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Edited Transcript of BH.BK earnings conference call or presentation 2-Mar-18 10:59am GMT

Q4 2017 Bumrungrad Hospital PCL Earnings Presentation

Jun 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Bumrungrad Hospital PCL earnings conference call or presentation Friday, March 2, 2018 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Aniello M. Sorrentino

Bumrungrad Hospital Public Company Limited - Chief Global Strategist

* Brian Dardzinski

* Kenneth Beasley Love

Bumrungrad Hospital Public Company Limited - Corporate CFO

* Oracha Kunajiranat

* Somsak Chaovisitsaree

Bumrungrad Hospital Public Company Limited - Former Hospital CEO, Medical Director & Director

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Presentation

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Aniello M. Sorrentino, Bumrungrad Hospital Public Company Limited - Chief Global Strategist [1]

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Okay, (foreign language), and welcome to Q4 and year-end analyst presentation for our company. Thank you for coming. I thank those who are calling in on our listen-only line as well. I'm not going to get myself too deeply into the quarter and into the year, I'm going to leave that for Ken Love to do. Although, since you know I can't be quiet for very long, I'll be jumping in and out of the conversation. But on a very superficial level, the quarter was a good one for us. The revenue growth, I believe, was the highest quarter-over-quarter we had for '17 at 6.4% year-over-year growth. And for the year, we were up 2.2% from '16.

And since we began Q1 of '17, down 2.9% year-over-year growth. We made remarkable pickups in Q2, 3 and 4 to finish up 2.2% up on top line growth. But Q4 was particularly encouraging at 6.4% top line growth. But we'll get into that much more deeply with Ken. Some introductions for you, there are some new people not...

(technical difficulty)

What happened? That's a late introduction for me, I guess. Thunder and clapping, and such.

Not new to the company, but 2 people that I'd like to introduce you to, and they'll be introducing themselves in terms of their curriculum vitae and their experience. Brian Dardzinski. Brain has been with us for 4 years, a little bit more, and he was announced as of June -- January 3 as the Vitallife CEO. And this lady here, Khun Oracha. Khun Oracha has been our Senior Director of Internal Audit over 2 -- about 2.5 years, and she was promoted as of August 31 -- September 1, '17, as the Vitallife CFO, as we continue to broaden our leadership there. And I would say, also with these changes for Vitallife, we have also instituted, like on the medical center campus, the office of the CEO, for which Dr. Somsak, Kun-ling, myself, Khun Linda and a couple of other Dr. Somsak's leading medical affairs physicians. Both on the hospital campus and Vitallife, we've created a matrix organization on top-of-the-line organization so that we can all help each other integrate the campuses, most importantly continue to integrate, moving them closer and closer and closer, and also getting a lots of experience not only on the medical center side, but on the Vitallife side to be able to continue to innovate. Innovation for us is very important, technology leadership is very important, 5-star customer service is very important.

This -- I've just described to you in addition to us being the Mayo Clinic of Southeast Asia, which we fancy ourselves as, as the definition of our brand. It's very important for those that are new to this message understand clearly who we are and how we got to where we are. What I want to do though this morning for a little bit is talk about the year-end review for you for '17. And I speak of the year-end review at the corporate level, at the company level, not at the medical center level, not at the Vitallife level, not at our hospital in Mongolia, but corporately.

So can you -- so I -- for a lack of a better way to do this, I have defined it into 3 particular areas of interest for you that hopefully will answer the question when I'm done, how in the world do you continue to produce these kinds of impressive numbers quarter, after quarter, after quarter in the face of the fact that we faced a Middle East oil crisis in early '16 and had to backfill that business. Not only backfill it at some level, but backfill with the kind of patients we wanted, which is very, very high, resource-consumption type patients, who we are.

So if I were to take you back to 2007, I joined the company in mid-2006 in various areas of responsibility. At that time our Managing Director said, "I want to take a whole new look at who we are. We've been in business now 30-some-odd years, it's time to do a refresh. I don't want to be Windows XP, I want to be Windows 7." If you know what I mean.

So we took the better part of 8 months, taking this organization apart at the corporate level and at the facility level, putting the pieces back together. And out of it came some very, very significant leadership changes, one is -- which was my recommendation to appoint Dennis Brown as the Group CEO and my recommendation to appoint Ken Love as the group CFO. We call them corporate CFO, corporate CEO, and I need not defend Dennis Brown's record, you all know what it is. It was sterling over the 6 years he was corporate CEO.

In the same way, in Q4 of '16, Managing Director approached myself as well as Dr. Somsak as well as Kun-ling, and we sat together and say, how do we refresh the organization? How do we reinvent ourselves in the innovative way we want to be? How do we build responsible long-term business development strategies that continues to grow this organization forward over the next 5 to 10 years? In this room today, you'll see some tired faces. This lady, Kunajiranat; this gentleman, Chao Somsak, yesterday we flipped the switch on 3 simultaneous pieces of software that brings us from Windows XP to Windows 10. We exchanged out our pack system, we exchanged out our health information system, we exchanged out our back office financial system with 3 major international vendors well, well known in the field.

