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Centric Health Announces Results for the First Quarter of 2018

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Centric Health Announces Results for the First Quarter of 2018

Canada NewsWire

Business focuses on operational efficiencies and new growth opportunities under newly appointed CEO

TORONTO, May 9, 2018 /CNW/ - Centric Health Corporation ("Centric Health" or "the Company") (TSX:CHH), Canada's leading diversified healthcare services company, today reported its financial results for the first quarter ended March 31, 2018.

"As we completed the transition of beds under a large national contract with an interim management structure, and began to execute on the business re-engineering plan, the results in the first quarter of 2018 were slightly below the Company's expectations.  While we face headwinds as a result of previously disclosed changes in government regulations, we are confident that we can mitigate the impact by improving efficiency and reducing costs in our new national Specialty Pharmacy structure," said Jack Shevel, Chairman of Centric Health. "Despite the potential impact of these changes, we expect to deliver year-over-year Adjusted EBITDA growth in 2018."

Highlights for the First Quarter of 2018

(All comparative figures are for the first quarter of 2017)

  • Revenue from continuing operations increased by 2% to $44.5 million from $43.6 million
    • Revenue generated in Specialty Pharmacy was relatively flat due to the similar number of beds serviced year-over-year, with the slight increase associated with increased influenza outbreaks in the first quarter of 2018 and higher surgical procedure and healthcare service volumes in Surgical and Medical Centres.

  • Adjusted EBITDA1 from continuing operations declined 14% to $3.8 million from $4.5 million
    • Due to ODB fee reductions, inventory adjustments related to reductions in generic drug pricing, and labour inefficiencies in Specialty Pharmacy;
    • Partially offset by growth in the Surgical and Medical Centres business; and
    • Adjusted EBITDA1 margin from continuing operations decreased to 9% from 10% in the same period in the prior year.

  • Expansive business re-engineering plan in Specialty Pharmacy segment to be completed by end of 2018
    • Focused on utilization of technology to maximize efficiencies through further automation of processes and minimizing manual activities;
    • Scaling capital investment through consolidation of sites and utilization of high-volume fulfillment centres;
    • Comprehensive workflow analysis to optimize the labour model, allow for a more dynamic cost base and gain efficiencies through centralization of functions; and
    • Company has increased its targeted annualized cost savings from $4.0 million to $7.5 million, of which $2 million has been implemented as of May 2018.

  • Completed additional investment of $0.5 million in AceAge Inc. ("AceAge"), to fund the production of the first batch of its home-based automated drug delivery appliance ("Karie").
    • Karie is an innovative device designed to solve the medication compliance issues of individuals taking multiple medications, particularly seniors living in seniors' housing communities and the aging population at home;
    • Production of the devices has commenced, with the first 2,000 units available by August 2018; and
    • The Company currently has an ownership interest in AceAge of 17.5% and has the ability to increase its investment in AceAge up to 32.5%.

  • Accelerated preparation for entry into the medical cannabis distribution business
    • Building operational plans in anticipation of receiving medical cannabis sales-only distribution license in second half of 2018;
    • Focus on leveraging our Specialty Pharmacy footprint and capabilities to assist in the provision of medical cannabis to seniors, complex care patients and Karie users; and,
    • In advanced discussions with a number of licensed producers about supply agreements and other potential partnerships.

Highlights subsequent to quarter-end

  • Appointed David Murphy as President and CEO
    • Over a decade of senior leadership experience in Canadian healthcare;
    • Most recently with Cardinal Health, serving as President of Canadian business, leading the strategic transformation of the organization; and
    • Has an impressive track record of increasing operating margins in the face of ongoing pricing pressure, while improving employee engagement and workplace culture.

  • Entered into collaborative program with Think Research Corporation to digitize Specialty Pharmacy operations
    • Solution will digitize the Company's medication review program, eliminating paperwork duplication in the pharmacy clinical review process;
    • Provides cost savings and labour efficiencies while offering valuable clinical insights to the Company's partner homes through real-time information; and
    • Maximizes safety of seniors through data analytics capabilities.

  • Expiration of Alberta Blue Cross agreement, announcement of new funding framework
    • Alberta Health announced a new funding framework to take effect May 17, 2018;
    • Amongst other things, the announcement stated reductions to dispensing fees in the province and changes to the frequency of dispensing and care plan follow-ups; and
    • In response to the changes in the new framework, we are evaluating and implementing a number of significant changes to our operating and service model in Alberta which are included as part of the additional $3.5 million cost savings targeted in the business re-engineering plan.

"As CEO, my focus will be on driving operational efficiency and excellence in execution, and delivering on the many growth opportunities that exist in the space in which we operate," added David Murphy, President and CEO of the Company. "Our management team has taken strong recent action to optimize our operations and lay the groundwork for a number of key growth initiatives.  I look forward to working with the team to deliver outstanding patient care while creating sustainable value for stakeholders."

FINANCIAL RESULTS

Discontinued Operations

The Company's discontinued operations consist of the businesses divested as part of the sale of its Physiotherapy, Rehabilitation and Medical Assessments segment in 2015 and London Scoping Centre in 2016.

Selected Financial Information

(All amounts in the chart below are in thousands except per share, shares outstanding, and percentage data)


For the three month periods ended March 31,


2018

2017

2016

(in $000)

$

$

$

Revenue

44,472

43,563

40,694





Income (loss) from continuing operations

480

127

(1,100)





Income (loss) from continuing operations before interest expense and income taxes

267

936

(1,341)





EBITDA1 from continuing operations

2,653

3,260

1,598

Adjusted EBITDA1 from continuing operations

3,825

4,456

2,878


Per share - Basic and diluted

$0.02

$0.02

$0.02

Adjusted EBITDA1 Margin from continuing operations

8.6%

10.2%

7.1%





Adjusted EBITDA1

3,825

4,456

2,821


Per share - Basic2 and diluted2

$0.02

$0.02

$0.02

Adjusted EBITDA1 Margin

8.6%

10.2%

6.9%





Net loss

(1,699)

(3,870)

(10,022)


Per share - Basic2 and diluted2

($0.01)

($0.02)

($0.06)





Cash provided by (used in) operations

(316)

1,114

(7,208)









Weighted Average Shares Outstanding (Basic and diluted)3

202,110

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