Slide 1: Unaudited Group interim results for the six months ended 31 March 2010
Unaudited Group interim results for the six months ended 31 March 2010 Richard Friedland | Group CEO Vaughan Firman | Group CFO
Slide 2: Note regarding forward-looking statements
Netcare Limited committed to our values Note regarding forward-looking statements The Company advises investors that any forward-looking statements or projections made by the Company, Company including those made in these presentations, are subject to risk and uncertainties that may cause actual res
Slide 3: Presentation outline
Presentation outline Group South Africa United Financial Guidance highlights (SA) Kingdom (UK) review CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 3
Slide 4: Group highlights
Group highlights CARE| DIGNITY | TRUTH | PARTICIPATION | PASSION
Slide 5: Group highlights
Group highlights Results Improved overall Basic EPS significantly performance in from continuing impacted by both SA and UK operations appreciation up 49% of the Rand Continued Maintained top 19% increase in expansion position as most capital reduction of UK network empowered of 19 cents company in
Slide 6: Group financial highlights
Group financial highlights Constant 31 Mar 31 Mar currency Rm 2009 2010 % %* Revenue 11 619 11 038 (5,0) 4,9 Impact of currency conversion: EBITDA 2 474 2 400 (3,0) 9,7 O Operating ti profit fit 1 822 1 843 12 1,2 13 7 13,7 Negative swing of: • 9,9% on revenue Operating profit margin (%) 15,7 16,7 •
Slide 7: South Africa (SA)
South Africa (SA) Financial and operating review CARE | DIGNITY| TRUTH | PARTICIPATION | PASSION
Slide 8: Business overview
Business overview Continued growth Turnaround in Improved in SA hospitals performance from performance and due to strong Primary care and positive earnings underlying Netcare 911 contribution from demand for associates private healthcare Commenced Continued Netcare operations in capital investment E
Slide 9: Continued progress on transformation
Continued progress on transformation Empowerdex Empowerdex rating rating Element Weight 2008/2009 2009/2010 Ownership 20 17,04 16,81 • Maintained number 1 ranking as most empowered company in Management g control 10 6,25 6,25 the JSE healthcare sector* • Ranked 13th in Overall category Employment eq
Slide 10: SA – financial highlights
SA – financial highlights 31 Mar 31 Mar Rm 2009 2010 % Revenue 5 616 6 014 7,1 Revenue growth in Hospitals and Emergency services offset by EBITDA 927 1 035 11,7 reduction in Primary care revenue O Operating ti profit fit 756 849 12 3 12,3 EBITDA growth due to: Capital expenditure 293 270 (7,8) • Op
Slide 11: SA Hospitals and Emergency services
SA Hospitals and Emergency services 77 new beds First neuro- Rollout of commissioned interventional third stage of and several MRI and CT SAP IT system new facilities theatre in Africa commenced opened within existing hospitals 5,3% growth in Netcare 911’s Hospitals and Netcare 911 aeromedical Netca
Slide 12: SA Hospitals and Emergency services – financial highlights
SA Hospitals and Emergency services – financial highlights 31 Mar 31 Mar Rm 2009 2010 % Revenue 4 873 5 336 9,5 Hospitals maintained patient days off a high base with a 10,2% EBITDA 943 1 029 9,1 increase in revenue per patient day O Operating ti profit fit 781 854 93 9,3 Operational efficiencies in
Slide 13: Primary care
Primary care Prime Cure Improvement of Managed care Reduction operating platform lives reduced in risk profile and risk to 172 000 – with full risk now management decrease of 28 28,4% 4% contributing 36% (from 59%) Medicross Significant Refurbishment Rollout of new improvement programme practice in
Slide 14: Primary care – financial highlights
Primary care – financial highlights 31 Mar 31 Mar Rm 2009 2010 % Decrease in revenue due to Revenue 743 678 ((8,7)) reduction in managed care lives and cancellation of loss-making EBITDA (16) 6 contracts EBITDA increased due d e to: to Operating profit (25) (5) • Improved operational efficiencies •
Slide 15: Primary care operating environment 2010
Primary care operating environment 2010 Change in risk profile 40% 41% 48% 64% 90% 60% 59% 52% 36% 10% FY 2006 FY 2007 FY 2008 FY 2009 H1 2010 Full risk Primary and secondary risk CARE | DIGNITY| TRUTH | PARTICIPATION | PASSION 15
Slide 16: Looking forward – a strong vote of confidence in South Africa!
