Life Healthcare Group Holdings Limited · JSE:LHC
Life Healthcare — H1 2018 Earnings Presentation
39 slides from Life Healthcare's earnings presentation, Mar 31, 2018
Slide 1: Unaudited Group Results for the Period Ended 31 March 2018
UNAUDITED GROUP RESULTS FOR THE PERIOD ENDED 31 MARCH 2018, SCRIP DISTRIBUTION WITH CASH DIVIDEND ALTERNATIVE, FURTHER CAUTIONARY AND TRADING STATEMENT
Slide 2: 2018 H1: Group Overview
2018 H1 : Group Overview Good operational performance across the Group 2 LHC SA: Positive turnaround in SA acute business against a difficult 2017 Strong year-on-year growth in complementary and healthcare services Good improvement in clinical quality outcomes Alliance Medical: Stable perfor
Slide 3: Group Overview
Group Overview 3 Revenue Cash generated from operations Normalised EBITDA +17.5% +37.3% +10.5% to R11.3 billion To R2.7 billion to R2.7 billion Revenue (%) Acute vs non-acute revenue (%) EBITDA (%) 100% 100% 100% 100% 100% 100% 74% 69% Southern Africa 79% Acute 80% Southern Africa 82% 78% 26% 31% In
Slide 4: Operational Review: Southern Africa
Operational Review Dr Shrey Viranna | Group CEO Southern Africa
Slide 5: Southern Africa Business Review
Southern Africa Business Review 5 Acute Healthcare Complementary Hospitals Services Services Proportion of 87.6% 6.8% 5.6% SA Revenue 4 year revenue 7.4% 10.1% 16.7% CAGR 50 acute hospitals: 10 PPP facilities: 7 Acute rehabilitation units 8 218 beds 2 919 beds 319 beds 290 000 admissions 278 Occupat
Slide 6: Southern Africa: Market dynamics frame the opportunity for growth
Southern Africa Market dynamics frame the opportunity for growth 6 Ageing Implications % PPDs/Revenue from patients aged 50+ Increasing proportion of PPDs and revenue come from patients above 2013 2017 2018 55 50 years of age 54 47 48 49 % Difference 42 LOS >50 vs LOS <50 +34% % of PPDs % of Rev R
Slide 7: Southern Africa Business Review: Steady increases in PPDs, revenue and EBITDA
Southern Africa Business Review: Steady increases in PPDs, revenue and EBITDA 7 31 March 31 Mar Change 2018 2017 % Good PPD growth across all business units PPD GROWTH 2.0% -1.0% Strong revenue growth enhanced by complementary and healthcare services REVENUE R 8 364m R 7 627m 9.7% Positive EBI
Slide 8: Revenue Split: Continued growth across key businesses
5 Year Revenue Split Continued growth across key businesses 8 Revenue* (Rm) FY18 H1 Commentary Healthcare Services Complementary Acute CAGR FY18 H1 Healthcare Services 42.4% growth in Healthcare Services due to the 8 364 8.0% 10.1% 42.4% acquisition of an occupational health and wellness 7 627 568 b
Slide 9: Acute quality outcomes continue to improve versus prior year
Quality Acute quality outcomes continue to improve versus prior year 9 31 March 31 Mar Clinical Quality outcome 2018 2017 Measure HAI (Healthcare associated infection) 0.39 0.49 Per 1 000 PPDs ACUTE VAP (Ventilator associated pneumonia) 1.21 1.76 Per 1 000 ventilator days SSI (Surgical site infectio
Slide 10: Quality outcomes continue to improve versus prior year
Quality The majority of quality outcomes continue to improve versus prior year 10 31 March 31 Mar Quality outcome 2018 2017 Measure Patient incident rate 2.66 2.83 Per Medication errors 1.11 1.15 1,000 PPDs Falls 0.69 0.76 Pressure ulcers 0.11 0.14 Procedure related 0.54 0.53 Quality Commentary Ha
Slide 11: Human Capital: Stable doctor base and more specialised nurses
Human Capital Stable doctor base and increase in training more specialised nurses 11 Doctor Recruitment Approximately Good specialist recruitment with stable doctor base with a progressively younger base, allowing for future growth 90% of highest performing LHC Net specialist additions – 15 months
Slide 12: Healthcare services
Healthcare services Strong growth in revenue and EBITDA 12 Revenue (R’m) EBITDA (R’m) Life Esidimeni: • Positive engagement with Department of +42.4% +20.3% 568 71 Health resulting in re-admission of 700 Gauteng mental health patients: 59 • H2 2017: 460 399 • H1 2018: 240 Life Employee Health So
Slide 13: Southern Africa: Sustainability
Southern Africa: Sustainability Water Sustainability 13 The water challenges in Life Vincent Pallotti Hospital / the Western Cape has Life Kingsbury Hospital: required Life Healthcare to revise its water sustainability strategy • Water consumption: 40% • First private hospital group to install wat
Slide 14: Operational Review: International
Operational Review Dr Shrey Viranna | Group CEO International
