Slide 1: Audited Group Results for the Year Ended 30 September 2011
Netcare Limited AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2011
Slide 2: Agenda
Agenda RICHARD FRIEDLAND GROUP CEO Group overview South Africa United Kingdom KEITH GIBSON GROUP CFO Financial review Guidance
Slide 3: Group overview
Group overview You're In safe hends
Slide 4: Group overview
Group overview South Africa Solid performance Continued Continued Guaranteed (SA) across contribution investment in minimum wage all divisions to job creation, infrastructure increases across and excellent training and development the board working capital skills improvements development United King
Slide 5: Group financial overview
Group financial overview Good SA results ▲ 3.3% Cash conversion Net debt ▲ 21.2% but weaker revenue of 113.4% ▼ 10.9% in SA basic HEPS performance ▼ 0.2% (2010: 101.4%) ▼ 4.8% in UK ▲ 14.0% in the UK operating profit ▼ R1 492m distributions per ▲ 12.3% total reduction share (DPS) pre-tax profit CARE
Slide 6: Geographic contribution
Geographic contribution Revenue (%) EBITDA (%)* Net interest paid (%) HEPS (%) 44 42 54 47 81 81 12 13 56 58 46 53 19 19 88 87 2010 2011 2010 2011 2010 2011 2010 2011 UK SA CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 6
Slide 7: South Africa
South Africa
Slide 8: Business overview
Business overview Strong EBITDA margin Net debt to equity Cash conversion performance expansion ratio of 52.7% of 116.0% across to 19.4% (2010: 68.0%) (2010: 109.6%) all divisions (2010: 17.7%) 126-bed 425-bed ▲ 4.9% Hospital Waterfall City Queen ’Mamohato cumulative debtors days in Midrand Memorial
Slide 9: South Africa: a comprehensive network of healthcare services
South Africa: a comprehensive network of healthcare services Sites 2010 2011 Hospitals 50 51 PPP hospitals¹ 4 5 Primary health facilities 91 88 Dialysis units 53 55 E Emergency bases b 67 67 Pharmacies 86 86 Registered beds 8 874 9 052 Employees¹ 21 031 21 391 Patient visits 4 919 584 4 866 610 1. I
Slide 10: South Africa
South Africa 30 Sep 30 Sep Rm 2010 2011 % Revenue 12 541 13 361 6.5 Revenue growth tempered by reduction in Primary Care revenue EBITDA* 2 249 2 608 16.0 Operating profit* 1 899 2 220 16.9 Strong operating leverage with focus on quality of earnings and operational efficiencies EBITDA margin (%) 17.9
Slide 11: Netcare's community reach
Netcare’s community reach Employment p y Inpatient p Outpatient p Surgical g Births growth through hospital and primary operations economic admissions healthcare visits downturn 2 514* >581 000 >3.8 million >390 000 >38 000 Education Closing the Community Partnering in extending wage gap sponsorship
Slide 12: Burden of diseases and new technology will continue driving future healthcare expenditure
Burden of diseases and new technology will continue driving future healthcare expenditure Increase in medical scheme spend on hospitalisation (pbpm), 2003-2009* Real price inflation contributed 51.2% 4.9% of total increase in private hospital expenditure Increased utilisation contributed 4.9% 44.0%
Slide 13: Quality leadership: a Group-wide focus and strategy to drive quality care
Quality leadership: a Group-wide focus and strategy to drive quality care • National Department of Health core standards: all 55 hospitals benchmarked by February 2012 in preparation for NHI • First accredited Level 1 Trauma Centres in SA (Netcare Milpark and Netcare Union hospitals) • Benchmarking
Slide 14: Learning from best practice internationally and driving clinical quality improvement
Learning from best practice internationally and driving clinical quality improvement Better than On Less than Improvement outcomes achieved in FY2011 expected target expected Prevention of Healthcare Associated Infections Ventilator Associated Pneumonia (VAP) Surgical Su g ca Site S te Infection ect