This takes us down the road another 10 years in being the digital hospital of today and tomorrow. So in Q4 of '16, leading into Q1 of '17, last year, this gentleman was appointed Co-CEO, which you're aware of. I made that announcement to you in prior analyst meetings. This lady was given significantly more responsibility. And these 2 together changed the culture in the medical center, flattened the medical center's organizational structure, changed risk management, changed a number -- nursing, changed a number of departments not only to flat knit, but to put the right people and maybe expand more people into the proper positions of responsibility and accountability in the image of Dr. Somsak in his style as opposed to the predecessor and Kun-ling's style.

So this is what I'm talking about when I talk about organizational leadership. In '17, dramatic organizational leadership changes in the medical center. Many, many, many of them for the good. In addition to which this office of the CEO was set up by our Managing Director to aid, assist, help, provide direction, provide experience, giving the operators an opportunity to not have to think 'Well, is this the right thing to do?' Well, what did you do Ken? What did you do Neil? Did it work in America? Has it been working here? What hasn't worked? What shouldn't we do, is much more important than what should we do, because we're both experienced operators.

So there was a lot of that in '17 that went on under the topic of organizational leadership. Under the topic of operational excellence, remember what I told you our definition of our brand is just a bit ago, being able to excel in delivering 5-star service, being able to deliver the kind of care that we're known for and have earned and the numbers demonstrate that we're known for, being able to do that by looking at the cost performance changes each of you have witnessed over the last 4 quarters, not an easy task to do. But this team was able to pull that off, and you will see later in Dr. Somsak's presentation, evidence and metrics that show we're doing a better job. It's not just me saying it, you'll see the metrics and the evidence for it.

And Dr. Somsak and his team have other changes that are forthcoming that we intend to do. Most of it has to do with the continued consolidation and integration of the campus of the company. The campus, meaning Vitallife; Asian Global Research, our CRO company; the medical center and their other subsidiaries that are lesser known to you, but are making contributions over the next 3 years in terms of how we innovate. In '18, not at liberty to tell you what they are now because we don't tell things in advance before we do them. But in '18, we have up to 4 new business lines we will introduce in this company.

They are part of the existing organization, but they're very innovative and long-term and advancing in their point of view. I'm talking about AI, I'm talking about genomics, I'm talking about how we take care of patients differently than all others. That's what I'm talking about. Long-term value growth. There's a term now going around in the world that is called responsible growth. So when I first saw that term, I asked myself, what does that mean? What does responsible growth mean? What does it mean to us, more importantly, as opposed to what it means to a Fortune 500 company in the United States. And for us, responsible growth means sustainable growth. For us, responsible growth means putting in place those things that are of critical, tangible and intangible benefit for our patients not just charging them more for something they don't need, but giving them something they can't get anywhere else, more importantly, giving them something that can't be delivered as well as we deliver it in the customer-patient experience. You will see metrics about that question as well. How we're doing in customer metrics and customer patient experience. Dr. Somsak's going to talk to you about that in a little bit. So for us, that's what responsible long-term value growth is. Ken is going to talk to you a little bit about what has driven the quarter and the year. We were a little bit concerned after the oil crisis in the Middle East occurred. Everybody who takes international patients were concerned as they were coming from the Middle East. So what did we do? We looked at other markets. I mentioned this to you in the past, but we have developed those markets even further; Qatar, Oman. Today, over the last 2 weeks, Kuwait is running somewhere between 25 to 34 patients a day in this hospital. A year ago, it was 7. I told you earlier in Q2, I believe, that Kuwait had made a decision as a country, as a kingdom, to move away from the United States and move away from Europe because of their concern about jihad and their concern about cost.

So we just didn't wait for the business to come to us, we went to them and presented our case about who we are. "Yes, you have some experience about coming to Bumrungrad. We would like to demonstrate that we can handle all kinds of complex esoteric patients at our hospital." And one thing led to another and relationship building occurred to where we now have not 100% of the Kuwaiti business that out-migrates from Kuwait, but lots of it. For us, 4x as much as we had a year ago.

And I can give you other examples of what we call sustainable long-term growth that is responsible. Responsibility for us also means taking care of very sick patients and getting them well with great outcomes. We don't just have patients who come here, they're treated as the word goes, "Oh, that's an expensive hospital." You've all have heard that, I know. But when they leave here, they know they've been treated fairly, they know they've been treated well and they know that they've been treated with 5-star customer care service. Not an easy thing to do in a 580-bed hospital, this big. But we're striving every day to improve on that customer experience.

So this is what I call long-term value growth. And I can describe to you a number of other markets, Ken is going to touch on them in terms of their contribution for the quarter and for the year, but I'll just mention 2 apart from Kuwait; China. It wasn't on our radar screen a year ago in Q3, early Q4, accepting a little bit of business at Vitallife. Now the growth year-over-year, I want to say this correctly, Ken, 51%?

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Kenneth Beasley Love, Bumrungrad Hospital Public Company Limited - Corporate CFO [2]

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Revenue growth.

