Life Healthcare Group Holdings Limited · JSE:LHC
Life Healthcare — H1 2012 Earnings Presentation
70 slides from Life Healthcare's earnings presentation, May 2012
Slide 1: Unaudited Group results and cash dividend for the six months ended 31 March 2012
Growth Efficiency Sustainability Unaudited Group results and cash dividend for the six month period ended 31 March 2012
Slide 2: Interim Results for 6 months ended 31 March 2012
www.lifehealthcare.co.za Interim Results For 6 months ended 31 March 2012 Notes 1 LIFE HEALTHCARE UNAUDITED GROUP RESULTS PRESENTATION FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2012
Slide 3: Agenda
Agenda 1 Group Review Michael Flemming CEO 2 Financial Review Roger Hogarth CFO 3 Future Guidance Michael Flemming CEO Notes 2 LIFE HEALTHCARE UNAUDITED GROUP RESULTS PRESENTATION FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2012
Slide 4: Highlights
Highlights Strong SA growth: o Hospital PPDs: + 6.0% Growth o Mental Healthcare & Rehabilitation revenue: + 29% o Occupational Health revenue + 21% Solid margin growth: Efficiency o Normalised Ebitda margin: 26.0% o Occupancy: 70.3% Net promoter score: 95.5% 6 year program - specialist train
Slide 5: Strategic Priorities
Strategic Priorities Growth Efficiency Sustainability Develop the breadth and Continue to enhance Maintain LHC’s depth of LHC’s existing operational efficiencies in commitment to world class hospital network SA and MHC: healthcare Expand our coverage and o occupancy Implement sustainable p
Slide 6: Growth SA: PPDs
Growth SA : PPDs PPDs 1 000 CAGR: 4.5% 6.0% 950 6.4% 900 1.8% 4.4% 850 4.7% 800 750 700 650 600 550 500 2007 2008 2009 2010 2011 2012 H1 PPD increase Notes 5 LIFE HEALTHCARE UNAUDITED GROUP RESULTS PRESENTATION FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2012
Slide 7: Growth SA: PPDs
Growth SA : PPDs Category Sub-category of the 6.0% Acute Hospitals: o Life Midmed hospital (1.9%) o Life Piet Retief o Life Empangeni o Life Glynnwood New beds o Other brownfield growth 3.5% Mental Health: o Life Glynnview o Life St Josephs Rehabilitation: o Life Vincent Pallotti Existing beds
Slide 8: Growth SA: Bed growth focus on Brownfield and NLB
Growth SA: Bed growth focus on Brownfield and NLB Actual Actual Est Category Total % 2010 2011 2012 Capacity expansion 163 142 118 427 36% at existing facilities 58% New lines of 28 92 134 254 22% business New facilities 176 0 43 219 19% Acquisitions 108 161 0 269 23% Total 475 395 295 1,169 100% No
Slide 9: Geographic spread
Geographic spread Facilities 57 Total Beds 8,212 Theatres 310 ICU beds 664 1 1 High care beds 320 23 2 Radiology units 44 A&E units 41 2 5 3 Maternity units 36 Cardiac units 12 7 Acute Rehab 6 2 units (219 beds) Mental health 6 units (277 beds) Life Esidimeni 12 3 (4,165 beds) 11 1 307 clinics 8 Occ
Slide 10: Hospital geographic spread
Hospital geographic spread 132 LHC beds 407 43 2012 bed growth 349 6 3,600 162 1,383 59 292 8 17 1,304 745 Registered beds excluding associates at 31 March 2012 Notes 9 LIFE HEALTHCARE UNAUDITED GROUP RESULTS PRESENTATION FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2012
Slide 11: Growth SA: Bed growth H1 2012
Growth SA: Bed growth H1 2012 Additional beds Capacity pipeline 2012 H1 2012 Expansion at Anncron, Rosepark, St Marys, Empangeni, Robinson, Capacity expansion Glynnwood 118 57 at existing facilities Combination of ICU, medical & surgical beds Mental Health beds: New lines of o Life St Josephs:
Slide 12: Growth SA: Associates
Growth SA: Associates JMH Transaction (November 2011 update): 5 Hospitals in Durban with 478 beds Made offer to existing shareholders - to increase shareholding from 49% to between 60% and 70% Subject to Shareholder agreement & Regulatory approval Aim to complete transaction by end January 2
Slide 13: Growth SA: New Lines of Business
