Diploma Healthcare Group – site visit

Diploma Healthcare Group – site visit
Markham, Toronto - September 2013
Table of Contents
1.
Diploma Group Overview
2.
Diploma Healthcare Group (DHG)
3.
DHG Businesses
4.
DHG Growth Strategy
1
1. Diploma Group Overview
3
Our Business Model
Diploma PLC is an international group of specialized businesses
supplying technical products and services
Essential Products
Essential Solutions
Essential Values
= recurring income and
stable revenue growth
= sustainable and
attractive margins
= agility and responsiveness
> Focus on essential
products and services
> Funded by customers’
operating rather than
capital budgets
> “GDP plus” organic
revenue growth
> Highly responsive
customer service
> Deep technical knowledge
and support
> Value adding activities
> Entrepreneurial culture
> Decentralised
management model
> Decisions made close
to the customer
STEADY ORGANIC REVENUE GROWTH AND SUSTAINABLE MARGINS
4
Our Acquisition Strategy
ACQUIRE
> Fit with Group’s
business model
> Marketing led with
strong customer
relationships
> Track record of stable
profitable growth and
cash generation
> Capable management
> Target of 20% plus
pre-tax ROI
BUILD
GROW
> Investment to build a
solid foundation for
growth:
> New facilities and IT
systems
> Increased working
capital
> Strengthened
management
> Businesses maintain
their distinct sales
and marketing identity
> Synergies managed
within business
clusters:
> Cross-selling
> Joint purchasing
> Shared back-office
operations
ACQUISITIONS ARE AN INTEGRAL PART OF SECTOR GROWTH STRATEGIES
5
Diploma PLC - Sectors
Life Sciences
34%
of revenues
Seals
36%
of revenues
Controls
30%
of revenues
A BALANCED AND DIVERSE PORTFOLIO OF BUSINESSES BY SECTOR
6
Group Overview - Geography
North America
53%
Seals
Healthcare
Aftermarket
Environmental
Industrial OEM
Rest of World
of revenues¹
22% UK
16% Continental Europe
of revenues¹
38%
of revenues¹
26% US
27% Canada
Life Sciences
Europe
9%
Controls
Controls
¹By destination
7
Life Sciences sector
Segmentation
Healthcare
Diploma Healthcare Group
(“DHG”) supplies medical
devices and related
consumables and services to
the healthcare industries in
Canada and Australia
Environmental
The a1-group supplies
environmental analysers,
containment enclosures,
emissions monitoring systems
and gas detection devices
85%
15%
Ca. £90m revenues
24% operating margins
300
72%
15%
13%
employees
Canada
Europe
Rest of World
85% OF REVENUES FROM STEADILY GROWING HEALTHCARE MARKETS
2. Diploma Healthcare Group (DHG)
9
DHG - Principal Operations
2013 Revenue: ca. C$120m
(by destination)
Edmonton,
AB
Kitchener,ON
85%
Markham,ON
15%
Melbourne
Sydney
Australia
& NZ
Canada
EXPANDING ESTABLISHED CANADIAN MODEL INTO AUSTRALIA & NZ
Specialized Medical Device Sales
10
Canadian Healthcare
Well funded, stable market with
consistent long-term growth
 2011 > C$200bn in total spending
 Public sector > C$140bn
 6-7% public sector growth,
11.7% of GDP
 “Socialized medicine”
= public insurer
 Increased opportunity
for private providers
Healthcare expenditure
C$bn 200
150
100
50
0
Canada Health Act ensures
fully accessible healthcare
for all Canadians
Longer term growth drivers
 Ageing population
Public Sector
Total Healthcare
 Consumer sophistication
 Technological innovation
 Robust economic position
2006 2007 2008 2009 2010 2011
ATTRACTIVE MARKET THAT IS WELL-FUNDED THROUGH THE CYCLE
Specialized Medical Device Sales
11
DHG – Current Markets
Clinical Diagnostics
Electrosurgery
MI Surgery
GI/Endoscopy
How doctors determine
disease and monitor
health through blood
and tissue testing.
Where surgeons
operate with modern
scalpels that use highfrequency electric
current to minimise
bleeding.
Where surgeons employ
new technologies for
imaging and surgical
access to improve
patient outcomes.
Where surgeons use
imaging equipment to
diagnose and treat
conditions of the
gastrointestinal tract.