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Aniello M. Sorrentino, Bumrungrad Hospital Public Company Limited - Chief Global Strategist [3]

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Revenue growth.

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Kenneth Beasley Love, Bumrungrad Hospital Public Company Limited - Corporate CFO [4]

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The high -- the highest as any market has grown in revenue growth.

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Aniello M. Sorrentino, Bumrungrad Hospital Public Company Limited - Chief Global Strategist [5]

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51%. That just doesn't happen, ladies and gentlemen. It happens through focus and execution. This lady, our International Medical Coordination Office. That's how it happens. Bangladesh has the same story, not as dramatic. Vitallife, as a business, is upwards of for the year, I don't know, Khun Oracha is going to tell you exactly what the numbers are quarter-over-quarter growth and year-over-year growth, but they're dramatic. These things just don't happen. They require focus and execution. But targeting the right business drivers, we pride ourselves on that. And people can say these things, but they don't produce these kind of results. Remember, we're a single medical center. We don't have 30 hospitals. People tell me, "Well, that's your greatest disadvantage." And I say back to them, "That's our greatest advantage." We can focus if we choose to.

So these all fall into the lines of long-term value growth in a responsible way. And I expect this to transcend '18, and some of these new business lines that we're bringing forward in '18, I expect them to make a contribution. You know that I don't do guidance on EBITDA and NOPAT, and we won't as a company. Given the 2.2% year-over-year revenue growth for the quarter 1 '18, I'm going to stay with our guidance now. I'd rather underpromise and overperform. If in fact Q1 tells me something different, like it did in Q4, then I'm seeing a trend and I may change that. I may change it down, I may change it up. It all depends on what we see in terms of performance. Q1 and Q3 are typically good quarters for us and all others. It's the first of the year. Q3 is post-Ramadan, especially for international hospitals. They're all -- historically, Q1 and Q3 have been good quarters for us. We'll see if that sustains in '18.

Is there any questions that you have on this year-end review that I've tried to provide for you, which has a long history of putting a microscope on ourselves and saying, "Who are we? How do we refresh? How do we innovate? How do we continue to do the things we do quarter, after quarter, after quarter in the face of things we can't control, at least oil crisis.

We've recovered -- we would like to have recovered better, but I think we've recovered very nicely out of that and the declines are abating. If you look at our international business for the quarter, it was good. If you look at our Thai business for the quarter, it was good. Was it -- was the Middle East business as good as it was a year ago? No, it was not. But expected. But I would say the level of decline, the pro rata level of decline is less than what it was the beginning of Q2 '16 forward, the decline is less. Still a decline, principally out of the UAE. But when you look at the UAE in terms of our revenue, our resource consumption-related revenue-driven performance, very, very high, sick patients from there still come here. I've told you that quarter-after-quarter, it was true in Q4 as well. That's the year-end review. Do you have any questions about those of you that don't know who we are and how we look at the world as a public company? Ken?

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Kenneth Beasley Love, Bumrungrad Hospital Public Company Limited - Corporate CFO [6]

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All right. (foreign language). Good morning. Welcome. As you may have seen already, the quarter and the year both were characterized by rather soft volumes and otherwise excellent results on the revenue and especially EBITDA and the net profit. The highest margins on net profit and EBITDA we've ever had and 11 points plus, almost 12% growth on EBITDA and net profit. After saying that the volumes are soft, I looked at it more closely, and I go wow. There's a lot of really important highlights in the volume. If you look closely, they are very, very encouraging. And I want to go through those and show you some of these examples of where the volumes in some areas were just great, really great. So I want to read some of these, because there's a lot of detail. For the quarter, you can see that the outpatients’ visits were flat, that's true. Let me put the glasses on. But if we look -- and that was mostly in the Thai business and expat business for the quarter, okay. But aside from that, there were several other markets were just outstanding for the quarter, and I want to go through some of those.

So Mongolia, outpatient visits up 29.5% year-over-year for the quarter. Kuwait, Neil mentioned, 31.8%. And these are all volume, not revenues, but volume, outpatient visits. Qatar, 19.6% growth year-over-year. China, 13.5%. Iran, 38.5%. Bangladesh 4.9% and Cambodia 3.2%, which are both big markets in Indochina.

Those are pretty extraordinary results, I think, and basically highlights some very positive changes over the past year. Whereas some markets have gone down, we focus on other markets. And there's a lot of these in Middle East -- focused on a lot of the other markets in the Middle East, and they are coming back to offset any drop in the UAE volumes, for example.

Now on admissions, we're down slightly on the quarter, 0.9%, but let me go through some of the highlights that are really shining stars if you look at them. Again, Thai and expat where we were down most. Mongolia, up 14.1% on admissions. Kuwait, up 63% on admissions. China, up 93% on admissions. Oman, up 17%. And Cambodia, yet another big contributor in Indochina, up 6.2%. So even though, if you look at it...