Looking forward – a strong vote of confidence in South Africa! Over and above planned • New Waterfall Hospital As a result, capital expenditure, › 132 beds, 8 theatres capex for 2010 will an additional R670m • 12 large projects increase from R800m to be invested in › 295 new beds to R950m expansion
Slide 17: Likotsi Clinic, Lesotho PPP - before
Likotsi Clinic, Clinic Lesotho PPP - before CARE | DIGNITY| TRUTH | PARTICIPATION | PASSION 17
Slide 18: Likotsi Clinic, Lesotho PPP - after
Likotsi Clinic, Clinic Lesotho PPP - after CARE | DIGNITY| TRUTH | PARTICIPATION | PASSION 18
Slide 19: Waterfall Hospital, Midrand
Waterfall Hospital, Midrand CARE | DIGNITY| TRUTH | PARTICIPATION | PASSION 19
Slide 20: United Kingdom (UK)
United Kingdom (UK) Financial and operating review
Slide 21: Geographical coverage
Geographical coverage 3 new sites added to portfolio, increasing GHG’s national coverage to 70 2006/07 48 existing BMI hospitals & 4 Care fertility clinics 2006/07 3 Netcare UK sites (1 closed 2009) 2007/08 8 sites added: 7 Nuffield, Oxford Clinic 2008/09 5 sites added: • Woodlands Private Hospital
Slide 22: The UK's number 1 independent healthcare provider
The UK’s number 1 independent healthcare provider 13% 28% BMI Healthcare Spire Healthcare 12% Nuffield Hospitals HCA Healthcare 10% Ramsay Health Care UK 17% NHS Private Patient Units 7% Other 13% UK iindependent d d th hospital it l sector t - market k t share h (b (beds) d ) Source: Healthcare Mar
Slide 23: Business overview
Business overview Challenging Revenue Efficiency market conditions growth of 2,8% programmes of higher and reported remain on track, unemployment EBITDA growth margin improved and little to no of 8,3% by 0,1ppt inflation NHS volumes All debt covenants Given volatile growing strongly met with suffici
Slide 24: UK income statement
UK income statement 31 Mar 31 Mar £m 2009 2010 % Revenue 407,4 418,7 2,8 Volume up 2,6%, driven by NHS EBITDA before items below 109,4 113,0 3,3 growth N Non-recurring i and d capital it l it items (3 6) (3,6) 16 1,6 Boosted by £3,7m capital gain on Reported EBITDA 105,8 114,6 8,3 bargain purchase o
Slide 25: Growth trajectory – GHG (WholeCo)
Growth trajectory – GHG (WholeCo) Revenue (£m) EBITDA (£m) EBITDA margin (%) 303 337 376 407 419 79 87 99 109 113 22,6 25,8 26,3 26,9 27,0 H1 06* H1 07 H1 08 H1 09 H1 10 H1 06* H1 07 H1 08 H1 09 H1 10 FY 06 H1 07 H1 08 H1 09 H1 10 * Pro-forma numbers prior to Netcare acquisition of GHG in May 2006 C
Slide 26: GHG leveraged growth
GHG leveraged growth OpCo# revenue (£m) OpCo# EBITDA (£m) PropCo rent (£m) 303 330 358 398 405 24 31 34 40 43 55 56 59 63 65 H1 06* H1 07 H1 08 H1 09 H1 10 H1 06* H1 07 H1 08 H1 09 H1 10 H1 06* H1 07 H1 08 H1 09 H1 10 Operating business achieved >15% annual growth in EBITDA # Excluding Netcare UK ^
Slide 27: Caseload continues to grow organically and from acquisitions
Caseload continues to grow organically and from acquisitions Caseload by payor (inpatients and day cases) Overall increase of 2,6% 140 • 1,5% 1 5% organic growth in the 105 period • Insured volumes marginally down due to snow effect 70 • Self pay volumes down versus last year, but showing signs of r
Slide 28: Outlook for caseload
Outlook for caseload Caseload by payor grouping is tracking in line with expectations Previous Next H1 Thereafter 12 months 12 months • Short term pressure due to level of UK unemployment sured • Demographics g of UK and fiscal Ins constraints on NHS expected to drive future PMI growth • Decline has
Slide 29: Looking forward – strengthening the business and consolidating acquisitions
