Slide 1: Results presentation for the year ended 30 September 2014
care helping for the health of humankind Netcare Limited 2014 RESULTS pRESENTATION for the year ended 30 September 2014
Slide 2: Audited group results for the year ended 30 September 2014
Netcare Limited AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2014 40 Netcare Limited Results presentation for the year ended 30 September 2014
Slide 3: Group overview, South Africa, United Kingdom, Financial review, Guidance
Group overview South Africa United Kingdom Financial review Guidance CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 2 Netcare Limited Results presentation for the year ended 30 September 2014 41
Slide 4: Group overview
Group overview CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 3 42 Netcare Limited Results presentation for the year ended 30 September 2014
Slide 5: Group | A comprehensive network of healthcare services
Group | A comprehensive network of healthcare services SA Hospitals 50 Public Private Partnership hospitals 4 Hospital beds 9 424 Primary healthcare facilities 87 Renal dialysis facilities¹ 58 Emergency bases/sites 86 Retail pharmacies 83 Netcare training colleges² 7 UK Hospitals 57 Hospital beds 2
Slide 6: Group | Overview
Group | Overview South Africa Strong demand Ongoing focus Concerted Growth (SA) for private on operational commitment of all divisions healthcare rationalisation to clinical remains an services and efficiency excellence and ongoing priority sustainability United Kingdom Recovery Uncertainty Jill Wat
Slide 7: Group | Financial overview
Group | Financial overview Revenue (%) Adjusted HEPS (%) 45 49 4 Revenue R31 783m ▲16.1% EBITDA R6 868m ▲18.3% (before GHG PropCo rent)¹ Adjusted HEPS 167.8cents ▲19.5% Final dividend 48.0 cents ▲18.5% 55 51 100 96 2013 2014 2013 2014 SA UK 1. Excluding 2013 profit on deconsolidation of GHG Property
Slide 8: Group | Quality strategy underpins results
Group | Quality strategy underpins results 85% 87% 90% Overall rating of Netcare SA BMI friends and family test – Patients and family satisfaction hospital services by patients recommend service score rate at Lesotho Queen ‘Mamohato Memorial Hospital 0.09 Best patient 23% Central line infection rate
Slide 9: Group | Governance and Sustainability strategy underpins results
Group | Governance and Sustainability strategy underpins results JSE SRI Index¹ - Dow Jones Dow Jones Carbon Signatory to one of the 6 Sustainability Sustainability Disclosure UN Global top performers Emerging World Index Project and Compact out of 157 Market Index Water companies Disclosure Project
Slide 10: South Africa
South Africa CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 9 48 Netcare Limited Results presentation for the year ended 30 September 2014
Slide 11: SA | Business update
SA | Business update Strong Increased Excellent Comprehensive performance capacity operational submissions across all utilisation leverage made to divisions Competition Commission CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 10 Netcare Limited Results presentation for the year ended 30 September
Slide 12: SA | Financials
SA | Financials 30 Sep 30 Sep Rm 2013 2014 % Revenue 15 147 16 273 7.4 Growth in Hospital and Emergency Services offset by EBITDA¹ 3 170 3 599 13.5 decline in Primary Care revenue Operating profit¹ 2 692 3 112 15.6 Margin enhancement reflecting operational leverage, process EBITDA margin (%) 20.9 22
Slide 13: SA | Business update | Hospitals and Emergency Services
SA | Business update | Hospitals and Emergency Services Revenue Full week Operating Commissioned Strong growth occupancy leverage 89 new beds future growth largely organic improved and efficiency and converted 65 pipeline by 1.5% initiatives beds to 68.9% continue to to higher demand deliver benefit
Slide 14: SA | Hospitals and Emergency Services
SA | Hospitals and Emergency Services 30 Sep 30 Sep Rm 2013 2014 % Revenue 13 984 15 171 8.5 • ▲2.6%² patient days • ▲6.7% revenue per patient day EBITDA¹ 3 087 3 501 13.4 due to higher mix of complex cases Operating profit¹ 2 643 3 047 15.3 • Price inflation of 5.6% EBITDA margin (%) 22.1 23.1 Marg
Slide 15: SA | Primary Care
SA | Primary Care 30 Sep 30 Sep Rm 2013 2014 % Revenue 1 163 1 102 (5.2) • 87 primary healthcare clinics • 36 pharmacies EBITDA¹ 83 98 18.1 • 13 day theatres Operating profit¹ 49 65 32.7 Transition of Prime Cure to a managed healthcare EBITDA margin (%) 7.1 8.9 administration model complete Operatin