Slide 15: Alliance Medical: Positive diagnostic growth drivers
Alliance Medical Positive diagnostic growth drivers frame the opportunity for growth 15 % Population 65+ % + 7.9m +7.1m +0.7m +8.6m 50 people people people people Ageing population 36% of MRIs and 60% of CTs performed on people over 60 0 UK Italy Ireland Germany 2006 2016 2026 2036 Urgent GP refer
Slide 16: UK diagnostic volumes predicted to continue to grow strongly
Alliance Medical UK diagnostic volumes are predicted to continue to grow strongly 16 Market CAGRs 2015-17: 5.6% 2015-17: 27% 2015-17: 6.2% 2025 Forecast: 5.6% 2025 Forecast: 12% 2025 Forecast: 6.2% UK MRI Scans (million) UK PET-CT (000) UK CT Scans (million) NHS 3rd Party Forecast NHS 3RD Party Fore
Slide 17: Alliance Medical: UK
Alliance Medical UK 17 Diagnostic Imaging: • Increased competition in the mobile business with additional capacity being added to DI static sites: 37 the market PET-CT national contract sites: 31 • Strategic focus continues to be partnership solutions with hospital trusts - moving away Mobiles: 45
Slide 18: Alliance Medical: Italy
Alliance Medical Italy 18 Good underlying performance Owned clinics: 13 Focus on growing the Clinic component of the business Static sites: 22 • The Clinic model is well established in Italy, with a resilient and established pathway for private revenues • A growth model based on a market consoli
Slide 19: Alliance Medical: Ireland / Northern Europe
Alliance Medical Ireland / Northern Europe 19 Ireland Other Ireland: geographies • Continues to show solid growth • Opportunity to leverage off Italy and UK delivery models and grow into the Spain Netherlands outpatient clinic model Germany Finland Northern Europe: • Has shown good revenue growt
Slide 20: Alliance Medical: Stable overall performance
Alliance Medical Stable overall performance with short-term investment in future growth 20 31 March 31 Mar Change For 6 months 2018 2017 % Revenue over the six months grew Revenue (£’m) 132.9 124.0 7.2 by 7.2% on the back of strong PET-CT growth in the UK, good northern Europe growth and a solid E
Slide 21: Poland: Market dynamics frame the opportunity for growth
Poland Market dynamics frame the opportunity for growth 21 Population by age group 0-19 20-65 65+ Population over 65 expected to grow by 35% by 2025 40 6.1 7.2 8.3 Increase in demand for funding expected to grow by 5-7% 20 24.6 23.6 22.2 Poland lags central and western Europe in healthcare spe
Slide 22: Scanmed's operational turnaround
Poland Scanmed’s operational turnaround is evident in excellent revenue and EBITDA results 22 Revenue (PLN’m) EBITDA (PLN’m) +100% Strong business turnaround driven by +11% 176 16 the new management team: 158 Continued focus on operational efficiency and costs optimisation Launch of key busine
Slide 23: India: Max Healthcare
India: Max Healthcare Strong momentum across key levers in last 5 years, but 2018 seeing a tough regulatory environment23 Phase 1 Phase 2 Phase 3 Strong top line growth Rapid organic expansion and profitability through Large inorganic acceleration, Recalibration driven by operating leverage but wi
Slide 24: Financial Review
Financial Review Pieter van der Westhuizen | Group CFO
Slide 25: Highlights
Highlights 25 Normalised EBITDA Cash generated from operations HEPS +10.5% +37.3% +116.5% to R2.7 billion to R2.7 billion 53.7 cents Interim dividend 38 cents (R556 million) www.lifehealthcare.co.za
Slide 26: Financial results
Financial results Group 26 31 Mar 2018 31 Mar 2017 Change R’m R’m % Revenue 11 323 9 638 17.5 Normalised EBITDA 2 673 2 418 10.5 Normalised EBITDA margin 23.6% 25.1% EBITA 2 125 1 977 7.5 Amortisation (255) (187) 36.4 Operating profit 1 870 1 790 4.5 Non-operating income/(expenses) ¹ 14 (446) >100 N
Slide 27: Financial results by segment
Financial results Group 27 31 Mar 2018 31 Mar 2017 Change R’m R’m % Revenue 11 323 9 638 17.5 Southern Africa 8 364 7 627 9.7 Alliance Medical 2 315 1 481 56.3 Poland 644 530 21.5 Normalised EBITDA 2 673 2 418 10.5 Southern Africa 2 095 1 981 5.8 Alliance Medical 518 410 26.3 Poland 60 27 122.2 Norm
Slide 28: Financial results: EBITA and operating profit
Financial results Group 28 31 Mar 2018 31 Mar 2017 Change R’m R’m % Revenue 11 323 9 638 17.5 Normalised EBITDA 2 673 2 418 10.5 Normalised EBITDA margin 23.6% 25.1% EBITA 2 125 1 977 7.5 Southern Africa 1 802 1 728 4.3 Alliance Medical 292 252 15.9 Poland 31 (3) >100 Operating profit 1 870 1 790 4.