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Aniello M. Sorrentino, Bumrungrad Hospital Public Company Limited - Chief Global Strategist [7]

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If I could, on this point, with respect to the look at the integration of how we're looking at business lines, of our China business, 60% of it is going to the medical center, 40% of it is going to Vitallife. So I can tell you a time that it was 100% at Vitallife and 0% at the medical center. But we're bringing this integration of really patient information, patient understanding about who we are. And because it's the medical center, and it's not Vitallife, which is an outpatient-driven business, clearly the percentage revenue is going to be higher and the absolute amount of NOPAT and EBITDA is going to be higher of course, but the margin at Vitallife is higher than the medical center. So this is the kind of balance we're looking for market after market in terms of this long-term business growth that I touched on earlier. Sorry.

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Kenneth Beasley Love, Bumrungrad Hospital Public Company Limited - Corporate CFO [8]

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Yes, and also in relation to Vitallife, a year ago in '16, Vitallife was about 2% of our revenues in total and about 2% of our EBITDA and net profit. In '17, it's about -- it's a little over 3%, 3.5% and on the net profit line 4 plus, 4.3%, I think. So it's essentially doubled.

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Aniello M. Sorrentino, Bumrungrad Hospital Public Company Limited - Chief Global Strategist [9]

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Khun Oracha, why don't you address the group and tell them about the performance of Vitallife, please.

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Oracha Kunajiranat, [10]

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Thank you, Khun Ken. For the last year, Vitallife did a good performance, as Khun Neil mentioned. We have the OP visit growth for quarter 4 at 15.1% and for the year 2017 for 23.1%. And EBITDA margin, we have the better margin than the medical center, as Khun Neil mentioned. EBITDA margin, we have the -- improved on the EBITDA margin from 2016 from 31.7% to 35.5%, so it's grown about 3.8%. And net profit margin, we improved 3.1% from 24.6% in 2016 to 27.7% in 2017. Thank you.

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Kenneth Beasley Love, Bumrungrad Hospital Public Company Limited - Corporate CFO [11]

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All right. Now turning to the revenues. That's where we had -- basically every market was up year-over-year. Thai market was up 4.1%, non-Thai up 7.3%. Middle East, up 11.8% on revenues. And I also want to go through some specific examples of some of these stars for the quarter that you typically may not hear about or appreciate how much they're actually going up year-over-year.

So for example, Kuwait, on revenues, up 76% year-over-year. China, up 32% year-over-year for the quarter. Bangladesh, again, a big market in Indochina, up about 11%. Saudi Arabia, up 248%. I think that's the big ones. So you get some appreciation not only on the volume side, but also on the revenue side that a lot of these may be less-known markets that you haven't heard much about them up until maybe '17, they're really starting to kick in. And what the UAE -- the UAE did okay, right. They were pretty -- the volumes were low, they were off, the revenues were about flat. But these other Middle East countries and Indochina as well are kicking in. And so you got this movement all the time. Some go down, some go up. The big news is that, we ended the year a lot better than we began it. And we've got a lot of markets where we see the growth as being very significant and very encouraging. So we'll continue to pursue these markets and develop them like Kuwait, like China, like even Iran, Saudi and Ethiopia. Ethiopia, I forgot to mention them, they had really solid growth, volumes and revenue. So I guess, what I'm saying is we're having more, so to speak, pistons firing than just a few. Instead of just have the Middle East or UAE and the Middle East, we have all these other countries now that are really showing good promise. And that's what you want to see, you want to see that diversification. If one area goes down, the other one comes back. It's like having a diversified stock portfolio. You got your defensive stocks, you got your growth stocks. When one is up, the other one is down and vice versa. So that's what we have, and that's what we're seeing. And that's, to me, a very good sign that these markets are developing and offsetting anywhere where we might have a little bit slippage from time to time. These are coming in basically and offsetting that.

If we look at the EBITDA, continued improvement, 11.3% growth and 6.4% revenue growth, almost double. Again, that's coming from the cost management. I think the cost of services went from 58.5% -- from 59.6% the prior quarter, the prior year. And on the net profit line, 11.9% growth with the highest EBITDA margin and net profit margin we've ever had. And what's also contributing to the net profit line in addition to the cost management, we retired THB 1.5 billion of the bonds, so you got less finance cost. And the other thing is, our effective tax rate keeps going down. So anytime we hear about a tax incentive going on in Thailand, we try to figure out a way to take advantage of that. And as I've mentioned before, in 2017, we also had, I think, about -- it was excess of THB 10 million? Yes, yes THB 10 million of tax benefit. The prior year we had THB 300 million.

So we increased a little bit over the prior -- in '17, but not the same rate as we did in '16. The tax incentive was much less in '17 than '16, but we took advantage of it and we further brought the rate down, you'll see later on in the slide presentation that the effective tax rate for '17 actually went down. So it's basically looking at all these different areas and trying to find a way even when you have soft volumes like we had, and most of those came from the tail -- the headwinds rather of 2016, the oil, the passing of the king, that slipped over into 2017, especially the first quarter. And as Neil said, second quarter we recovered a little bit. Third quarter, we had a good third quarter. And the fourth quarter, much better than where we started from. So that's kind of the overview. I have a lot more slides later on, on more detail.