Slide 16: SA | 2014 investment in hospital portfolio
SA | 2014 investment in hospital portfolio Expansion Upgrades Netcare Blaauwberg 17 beds Netcare Bougainville Doctor suites Netcare Pelonomi 46 beds Netcare Cuyler General upgrade Netcare Rehabilitation 7 beds Netcare Femina Ward, theatres Netcare St Anne’s 15 beds Netcare Greenacres Cath lab¹ Netca
Slide 17: SA | R2bn investment in future growth pipeline
SA | R2bn investment in future growth pipeline Future expansion Netcare Polokwane Committed plans to add 510 beds in 2015: Greenfield 270 beds • Netcare Polokwane • Netcare Pinehaven Acquisition – Ceres Private Hospital¹ 28 beds Netcare Pinehaven Brownfield 212 beds Relocation: Netcare Christiaan Ba
Slide 18: Netcare Polokwane Hospital
Netcare Polokwane Hospital CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 17 56 Netcare Limited Results presentation for the year ended 30 September 2014
Slide 19: Netcare Pinehaven Hospital
Netcare Pinehaven Hospital CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 18 Netcare Limited Results presentation for the year ended 30 September 2014 57
Slide 20: SA | Investment in leading edge health technology
SA | Investment in leading edge health technology da Vinci robots First high First minimally Polymeric BVS¹ 200th heart installed at definition (HD 3D) invasive surgery for coronary transplant at Netcare Waterfall laparoscopic for repairing artery disease at Netcare and Netcare surgery at heart valv
Slide 21: SA | Driving a comprehensive approach to sustainability
SA | Driving a comprehensive approach to sustainability Strategy to reduce energy utilisation kWh (millions) Value (Rm) Electricity costs Electricity costs and instability escalated 160% of supply are since 2009, a major risk power outages to hospital >doubled operations in past year Secured 35 hosp
Slide 22: SA | Sustainability
SA | Sustainability 2014 electricity cost per bed | R23 000 per bed = R1 000 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 21 60 Netcare Limited Results presentation for the year ended 30 September 2014
Slide 23: SA | Sustainability
SA | Sustainability 2024 forecast electricity cost per bed pre energy savings | R46 000 per bed¹ = R1 000 1. Estimated Eskom tariff increase of 8% per annum until 2018 and 6% thereafter CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 22 Netcare Limited Results presentation for the year ended 30 Sep
Slide 24: SA | Sustainability
SA | Sustainability 2024 forecast electricity cost per bed post energy savings | R29 000 (R17 000 per bed savings) = R1 000 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 23 62 Netcare Limited Results presentation for the year ended 30 September 2014
Slide 25: SA | Quality: Embedding a culture of continuous improvement
SA | Quality: Embedding a culture of continuous improvement Weighting for quality measures 35% on executive balanced scorecards Quality measures across Frontline leaders trained in 307 >1500 all Netcare SA divisions quality improvement (QI) science in 2014 Measures improved 74% Physician Advisory Bo
Slide 26: SA | Playing a leading role in the local response to the Ebola pandemic
SA | Playing a leading role in the local response to the Ebola pandemic Globally 15 145 Policies and Close cases reported. procedures, co-operation 5 420 deaths. training, with SA DoH², Fatality rate 36%¹ specialised NICD³ and (no cases to date equipment and SA Military in SA) isolation facilities M
Slide 27: SA | Accolades achieved in 2014
SA | Accolades achieved in 2014 Service Best Best Top excellence hospital hospital Employer Ask Afrika Netcare Netcare Pretoria Top Employers Orange Index St Augustine’s East Hospital, Institute award for private Hospital, Pretoria Rekord award in hospitals in SA Daily News healthcare Your Choice se
Slide 28: SA | Regulatory: Independent research informing Competition Commission submissions
SA | Regulatory Comprehensive independent research informing Netcare’s submissions to Competition Commission Hospital expenditure, 2000 – 2013 Membership growth 15.4% 41% Utilisation growth 25.6% Utilisation impact Real price increase 8.2% 59% CPI 50.8% Price impact 00 01 02 03 04 05 06 07 08 09 10
Slide 29: United Kingdom
United Kingdom CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 28 Netcare Limited Results presentation for the year ended 30 September 2014 67
Slide 30: UK | Business update