Growth SA: New Lines of Business New lines of Business: o Mental Health / Acute Rehabilitation: • 29% revenue growth • High demand: – Life St Joseph occupancy March 2012: 89% • Opening 80 bed Life Poortview mental Healthcare facility in May o Renal Dialysis: Life St Josephs • Additional 28 chronic
Slide 14: Growth International: MHC
Growth International: MHC India (MHC) re-cap: o Leading hospital chain in Delhi with strong brand and reputation o Existing business: • March 2011: 968 beds, 68% occupancy • March 2012: 1,050 beds, 71% occupancy o Greenfield business: • additional 904 beds added in 4 facilities o Initial Investmen
Slide 15: Growth International: MHC
Growth International: MHC MHC bed growth: Bed Capacity Hospital Area Opened constructed Existing business 1,050 Shalimar Bagh 288 North Delhi Nov 2011 Mohali 206 Punjab Dec 2011 Bhantinda 205 Punjab Dec 2011 Dehra Dun 205 Uttarakhand May 2012 Total capacity 1,954 Focus on ramping-up the occupanc
Slide 16: Strategic Priorities
Strategic Priorities Growth Efficiency Sustainability Develop the breadth and Continue to enhance Maintain LHC’s depth of LHC’s existing operational efficiencies in commitment to world class hospital network SA and MHC: healthcare Expand our coverage and o occupancy Implement sustainable p
Slide 17: Efficiency
Efficiency Efficiency strategy requires the H1 EBITDA Margin % combination of the following business strategies: 27 % 1. ARM pricing strategy: creates the right incentives 26 2. Cost of sales: Focus on 25 procurement, utilisation & benchmarking 24 3. Leveraging our fixed cost base through increasi
Slide 18: Efficiency: Cost of Sales (COS) Management
Efficiency: Cost of Sales (COS) Management ARM and pricing: o The ARM incentivises LHC to focus on procurement costs o Results in lower hospital costs for Funders o Experienced a 5.3% increase in revenue / PPD Procurement o Through a continuous focus on: Resulted in lower procurement costs • Str
Slide 19: Efficiency: Occupancy
Efficiency: Occupancy Occupancy increased from 65.7% in 2007 to 70.3% An additional 20% bed growth over the same period Demand driven by: o Aging / disease burden / technology o Preferred networks o Growth of medical scheme members o Expanding into new lines of business % 72 70.3% 70 69.5% 68.
Slide 20: Efficiency: Occupancy
Efficiency: Occupancy Occupancy improvement: o Focus on under-performing units: • Additional doctors • Re-positioning • Capex • Network deals 2007: Bed Occupancy Split 2011: Bed Occupancy Split 10% 22% 22% 19% 19% < 60% 60 - 69% 26% 33% 49% 70 - 79% 80%+ 71% of beds with 45% of beds with occupancy
Slide 21: Efficiency: Administrative
Efficiency: Administrative Systems driven efficiency through our Impilo system: o 5 year program o Patient centric system o Focus on driving: • standardisation • reduction in administrative costs • economies of scale o Provides: o platform for accurate clinical coding o application for pro-active
Slide 22: Efficiency: Administrative
Efficiency: Administrative 2010 2011 2012 2013 2014 1. Impilo Admissions 1. Impilo Case 1. Impilo 1. Impilo Billing 1. Doctor Module Management & Confirmation & Debtors Portal – P.S. Staffing Module – Module Theatre model Centralisation 2. Stock and Booking product Process 1. Patient 1. Standard wor
Slide 23: Efficiency: Administrative
Efficiency: Administrative Multi-touch system: o Real time census management o Removal of dependency on complex tariff knowledge by staff o Remove the delay between patient movements and recording o Remove the whiteboards in wards – patient confidentiality o Remove the reliance on bed-types - map
Slide 24: Efficiency: Administrative
Efficiency: Administrative 55 51 51 50 50 49 Days Payable: 46 46 o Improved product and supplier mix 45 change 42 DSO: 38 38 o Hospital DSO at 34 days. Excluding 40 37 37 35 Coid Hospital DSO at 30 days 35 o Issues regarding government related 30 debt and a disappointing March 27 26 25 25 collec