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Aniello M. Sorrentino, Bumrungrad Hospital Public Company Limited - Chief Global Strategist [12]

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So with that maybe Khun Oracha, Brian maybe I could ask you to just give just a bit of brief summary about yourself, please.

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Brian Dardzinski, [13]

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Sure. Okay, (foreign language). My name is Brian Dardzinski. I'm from the United States. I went to -- there's a little summary up here. I went to Boston University for my undergraduate and the San Francisco Bay Area for my graduate work. I've had about 25 years of experience in the high-tech industry. I've worked with Fortune 500 companies like Tyco International and Thermo Fisher Scientific. I've been in Asia for 15 years, primarily in the biotech industry with my main focus in the stem cell field. So I've been in the stem cell field for about 15 years. I've worked with the heart stem cell company here in Thailand. We did 2 clinical trials here at Chularat Hospital. And then I was recruited to another stem cell company that does adipose-derived stem cells and we did 3 clinical trials. I was involved in commercialization of that cell therapy around the world. I have worked in 54 different countries commercializing and registering the treatment in those different companies -- countries on 6 different continents. And I was recruited here 4 years ago, and I was the Senior Director of Research and Development, working on primarily regenerative medicine programs and also advanced cancer therapies using cell technologies, which we refer to as biomedicine. I was involved also with the NGS program. So we -- we'll get into that, I guess, later, the sequencing program. Actually I'm going to run out and meet a very famous geneticist from America, who is supporting our program here. And then, I guess, in January, I got promoted to the CEO of Vitallife to help bring some of these technologies into the clinic and also grow the business. And that's a brief summary. I think that was less than a minute.

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Aniello M. Sorrentino, Bumrungrad Hospital Public Company Limited - Chief Global Strategist [14]

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Thank you, Brian. Khun Oracha.

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Oracha Kunajiranat, [15]

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(foreign language) My name is Oracha Kunajiranat. I'm graduated in accounting, in Bachelor degree and Master degree in accounting information system. After graduated, I started working in the accounting firms like KPMG and Deloitte as the advisory in the consulting service and also auditing service. After that I moved to the corporate, joined with the Holcim, which is the Swiss-based company. In that company, I worked in 4 positions such as the regional audit in Asia Pacific and also the Head of the Internal Audit at a CCC, Siam City Cement for 1 year in total with Holcim. I worked there for 7 years. And including as the Head of Internal Audit in Vietnam for 2 years. After that I moved to work with the Gulf Energy Development, which is now one of the listed company in SET. Then I moved to join with Bumrungrad as the Division Director of Corporate Internal Audit. After 2.5 years, I was promoted to be the CFO at Vitallife on August 31, 2017. So right now, I become the CFO of the Vitallife. That's all from my side. Oh, in this career, I also have the certification in CPA of Thailand and also CIA, CISA, CCSA, which are globally recognized certification in internal control and auditing. Thank you.

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Aniello M. Sorrentino, Bumrungrad Hospital Public Company Limited - Chief Global Strategist [16]

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I don't think Khun Oracha has any fun at all with all of these credentials. And the 2 things to note about both of these people; they don't come out of the hospital industry. We looked for bright people who can come to us not biased by, 'Oh, I worked in this hospital, that hospital.' They've never worked in hospitals before, but they're really talented people in their own way, help us innovate. Okay, what's the next one, please. This is next? Okay. Dr. Somsak.

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Somsak Chaovisitsaree, Bumrungrad Hospital Public Company Limited - Former Hospital CEO, Medical Director & Director [17]

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Thank you, Khun Neil, Khun Ken and Khun Oracha Kunajiranat for more [wordified] or -- and preceding what I would like to convey some key message that to support and to scrutinize what our outcome on -- in terms of our finance. This is really key that I would like to summarize, meaning as of some key factor there to answer that -- some question later. The first -- sorry, I can't. Okay, thank you, Khun Ken. Yes. This is -- the following 4 slides for the patient safety is the key that patient -- that they recognize on our reputation. The first one is that we see this DNV, MIR, we achieved our first award in Asia. This meaning is managing infection risk, so far is our first hospital data to -- totally that finished. The second is really importantly that we achieved recognition from the American Nurses Association. This is a pathway to excellence, meaning is processing a nurse to take care. In the -- internationally that we sometime we have hearing at a macnet hospital that this is the first step that we view time to touch another milestone out of macnet hospital that met the people or the customer is more certification and on the -- to make sure that the nursing care. The next is under 2017 on our leading with Kunajiranat and our team. This area that really with a very strong year that we have about 2% that of 4x of the JCI. We had a first hospital in the Asia that we accomplished that JCI accreditation. Last year, this -- the fifth edition and we achieved is very high score and maybe in the top 10 percentile in the world. Is -- what is the meaning? It's meaning is, how critical to take care our procedure is to meet the world standard, yes. The next is this with last year as we achieved a Global Healthcare Accreditation. So far, we answered why, why the international patient not only in the clinical practice or clinical data also with -- but also that to service that maybe the international patient that the need is in the term of the Medical Destination Program to take care visa or PAN or everything data. We had the first hospital outside America, the second hospital in the world that we achieved so far this month. They have a initial health care accredited program. We have invited them to a session there to demonstrate or to share this for the Thailand.

