Slide 1: Audited Group results for the year ended 30 September 2010
N t Netcare Li Limited it d Audited Group results for the year ended 30 September 2010 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 1
Slide 2: Note regarding forward-looking statements
Netcare Limited Note regarding forward-looking statements The Company advises investors that any forward forward-looking looking statements or projections made by the Company, including those made in these presentations, are subject to risk and uncertainties that may cause actual results to differ m
Slide 3: Group overview, South Africa, United Kingdom, Financial review, Guidance 2011
GROUP SOUTH UNITED FINANCIAL GUIDANCE OVERVIEW AFRICA KINGDOM REVIEW 2011 Richard Friedland • Group CEO Vaughan Firman • Group CFO N t Netcare Li Limited it d Audited Group results for the year ended 30 September 2010 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 3
Slide 4: Group overview
GROUP OVERVIEW CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 4
Slide 5: Group overview
Group overview Solid Results continue Strong All UK debt operational to be influenced working capital covenants met performance in by rand improvements with sufficient both SA and UK pp appreciation in SA and UK headroom IPO off UK Health H lth reform f Significant Si ifi t H2 distribution di t ib t
Slide 6: Group financial highlights
Group financial highlights Constant 30 Sep 30 Sep currency Rm 2009 2010 % %* Revenue 23 232 22 474 (3.3) 4.4 Impact of currency conversion: EBITDA 4 927 4 865 (1.3) 8.4 O Operating ti profit fit 3 700 3 708 02 0.2 92 9.2 Negative swing of: Operating profit margin % 15.9 16.5 • 7.7% on revenue • 9.7%
Slide 7: Geographic contribution
Geographic contribution Revenue EBITDA Net interest paid HEPS 81% 88% 56% 54% 44% 46% 19% 12% SA UK CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 7
Slide 8: South Africa
SOUTH AFRICA CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 8
Slide 9: Business overview
Business overview Return Demand 2001-2003 Netcare 911 to profitability for hospital KwaZulu-Natal awarded in Primary Care services organ transplant “Air Ambulance division maintained case resolved Provider of the Year”¹ Treated T t d over 800 Maintained M i t i d topt 10 Achieved A hi d Netcare N t
Slide 10: Transformation - maintained number 1 ranking in health sector
Transformation - maintained number 1 ranking in health sector Empowerdex Empowerdex rating rating Element Weight 2009/2010 2010/2011 Ownership 20 16.81 18.78 Management g control 10 6.25 6.78 • Maintained number 1 ranking as most empowered company in Employment equity 15 7.43 8.54 JSE health sector
Slide 11: South Africa
South Africa 30 Sep 30 Sep Rm 2009 2010 % Revenue 11 832 12 541 6.0 Revenue increase in Hospitals and Emergency services offset by EBITDA 2 018 2 249 11.4 restructure of Primary Care division O Operating ti profit fit 1 662 1 899 14 3 14.3 • Margin expansion due to EBITDA margin (%) 17.1 17.9 improv
Slide 12: SA Hospitals and Emergency services
SA Hospitals and Emergency services 30 Sep 30 Sep Rm 2009 2010 % Revenue 10 319 11 167 8.2 • Revenue per patient day up 8.3% EBITDA 2 042 2 220 8.7 • Stable demand in Hospitals with 0.6% increase in patient days O Operating ti profit fit 1 703 1 893 11 2 11.2 Expansion of margins despite EBITDA marg
Slide 13: Primary Care
Primary Care 30 Sep 30 Sep Rm 2009 2010 % Revenue 1 513 1 374 (9.2) Revenue decrease due to: • End of GEMS contract and EBITDA (24) 29 termination of loss making schemes O Operating ti profit fit (41) 6 • Reduction in the number of managed Medicross clinics EBITDA margin (%) (1.6) 2.1 EBITDA benefit
Slide 14: Healthcare reform remains a focus