Slide 15: SA Hospitals and Emergency services
SA Hospitals and Emergency services 30 Sep 30 Sep Rm 2010 2011 % Revenue 11 167 12 089 8.3 ▲ 6.4% revenue per patient day ▲ 14.4% in 911 road activity EBITDA* 2 220 2 543 14.5 ▲ 2.2% patient days ▲ 178 additional dditi l beds b d Operating profit* 1 893 2 182 15.3 1.4 million pharmacy scripts EBITDA
Slide 16: Examples of major SA capex projects
Examples of major SA capex projects 76% 100% 64% 52% 50% 24% 36% 48% 50% Netcare Netcare Netcare Netcare Netcare Montana St Anne's y The Bay Mulbarton Kingsway g y 54 beds 63 beds 64 beds 57 beds 35 beds 2011 2012 and thereafter CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 16
Slide 17: Netcare Waterfall City Hospital opened in July 2011 in Midrand
Netcare Waterfall City Hospital opened in July 2011 in Midrand CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 17
Slide 18: Primary Care: stabilised operations
Primary Care: stabilised operations EBITDA (Rm) 65 • EBITDA margin improvement from 2.1% to 5.1% • 37 pharmacies 29 • 568 doctors and dentists • 88 medical centres • 129 740 managed care lives (2010: 181 881) • 1.7 million pharmacy scripts • 3.2 million primary healthcare (24) visits 2009 2010 2011
Slide 19: Queen 'Mamohato Memorial Hospital opened in October 2011 in Lesotho
425-bed Queen ’Mamohato Memorial Hospital opened in October 2011 in Lesotho CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 19
Slide 20: United Kingdom
—— NF United Kingdom | ji
Slide 21: Business overview
Business overview Trading Stephen Collier EBITDA margins conditions appointed CEO impacted remain difficult and management by funder mix team being and non-core strengthened business mix ▲ 4.2% Outstanding Net debt reduced inpatient and working capital by £89.8m and day caseload Record bank covenant
Slide 22: GHG is an amalgamation of various businesses
GHG is an amalgamation of various businesses BMI facilities 2010 2011 Owned hospitals 43 41 Leased and managed hospitals 21 21 Transform (cosmetic) 2 2 Care Fertility 4 4 N t Netcare UK (NHS ttreatment t t centres) t ) 3 1 Registered beds 3 035 3 038 Employees 8 234 8 034 Patient episodes 1 555 741
Slide 23: UK income statement
UK income statement 30 Sep 30 Sep £m 2010 2011 % Revenue 855.0 887.6 3.8 • Decline in PMI caseload • Strong NHS growth EBITDA before items below 224.0 191.5 (14.5) • Abbey and Transform acquisitions Profit on disposal of property - 15.0 Gain on bargain purchase 6.7 - Affected by: • business mix and
Slide 24: EBITDA margins impacted by lower margin OpCo acquisitions
EBITDA margins impacted by lower margin OpCo acquisitions Leased and Owned O ned managed Transform Care Netcare hospitals hospitals (cosmetic) Fertility UK PMI Self-pay NHS EBITDA 24 5% 24.5% 10 8% 10.8% 3 4% 3.4% 31 1% 31.1% 32 4% 32.4% Heritage portfolio Acquired Acquired Largest Leeds Commuter pl
Slide 25: Caseload and funder mix continues to be impacted by economy
Caseload and funder mix continues to be impacted by economy Caseload • ▲ 23.0% in NHS cases • NHS is slowing outsourcing as financial constraints bite • “Nicholson Nicholson Challenge” Challenge remains • Self-pay recovering off a low base ddriven e by NHSS waiting a g lists ss • Unemployment led co
Slide 26: Financial review
Financial review You're In safe hands
Slide 27: Factors influencing results
Factors influencing results Exchange rate • Average g rate of R11.09 ((2010: R11.63); ) closing g rate of R12.54 ((2010: R10.93)) • Liability increased to £422 £422.7m 7m (2010: £374 £374.2m) 2m) Interest rate swaps • Ineffective portion was a credit of £2.8m (2010: charge of £8.7m) • Two properties
