Life Healthcare Group Holdings Limited · JSE:LHC
Life Healthcare — FY2016 Earnings Presentation
57 slides from Life Healthcare's earnings presentation, Sep 30, 2016
Slide 1: Group Results and Distribution
Group Results and Distribution for the 12 month period ended 30 September 2016 www.lifehealthcare.co.za
Slide 2: Operational Review
OPERATIONAL REVIEW ANDRÉ MEYER CEO 2
Slide 3: Summary Group – Southern Africa
Summary Group – Southern Africa • Solid 12 month performance: • Good bed growth • Strong activity growth • Management of costs in a difficult environment • PPD growth 4.0% • Additional beds 176 • Occupancy rate 72.5% • EBITDA margin 27.5% 3
Slide 4: Summary Group – Poland
Summary Group – Poland • Completed acquisition of Polska Grupa Medyczna (PGM) for R629 million • Difficult operating environment with regulatory / pricing uncertainty • Negative impact of new cardiac pricing on revenue and EBITDA • Changed senior management team and seconded SA management to Poland
Slide 5: Summary Group – India
Summary Group – India • Good growth in: • Revenue 16.7% • EBITDA 29.3% • Improvement in EBITDA margins 10.9% • Bed growth 331 • Total operational beds 2 384 • Good growth in occupancy rates 75% • Bedding down of Phase 3 acquisitions 5
Slide 6: Highlights Group
Highlights Group • Revenue +12.0% to R16 404m • Normalised EBITDA +6.6% to R4 314m • Headline earnings per share +7.0% to 192.5 cents • Normalised EPS +2.6% to 182.1 cents +7.0% Final dividend to 92 cps • Total dividend +7.1% Total dividend to 165 cps 6
Slide 7: Southern Africa: Growth – PPD Growth
Southern Africa: Growth PPD Growth PPDs (000) 2 300 • Strong PPD growth across the acute care and 4.0% complementary 2 200 lines of business 3.0% 2 100 2.0% 2.7% 2 000 1 900 2012 2013 2014 2015 2016 FY bed growth 292 95 249 253 176 7
Slide 8: Southern Africa: Growth – Acute and Complementary Growth
Southern Africa: Growth Acute and Complementary Growth H1 H2 Total Category 2016 2016 2016 Capacity expansion at existing facilities 91 34 125 Mental Health - 51 51 Total beds 91 85 176 Renal Dialysis stations 17 19 36 Oncology units - 1 1 • Life Bay View Private • Life Bay View Private • Life St Ma
Slide 9: Southern Africa: Growth – Life Hilton Private Hospital
Southern Africa: Growth Life Hilton Private Hospital Occupancy (%) 80% 70% 60% 50% 40% 30% Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 Jul 16 Aug 16 Sep 16 Phase 1 Phase 2 Phase 3 • Opened the 94 bed facility end • ±100 acute beds • ±70 mental health beds September 2015 (license a
Slide 10: South Africa: Growth – Impact of Ageing
South Africa: Growth Impact of Ageing 10% 8% 6% 4% 2% 0% 1-4 5-9 75-79 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 80-84 85+ <1 2005 2015 Council for Medical Schemes (CMS) 2015 annual report shows a shift in the age profile in the medical scheme population • Less me
Slide 11: South Africa: Growth – Impact of Ageing
South Africa: Growth Impact of Ageing PPDs (000) 300 • The shift in ageing as 250 evidenced by the 200 CMS report is 150 reflected in our PPD experience 100 • Ageing impacts 50 LOS, ICU 0 occupancy and changing case 11-15 0 16-20 21-25 26-30 31-35 36-40 41-45 46-50 51-55 56-60 62-65 66-70 71-75 >75
Slide 12: Southern Africa: Growth – Medical / Surgical split
Southern Africa: Growth Medical / Surgical split Acute Medical / Surgical split as a % of PPDs 54% • Continued growth of 52% 50.9% 51.0% 50.4% 50.3% medical cases 50.8% 50% • Negatively 49.2% 49.6% 49.7% 48% 49.1% 49.0% impacts revenue − Medical revenue 46% per PPD is 2012 2013 2014 2015 2016 40.9%