UK | Business update Good Focus on quality, NHS contracting performance growing higher systematically in a challenging acuity service increased market lines and due to capacity operational constraints and efficiencies efficiency needs NHS volume Clinical staff Exited 4 sites growth offsets vacancies
Slide 31: UK | BMI OpCo
UK | BMI OpCo 30 Sep 30 Sep £m 2013 2014 % Revenue 847.9 886.2 4.5 • Inpatient and day case volumes broadly flat EBITDA (before GHG PropCo rent and items below)¹ 184.0 194.0 5.4 › ▲9.8% NHS caseload › Challenges in private demand GHG PropCo rent (136.3) (140.9) persist EBITDA (before items below)¹ 4
Slide 32: UK | 2014 investment in hospital portfolio
UK | 2014 investment in hospital portfolio Expansion BMI Chaucer Theatre BMI Clementine Churchill Private GP centre BMI London Independent Outpatient consulting rooms Upgrades 8 BMI sites Endoscopy units 23 BMI sites Ultrasound suites BMI Alexandra CAT scanner¹ BMI Bath Clinic MRI scanner² BMI Black
Slide 33: UK | Performance of Private Medical Insurance market
UK | Performance of Private Medical Insurance market 7 800 7 400 Total market 7 000 ▼764 000 lives (10%) since 2008 6 600 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 Lives insured (000) 2 600 2 200 Individual 1 800 ▼310 000 lives (17%) since 2008 1 400 95 96 97 98 99 00 01 02 03 04 05 0
Slide 34: UK | Payor mix, caseload
UK | Payor mix, caseload 67% 63% 59% 55% 52% 35% 32% 28% 24% 20% 13% 13% 13% 13% 13% 2010 2011 2012 2013 2014 PMI Self pay NHS CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 33 72 Netcare Limited Results presentation for the year ended 30 September 2014
Slide 35: UK | Caseload growth despite challenging environment
UK | Caseload growth despite challenging environment Total inpatient and day cases (thousands) 285 Thousands 280 275 270 265 2010 2011 2012 2013 2014 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 34 Netcare Limited Results presentation for the year ended 30 September 2014 73
Slide 36: UK | Decoupling of PMI growth from GDP following significant increase in NHS funding
UK | Decoupling of PMI growth from GDP following significant increase in NHS funding Average growth 8.4% pa 12% 9% 6% 2011 - 2013 average growth 3% 0.7% pa 0% -3% -6% 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Real GDP PMI (lives insured) Real NHS funding gr
Slide 37: UK | Market underpinned by strong demand drivers
UK | Market underpinned by strong demand drivers Population growth and ageing to 2032¹ Burden of disease, 1993 - 2011² 15% 39% 106% 69% 62% 10% Population 65-84 years 85+ years Obesity Diabetes Cancer 1. Source: The King’s Fund 2. Source: Cancer Research UK, HSE, Euromonitor CARE • DIGNITY • TRUTH •
Slide 38: UK | Rapidly growing healthcare supply gap
UK | Rapidly growing healthcare supply gap UK healthcare expenditure (£bn)¹ NHS capacity and capability constraints 161 5.5% p.a. forecast demand growth 5.5% for UK healthcare services² Estimated funding gap of 35 ±£35bn provides opportunity for the private sector 2% p.a. forecast nominal funding gr
Slide 39: Financial review
Financial review CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 38 Netcare Limited Results presentation for the year ended 30 September 2014 77
Slide 40: Group | Financial overview
Group | Financial overview Ongoing SA business operational performing leverage well underpins solid Group financial results UK Strong absorbed balance sheet significant and unavoidable cash generation non-recurring costs CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 39 78 Netcare Limited Results
Slide 41: Group | Factors influencing results
Group | Factors influencing results Impact of new • IFRS 10 – Consolidated Financial Statements International • IFRS 11 – Joint Arrangements Financial Reporting • IAS 19 (Revised) – Employee Benefits Standards • 2013 comparative results have been restated Exchange • Average rate of R17.49 (2013: R14
Slide 42: Group | Summarised income statement
Group | Summarised income statement 30 Sep 30 Sep • Significant non-recurring costs Rm 2013 2014 % on CC and UK site closure of R176m (2013: R55m) Revenue 27 382 31 783 16.1 • ▲20.2% excluding non-recurring EBITDA before GHG PropCo rent 5 805 6 868 18.3 costs GHG PropCo rent (1 719) (2 464) Pro-form
Slide 43: Group | Constant currency performance
Group | Constant currency performance Revenue EBITDA (before GHG PropCo rent)¹ 2 722 6.1% 637 9.3% 12 788 12 235 2 746 2 674 15 147 16 273 3 186 3 661 2013 2014 2013 2014 SA UK Exchange rate impact 1. Adjusted to exclude all Competition Commission and UK site closure costs CARE • DIGNITY • TRUTH • P
