Slide 1: Unaudited Group Results for the Six Months Ended 31 March 2012
Netcare Limited UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2012 1
Slide 2: Agenda
RICHARD FRIEDLAND GROUP CEO Group overview South Africa United Kingdom KEITH GIBSON GROUP CFO Financial review Guidance Agenda 2
Slide 3: Group overview
Group overview 3
Slide 4: Group overview
Group p overview South Africa Ongoing Dedicated focus NHI: Innovative (SA) efficiencies on quality care all hospitals integrated have enhanced yielded improved completed DOH* health model performance outcomes across core standards in Lesotho PPP all divisions and Primary Care fully operational well
Slide 5: Group financial overview
Group p financial overview Revenue R12 654m ▲ 11.1% EBITDA R2 477m ▲ 9.3% Profit before taxation R870m ▲ 15.5% Adjusted HEPS 51.9 cps ▲ 16.1% CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 5
Slide 6: South Africa
South Africa 6
Slide 7: A comprehensive network of healthcare services
A comprehensive p network of healthcare services 2012 EBITDA margin² Hospitals 51 19.6% 18.7% PPP hospitals¹ 5 17.2% 16.5% Primary health facilities 88 Dialysis units 56 E Emergency vehicles hi l 182 Pharmacies 85 Registered beds 9 143 Employees¹ 20 478 H1 2009 H1 2010 H1 2011 H1 2012 1. Includes SA
Slide 8: South Africa
South Africa 31 Mar 31 Mar Rm 2011 2012 % Revenue 6 472 6 983 7.9 Weighted average revenue EBITDA¹ 1 212 1 369 13.0 growth across all service lines Operating profit¹ 1 021 1 145 12.1 ▲ 13.0% in EBITDA and ▲90 bps in EBITDA margin due to EBITDA margin (%) 18.7 19.6 g operating continuing p g leverage
Slide 9: SA Hospitals and Emergency services
SA Hospitals p and Emergency g y services 31 Mar 31 Mar Rm 2011 2012 % • Netcare Hospital division has the highest complexity network Revenue 5 844 6 327 8.3 • 91 beds added in H1 2012 EBITDA¹ 1 191 1 324 11.2 • ▲ 1.8% in patient days • ▲ 5.6% g gross revenue pper Operating profit¹ 1 013 1 114 10.0
Slide 10: Primary Care
Primary y Care 31 Mar 31 Mar Rm 2011 2012 % Revenue 628 656 4.5 >1.5 million patient visits >140 000 managed care lives EBITDA* 21 45 114.3 >875 000 scripts, ▲ 9.5% Operating profit* 8 31 287.5 EBITDA growth and margin improvement due to: EBITDA margin (%) 3.3 6.9 • continuingg efficiencies Operatin
Slide 11: Primary Care: continued improvement
Primary y Care: continued improvement p EBITDA* (Rm) 60 Medicross and Prime Cure comprise the largest private national network of GP group 40 45 practices with 557 doctors and dentists Primary care increasingly more 20 21 important in the delivery of sustainable and affordable healthcare 6 0 (16) Pr
Slide 12: Significant improvement in quality KPIs (October 2011)
Significant g improvement p in quality q y KPIs Better Less than On than October 2011 expected target expected Prevention of Healthcare Associated Infections • Ventilator Associated Pneumonia (VAP) • Surgical g Site Infection ((SSI)) • Central Line Associated Blood Stream Infection (CLABSI) • Cathet
Slide 13: Significant improvement in quality KPIs (March 2012)
Significant g improvement p in quality q y KPIs Better Less Enhanced performance over 6 months than On than March 2012 expected target expected Prevention of Healthcare Associated Infections • Ventilator Associated Pneumonia (VAP) • Surgical g Site Infection ((SSI)) • Central Line Associated Blood S
Slide 14: Health reform: NHI pilots move forward
Health reform NHI pilots In preparation for Inflation² a significant NHI, all hospitals 20.7 20.9 move forward completed 18 2 18.2 White paper National DOH¹ imminent core standards assessment 13.0 12.3 10.3 Netcare’s Competition Hospital 9.3 9.2 diversified Commission price inflation 7.0 health serv