Healthcare reform remains a focus National • RPL was declared invalid by the courts and set aside in July 2010 Reference Price List • Correct cost benchmarking is important for sustainability of private healthcare (RPL) • Cost benchmarking of public hospitals are equally critical to inform future he
Slide 15: United Kingdom
UNITED KINGDOM CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 15
Slide 16: Geographical coverage
Geographical coverage 9 new facilities added to portfolio, increasing GHG’s national coverage to 75 2006/07 48 existing BMI hospitals 4 Care fertility clinics 1 remaining Netcare UK facility 2007/08 8 facilities added 2008/09 5 facilities added 2009/10 9 facilities added: • Syon Clinic • Southend Da
Slide 17: Business overview
Business overview Sector Successfully Margin experiencing a managed a maintained structural change six-fold increase through in funder mix in monthly y cost control Choose & Book despite mix (C&B) volumes change Cash C h conversion i DoH D H White Whit Paper P 9 new sites it added dd d increased to
Slide 18: UK income statement
UK income statement 30 Sep 30 Sep Acquisitions and strong NHS £m 2009 2010 % growth partially offset by modest private case decline Revenue 831.5 855.0 2.8 EBITDA before items below 213.1 224.0 5.1 EBITDA supported by ongoing cost efficiency programme C it l it Capital items (0 1) (0.1) 67 6.7 IPO c
Slide 19: Growth trajectory and operating & financial leverage
Growth trajectory and operating & financial leverage Revenue (£m) Group, PropCo and OpCo EBITDA (£m) CAGR 7 5%¹ 7.5%¹ CAGR 10 8%¹ 10.8%¹ CAGR 4 8%¹ 4.8%¹ CAGR 21 4%¹ 21.4%¹ 832 855 228 773 213 689 194 168 127 130 122 113 98 86 72 55 2007 2008 2009 2010 2007 2008 2009 2010 Group PropCo² OpCo 1. 3 yea
Slide 20: Continued caseload growth
Continued caseload growth Caseload by funder Overall increase of 6% 3% organic 3% acquisitive 2008 2009 2010 Insured Self-pay NHS New sites CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 20
Slide 21: Self-pay
Caseload demand expected to grow in the long term but short term pressures p p persist Previous 2010 Thereafter 12 months • Unemployment led contraction in nsured insured lives impacted caseload in H2 In • Trend likely to continue in 2011 • Ongoing economic weakness Self-pay y continues ti tto erode
Slide 22: Healthcare reform – White Paper could take 2-3 years to implement
Healthcare reform – White Paper could take 2-3 years to implement NHS White Paper Creating a Commissioners Moves Removal of level playing field free to buy services commissioning from waiting timelines between the from PCTs¹ and SHAs² likely to result in private and public ‘Any Willing Provider’ to
Slide 23: Financial review
FINANCIAL REVIEW CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 23
Slide 24: Structural financial factors impacting results
Structural financial factors impacting results Exchange rate impact • Closing exchange rate R10.93 (2009: R11.95) • Average exchange rate R11.63 (2009: R13.73) • Strength of rand decreased HEPS by 2.2 cents Interest rate swaps • UK interest rates at record lows • Income statement effect of £8.7m (R1
Slide 25: Exchange rate impact – no currency hedging
Exchange rate impact – no currency hedging Strengthened R/₤ exchange rate GHG acquisition 12 May 06 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 R11.73 R14.76 R13.64 R11.95 R11.03 R10.93 20 18 16 14 12 10 Mar 06 Sep 06 Mar 07 Sep 07 Mar 08 Sep 08 Mar 09 Sep 09 Mar 10 Sep 10 CARE • DIGNITY • TRUTH • PARTICIPAT
Slide 26: Revenue analysis
Revenue analysis Actual rates (Rm) Constant rates (Rm) Total Total Total Total 24 263 23 232 23 232 22 474 11 722 11 400 9 933 11 400 11 832 12 541 11 832 12 541 2009 2010 2009 2010 SA UK CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 26
