDr group, the Balance group, which is the core of the podiatry business started out of Queensland, and the Allsports group has started out of Queensland. So I think it's the origins of the business were Queensland-centric. So that has seen us start and grow in Queensland. Look, we don't make a lot of outbound phone calls in terms of acquisitions. We still have those founders of those businesses here in leadership roles. And they -- we're still leveraging off a lot of their contacts when it comes to acquisitions. So they're spread across the country, but obviously, a large part of their network is always going to be Queensland based. But we do -- the largest market being New South Wales and then the second Victoria. I guess what it highlights is there is still plenty of room and plenty of run rate to go on our acquisition strategy.
I've just got a question that was emailed in by [ Michael ]. Michael's asked, how many more years do you anticipate the debt facility to last? And will you look to increase it to continue acquiring?
At the run rate we're going at the moment, as I mentioned earlier, we've -- we had normalized operating cash flows of $15 million for the period. We're saying a minimum of $15 million we want to deploy each year. We're moving to a less debt, more free cash kind of model. We funded the May acquisition out of cash, and we'll fund a couple more out of free cash over the next 6 to 12 months. So look, we've still got $23 million in the current facility. So I know the facility is $50 million, but we've only drawn $27 million of it. So there's still headroom of $23 million. And we're only in our first year still. So September marks year 1 of the facility, and it's a 3-year facility. So we've still got over 2 years to go in the facility. And we'll continue to work with the banks and try to have a rolling kind of 2 to 3-year period on that facility at all times.
Terrific. Wes, we got a question from [ Warren ]. What are your expectations for the U.S. business going into FY '21?
Look, I guess, it's a challenging environment in the U.S. with Donald Trump and a few other bits and pieces that happen over there. But look, that business is going -- is ahead of expectation. I think COVID has made the Americans realize that they need to find more efficient ways of doing things rather than relying on what was cheaper labor. So that business is tracking along nicely there. We still believe there's a great opportunity in that market to utilize our technology to change and disrupt things over there. So look, we're still working through that. But we -- I guess, we're in no rush to do anything there just given the way the environment is up there at the moment. And plus, all the opportunities we still have here in Australia.
I got a question from [ Scott ]. Do you foresee any key risks linked to your acquisition strategy? And how do you plan to mitigate these?
Look, I guess, the -- any risks at the moment are around COVID-related. We closely monitor all acquisitions or any conversations that we have. We are ensuring that the businesses are trading at pre or above pre-COVID kind of levels as we push through. I guess, no one -- things are still uncertain. We don't know what the world will look like in 6 to 12 months' time. So whether we have a third wave or a fourth wave, who knows. But outside of that, we don't see a lot of risk. I think we're pretty happy with the strategy that we have in place around our clinic ownership model and the acquisition targets that we're after. We manage -- we try to manage a lot of the risk upfront when we do our due diligence and we create our integration plan. Our integration plans usually -- our integration plans pick up the risks that we see in each different individual transactions. So I think we've got to a point where we're quite comfortable with our ability to acquire and integrate businesses. But to me, the risks are still the uncertainty of the world. I can't look forward and tell you what things will look like in 12 to 18 months. But we're still very comfortable with the repeatable nature of the earnings of physiotherapy and podiatry businesses.
Very good. Just a follow-up from that, from [ Jared ]. Are there any opportunistic acquisitions from vendors that have been hardest hit by COVID?
No, not really. I think that's not really our model. Our model is not really about trying to find opportunistic people. Look, I think more what we found is people seeing the benefits of being part of a larger organization where you don't have to go through that pain by yourself. Everyone -- all the businesses we've looked at were the same as us. They have hard trading in April and May and have come out the other side quite well. So it's not -- some have come out quicker than others, just depending on some of the decisions they made in April and May. But I wouldn't say opportunistic. It's probably more around the fact that people are looking to partner with an organization that can provide some of that benefits during these kind of times.
I'm sure a lot of the small business operators would appreciate the support services. Just one last one here, still talking about acquisitions from [ Andrew ]. Do you have an appetite to accelerate the acquisition strategy beyond $15 million a year?
Look, the industries we operate in are very fragmented. So there's not large acquisitions out there for us to target. The group that we announced of 3 physiotherapy clinics with the results is about the size that -- the maximum size that we can do. So it really comes down to the opportunities that are out there. And we'll assess each one as it comes and make sure it's a good fit for the business. But to think that we could go and buy 40 clinics tomorrow as a group, it's just -- they're not out there. So that's just not our model, which we -- we like to understand the businesses we're about to partner with. As I mentioned before, design our integration plan around any of the risks that we may see, integrate them into our business systems and then support them moving forward from there.So while it sounds like a lot of hard work, it's actually derisks the business model a little bit as well. So we'll run as hard as the opportunities come to us. We're comfortable that $15 million is easily achieved this year, but I guess, we're just not committing to any more than that at this stage.
Terrific. As we have now gone past half an hour, I'll probably just ask 2 or 3 more of the questions that are in the list. If anyone does have any more questions, please feel free to e-mail them in, and we can get Wes to answer them offline. Wes, I've got a question regarding JobKeeper and accounting. It looks like you received $4.7 million in FY '20 from JobKeeper, but recognized $7.9 million of JobKeeper. Is it right to say this means you will receive $11.1 million of JobKeeper cash in FY '21?
We received about $6.4 million. Is that right, Chris? A little bit less of -- in cash. Oh, sorry. No, we wouldn't have received June's. Yes. So I think that's right. The $4 million in this period, and the rest is accrued that was due for June. We've applied $4.1 million to the revenue, but $7.9 million are in the accounts. And yes, we expect to receive the balance of it over up to October when we don't think we'll qualify for JobKeeper again after September.
Terrific. It's probably a good problem to have for a lot of businesses. Wes, regarding podiatry, have you got much exposure to aged care home visits that would impact revenue?
No. No, we don't. That's not our model. Our model is bricks-and-mortar and alone practices. There's a tiny amount of aged business that we do, but it's not significant in what we do.
Terrific. And just one last question comes from [ Jared ] again. Do you expect to benefit from increased adoption of telehealth services?
Look, we got telehealth up and running in April quite quickly. I was actually quite proud of the team how quickly they got that up and running. And I did say to them if we can do telehealth in 2 weeks and get it running, then we should be able to execute more things, but that's a different conversation. But look, but telehealth has been about 1% of revenue over that period of time. It didn't take off. At the end of the day, a lot of our services, the patient needs to be in front of us where if you're coming in for podiatry or physiotherapy, they need to be in front. We -- I think we used it during that period to more show the patients that they were safe to come in, that we were taking all measures to keep them safe as they came into the clinic. So we don't believe telemedicine will be the future for podiatry and physio because we were only able to generate about 1% in the month of April and the same in May of our revenue from telehealth.
Fantastic. All right, Wes. Well, we're -- it's just about a tick to 5 past 11. So we won't keep you any longer. On behalf of everyone that's attended today, I just want to thank you very much for your time. I know you've got a very busy schedule, but you've always made yourself readily available to shareholders. And to everyone in attendance, thank you very much for coming.