CFO LOOKING IN

CONTENTS

Metro Pacific Hospital Portfolio

Evolving Roles of CFOs

Financial Reports and Analysis

Fund Allocation

Decisions on CapEx purchases

The Evolved CFO

Characteristics of a Modern CFO

Emerging trends that causes CFOs to evolve

Metro Pacific Hospital Portfolio

• About First Pacific, MPIC and MPHHI

• MPPHI’s Hospital Partnerships

• MPHHI Group Management

Presentation Outline

4

• 30 yr old investment & management co.

• Headquartered and listed in Hong Kong

• Focus: developing LT value in Asia Pacific

• Investments primarily in the Philippines & Indonesia

Mother Company: First

Pacific

5

NATURAL

RESOURCES TELECOMS

FOODS/

CONSUMER

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UTILITIES/

HEALTHCARE/

INFRASTRUCTURE

#1 in cellular #1 in fixed line #1 in broadband in the Philippines

The First Pacific Group

Today

Water Distribution Exclusive concession Toll Roads Exclusive concessions Electricity Distribution

Exclusive franchise Largest Healthcare in the Philippines

Largest vertically integrated food company in Indonesia with largest flour mill and largest instant noodle maker in the world

Largest mining company in the Philippines 3rd largest palm oil plantations in the world with interests in sugar and rubber plantations

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The First Pacific Group

Today TELECOM

S

UTILITIES CONSUME

R GOODS

NATURAL

RESOURC

ES

POWER

GENERATI

ON

• An investment and management company

• Listed in the Philippine Stock Exchange

• Towards Nation Building

• Focus on Infrastructure

• To make a difference

• To uplift the quality of life of every Filipino

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The Metro Pacific Group

WATER TOLLROADS POWER HOSPITALS RAIL

Nationwide Chain

Existing

Desired

West Metro Med Center

Sacred Heart Malolos

Medical Doctors Hospital

• Now largest private hospital group in Philippines: 2,600 beds

• Mostly premier brands, the best in their areas: • Makati Medical Center Makati

• Cardinal Santos Medical Center San Juan

• Manila Doctors Hospital Manila

• Our Lady of Lourdes Hospital Manila

• Asian Hospital Muntinlupa

• De Los Santos Medical Center QC

• Sacred Heart Hospital of Malolos* Bulacan

• Central Luzon Doctors Hospital Tarlac

• Riverside Medical Center Bacolod

• Davao Doctors Hospital Davao

• West Metro Medical Center * Zamboanga

• Nationwide presence in Luzon, Visayas & Mindanao

Towards a Nationwide Chain

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Makati Medical Center

Location Makati City

Management Date 2005

Investment Date May 2007

Ownership 33%

Beds 525

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Davao Doctors Hospital Location Davao City

Investment Date May 2008

Ownership 35%

Beds 289

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Cardinal Santos Med Ctr

Location San Juan City

Interim Lease Date Aug 2008

Long Term Lease Date Feb 2009

Ownership Lease

Beds 239

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Riverside Medical Center

Location Bacolod

Investment Date May 2010

Ownership 70%

Beds 330

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Our Lady of Lourdes Hosp Location Manila

Long Term Lease Date Nov 2010

Ownership Lease

Beds 229

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Asian Hospital Location Alabang

Investment Date Dec 2011

Ownership 86%

Beds 217

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De Los Santos Med Ctr Location Quezon City

Management Date Sep 2011

Investment Date June 2013

Ownership 51%

Beds 138

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Central Luzon Drs. Hospital

Net Profit After Taxes (2007 to 2012)

In P

Mn

s

MPIC Entry

Location Tarlac

Management Date Jun 2013

Investment Date Oct 2013

Ownership 51%

Beds 195

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West Metro Medical Center

Net Profit After Taxes (2007 to 2012)

Location Zamboanga

Management Date*

June 2015

Beds 110 to 190

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Manila Doctors Hospital

Net Profit After Taxes (2007 to 2012)

Location Manila

Investment Date Dec 2015

Beds 300

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Sacred Heart Hospital

Net Profit After Taxes (2007 to 2012)

Location Bulacan

Investment Date Mar 2016

Beds 55 to 122

EVOLVING ROLES OF CFOs

ACCOUNTING

FINANCIAL REPORTS

TREASURY

LOANS/INVESTMENT/

CASH MANAGEMENT

PRODUCT COSTING & PRICING

PURCHASING

COMPLIANCE/TAXATION

WAREHOUSING & INVENTORY

MANAGEMENT

CFO

= FINANCE

Traditional CFO

Chief Finance Officers are no longer simply responsible for a company’s

financial health. Today they make a vital contribution to the strategic direction

of the business, thus, the roles are now evolving.

CFO

FINANCE

Driver for corporate strategy along with CEOs.