The next is the patient and visitor experience that you see, the -- overall the hospital -- in the satisfaction score on the outpatient IPD. This is maintained nearly in 95% delivery score, meaning that's value and the perception of our customer. And in the Thai, expat and inter is the same here. And I would like to -- to the loyalty score, that the net promotion score (sic) [net promoter score], I would like it in the 3-year trend is that we increased from 80% to 88% as of so far to show that the loyalty, thereby that we make sure that they will to visit again. And that Khun Neil mentioned that someone questioned that on the Thai people exactly in the last 2 years, we -- the net promotion score (sic) net promoter score on Thai people is already 76% here after we launched many programs, and we escalated the service. Now the Thai is to achieve 90% and expat, okay. So far is, so what is the strategy? What do you need Dr. Somsak to do? And I would like to summarize some activity over the year. As you know that this is the first time that Khun Neil -- that to less implement our team to do some Health Fair. Health Fair is a gateway to let the -- from a -- order Neil Khun to touch our hospital there, because we're beginning on WellNet. Now the spectrum of care, why we expand? Some question that what is a study that when you had volume of the people. If you look in the population increase in the world, it not increased in the segment of the people of our target, not increased in the population, but the change is this slot in the spectrum of care. So far, we -- time to expand to the Health Fair. And this is the first in health care, we either get there because it will -- under Vitallife this is our strategy. The second that -- in same market activity is CardioInsight. This is a main -- what the meaning CardioInsight as we know, electrical field technology of -- to treatment of the maybe arrhythmia of the heart is high incentive, but we're adding more, adding more the incentive by the technology. We are the first hospital outside the international hospital that make that so far. Why? Why, we create more and more intensity, okay. And really that the people are really happy. I will -- to update more detail when each of time is what we do. And this -- that you see last year is really the first time that expand -- we not to -- on the term that to expand in the branches. But everyone asked why, why, why? Bumrungrad not to do that size, but we have a networking, networking which tied with the -- and with the core education. By the way, now is there more and more, more and more data they are referring on the tertiary care. So far, everyone should be to ask me how presented, how were you? No. They are referring that on the tertiary and need some equipment or some technology for CardioInsight for robotic surgery, for some oncology or some lab in the future. And I think it's to summarize the way we reach our data to demonstrate that I and Kunajiranat and the leader of the -- in the terms of the operation team. So far that in the 2017 on the term of operational excellence resulting in people management, in cost management and so far, I think, this -- we continue to this year on meeting that. We -- the next time maybe I and Kunajiranat to convey what is going on in this year half. Can you please summarize Kunajiranat?

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Aniello M. Sorrentino, Bumrungrad Hospital Public Company Limited - Chief Global Strategist [18]

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Yes, good. Thank you. And to the question about -- oh, sorry. Go ahead.

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Oracha Kunajiranat, [19]

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Before you -- kind of you asking about a revenue audit successful from the network management. I think after we launched this, this is the second time we expand to be 51 hospitals. So we thought the revenue for the total year of 2017 nearly THB 600 million and compared to 2016 domestic network referral improvement, I mean, the revenue growth around 50%. 50% total.

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Aniello M. Sorrentino, Bumrungrad Hospital Public Company Limited - Chief Global Strategist [20]

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So this is one of the other in-country channel drivers that a little over a year ago, in terms of its structure, didn't even exist at Bumrungrad. Yes, we would get referrals from world hospitals because they knew of the brand, but what Dr. Somsak and his team have structured, is providing them services, academic services, online training, things that they need, that they can't get in real Thailand. And in return, if those patients see Bumrungrad as acceptive, well, then they come and the revenue numbers that Kun-ling, Kunajiranat has told you, pretty substantial numbers out of this network that hadn't even been put together structurally or formally over a year ago. So that's to this lady's question here on my left about the Thai business and Thai business development. This is a -- this was an important business development issue. Okay, any questions about Dr. Somsak's year-end review about the medical center? If not, I'll go on and answer your question about the campus master plan.

Last time I spoke about this was Q2. We skipped Q3, because it was getting a bit redundant and stale. I'm just saying the same things over again. But now as we look into Q1 of '18, you'll notice down here at the total bottom right that number was about 4 -- THB 14.3 billion, if I remember correctly. It's now -- we burned the difference between it and that number down to THB 13.129 billion, we burned that down principally in the completion of BI Tower. That building is finished. It's open. The employees that we had spread all over Bangkok in 1, 2, 3 rental properties, we have eliminated that expense completely. We no longer have that rental expense that we're absorbing in '18. And those people are deployed in offices in BI Tower. On February 16, we moved hemodialysis from the hospital over to BI Tower, our first of several clinical operations that we'll be moving over to BI Tower. The next will be lab. It's going through a certification of College of American Pathologists. Just as soon as that's done, we will move lab over and then some other ancillary services.