Slide 13: Life Employee Health Solutions
Southern Africa: Growth Healthcare Services Life Employee Health Solutions • Life Occupational Health and Careways (employee wellness) is in the process of being integrated and will be re-branded as Life Employee Health Solutions • Combined entity consists of: − Contracted occupational and primary h
Slide 14: Life Esidimeni
Southern Africa: Growth Healthcare Services Life Esidimeni • Non-renewal of 1 570 mental health beds as of 30 June 2016 by the Gauteng Department of Health • As a consequence of the non-renewal of the contract, the Gauteng Department of Health transferred approximately 1 500 mental health patients t
Slide 15: Southern Africa: Efficiency – Effective Use of Assets
Southern Africa: Efficiency Effective Use of Assets Occupancy (%) 77% • ICU occupancy 75.8% 75% • H2 Occupancy of 72.5% 73.9% 73% 71.7% 71.9% 71.9% 71.2% • Growth in 71% occupancy 69% despite the addition of 1 065 67% beds since 2012 65% 2012 2013 2014 2015 2016 2012: Bed occupancy split (%) 2016: B
Slide 16: Southern Africa: Efficiency – Occupancy Split
Southern Africa: Efficiency Effective Use of Assets Occupancy split between Acute and Complementary* 80 • Consistent 78.9 occupancy within 78 the acute business - 76.7 860 acute beds 76.3 76 added since 2012 • 205 complementary 74 beds added since 72.6 72.5 2012 71.7 71.5 71.9 71.9 71.9 72 71.3 71.2
Slide 17: Normalised EBITDA Margin – Continuing Basis
Southern Africa: Efficiency Normalised EBITDA Margin – Continuing Basis EBITDA margin (%) 30% • Margins on a normalised basis excluding the once-off cost below – 28.2% 28.3% 27.9% 27.9% 27.9% 28% • Additional legal costs 27.5% resulting from increased 26.6% malpractice insurance and a legal settleme
Slide 18: Measuring Clinical Outcomes
Southern Africa: Quality Measuring Clinical Outcomes Outcome 30 Sept 2016 30 Sept 2015 Standard Patient incident rate 2.53 2.66 Per 1 000 PPDs HAI (Healthcare Associated Infection) 0.37 0.32 Per 1 000 PPDs VAP (Ventilator Associated Pneumonia) 1.50 1.17 Per 1 000 ventilator days SSI (Surgical Site I
Slide 19: Competition Commission Healthcare Market Inquiry
Southern Africa: Sustainability Competition Commission Healthcare Market Inquiry • Submitted further responses to the panel focusing on − The nature of Life Healthcare’s relationships with doctors − Profitability − OECD report • We are unsure as to the timing of the next set of public hearings • Com
Slide 20: Environmental Management System
Southern Africa: Sustainability Environmental Management System Environmental certification • 12 Hospitals achieved ISO 14001:2004 environmental certification in 2015 • 4 Hospitals were audited in 2016 – awaiting results • 10 Hospitals targeted for certification 2017 Energy-saving initiatives • Sola
Slide 21: Environmental Management System
Southern Africa: Sustainability Environmental Management System Energy-saving initiatives • Heat pumps: − All sites now complete − Estimated saving of 1 495 MWh projected per annum • Power Factor Correction: − 5 Sites completed in 2016 − Combined KVA reduction of 500 KVA per month Water initiatives
Slide 22: International: Poland – Business update
International: Poland Business update New Cardiac pricing came into effect 1 July • Approximately a 17.4% decrease in pricing • Cardiology represents 45% of the Scanmed business • These price changes will have a significant impact in 2017 Management Team: • Change in senior management – new CEO in p