Slide 15: Focus areas over the next 18 months
Focus areas over the next 18 months Concerted focus Procurement Integrating 85 Brownfield on shared efficiencies Hospital and expansion services including through Medicross projects: S SAP rollout standardisation off pharmacy H2 2012: 68 beds completion product portfolio operations into a 2013: 117
Slide 16: United Kingdom
13112607 | F fgets : PAGE 2 Delivery | United Kingdom i718 Healthcare THE CONSULTANTS’ CHOICE
Slide 17: Business overview
Business overview Macro economic Continued Decline in environment recovery in private medical remains very Self-pay insurance (PMI) challenging and strong beginning to slow NHS demand EBITDA margin Strong Senior impacted by working capital management payor mix management team further and record cash
Slide 18: UK income statement
UK income statement 31 Mar 31 Mar £m 2011 2012 % Revenue 445.8 456.8 2.5 ▲ 3.2% in inpatient and day case admissions EBITDA before items below 94.4 92.8 ((1.7)) EBITDA impacted i t dbby iincreased d Profit on disposal of property 4.4 mix of NHS vs. private patients Other non-recurring items (4.3) (4
Slide 19: UK income statement: H1 segmental analysis
UK income statement: H1 segmental g analysis y Consolidation £m OpCo PropCo journals WholeCo Revenue 456.8 66.7 (66.7) 456.8 EBITDAR 99.1 66.5 (66.7) 98.9 Rentals - External (10.2) (10.2) - Internal (66.7) 66.7 EBITDA 22.2 66.5 88.7 Depreciation and amortisation (21.7) (13.3) (35.0) Operating p g pr
Slide 20: Funder mix continues to be impacted by economy
Funder mix continues to be impacted p by y economy y Caseload* • ▲ 18.0% in NHS cases • NHS represents 27.3% of overall caseload (2011: 23.7%) • Largest independent provider under Choose and Book • ▲ 7.8% in Self-pay cases • Self-pay continues to recover off a low base driven by NHS waiting lists •
Slide 21: UK health reform
UK health reform Patient Choice As a result, Fiscal constraints NHS £20bn introduced private sector in UK impacting productivity in 2007 playing an on NHS delivery, improvement now entrenched increasing role creating challenge remains in the delivery opportunity for of public health independent sect
Slide 22: Financial review
Financial review 22
Slide 23: Factors influencing results
Factors influencing g results Exchange g • Average g exchange g rate of R12.42 ((2011: R11.02)) rate • Closing rate of R12.25 (March 2011: R10.85; September 2011: R12.54) Interest rate • Ineffective portion of UK interest rate swaps: non-cash flow charge of swaps R100m (£8.1 m) (2011: R60m (£5.4m))
Slide 24: Summarised Group income statement
Summarised Group p income statement 31 Mar 31 Mar Growth in both geographies Rm 2011 2012 % Revenue 11 392 12 654 11.1 • 11.9% ▲ SA EBITDA 2 266 2 477 • Lower UK results softened by currency impact Operating profit 1 698 1 818 7.1 • 2011 R47m profit on sale of UK property Net financial expenses (948
Slide 25: Constant currency performance
Constant currency ypperformance Revenue Operating profit Net interest expense 630 70 89 5 041 595 716 4 920 668 693 1 153 1 030 6 472 6 983 162 98 2011 2012 2011 2012 2011 2012 SA UK Exchange rate CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 25
Slide 26: Headline earnings per share
Headline earnings g per p share Headline earnings per share (cents) 31 Mar 31 Mar 52.8 Cents per share 2011 2012 % 48.0 Headline earnings 41.5 48.0 52.8 10.0 per share Adjusted* headline 44.7 51.9 16.1 earnings per share SA 46.3 54.8 18.4 UK (1.6) (2.9) (81.3) H1 2010 H1 2011 H1 2012 * Adjusted to e
Slide 27: Summarised statement of financial position