So that consumed about THB 800 million, THB 900 million to completely get that building, refinish the mechanical, electrical, plumbing and finish it out. It's actually now quite a beautiful building, it's a building we own. The difference between the burn rate of THB 800 million and THB 1.2 million had to do with about THB 400 million in land banking -- strategic land banking that we purchased land in and around the major campus area. So that takes us to today, and let's stay with BI Tower for a moment. We have floors 8, 9, 10 and 11 and this lady right here is planning some major expansion for Vitallife for which will go on floors 8 and 9 in the form of new services coming online for Vitallife.

She has those plans. What those are, I'm not at liberty to disclose until we actually launch them. But for that, I believe the CapEx for that is about THB 123 million, if I remember the number correctly. Floors 10 and 11 of BI Tower is yet another new business line that will go in there. And those 2 combined, I should say, I'm sorry -- those 2 combined will be about THB 123 million. Vitallife will be expanded substantially in the upcoming year. Vitallife will not only get a complete renovation of what we call BI Small, which is the building we own that Vitallife sits in today. It will be completely renovated just like BI Tower was. The cost of both renovating and expanding Vitallife both in its -- in the BI Small building and the BI Tower building, if I were to add those 2 projects together, I've talked to you about floors 8, 9, 10, 11 in BI Tower and BI Small, the cost to the company is THB 420 million.

Those are new numbers that we haven't talked about in the campus master plan, but they're opportunistic expenditures associated with new services and expanded services to accommodate Vitallife's significant growth. Not only growth in its current business line, but other new business lines. Not a lot has changed on the outpatient clinics, I've just described that to you. We are in this building, this is new. We are in this building because of we're so busy here with our clinic operations. If you've been up to our Sky Lobby on 10, below us. I don't know if any of you have ever gone there, we are adding 2 new elevators in the back area of the Sky Lobby, which is what that refers to BI Clinic addition of renovation of the Sky Lobby, which is an addition to additional 2 elevators and Khun Linda, along with Kunajiranat, wants to add an outpatient robotic pharmacy on the Sky Lobby in order to be able to give patients much, much faster delivery of their medications. We have an inpatient robot that we've had here the first in Asia, Swisslog is the name of the company. We will add an outpatient robotic pharmacy on the Sky Lobby as well. That's a new item for CapEx purposes, all incorporated in this number of THB 13.129 billion. The inpatient at the hospital, MEP stands for mechanical, electrical and plumbing. We're going to do what we did in BI Tower, to the main hospital building. We're also going to renovate all of the patient rooms over time to modernize them, to bring them forward in a very modernistic way and a unique way, I would add. Going to glaze the windows throughout the building. And the one thing that I talked about earlier is BI Annex. BI Annex, as I said earlier, is in the final planning stages by Dr. Somsak and his team, and in part, it will have -- it will house advanced cancer diagnostics -- state-of-the-art cancer diagnostics that's not being done in town.

We expect to ground break -- we believe it will be the beginning of Q4, might be a little earlier. But we will ground break sometime in '18 on our Annex building. It's 6 storeys above ground, 2 storeys below ground, 8-storey structure. It'll be connected with a connecting walkway over the road, so a 1/1 small narrow road into the hospital.

So I've talked to you about the new construction, which is floors 8, 9, 10, and 11 in the BI Tower, which is Vitallife expansion. The new services expansion, which is a secret right now. And the major renovation of BI Small, which is where Vitallife exists now, that will be redone and Vitallife will be expanded into that building.

So rolling all of that up in this number, THB 13.129 billion, are those numbers in -- for the most part. There's also some of the numbers in our annual CapEx budget, but most of it falls here, some of it falls in our annual budget at the hospital level. This is the campus master plan update, we're on track. We've added some things. We haven't eliminated anything. And I think that summarizes for you the campus master plan. Yes?

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Questions and Answers

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Unidentified Analyst, [1]

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But that doesn't include the second campus on Petchburi, that's not in the final numbers?

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Aniello M. Sorrentino, Bumrungrad Hospital Public Company Limited - Chief Global Strategist [2]

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Yes, Petchburi is in these numbers. Petchburi is in these numbers. I believe it starts in '19. It's in the '19 numbers forward. We did not remove Petchburi. I don't need the beds right now. Until I need the beds, that's when I'll build it. Right now, I don't need them. I'm expanding the campus here, as we talked about. And we got real lucky with BI Tower, moving ancillary services, clinical services out of the hospital. I'm going to be able to add -- I'm still going to be able to add those 36 beds that we've talked about historically, 24 med surge and 12 new ICU beds. We're renovating our -- one of our existing ICUs, which is in our budget. So right now, while it's in our campus master plan, I'm not prepared to start now because I don't need the beds. When I think I need them to your sense, we'll start. We're ready to start, we can start whenever we want to start. But no need to spend CapEx if it's not necessary. We've deployed CapEx very -- well, we got lucky, as you know the story, but we've deployed it very intelligently over the last 3 years. It's one of the successes of Vitallife is that it's on this campus. It's real important when we talk about integration. If we were a standalone, Sukhumvit, more difficult to continue to grow, but since it's on the campus and we have over 1 million patient encounters a year principally at the hospital, the medical center, it's almost a natural where patients and family and visitors say, "Well, what is that over there? Maybe I go have a look." And then we do our part in trying to educate them about what is Vitallife. The big difference maker being integrated on our campus and then it is as a stand-alone entity somewhere. Any other questions about campus master plan, Vitallife, anything else until -- other than -- if not, we can go then into the final part of the program, and Ken will do this quickly, which is a pictorial display of the performance.