Looking forward – strengthening the business and consolidating acquisitions i iti Continued focus on Driving g improved Lookingg to working capital, patient care and quality engage with the new streamlining internal of outcomes government in providing processes & efficiencies solutions to expected a
Slide 30: Financial review
Financial review
Slide 31: Exchange rate impact – no currency hedging
Exchange rate impact – no currency hedging Strengthened R/₤ exchange rate 20 GHG acquisition May 2006 Mar 2009 Sep 2009 Mar 2010 18 R11,73 R13,64 R11,95 R11,03 16 14 12 10 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar 2006 2007 2008 2009 2010 CARE | DIGNITY | TRUTH | PARTICIPAT
Slide 32: SA interest rate trends
SA interest rate trends 16 14 Prime rate decrease from 12 15,5% to 10,0% 10 8 6 Sep 2006 Sep 2007 Sep 2008 Sep 2009 Mar 2010 3m Jibar Prime rate CARE | DIGNITY | TRUTH | PARTICIPATION| PASSION 32
Slide 33: Geographic contributions
Geographic contributions Revenue EBITDA Net interest paid HEPS 54% 4% 46% 57% 43% 21% 79% 9% 13% 87% 48%* 52%* 63%* 37%* SA UK * H1 2009 CARE | DIGNITY | TRUTH | PARTICIPATION| PASSION 33
Slide 34: Revenue analysis
Revenue analysis Actual rates (Rm) Constant rates (Rm) Total Total Total Total 12 184 11 619 11 619 11 038 6 003 6 003 6 170 5 024 743 678 743 678 4 873 5 336 4 873 5 336 H1 2009 H1 2010 H1 2009 H1 2010 Hospitals and Emergency services Primary Care UK CARE | DIGNITY | TRUTH | PARTICIPATION| PASSION
Slide 35: Operating profit analysis
Operating profit analysis Actual rates (Rm) Constant rates (Rm) Total Total Total Total 2 072 1 822 1 843 1 822 1 222 1 067 993 1 067 755 850 755 850 H1 2009 H1 2010 H1 2009 H1 2010 SA UK CARE | DIGNITY | TRUTH | PARTICIPATION| PASSION 35
Slide 36: Interest rate analysis
Interest rate analysis Actual rates (Rm) Constant rates (Rm) Total 1 251 Total 1 251 Total Total 1 326 975 979 979 775 952 272 200 272 200 H1 2009 H1 2010 H1 2009 H1 2010 SA UK CARE | DIGNITY | TRUTH | PARTICIPATION| PASSION 36
Slide 37: Summarised Group income statement
Summarised Group income statement 31 Mar 31 Mar Rm 2009 2010 % Revenue 11 619 11 038 (5,0) • Both geographies delivered improved margins Operating profit 1 822 1 843 1,2 • 13,7% increase in constant currency N t financial Net fi i l expenses (1 252) (1 005) 19 7 19,7 • Including R36m (₤3m) charge At
Slide 38: Headline earnings per share
Headline earnings per share Basic HEPS (Cents) 31 Mar 31 Mar Cents 2009 2010 % SA 29 8 29,8 35 9 35,9 20 5 20,5 UK 3,6 8,3 130,6 Adjusted HEPS¹² 33,4 44,2 32,3 33,3 41,5 42,8 44,2 H1 2009 H1 2010 H1 2010 H1 2010 Actual Constant Constant¹ Adjusted ² Adjusted¹ 1. Calculated at constant exchange rates
Slide 39: Headline earnings trend and capital reduction per share
Headline earnings trend and capital reduction per share Cents • Capital reduction of 19,0 cents per share Compound growth rates • HEPS 32% • SA HEPS 26% 23,7 22,7 33,3 29,8 41,5 35,9 H1 2008 H1 2009 H1 2010 HEPS SA HEPS CARE | DIGNITY | TRUTH | PARTICIPATION| PASSION 39
Slide 40: Summarised statement of financial position | assets
Summarised statement of financial position | assets 30 Sep 31 Mar Forex Other Rm 2009 2010 effect movement Non-current assets 41 043 38 332 (2 684) (27) Capex of R270m in SA and R153m in UK, offset by PPE 25 097 23 538 (1 537) (22) depreciation Goodwill G d ill and d iintangible t ibl 14 669 13 572
Slide 41: Summarised statement of financial position | equity and liabilities