40%
25%
10%
25%
of revenues
of revenues
of revenues
of revenues
FOCUS ON GROWING, NICHE HEALTHCARE MARKETS
Specialized Medical Device Sales
12
DHG – Competitive Positioning
GI/Endoscopy
General Surgical Devices
AMT
Vantage
Market
Market
C$200m
C$650m
>
>
>
8-10 definable segments
Different competitors in
different market segments
Clinical Diagnostics
>
Differentiated segments by
clinical specialization and
practice
Different competitors in
different market segments
(e.g. Electrosurgery, MI
surgery)
Somagen
Market
C$600m
>
>
High volume versus niche
applications in pathology
specialties
Different competitors in
different market segments
STRONG MARKET POSITIONS IN NICHE MARKET SEGMENTS
Specialized Medical Device Sales
13
DHG Development
Financial
Year
Revenues
C$m
DHG Business Development
2004
5
2007
33
Acquisition of AMT extends business into hospital operating
rooms and GI/Endoscopy suites
2009
66
Meditech acquired to extend business into Assisted Reproductive Technology
(ART or IVF) clinics
2010
67
Acquisition of BGS in Australia – same customers and suppliers as AMT
2011
94
Acquisition of Carsen Medical – now integrated with AMT’s Endoscopy
business as Vantage
2012
102
Acquisition of DSL business in Australia
2013
120
Strong growth across the businesses
Entry into Canadian Healthcare through acquisition of Somagen
Specialized Medical Device Sales
14
DHG - Business Model
> Long term, exclusive distribution agreements with high
quality medical device manufacturers
> Multi-year customer contracts for consumables and service
underpin ca. 70% of revenues
> Full service solutions provided by highly qualified technical
specialists
> Network of trained service engineers to maintain
instrumentation
> A very cost effective route to market for medium sized,
medical device manufacturers
MARKET LEADING POSITIONS IN WELL DEFINED NICHES WITHIN BROADER
MEDICAL DEVICE MARKETS
Specialized Medical Device Sales
15
DHG - Partnerships
> 15 exclusive supplier/partners, each with sales of >$2m
annually, account for ca. 80% of DHG revenues
> These partnerships are all secured with long-term contracts
and with an extensive history with the DHG companies (130
years in aggregate)
> 12 of the 15 key supplier/partners have contracts that
extend through 2016 or beyond
> 5 of the 15 key supplier/partners now active in both Canada
and ANZ markets
> Multi-level relationships with management, sales and
technical contact points
STRONG, LONG-TERM RELATIONSHIPS WITH KEY SUPPLIERS
Specialized Medical Device Sales
3. DHG Businesses
17
DHG – Current Businesses
Clinical Diagnostics
Electrosurgery
MI Surgery
GI/Endoscopy
40%
25%
10%
25%
of revenues
of revenues
of revenues
of revenues
Specialized Medical Device Sales
18
Clinical Diagnostics
•
Market leading positions in well defined clinical
diagnostics market niches
•
Focused on very specialized lab assays in markets such
as allergy, autoimmunity, HbA1c, electrophoresis and
cellular pathology
•
Also a leading player in the assisted reproductive
technology (ART) market
•
Based in Edmonton, AB in a 16,000 sq.ft. facility
•
DSL is the Somagen equivalent in Australia – DSL and
Somagen share several key supplier relationships
•
Based in Melbourne, VA in a 15,000 sq.ft. facility
Specialized Medical Device Sales
19
Case Study
Serum Protein Electrophoresis
 Modern pathology labs are highly automated for routine
testing demands, performing thousands of tests daily
 There is still significant specialization for lower volume
“reflex” tests requiring technical expertise and support
on non-core instrumentation
 Certain forms of cancer testing require interpretation of
various immuno-globulins using electrophoretic techniques
 We provide the world’s leading technology (Sebia Capillarys)
along with highest quality support and education
 Our relationships, established education and support have
brought Somagen 90%+ market share – #1 anywhere in the
world
 We benefit from long-term contracts for the placement
of unique instrument platforms and the supply of related
consumables
Specialized Medical Device Sales
20
Electrosurgery
•
Dominant player in the Canadian electrosurgery market
•
Focused, unique products including specialized return
electrodes, coated blades and surgical smoke evacuation
•
Significant and growing own brand franchise
•
Based in Kitchener, ON in a 15,000 sq.ft. facility
•
BGS is smaller version of AMT Electrosurgery in Australia
and New Zealand
•
AMT’s two largest suppliers represent 85% of BGS current
revenues
•
Operations and back office functions integrated this year
into DSL’s facility in Melbourne, VA
Specialized Medical Device Sales
21
Case Study
Smoke Evacuation in Electrosurgery
 Electrosurgery devices are used in 90% of laparoscopic
and open surgical procedures to cut and coagulate tissue
 Inhaling surgical smoke is a hazard for operating room
surgical teams
 We supply smoke evacuation pumps at little or no charge
to hospitals along with integrated electrosurgical pens/