Retain controllership and integrate value of Business Partnership

Risk Identification and Management

Create sustainable value adding services

Must be the main example in encouraging ethical behaviour

and professionalism

*CFO should be Focused, Innovative, Decisive

Evolving Roles of CFO

FINANCIAL REPORTS & ANALYSIS

FINANCIAL REPORTS – Profit & Loss

Standard Profit and Loss (PNL)

Performance vs Last year vs Budget

Percentage to Revenues

Cost of Sales

Gross Profit

Expenses

Net Income

Standard Profit and Loss (PNL)

FINANCIAL REPORTS – Profit & Loss

Increasing revenue of Outpatients than Inpatients

Higher Occupancy Rate

Lower ALOS (average length of stay)

More consultants with subspecialties

Efficiently run specialty clinics

Average Bill per patient

indicator of high value procedures

are availed

rates of hospital are high so need

to revisit

Sources of revenue

indicator of where to put the trust

of marketing or where to push

indicator of where to put resources

FINANCIAL REPORTS – Profit & Loss

Standard Profit and Loss (PNL)

FINANCIAL REPORTS – Profit & Loss

Standard Profit and Loss (PNL) OTHER FINANCIAL REPORTS – HOSPITAL

Census and Gross Revenues

Medical Cases

Patient Profile (Age, Location)

Payment Type (Selfpay, HMO, Corporate)

Profit and Loss per Department

Contribution Margin per procedure

FINANCIAL REPORTS – Profit & Loss

Profit & Loss Analysis

Standard Profit and Loss (PNL) GROSS MARGIN

Declining Gross Margin, Increasing Fixed Operating Expenses

= recipe of disaster

COST OF SALES

Increasing COST of SALES %

Case mix of more expensive low margin cases

Issuance of drugs and supplies not properly charged

Erroneous pricing or procedures

Profit & Loss Analysis

EXPENSES

Increasing PM poor maintenance, expensive cost to own or pilferage

Increasing Utilities Expense Office layout, machines are not energy efficient

DEPRECIATION Increasing depreciation without a reasonable increase in revenue

Overspending in CAPEX, CAPEX not maximized /non income generating

Reasonable CAPEX spend should equate to % increase of revenue

EBITDA

Increasing EBITDA would mean a good steady cash

balances to cover expansion or acquisition

FINANCIAL REPORTS – Balance Sheet

Reasonable percentage of inventory: higher

accounts trade payable means trading on

supplier credit, cash is maximized for

working capital

Ideal working capital is sourced out from

Fast TAT of AR to cash

Reasonable payable turnover

Fast TAT inventory to cash or AR to

finance operation and lower debt and debt

service cost

FINANCIAL REPORTS – Cash Flow

Purchases of CAPEX should be financed by

internally generated funds or income from

operation

CAPEX purchases should not be more than

cash from operation

Enough cash to payout dividends to

shareholders

Enough cash to fund operating requirements

FUND ALLOCATION

Considerations in Funds Allocation

Complete the hospital offerings

Need to compete with other similar hospitals

Requests of doctors

Make a distinction or differentiation of the hospital

Allocate according to revenue generating vs. non revenue generating

Evaluate based on ROI, payback period and Cash Flow

DECISION POINTS IN CAPEX PURCHASES

Decision Points for CAPEX Purchases

Financing Options

Technology Advancement

1.

Operational Efficiency

2.

Technical and After-Sales support

5.

Cost to Own

3.

4.

THE EVOLVED CFO

Driver for Corporate Strategies

CFOs should:

Take active role in business

development.

Integrate financial and non-financial

information.

Ensure that business decisions are

based on solid financial criteria.

Initiate change programs that will fine

tune financial processes.

Controllership and Business Partnership

CFOs must focus on:

• Stewardship of organizational assets

• Financial Health of the Organization

• Adherence to government regulations

• Transparency on financial reports

At the same time look into:

• Careful vendor selection

• Price negotiations

• Finance talents retention

• Technological Advancement

• Competitor and Market Dynamics

CFO as Risk Identifier and Manager

CFOs must be able to:

Identify and mitigate risks on factors such as:

change in political leadership

new government regulations

natural and man-made disasters

globalization and technological advancement

employee turnover

Use and analyse various financial models and

techniques that has impact on potential investment

return

Value-Adding Services

Participate in master planning and infra

developments

Look for Purchasing Synergies to get

best terms

Understand new hospital technologies

Encourages Ethical Behaviour and Professionalism

CFOs shows:

Strong ethical leadership and good

governance

Principles of integrity, objectivity,

competence, due care, confidentiality

and professional behaviour

Effective communication with both

internal and external stakeholders

CHARACTERISTICS OF A MODERN CFO

What characteristics of a modern CFO?

o Finance Expert

Have experience across in various finance functions.

o Broad Industry Experience

With significant experience with various industries

o Strong Track Record

Significant achievements in his/her career

o Hungry for growth

Never-ending satisfaction in terms of learning new skill sets

EMERGING TRENDS

Sample emerging trends that causes CFOs role to evolve

Globalization (i.e. ASEAN Integration)

Technological Advancement (i.e. Hospitals

gearing towards non-invasive surgeries)

Tighter Competition

Regulatory changes