Slide 23: International: Poland – Scanmed
International: Poland Scanmed 2016 2015 2014 Beds 624 334 163 Cardiac units 12 7 0 Medical facilities 40 36 28 Revenue R1 174m R648m R175m* Normalised R120m R91m R16m EBITDA Normalised 10.2% 14.0% 9.1% EBITDA margin * 5 months 23
Slide 24: International: India – Max Healthcare
International: India Max Healthcare (MHC) 2016 update: • Bedding down the Phase 3 acquisitions (Vaishali Hospital and Max Smart): − Increased the number of operational beds from 260 to 493 − Improved occupancies from 67% to 72% • Continued good revenue growth and improving margins: − Max Healthcare
Slide 25: International: India – Max Healthcare Occupancy
International: India Max Healthcare Occupancy Operational Operational Operational beds Occupancy beds Occupancy beds Occupancy 30 Sep 30 Sept 30 Sep 30 Sep 30 Sep 30 Sep 2016 2016 2015 2015 2012 2012 Total: Phase 1 1 122 78% 1 095 76% 1 014 71% Total: Phase 2 769 72% 698 69% 304 - Total: Phase 3 493
Slide 26: Financial Review
FINANCIAL REVIEW PIETER VAN DER WESTHUIZEN GROUP CFO 26
Slide 27: Summary – Southern Africa
Summary Southern Africa: • Strong southern African operational performance, particularly PPD growth of 4.0% • Revenue per PPD negatively impacted by the continuing growth of medical cases • H2 experienced more pressure on cost of sales due to exchange rate weakness in H1 • Experienced increased cost
Slide 28: Summary – International
Summary International: • Poland • Experienced a satisfactory operating performance • Behind on the business integration • Seconded SA management to Poland • Regulatory impact on the cardiology business from 1 July of (PLN9m) • India • EBITDA growth of 29.3% and improved margins • Funding cost for tw
Slide 29: Highlights
Highlights Revenue +12.0% to R16 404m Normalised EBITDA +6.6% to R4 314m Headline EPS +7.0% to 192.5 cents Normalised EPS +2.6% to 182.1 cents Dividend +7.0% to 92 cents Increase in investments in India and Poland R1 083 million 29
Slide 30: Financial results
Financial results Group 30 Sep 2016 30 Sep 2015 Change R’m R’m % Revenue 16 404 14 647 12.0 Southern Africa 15 230 13 999 8.8 Poland 1 174 648 81.2 Normalised EBITDA 4 314 4 048 6.6 Southern Africa 4 194 3 957 6.0 Poland 120 91 31.9 Normalised EBITDA margin 26.3% 27.6% Southern Africa 27.5% 28.3% Po
Slide 31: Financial results
Financial results Group 30 Sep 2016 30 Sep 2015 Change R’m R’m % Revenue 16 404 14 647 12.0 Normalised EBITDA 4 314 4 048 6.6 Normalised EBITDA margin 26.3% 27.6% Operating profit: 3 660 3 496 4.7 Southern Africa 3 602 3 432 5.0 Poland 35 44 (20.5) Once-off 23 20 31
Slide 32: Financial results
Financial results Group 30 Sep 2016 30 Sep 2015 Change R’m R’m % Revenue 16 404 14 647 12.0 Normalised EBITDA 4 314 4 048 6.6 Normalised EBITDA margin 26.3% 27.6% Operating profit 3 660 3 496 4.7 Associates and joint ventures: 8 14 (42.9) Max Healthcare (4) 5 Poland 3 2 Other 9 7 32
Slide 33: Financial results
Financial results Group 30 Sep 2016 30 Sep 2015 Change R’m R’m % Revenue 16 404 14 647 12.0 Normalised EBITDA 4 314 4 048 6.6 Normalised EBITDA margin 26.3% 27.6% (4.9) Operating profit 3 660 3 496 4.7 Associates and joint ventures 8 14 (42.9) Attributable profit: 1 616 1 866 (13.4) Southern Africa
Slide 34: Financial results – Group Segmental Review
Financial results Group Segmental Review 30 Sep 2016 30 Sep 2015 Change R’m R’m % Revenue 16 404 14 647 12.0 Southern Africa Hospital division 14 381 13 133 9.5 Healthcare services 849 866 (2.0) International Hospitals 1 174 648 81.2 EBITDA 4 314 4 048 6.6 Southern Africa Hospital division 3 819 3 5