Slide 25: Efficiency: MHC
Efficiency: MHC Since payment: o MHC management has visited LHC facilities and had detailed meetings with LHC management o LHC has sent the following management teams to MHC: • Finance • Systems • Procurement • Nursing • Business Efficiency o To assist with the integration plan LHC is seconding a
Slide 26: Efficiency: MHC
Efficiency: MHC Since payment: o Focus on MHC leveraging off LHC’s processes, systems and operating model o An integration team is working on the following opportunities: • Management information systems and Financial reporting • Utilising LHC best practices in supply chain management • Focusing o
Slide 27: Efficiency: MHC
Efficiency: MHC MHC has also focused on the following strategic business areas, implementing specific plans and processes: o Quality of Business Processes: • New organization structure for MHC: – Creating bandwidth to cater for the growth in beds, drive efficiency programs and assist with scalabil
Slide 28: Strategic Priorities
Strategic Priorities Growth Efficiency Sustainability Develop the breadth and Continue to enhance Maintain LHC’s depth of LHC’s existing operational efficiencies in commitment to world class hospital network SA and MHC: healthcare Expand our coverage and o occupancy Implement sustainable p
Slide 29: Sustainability: Quality
Sustainability: Quality Outcome Outcome Measure Mar 2012 Mar 2011 Standard Net promoter score 95.5% 94.8% All hospital over 90% Patient incident rate 4.04 4.45 Per 1,000 PPDs VAP (Ventilator Associated Pneumonias) 4.81 7.67 Per 1,000 VAP days SSI (Surgical Site Infections) 0.96 1.02 Per 1,000 theatr
Slide 30: Sustainability: Quality
Sustainability: Quality Clinical Initiatives: o AMI (Acute Myocardial Infarction): • Into the 3rd year of measuring the AMI bundle at our 12 hospitals with cardiac facilities • Rolled out the AMI bundle to 16 feeder hospitals o VTE (Venous thrombolembolism): • Program launched in March • Focusing
Slide 31: Sustainability: Human Capital
Sustainability: Human Capital Doctor Training: o R78 million 6 year program training 60 specialists o Done in coordination with the College of Medicines Nurse Training: o 1,300 nurses in training o Looking to recruit specialised nurses from India in conjunction with MHC Pharmacist training: o
Slide 32: Sustainability: Health Policy
Sustainability: Health Policy Taxation Law Amendment: o Convert medical expense deductions to medical tax credits o Benefit medical scheme members with taxable income of R150,000. ( > 50% of medical scheme members) o Increase the affordability of private healthcare at the low income end of the mar
Slide 33: Agenda
Agenda 1 Group Review Michael Flemming CEO 2 Financial Review Roger Hogarth CFO 3 Future Guidance Michael Flemming CEO Notes 32 LIFE HEALTHCARE UNAUDITED GROUP RESULTS PRESENTATION FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2012
Slide 34: Highlights
Highlights Excellent Good Strong Healthy Normalised Revenue Normalised Profit EPS Growth Ebitda growth conversion growth + 11.7% + 17.5% + 22.4% + 21.9% Revenue : + 11.7 % to R5,271m Operating profit : + 22.4 % to R1,208m Profit before tax : + 23.2% to R1,154m EPS : + 25.1 % to 66.3 cents HEPS : + 2
Slide 35: Financial results
Financial results March March % 2012 2011 Revenue 5,271 4,718 11.7 Normalised EBITDA 1,370 1,166 17.5 Normalised EBITDA margin 26.0% 24.7% H1 Comment Revenue growth - driven by hospitals: o 6.0% increase in PPDs (paid patient days) o 5.2% revenue/ppd increase Normalised EBITDA margin: o Increase
Slide 36: Six year review – 6 months to March