Slide 29: Financial results: Associates and joint ventures
Financial results Group 29 31 Mar 2018 31 Mar 2017 Change R’m R’m % Revenue 11 323 9 638 17.5 Normalised EBITDA 2 673 2 418 10.5 Normalised EBITDA margin 23.6% 25.1% Operating profit 1 870 1 790 4.5 Associates and joint ventures (64) (9) (>100) Max Healthcare (67) (12) Other 3 3 www.lifehealthcare.c
Slide 30: Financial results: EPS and HEPS
Financial results Group 30 Previously Adjusted reported Change 31 Mar 2018 31 Mar 2017 Adjustment 31 Mar 2017 % Weighted average number of shares (million)* 1 423 1 133 79 1 054 25.6 EPS (cents) 54.6 12.7 (1.0) 13.7 329.9 Impairment of investments 1.2 12.6 13.5 Profit on disposal of PPE (2.1) (0.5)
Slide 31: Consolidated condensed statement of financial position
Consolidated condensed statement of financial position 31 31 Mar 2018 30 Sept 2017 R’m R’m Non-current assets 29 873 31 459 PPE 10 888 11 131 Goodwill 11 264 12 170 Intangibles 3 578 4 111 Investment in Max Healthcare 2 893 2 960 Other 1 250 1 087 Current assets (excluding cash) 3 789 4 004 Cash 1 7
Slide 32: Debt
Debt 32 31 Mar 2018 Weighted avg. cost of 30 Sep 2017 Weighted avg. cost of Funding R’m debt R’m debt (post-tax) (post-tax) Acquisition funding ZAR 3 925 7.46 4 851 7.32 PLN 742 3.77 801 3.77 GBP 962 2.55 992 2.26 Capex funding - ZAR 2 623 6.49 2 498 6.67 Poland 134 3.05 148 3.05 Alliance Medical 3
Slide 33: Cash flow
Cash flow Group 33 31 Mar 31 Mar R’m 2018 2017 Change 2 800 120% R’m R’m % Cash generated from operations 2 679 1 951 37.3 2 400 100% 100% Transaction costs paid (8) (87) Net interest paid (493) (643) 2 000 81% 83% 81% 81% 80% 77% Tax paid (548) (513) 1 600 Maintenance capex (309) (327) 60% Minority
Slide 34: Distribution
Distribution 34 Cents/ share R’m Declared an interim scrip dividend Distributions of 38 cps Interim 2017 35 504 Cash dividend alternative Shareholders entitled to receive all Final 2017 45 652 or part of their distribution in cash or in shares Total 2017 80 1 156 Scrip distribution done at a
Slide 35: 2018 H2 Outlook
2018 H2 Outlook Dr Shrey Viranna | Group CEO
Slide 36: 2018 H2: Outlook
2018 H2 : Outlook 36 LHC SA: PPD growth: c. 2% with conservative brownfield expansion beds (c.20) Continued good complementary and healthcare services growth Focus on increased operational leverage Testing and piloting new business/customer segment offerings Alliance Medical: UK: • PET-CT
Slide 37: Outlook: strategic focus areas
Outlook: strategic focus areas 37 Operational Excellence: Growth: • Group has a history and culture of driving operational excellence • Grow the Group to an international healthcare provider, while still • Expand through: focussing heavily on SA growth and implementation of new initiatives • Review
Slide 38: Group Overview Questions?
Group Overview 38 Revenue Cash generated from operations Normalised EBITDA +17.5% +37.3% +10.5% to R11.3 billion To R2.7 billion to R2.7 billion Revenue (%) Acute vs non-acute revenue (%) EBITDA (%) 100% 100% 100% 100% 100% 100% 74% 69% Southern Africa 79% Acute 80% Southern Africa 82% 78% 26% 31% I
Slide 39: Life Healthcare Group
Li a2 Group HEALTH [iy CARE
Life Healthcare Group Holdings — H1 2018 Earnings Presentation on 6ix