Slide 35: Southern Africa – Segmental Revenue
Financial results Southern Africa – Segmental Revenue 30 Sep 2016 30 Sep 2015 Change R’m R’m % Revenue 15 230 13 999 8.8 Southern Africa Hospital division 14 381 13 133 9.5 Healthcare services 849 866 (2.0) Hospital division: • PPD growth: + 4.0% • Revenue/ppd: + 5.2% − Tariff impact: + 5.9% − Case
Slide 36: Five year review – Southern Africa
Five year review Southern Africa – Continuing Basis Revenue (R’m) Normalised EBITDA (R’m) 16 000 720 6 000 614 849 536 866 CAGR 9.8% 12 000 444 361 809 734 4 000 657 4 194 3 957 8 000 3 581 3 311 13 661 2 886 12 519 11 471 2 000 9 816 10 553 4 000 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 201
Slide 37: Poland Revenue and Margin
Financial results Poland Revenue and Margin R million EBITDA margin % 1 500 16% 14.0% 1 200 1 174 12% 10.2% 900 9.1% 8% 648 600 4% 300 175 120 91 16 0 0% 2014 2015 2016 Revenue EBITDA EBITDA margin 1PLN = ZAR3.78 37
Slide 38: India: Max Healthcare
Financial results India: Max Healthcare MHC 2016 MHC 2015 Change Net revenue Rs Crore Rs Crore % Net revenue – Phase 1 hospitals 1 426 1 416 0.7 Net revenue – Phase 2 hospitals 581 559 3.9 Net revenue – Phase 3 hospitals (Vaishali & Smart) 333 30 >100 Total net revenue 2 340 2 005 16.7 Financial yea
Slide 39: India: Max Healthcare
Financial results India: Max Healthcare MHC 2016 MHC 2015 Change Net revenue Rs Crore Rs Crore % Net revenue – Phase 1 hospitals 1 426 1 416 0.7 Net revenue – Phase 2 hospitals 581 559 3.9 Net revenue – Phase 3 hospitals (Vaishali & Smart) 333 30 >100 Total net revenue 2 340 2 005 16.7 MHC 2016 MHC
Slide 40: India: Max Healthcare – Four Year Growth
Financial results India: Max Healthcare – Four Year Growth Revenue: 12 months to September (Rs Crore) 2 500 30 333 2 000 559 581 1 500 388 229 1 000 1 416 1 426 500 1 010 1 142 0 2013 2014 2015 2016 Phase 1 Phase 2 Phase 3 EBITDA: 12 months to September (Rs Crore) 300 12% 250 24 10% 200 7 40 8% 4 15
Slide 41: Financial results – EPS and HEPS
Financial results Group 30 Sep 2016 30 Sep 2015 Change cents cents % EPS 154.9 179.9 (13.9) Impairment of investment 35.5 - Loss on remeasuring previously held interest in associate 2.2 - to fair value Other (0.1) - HEPS 192.5 179.9 7.0 Contingent consideration released (10.4) (2.1) Other - (0.4) No
Slide 42: Financial results – Normalised EPS
Financial results Group 30 Sep 2016 30 Sep 2015 Change R’m R’m % Normalised EPS 182.1 177.4 2.6 Southern Africa 208.1 194.1 7.2 Poland & India (1.0) 1.8 Funding costs for international acquisitions (25.0) (18.5) 42
Slide 43: Consolidated Condensed Statement of Financial Position
Consolidated Condensed Statement of Financial Position 30 Sep 2016 30 Sep 2015 R’m R’m Non-current assets 14 395 13 152 PPE 7 752 7 101 Goodwill 2 288 2 089 Intangibles 908 875 Investment in Max Healthcare 2 546 2 230 Other 901 857 Current assets (excl cash) 2 498 1 959 Cash 604 812 Total assets 17
Slide 44: Net Debt
Net Debt Weighted Weighted 30 Sept 2016 average cost 30 Sep 2015 average cost Funding Rm of debt Rm of debt (post-tax) (post-tax) Acquisition funding ZAR 2 951 6.67 3 271 6.46 PLN 773 3.76 - - Capex funding 1 925 6.06 1 864 5.47 Poland 181 3.05 72 4.67 Property finance leases (IFRS) 951 7.91 980 7.8
Slide 45: Dividend