Six year review – 6 months to March Revenue Normalised EBITDA R’000m R’000m CAGR : 11.1% CAGR : 16.1% 5 271 5 271 6 000 1 600 4 718 4 718 1 370 1 400 4 186 4 156 5 000 3 776 3 734 3 517 1 200 3 263 3 110 4 000 2 917 1 000 1,166 9,812 3 000 8,786 800 982 2,548 7,930 865 600 805 2,173 2 000 6,943 6,14
Slide 37: Financial results
Financial results March March % 2012 2011 Revenue 5,271 4,718 11.7 Normalised EBITDA 1,370 1,166 17.5 Normalised EBITDA margin 26.0% 24.7% Operating profit 1,208 987 22.4 Operating profit margin 22.9% 20.9% Profit before tax 1,154 937 23.2 Profit after tax 808 640 26.3 H1 Comment Midmed, previousl
Slide 38: Financial results
Financial results March March % 2012 2011 EPS 66.3 53.0 25.1 • Profit on disposal of investment in business (2.5) (0.4) HEPS 63.8 52.6 • Retirement funds (1.5) (1.5) Normalised EPS 62.3 51.1 21.9 Normalised EPS (excl. Amortisation of intangible assets) 66.2 55.2 19.9 Normalised EPS 80.0 62.3 60.0 51
Slide 39: Financial results - segmental review
Financial results - segmental review March March % 2012 2011 Revenue 5,271 4,718 11.7 Hospital division 4,905 4,393 11.7 Healthcare services 365 324 12.7 Other 1 1 H1 Comment Hospital revenue increased by 11.7% and represents 93% of Group revenue Mental Healthcare and Acute Rehabilitation experi
Slide 40: Financial results - segmental review
Financial results - segmental review March March % 2012 2011 Revenue 5,271 4,718 11.7 Hospital division 4,905 4,393 11.7 Healthcare services 365 324 12.7 Other 1 1 Operating profit before amortisation, profit on disposals and impairment of intangible assets 1,211 1,020 18.7 Hospital division 1,040 8
Slide 41: Cash generated vs normalised EBITDA (H1)
Cash generated vs normalised EBITDA (H1) R’000m 1 200 100% 1,069 83% 90% 79% 78% 1,003 1 000 76% 90% 80% 821 70% 800 73% 673 60% 588 612 600 50% 40% 400 30% 1,565 1,865 1,895 2,233 2,562 20% 200 10% 0 0% 2007 2008 2009 2010 2011 2012 Cash generated from operations (H1) Cash generated as % of normali
Slide 42: Summarised statement of financial position: Assets
Summarised statement of financial position: Assets March Sept March 2012 2011 2011 Non-current assets 7,582 6,775 6,266 PPE 3,791 3,753 3,346 Intangibles 2,242 2,296 2,164 Other 1,549 726 756 Current assets (excl. cash) 1,558 1,293 1,360 Cash 213 400 264 Total Assets 9,353 8,468 7,890 H1 Comment O
Slide 43: Summarised statement of financial position: Equity and liabilities
Summarised statement of financial position: Equity and liabilities March Sept March 2012 2011 2011 Total shareholders equity 4,507 4,385 3,788 Non current liabilities 2,685 2,084 2,292 Interest bearing borrowings 2,213 1,565 1,786 Other non-current liabilities 472 519 506 Current liabilities 2,161 1
Slide 44: Cash distribution
Cash distribution Cents/ Rand % of share million Normalised EBITDA Total 2010 52 542 24.9 Total 2011 85 885 34.7 Interim 2012 45 469 34.2 H1 Comment Dividend based on revised policy as outlined at 2011 Year end results Equates to a cover of 1.47 X normalised earnings excluding amortisation Notes
Slide 45: Agenda
Agenda 1 Group Review Michael Flemming CEO 2 Financial Review Roger Hogarth CFO 3 Future Guidance Michael Flemming CEO Notes 44 LIFE HEALTHCARE UNAUDITED GROUP RESULTS PRESENTATION FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2012
Slide 46: Future Guidance
Future Guidance Growth: o SA • Continued good PPD growth • Hospital occupancy of 70% • Bed growth: – Additional 141 beds in 2012 – Received approvals to add: 300 + beds – Applications pending for: 250 + beds • Total Capex spend of R686 million • Decision on the JMH transaction o India: Focus on th
Slide 47: Questions
Questions Life is an opportunity, benefit from it. Life is beauty, admire it. Life is bliss, taste it. Life is a dream, realise it. Life is a challenge, meet it. Life is a duty, complete it. Life is a game, play it. Life is a promise, fulfill it. Life is sorrow, overcome it. Life is a song, sing it.