Slide 44: Group | Headline earnings per share (HEPS)
Group | Headline earnings per share (HEPS) Adjusted HEPS¹ (cents) 30 Sep 30 Sep Cents per share 2013 2014 % CAGR 15.1% CAGR 21.8% HEPS 134.6 158.2 17.5 SA 140.5 158.6 12.9 UK (5.9) (0.4) 93.2 Adjusted HEPS¹ 140.4 167.8 19.5 SA 140.2 161.8 15.4 UK 0.2 6.0 122.1 140.2 161.8 113.2 140.4 167.8 2012 2013
Slide 45: Group | Summarised statement of financial position
Group | Summarised statement of financial position 30 Sep 30 Sep Forex Other Rm 2013 2014 effect movement Assets Group capex R1 945m (2013: R1 387m) PPE¹, goodwill and intangible assets 14 256 15 820 879 685 • SA: R1 195m (2013: R800m) • UK: R750m (2013: R587m) Other non-current assets 2 936 3 479 2
Slide 46: Group | SA debt
Group | SA debt 30 Sep 30 Sep Facility utilisation (Rm) Rm 2013 2014 Gross debt 3 898 3 589 4 908 Cash (684) (622) Net debt 3 214 2 967 622 3 589 Net debt to EBITDA (times) 1.0 0.8 Utilised Cash Available Cost of debt (%) 7.0 7.9 Net interest paid 101 128 Further de-gearing with significant capacity
Slide 47: Group | SA net debt: leverage improvement
Group | SA net debt: leverage improvement 1.6 1.3 1.2 1.0 0.8 3 706 2 249 3 303 2 608 3 492 2 901 3 214 3 170 2 967 3 599 2010 2011 2012 2013 2014 Net debt EBITDA Net debt to EBITDA CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 46 Netcare Limited Results presentation for the year ended 30 Septemb
Slide 48: Group | UK debt: BMI OpCo
Group | UK debt: BMI OpCo 30 Sep 30 Sep £m 2013 2014 Gross debt 156.0 168.9 Facility utilisation (£m) Cash (50.4) (59.3) 22.3 59.3 Net debt 105.6 109.6 Cost of debt¹ 6.9 6.9 168.9 Net interest paid 8.0 12.8 Utilised Available Cash Debt term 2014 - 18 Swap term 2015 • Net debt to EBITDA² of 2.1 times
Slide 49: Group | GHG PropCo debt: negotiations continue
Group | GHG PropCo 1 debt: negotiations continue GHG PropCo 1 Board Consensual Master Servicer and lender group short-term extensions and lenders actively engaged of maturity date have ability in restructuring to 15 January 2015 to shorten maturity discussions to 2 December 2014 if not satisfied wit
Slide 50: Guidance
Guidance CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 49 88 Netcare Limited Results presentation for the year ended 30 September 2014
Slide 51: Guidance | SA outlook
Guidance | SA outlook Demand Ongoing evaluation Strong pipeline Capex: for private of systems, of investment projects approximately R2bn hospital services processes and equivalent to 5.4% in 2015 expected to internal synergies of registered beds plus R500m from remain strong 2015 - 2019 on energy ef
Slide 52: Guidance | UK outlook
Guidance | UK outlook UK Healthcare Expansion of NHS expected to Capex: market growth PMI coverage increase contracting approximately £40m underpinned expected as economic to the private sector - on projects to by strong recovery gathers BMI hospitals have enhance revenue demand drivers momentum cou
Slide 53: Thank you
THANK YOU Netcare Limited Results presentation for the year ended 30 September 2014 91
Slide 54: Appendices
APPENDICES 92 Netcare Limited Results presentation for the year ended 30 September 2014
Slide 55: Appendix I | UK income statement - segmental analysis
Appendix I | UK income statement - segmental analysis £m BMI OpCo GHG PropCo WholeCo Revenue 886.2 886.2 EBITDA (before GHG PropCo rent and items below) 194.0 194.0 GHG PropCo rent (140.9) (140.9) EBITDA (before items below) 53.1 53.1 Non-recurring costs (6.3) (6.3) EBITDA before capital charges 46.
Slide 56: Appendix II | Group borrowings at 30 September 2014
Appendix II | Group borrowings at 30 September 2014 Gross borrowings Net borrowings 30 Sep 30 Sep 30 Sep 30 Sep Rm 2013 2014 2013 2014 SA 3 898 3 589 3 214 2 967 BMI OpCo 2 532 3 089 1 713 2 005 Group 6 430 6 678 4 927 4 972 £m BMI OpCo 156.0 168.9 105.6 109.6 Closing exchange rate 16.22 18.29 CARE
Slide 57: Administration
Administration Netcare Limited Non-executive directors (“Netcare”, “the Company” or “the Group”) SJ Vilakazi (Chairman) T Brewer Registration number APH Jammine JM Kahn 1996/008242/06 MJ Kuscus (Incorporated in the Republic of South Africa) KD Moroka N Weltman JSE share code NTC Company Secretary L
Slide 58: www.netcare.co.za
www.netcare.co.za Investor relations: ir@netcare.co.za 96 Netcare Limited Results presentation for the year ended 30 September 2014