Dividend • Declared a final Distributions Cents/share Rm dividend of 92 Interim 2015 68 709 cps Final 2015 86 896 • Scrip distribution alternative Total 2015 154 1 605 • Shareholders Interim 2016 73 765 entitled to receive all or part of their Final 2016 92 973 distribution in Total 2016 165 1 739 c
Slide 46: Outlook
OUTLOOK ANDRÉ MEYER CEO 46
Slide 47: 2017 Outlook – Southern Africa
2017 Outlook Southern Africa Southern Africa: • Bed growth: − Addition of 196 beds: › 115 acute hospital beds › 81 mental health beds • PPD growth: − Between 2.0% - 3.0% • EBITDA margins: − Between 27.5% - 28.5% • Continued focus on improving clinical quality outcomes • Expect the HMI process to be
Slide 48: Acute and Complementary Pipeline
Southern Africa: Growth Acute and Complementary Pipeline Total Total Approved Applications Category 2016 2017 beds* pending Capacity expansion at existing acute facilities 125 115 622 224 New acute facilities - - 300 138 Mental Health / Acute Rehab – new facilities 35 60 140 465 Mental Health / Acut
Slide 49: 2017 Outlook – International
2017 Outlook International Poland: • Focus on completing integration of acquired businesses to drive efficiencies − Secondment of Life Healthcare staff • M&A on hold until we receive clarity on pricing • Government has proposed further potential pricing changes. These price changes are currently bei
Slide 50: Appendices
Life» APPENDICES 50
Slide 51: Max India Limited – Disclaimer
Max India Limited Investor Release Quarter and Half Year ended September 30, 2016 Disclaimer This release is a compilation of financial and other information all of which has not been subjected to audit and is not a statutory release. This may also contain statements that are forward looking. These
Slide 52: Max India – Key Highlights
Max India – Key Highlights 1 Max India get shareholders’ nod for composite merger scheme. The application filed with all relevant regulatory authorities. Approvals currently expected in Nov 16 2 Max Healthcare : Robust revenue growth of 26% to Rs. 1,300 Cr in H1FY17 3 Max Healthcare : EBITDA grows a
Slide 53: MHC Network Financial Snapshot – Q2 & H1 FY17
MHC Network* (Financial Snapshot – Q2 & H1 FY17) • Q2FY17 revenue at Rs 667 Cr grows a strong 24% y-o-y • Oncology continues to be the highest revenue contributor ~ 13% to revenue Revenue • Pathology- B2B launched in May’16 (200+ tie ups); B2C to launch by Q3FY17 end • Avg. Occupancy across network
Slide 54: MHC Network Performance Dashboard
MHC Network* – Performance Dashboard (Q2 & H1FY17) Rs Cr Quarter Ended Y-o-Y Half Year Ended Y-o-Y Key Business Drivers Sep-16 Sep-15 Growth Sep-16 Sep-15 Growth a) Financial Performance Revenue (Gross) 667 539 24% 1,300 1,032 26% Revenue (Net) 640 522 23% 1,248 994 26% Direct Costs Material Cost 15
Slide 55: MHC Network Performance Dashboard
MHC Network* – Performance Dashboard (Q2 & H1FY17) Quarter Ended Y-o-Y Half Year Ended Y-o-Y Key Business Drivers Sep-16 Sep-15 Growth Sep-16 Sep-15 Growth a) Patient Transactions (Nos in lacs) Inpatient Discharges 0.51 0.43 19% 0.99 0.78 26% Day care Procedures 0.13 0.07 76% 0.25 0.14 79% Outpatien
Slide 56: MHC Network Performance Dashboard
MHC Network* – Performance Dashboard (Q2 & H1FY17) Unit Quarter Ended Y-o-Y Half Year Ended Y-o-Y Key Business Drivers Sep-16 Sep-15 Growth Sep-16 Sep-15 Growth Mature Hospitals* a) Financial Performance Revenue(Net) Rs. Cr 370 344 8% 728 675 8% EBITDA Rs. Cr 54 47 15% 102 89 14% EBITDA Margin % 14.
Slide 57: Thank You
THANK YOU 57
Life Healthcare Group Holdings — FY2016 Earnings Presentation on 6ix