Slide 48: Disclaimer
www.lifehealthcare.co.za Disclaimer The information contained in this document is or may constitute unpublished price sensitive information. By accepting this document the recipient undertakes to keep this information confidential and not to disseminate such information to any party/parties not auth
Slide 49: Interim Results
www.lifehealthcare.co.za Interim Results For 6 months ended 31 March 2012 Notes 48 LIFE HEALTHCARE UNAUDITED GROUP RESULTS PRESENTATION FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2012
Slide 50: Funder Industry - Consolidation
Funder Industry - Consolidation 8,500 48.2% 50.0% 43.9% DH / Gems Percentage 45.0% 8,000 39.4% Beneficiaries 40.0% % of Total 7,500 36.0% Beneficiaries belonging 8,316 35.0% 30.5% 8,069 To Discovery 7,875 And GEMs 7,000 7,478 30.0% 7,127 6,500 25.0% 2006 2007 2008 2009 2010 Beneficiaries DH/Gems % 9
Slide 51: South Africa's significant burden of disease
South Africa’s significant burden of disease is significantly higher than other countries Diseases as % of total burden Germany Nearly 40% share of HIV/AIDS in UK total disease burden (very high even USA for developing countries) Indonesia Tuberculosis, influenza and Ghana pneumonia as major cau
Slide 52: Increasing Disease Burden
Increasing Disease Burden Discovery Health membership: • 0.25% of members = 18.5% of total spend • 1.75% of members = 29.5% of total spend Notes 51 LIFE HEALTHCARE UNAUDITED GROUP RESULTS PRESENTATION FOR THE SIX MONTH PERIOD ENDED 31 MARCH 2012
Slide 53: SA population is aging
SA population is aging South African population by age 74+ LHC 2006 2010 70–74 6.7 m 10.4 m 63–73 60–64 53–63 13.6% 19.1% 50–54 % of admissions > 50 years 33% 36% 43–53 40–44 33–43 30–34 25–33 % of revenue from 45% 48% 20–24 15–23 admissions > 50 years 10–14 5–13 0–4 7.0 5.0 3.0 1.0 1.0 3.0 5.0 7.0
Slide 54: Growth International: MHC
Growth International: MHC India re-cap: o Demand side drivers: • Growing middle class and rise in disposable income • Ageing population and increased health awareness • Rapid growth in health insurance • Rapidly changing disease profile o Significant barriers to entry give incumbents a significant
Slide 55: Growth Offshore: India
Growth Offshore: India India: Population: 1,186 billion GDP 2011: 7.9% CPI 2011: 6.8% 10 Year Bond: 9.04% Current account : - 3.1% of GDP Indian Healthcare market Indian healthcare sector currently valued at $62bn Growing at 13% per annum and expected to double by 2015 - $125bn Priva
Slide 56: Growth Offshore: India demand side drivers
Growth Offshore: India demand side drivers Growing middle class and rise in 300 India’s growing middle class disposable income Globals 250 33.1 (>1000) Ageing population and increased health 200 20.4 55.1 Strivers (500- 94.9 1000) Family in mn awareness 150 Seekrs (200- 107.2 106.0 500) Rapid
Slide 57: Growth Offshore: India supply side drivers
Growth Offshore: India supply side drivers Beds per 10,000 people - low India has 9 beds per 10,000 population 160 139 140 Estimated 900,000 bed shortfall 120 100 Significant barriers to entry give 72 83 80 incumbents a significant advantage 60 39 40 31 30 o Long gestation periods for green fi
Slide 58: Notes
Notes 57 LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011
Slide 59: Unaudited Group results and cash dividend for the six months ended 31 March 2012
Growth Efficiency Sustainability Unaudited Group results and cash dividend for the six month period ended 31 March 2012
Slide 60: Group highlights
Group Paid patient days (PPDs): +6,0% Operating profit: +22,4% to R1 208 million Revenue: +11,7% to R5 271 million Normalised earnings per share: +21,9% to 62,3 cents Normalised EBITDA: +17,5% to R1 370 million Interim dividend: 45 cents 1 LIFE HEALTHCARE UNAUDITED GROUP RESULTS PRESENTATION FOR THE