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Kenneth Beasley Love, Bumrungrad Hospital Public Company Limited - Corporate CFO [3]

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All right. I will go through quickly, okay. If you recall, beginning of the meeting, Neil went through organizational changes, operational changes since 2007, correct? Here's a translation of that. The next 2 slides will translate that into the operational performance. So if you look up there, go back to 2007 on the revenues, THB 8.6 billion, and today THB 18.6 billion, more than double the growth in revenue, and a steady upward trend year, after year, after year. On the EBITDA, to me, a lot more impressive, a steeper incline, so to speak, of revenue growth from THB 2 billion -- a little over THB 2 billion in 2007, 3x at THB 6 billion in 2017. The margin for a long time stayed kind of flat, but then over the -- ever since 2012, steady increases year, after year, after year.

So all these indicators year, after year, year after, up, up, up. So that -- those changes translated into pretty good operational performance, right. And looking at the net profit, pretty similar story to the EBITDA. Here we had a banner year, actually it was an exceptional item that happened that year, but about THB 1.2 billion here in 2008 up to almost THB 4 billion, THB 4 billion, 4x almost -- no 3x. The net profit margin, the same thing. Dip down, 2010, but starting 2011, a steady upward trend.

There's a few exceptional items in there where we sold KH Hospital, right there. So we had kind of an unusual, significant event with that sale to the revenue, to the profit line, right. Return on equity actually has been kind of about flat, if you take out this 1 year. 2012, again, that's where we sold, I think that was the KH sale, right there. And since then, 2015 was one of the higher years. If you remember, I keep talking about 2015, a record year. Then the 2016 headwinds and then the recovery in 2017 with some of that residual headwind effect in the first quarter.

So I would say, overall, the changes made reflect -- or gets translated here in the operational performance that shows the results. And it's pretty clear, I think, it speaks for itself. Any questions on that 10 year -- or it's actually 11 years of history that puts all this in perspective of what Neil was talking about earlier in the meeting. Now from here, I'm going to kind of breeze through. What you're going to see in the next few slides are things we've talked about already. Recovery, you'll see that the basic -- the spillover in the first quarter from the 2016 passing of the king, then you'll see the recovery by quarter, you'll see the revenue intensity, you'll see the cost management throughout the year, right? So I'm going to breeze through. Average business per day. What I just said, this was a spillover from 2016, improvement, more improvement and flat, okay.

Same thing here, except admissions got hit a little bit harder, quite a bit -- big drop here in the first quarter, improvement, basically recovery and flattened out in the last quarter a little bit, because we had pretty strong fourth quarter in 2016, actually.

And here is the year-to-date over here, I don't want to miss that out, 2.8%. Average daily census, even more impact because the length of stay went down, partly because we had more Thai, the international dried up, they didn't come for a while, especially the first quarter. But the Thai stayed around, a little bit less length of stay than the international. So the patient days actually -- the drop was larger than the admissions. But again, less of a drop, less of a drop, came back up a little bit in the fourth quarter giving us a total for the year on the census.

The revenue. If you noticed, the same year-over-year for the quarter, the same year-over-year, year-to-date in terms of international and Thai business, what I was talking about earlier with this lady over here. That really doesn't change that much period over period.

Revenue contribution by services. A little bit of change here between inpatient and outpatient. This you'll see the inpatient went down a little bit and why was that? The international mostly, not coming as they likely did, especially in the first quarter. And then over here, you'll see the same impact. So the same year -- quarter-over-quarter, year-over-year impact, change year-over-year. Revenue by payer, identical. Like I said, a lot of these things really don't move a lot year-over-year, quarter-over-quarter. They don't really move that much.

Patient revenues here. We hit -- we went through that already the 6.5%, the 2.4%. That's what I mentioned earlier, the 2.2% was the total revenues. This is the patient revenue growth, which is far above the guidance of 2 point -- the high end of the guidance of 2.0%. EBITDA, you've seen this, 11.3%, 7.4%, cost management mostly at work there with a little bit of the revenue intensity added to that. EBITDA margin, again, the highest ever. Net profit, talked about that, you add to the cost management, add to that the finance cost reduction with the bond retirement of THB 1.5 billion, December 2016, as well as the effective tax rate going down.

Net profit margin. This is the best we've ever had. Net debt-to-EBITDA, you see it goes up a little bit. You know why that is, because we put more in short-term investments. We moved it out of cash, put in short-term investments. The calculation doesn't include short-term investments, it's the only reason that spiked up a bit, otherwise, it would have been exactly the same. Same with net debt-to-equity. Interest coverage, continued improvement with continued operating profit. I keep doing that. Is that it? Let's see if I can get that. Is that the end of it? Oh, that's the end of it. Okay, that's finished.