Summarised statement of financial position | equity and liabilities 30 Sep 31 Mar Forex Other Rm 2009 2010 effect movement Total shareholders' Increase due to profit for the 7 133 6 997 (400) 264 equity period of R669m, offset by capital reduction of R279m Non-current liabilities 33 720 31 415 (2 34
Slide 42: Group debt
Group debt Gross debt at 31 Mar 2010 Geographic split of gross debt at 31 Mar 2010 Facilities Utilised UK debt (£m) 1 988 1 937 UK debt d b (Rm) (R ) 21 921 21 370 16% SA debt (Rm) 5 803 4 164 Group net debt (Rm) 27 724 25 534 Cost of debt (%) 31 Mar 31 Mar 84% 2009 2010 UK debt 6,5 6,4 SA debt 9,5
Slide 43: SA debt position
SA debt position Gross debt Mar Mar Cost Rm 2009 2010 % 55% of debt hedged at Mar 2010 (30 Sep 2009: 56%) Convertible bonds¹ 1 568 1 510 6,0 DMTN 1 969 2 210 9,1 Preference shares 471 258 8,7 Cost of debt decreased from 8,1% at 30 Sep 2009 to 8,0% Other debt 548 186 11,2 due to decrease in interest
Slide 44: Strengthening Netcare balance sheet by lengthening tenor of SA debt
Strengthening Netcare balance sheet by lengthening tenor of SA debt 31 Mar 2010 Planned post Mar 2010 25% 68% 1% 31% 44% 31% <1 year 1 - 2 years >2 years CARE | DIGNITY | TRUTH | PARTICIPATION| PASSION 44
Slide 45: UK debt position
UK debt position UK OpCo PropCo 1 PropCo 2 58 hospitals 36 hospital properties 8 hospital properties • £239m gross debt • £1 614m gross debt • £80m gross debt • 84% fi fixedd@77,7% 7% • 100% fixed fi d @ 6,3% 6 3% • 100% fixed fi d @ 66,9% 9% • Interest: £8m (6 months) • Interest: £54m (6 months) •
Slide 46: UK debt covenants – headroom
UK debt covenants – headroom OpCo (£m) PropCo (£m) 100 50 80 40 60 30 40 20 20 10 0 0 H1 2009 H2 2009 H1 2010 H1 2009 H2 2009 H1 2010 Cash cover - cashflow headroom Interest cover* Interest cover - EBITDA headroom Rent cover - EBITDA headroom Leverage - EBITDA headroom Capex - capex spent headroom *
Slide 47: Repayment of UK debt
Repayment of UK debt UK (£m) Thereafter consists of: • PropCo 1 - Oct 2013 £1 535m • PropCo 2 - Feb 2015 £73m • OpCo facility A - Oct 2013 £7m • OpCo facility B - Oct 2014 £80m • OpCo facility C - Oct 2015 £80m • Capex facility - Oct 2013 £20m 20 27 34 43 1 795 FY 2010 FY 2011 FY 2012 FY 2013 Therea
Slide 48: Interest rate swaps
Interest rate swaps Net derivative instruments - liability 30 Sep 31 Mar Rm 2009 2010 Change Recognised in: Net interest rate swaps (UK) 2 771 2 712 59 • Equity Net interest rate swaps (SA) 26 27 (1) ((hedged g p portion)) R23m • Income statement Total 2 797 2 739 58 (ineffective portion) R36m Movem
Slide 49: Working capital
Working capital 31 Mar 31 Mar Movement 2009 2010 Increased stock for Easter period SA (Rm) Inventories 356 437 81 Hospital debtors’ days increased to 38 38,4 4 from 37 37,1 1 days due to T d and Trade d other h receivables i bl 1 931 2 024 93 COID,* offset by improvements Trade and other payables (1
Slide 50: Cash generation
Cash generation Rm 78,9%¹ 72,3%¹ 72,2%¹ 1 579 2 186 1 788 2 474 1 894 2 400 H1 2008 H1 2009 H1 2010 Cash generated from operations EBITDA 1. Cash conversion to EBITDA ratio CARE | DIGNITY | TRUTH | PARTICIPATION| PASSION 50
Slide 51: Guidance 2010
Guidance 2010
Slide 52: Guidance 2010
Guidance 2010 SA UK Revenue Estimating revenue growth Estimating flat revenue growth growth between 7% and 10% Operating Expecting improvement Expecting to maintain efficiencies in EBITDA margins 17% to 18% EBITDA margins Capital Estimating R950m Estimating £50m expenditure Unchanged Revised CARE |
Slide 53: Unaudited Group interim results for the six months ended 31 March 2010
Unaudited Group interim results for the six months ended 31 March 2010 Richard Friedland | Group CEO Vaughan Firman | Group CFO