Slide 61: Condensed consolidated statement of comprehensive income
Condensed consolidated statement of comprehensive income 6 months 6 months 12 months 31 March 31 March 30 Sept 2012 Change 2011 2011 R Million Unaudited % Unaudited Audited Revenue 5 271 11,7 4 718 9 812 Other income 50 50 102 Operating expenses (4 144) (3 785) (7 838) (Loss)/Gain on remeasuring of
Slide 62: Condensed consolidated statement of financial position
Condensed consolidated statement of financial position 31 March 31 March 30 Sept 2012 2011 2011 R Million Unaudited Unaudited Audited ASSETS Non-current assets 7 582 6 266 6 775 Property, plant and equipment 3 791 3 346 3 753 Intangible assets 2 242 2 164 2 296 Other non-current assets1 1 549 756 72
Slide 63: Condensed consolidated statement of changes in equity
Condensed consolidated statement of changes in equity for the period ended 31 March 2012 Total capital Non- and controlling Total R Million reserves interest equity Balance at 1 October 2011 3 518 867 4 385 Total comprehensive income for the year 689 117 806 Profit for the year 690 118 808 Other com
Slide 64: Condensed consolidated statement of cash flows
Condensed consolidated statement of cash flows 6 months 6 months 12 months 31 March 31 March 30 Sept 2012 2011 2011 R Million Unaudited Unaudited Audited Cash generated from operations 1 003 1 069 2 562 Tax paid (375) (301) (617) Net cash inflow from operating activities 628 768 1 945 1 Net cash out
Slide 65: Segmental report
Segmental report During the reporting periods all the operating segments operated in Southern Africa and therefore no geographical segments are presented. Assets and liabilities are not reviewed on an individual segment basis but rather on a Group basis and are therefore not presented. There are no
Slide 66: Acquisition and disposal of investments; basis of presentation
Acquisition of investments Increase in ownership interest in subsidiaries as a result of non-controlling interest transactions The Group had a marginal increase in its interest in Little Company of Mary Trust. Acquisition of shareholding in Max Healthcare Institute Limited, India (Max Healthcare) On
Slide 67: Commentary
Commentary Overview Life Healthcare continued to grow during the period under review and is in a healthy financial position to deliver on its strategic objectives of growth, efficiency and sustainability. Activities as measured by hospital paid patient days (PPDs), increased by 6,0% as a result of a
Slide 68: Normalised earnings, dividend, capex and board changes
6 months 6 months 12 months 31 March 31 March 30 Sept 2012 % 2011 2011 R Million Unaudited Change Unaudited Audited Normalised earnings Profit attributable to ordinary equity holders 690 552 1 287 Adjustments (net of tax): Profit on disposal of businesses (27) (3) — Additional receipt on previous di
Slide 69: Directors and corporate information
Executive Directors: CMD Flemming (Chief Executive Officer), RJ Hogarth (Chief Financial Officer) Non-executive Directors: Prof GJ Gerwel (Chairman), MA Brey, FA du Plessis, PJ Golesworthy, KM Gordhan, LM Mojela, TS Munday, JK Netshitenzhe, MP Ngatane, GC Solomon Company Secretary: F Patel Registere
Slide 70: Life quote – Mother Teresa
Life it An rpertany benefit from it. Life U beauty, admire it. Life it bls, taste it. Life it 4 dream, realize it. Life I 4 challenge, meet it. Life i 4 duty, complete it. Life U4 game, play it Life it 4 promise, fulfil it. Life U Sorrow, overcome it. Life 4 Jong, sing it Life it A struggle accept i
Life Healthcare Group Holdings — H1 2012 Earnings Presentation on 6ix