Summarised statement of financial position p 31 Sep 31 Mar Forex Rm 2011 2012 effect Movement Assets PPE*, goodwill and 41 816 40 914 (808) (94) g intangible assets Other non-current assets 2 662 2 991 (99) 428 Current assets 6 186 6 401 (83) 298 Total assets 50 664 50 306 (990) 632 • Acquisition of
Slide 28: Movement in Group PPE and intangible assets
Movement in Group p PPE* and intangible g assets Rm 577 41 816 (659) (12) 40 914 (808) Sep 2011 Additions Depreciation Disposals Exchange rate Mar 2012 and amortisation and other impact * Property, plant and equipment CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 28
Slide 29: Acquisition of economic interest in UK OpCo debt
Acquisition q of economic interest in UK OpCo p debt Key figures £m Rm Face value 64.7 827 • Total OpCo gross debt £230.5m Cash outlay 45.5 582 • 29.7% 29 7% discount to face value Discount on purchase of interest 19.2 245 • Economic benefit to Netcare to H1 3.8 48 be recognised g in financial H2 (e
Slide 30: Group borrowings at 31 March 2012
Group p borrowings g at 31 March 2012 Gross Net borrowings Net cash borrowings Facility utilisation UK (£m) 1 899.5 (123.1) 1 776.4 123 UK UK ((Rm)) 23 264 ((1 508)) 21 756 39 (£ ) (£m) SA (Rm) 4 312 (94) 4 218 Group (Rm) 27 576 (1 602) 25 974 1 872 31 Mar 31 Mar 4 441 Cost of debt (%) 2011 2012 SA
Slide 31: SA gross debt
SA g gross debt 31 Mar 30 Sep 31 Mar Rm 2011 2011 2012 DMTN 1 910 3 180 4 039 R1bn 3-year amortising note raised January 2012 Preference shares 42 34 22 Convertible bond 1 445 Maintained GCR rating (Jan 2012) - A Long-term Long-term bank debt 509 257 251 - A1 Short-term G Gross debt d bt 3 906 3 471
Slide 32: UK gross debt
UK g gross debt 31 Mar 30 Sep 31 Mar £m 2011 2011 2012 OpCo 244.0 237.9 230.5 All bank covenants satisfied Transform 20.3 20.2 20.2 • All UK debt is non-recourse to PropCo 1 1 595.8 1 585.8 1 574.6 SA operations PropCo 2 67.3 47.5 46.6 • The 4 categories of debt are ring-fenced from each other 1 927
Slide 33: UK debt
UK debt £m PropCo 1 PropCo 2 OpCo Transform Debt 1 574.6 46.6 230.5 20.2 Cash (0.4) (3.2) (119.1) (0.4) • Reduction R d ti in i OpCo O C nett debt d bt off Net debt 1 574.2 43.4 111.4 19.8 £46.5m during last 12 months Swap liability 414.9 5.2 12.0 0.4 • October 2013 debt maturity %d debt bt att fi f
Slide 34: Working capital
Working g capital p 31 Mar 31 Mar 2011 2012 Movement SA (Rm) • Hospital debtors 25.5 days (Mar 2011: 25.8 days) Inventories 427 487 (60) excluding COID* • Marginal timing impact of period Trade and other receivables 1 757 1 870 (113) close falling over weekend Trade and other payables (1 777) (1 850
Slide 35: Dividends
Dividends Distributions determined after having regard for: 31 • Enhanced earnings • HPFL BEE shareholder requirements • SA credit/financial markets • New dividend withholding g tax of 15% • SA leverage ratios 22 22 • De-gearing benefits • Working W ki ttowards d sustainable t i bl didividend id d c
Slide 36: Guidance
Guidance ‘You're In safe hands
Slide 37: Guidance 2012
Guidance 2012 South Africa Estimated Continued focus Capex ±R1bn revenue growth on efficiencies upper single digit and cost reductions United Kingdom Challenging Continued Capex <£50m trading conditions softness expected in PMI market t continue to ti CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION
Slide 38: Disclaimer
Disclaimer Netcare has acted in good faith and has made every reasonable effort to ensure the accuracy and completeness of the information contained in this presentation, including all information that may be b ddefined fi d as 'f'forward-looking d l ki statements'. t t t ' Forward-looking statement