blades and smoke evacuation devices called “Penevac”
 We then sign multi-year contracts to supply consumable
electrosurgery and smoke evacuation products
 Once smoke evacuation has been introduced its use
quickly becomes an essential requirement in operating
rooms and is written into policies and procedures
 Growth will continue to come from broader acceptance
and increased utilization in new and existing facilities
Specialized Medical Device Sales
22
Minimally Invasive Surgery
•
Has evolved out of the AMT Electrosurgery business
•
Two major components to the business:
>
Laparoscopic surgery
>
New image guided, percutaneous ablation
technologies
•
Significant new and evolving applications and
technologies which are constantly evolving
•
Shares AMT Electrosurgery facility in Kitchener, ON
Specialized Medical Device Sales
23
Case Study
Minimally Invasive Surgery
 New, minimally invasive techniques have clinical
applications in a variety of different surgeries; abdominal,
cardiovascular, spinal, urological, Interventional Oncology
 Significant recent developments in cancer treatment and
tumor ablation
 Ablation using image-guided, percutaneous instruments
performed in the radiology lab allows specialized clinicians
to target tumors accurately and quickly
 Ablation technologies include radio-frequency (RF),
microwave, Cryo and Irreversible electroporation (IRE) applications determined by factors such as the specific
organ in question, location and size of the tumor
 Only AMT offers all 4 varieties of ablation technology (plus
argon ablation for GI procedures)
Specialized Medical Device Sales
24
GI/ Endoscopy
•
Created in 2012 through the merger of AMT’s Endoscopy
business with Carsen Medical (acquired in 2010)
•
Vantage is the most diverse and well rounded business in
the GI/Endoscopy market
•
Products include flexible endoscopes, endoscope
reprocessors (AER’s), disposable endoscopic instruments,
argon ablation instrumentation, motility and infection
control products
•
Based in Markham in a 16,000 sq.ft. facility
Specialized Medical Device Sales
25
Case Study
Automated Endoscope Reprocessing
 Less invasive procedures, such as flexible endoscopy (GI
colon cancer screening and harvesting) are growing at a
rate significantly faster than total healthcare spending
 Hospitals and private GI clinics must invest in large
inventories of expensive video instrumentation to
meet needs
 Each scope must be decontaminated and “re-processed”
for use on other patients
 We provide support and repair instrumentation specifically
designed to provide the highest quality cleaning and high
level disinfection
 Vantage offers sophisticated capital instrument systems
with leading edge, proprietary consumables delivered on
long-term sustainable contracts
Specialized Medical Device Sales
4. DHG Growth Strategy
27
DHG Growth
Total DHG Revenues (C$millions)
140
ca. 120
120
100
80
94
102
67
60
40
20
0
2010
2011
2012
2013
TRACK RECORD FOR CONSISTENT GROWTH
Specialized Medical Device Sales
28
Investment for Growth
DHG has benefited from the Group’s Investment for Growth programme
Facilities
• Vantage business relocated to modern new facility in
Markham, ON
• BGS warehouse and back office operations consolidated into
DSL facility
IT
• Investment in new Microsoft AX ERP system across the
Canadian businesses
People
• Ongoing investment in senior management development
• New “DHG Young Stars” initiative
• LTIP programs to retain & motivate entrepreneurial managers
A WELL INVESTED PLATFORM TO SUPPORT CONTINUED GROWTH
Specialized Medical Device Sales
29
Growth Potential
Robust structural market drivers
•
•
•
Consistent, predictable
growth in healthcare spend in
Canada and Australia (6-7%
p.a. over 15 years)
Ageing population &
increased consumer
sophistication drive increased
demand & technological
development
Balance of capital instrument
and consumables sales
Organic growth opportunities
•
Market share gains
> GI/Endoscopy: flexible endoscopes
> Electrosurgery: clinical utilization of Penevac
•
New technologies
> Minimally Invasive Surgical techniques and
consumables
> Diagnostics: colon cancer screening
(FIT versus FOB)
•
New suppliers/products/markets
Diagnostics: IVF products and services
> Minimally Invasive: tumour ablation,
laparoscopy
>
SIGNIFICANT SCOPE TO GROW SHARE IN A GROWING MARKET
Specialized Medical Device Sales
Expansion Opportunities Outside of the Core
 Other medical
 Own brand
disciplines
Electrosurgery
products
Range of
specialized
medical devices
 New geographies
Clinical Diagnosis
GI/Endoscopy
Minimally Invasive
Surgery
????
????
BUSINESS MODEL OFFERS SIGNIFICANT FUTURE GROWTH PROSPECTS
Specialized Medical Device Sales
30
Contact
Bruce M Thompson
Chief Executive Officer
(0) 20 7549 5700
Fax: +44 (0) 20 7549 5715
www.diplomaplc.com
Nigel P Lingwood
Group Finance Director
12 Charterhouse Square
London EC1M 6AX
Tulchan Communications
David Allchurch
Martin Robinson
Tel: +44 (0) 20 7353 4200
Email: diploma@tulchangroup.com
Tel: +44