Slide 28: Exchange rate spike at year end
Exchange rate spike at year end 13 Minimal impact on earnings: • Revenue R ▼ 2.0% 2 0% 12 • EBITDA ▼ 1.6% Significant impact on financial 11 position • NAV ▲ R546m 10 Sep 09 Jan 10 May 10 Sep 10 Jan 11 May 11 Sep 11 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 28
Slide 29: Summarised Group income statement
Summarised Group income statement 30 Sep 30 Sep Rm 2010 2011 % Revenue 22 474 23 221 3.3 Growth in both geographies in constant currencies EBITDA 4 865 4 914 1.0 Depreciation and amortisation (1 157) (1 213) Improvement in SA impacted by Operating profit 3 708 3 701 (0.2) UK performance N t financia
Slide 30: Headline earnings and distributions per share
Headline earnings and distributions per share HEPS (cents) DPS (cents) 117.0 69.0 96.5 55.0 53.0 46 5 46.5 31.0 27.5 41.5 48.0 19.0 22.0 2010 2011 2010 2011 H1 H2 H1 H2 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 30
Slide 31: Summarised statement of financial position
Summarised statement of financial position 30 Sep 30 Sep Forex Rm 2010 2011 effect Movement Assets PPE, goodwill and 37 336 41 816 4 525 (45) g intangible assets • Deferred tax asset of R2 165m Other non-current assets 1 959 2 662 231 472 • Investments in associates of R289m Current assets 5 384 6 1
Slide 32: Movement in Group property, plant & equipment and intangible assets
Movement in Group property, plant & equipment and intangible assets Rm 4 525 41 816 1 408 37 336 (1 213) (240) 2010 Additions Depreciation Disposals Exchange rate 2011 and amortisation and other impact CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 32
Slide 33: Group debt
Group debt Geographic split of net debt at 30 Sep 2011 Net debt at 30 September 2011 30 Sep 30 Sep 2010 2011 % UK debt (£m) 1 875 1 785 (4.8) 87% UK debt (Rm) 20 491 22 386 9.2 SA debt (Rm) 3 706 3 303 (10.9) N td Net debt bt (Rm) (R ) 24 197 25 689 62 6.2 Cost of debt (%) 13% UK debt 6.5 6.4 SA deb
Slide 34: SA debt position at lowest level in five years
SA debt position at lowest level in five years 4 200 4 133 4 119 9 4 000 8 Improved GCR rating in Jan 2011: 67 6.7 7 • A Long-term (Feb 2009 A-) 3 800 • A1 Short-term (Feb 2009 A1-) 6 3 600 5.1 3 471 5 Convertible bond repaid in 3 400 3.6 4 September 2011 replaced by R1bn DMTN debt raise in August 3
Slide 35: UK debt: ring-fenced and non-recourse to SA operations
UK debt: ring-fenced and non-recourse to SA operations Secured banking facilities (£m) The 4 categories of UK debt are 1 585.8 ring-fenced from each other There is no cross-default across debt categories 47.5 All UK debt is non-recourse to SA 237.9 operations 20.2 PropCo 1 debt maturity (Oct 2013) •
Slide 36: Working capital
Working capital 30 Sep 30 Sep 2010 2011 Movement SA (Rm) Inventories 413 431 (18) Trade and other receivables 1 693 1 596 97 Trade and other payables (1 764) (2 250) 486 • Receivables at record lows in T Taxation ti payable bl (250) (164) (86) both geographies • Result of continued focus on Net work
Slide 37: Cash conversion
Cash conversion SA (Rm) UK (£m) 109 6% 109.6% 116 0% 116.0% 93 9% 93.9% 103 4% 103.4% 228 3 010 2 594 2 428 2 215 214 214 207 2010 2011 2010 2011 EBITDA Cash flow from operations CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 37
Slide 38: Guidance
Guidance
Slide 39: Guidance 2012
Guidance 2012 South Africa Estimated Continued focus Capex: (SA) revenue growth on efficiencies ±R1bn upper single digit and cost reductions United Kingdom Tough trading Further decline Capex: (UK) conditions in PMI forecast <£50m expected to continue ti CARE • DIGNITY • TRUTH • PARTICIPATION • PASS
Slide 40: 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
Slide 41: Thank you
Thank you