Slide 27: Operating profit analysis
Operating profit analysis Actual rates (Rm) Constant rates (Rm) Total Total Total Total 4 040 3 700 3 708 3 700 2 175 2 047 1 843 2 047 1 653 1 865 1 653 1 865 2009 2010 2009 2010 SA UK Including capital items CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 27
Slide 28: Operating profit margin analysis
Operating profit margin analysis SA (Rm) UK (£m) 17.8% 17 6% 17.6% 16.7% 15.1% 14.0% 13.5% 2008 2009 2010 2008 2009 2010 Excluding capital items CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 28
Slide 29: Net interest expense analysis
Net interest expense analysis Actual rates (Rm) Constant rates (Rm) Total Total 2 275 2 275 Total 2 164 Total 1 888 1 812 1 812 1 797 1 521 463 367 463 367 2009 2010 2009 2010 SA UK CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 29
Slide 30: Summarised Group income statement
Summarised Group income statement 30 Sep 30 Sep Rm 2009 2010 % Revenue 23 232 22 474 (3.3) • 9.2% increase in constant currency Operating profit 3 700 3 708 0.2 • Both geographies delivered improved p o ed margins ag s N t financial Net fi i l expenses (2 260) (1 978) 12 5 12.5 Attributable earnings
Slide 31: UK income statement
UK income statement 30 Sep 30 Sep £m 2009 2010 % Reported EBITDA 213.0 228.2 7.1 • Increase in depreciation due to acquisitions Depreciation and amortisation (65.2) (71.2) (9.2) Net interest expense (130.0) (128.8) • Reduction in interest expense negated by non-cash swap Swap ineffectiveness 0.2 (8.
Slide 32: Headline earnings per share
Headline earnings per share 30 Sep 30 Sep Cents 2009 2010 % Basic HEPS 78.2 96.5 23.4 Improved HEPS from both From continuing operations 74.6 96.5 29.4 geographies From discontinued operation 3.6 South Africa 68.1 85.0 24.8 UK contributed 11.9% to total HEPS United Kingdom 10.1 11.5 13.9 Diluted HEP
Slide 33: Adjusted headline earnings per share
Adjusted headline earnings per share Cents 97 97.8 8 78.9 30 Sep 30 Sep Cents 2009 2010 % SA 68.9 85.5 24.1 UK 10.0 12.3 23.0 Adjusted HEPS 78.9³ 97.8¹ ² 24.0 2009 Adjusted³ 2010 Adjusted¹ ² 1. Calculated at constant exchange rates 2. Adjusted to exclude costs relating to the IPO, the ineffectivenes
Slide 34: Summarised statement of financial position | assets
Summarised statement of financial position | assets 30 Sep 30 Sep Forex Rm 2009 2010 effect Movement Non-current assets 41 043 38 988 (3 032) 977 Capex of R787m in SA and R497m in UK, offset by PPE 25 097 23 852 (1 720) 475 depreciation Goodwill Good ill and intangible 14 669 13 484 (1 193) 8 assets
Slide 35: Summarised statement of financial position | equity and liabilities
Summarised statement of financial position | equity and liabilities 30 Sep 30 Sep Forex Rm 2009 2010 effect Movement Total shareholders' equity 7 133 6 529 (367) (237) Reduction due to transfer to short term debt Non-current liabilities 33 720 30 504 (2 730) (486) L Long term d debt b 25 423 21 630
Slide 36: Group debt
Group debt Net debt at 30 Sep 2010 Geographic split of net debt at 30 Sep 2010 Facilities Utilised UK debt (£m) 1 994 1 875 UK debt ((Rm)) 21 784 20 491 15% SA debt (Rm) 6 788 3 706 Net debt (Rm) 24 197 Cost of debt (%) 30 Sep 30 Sep 85% 2009 2010 UK debt 6.5 6.5 SA debt 8.1 7.9 SA UK Group debt 6.7
Slide 37: UK debt
UK debt UK bank borrowings OpCo PropCo 1 PropCo 2 Transform 63 hospitals p 36 hospital p p properties p 8 hospital p p properties p 2 hospitals p • £234m gross debt • £1 605m gross debt • £79m gross debt • £20m gross debt • 73% fixed @ 7.8% • 100% fixed @ 6.3% • 100% fixed @ 6.9% • 85% fixed @ 7.6%
Slide 38: Repayment of UK bank borrowings
Repayment of UK bank borrowings UK (£m) 1 568 246 34 41 49 2011 2012 2013 2014 Thereafter Refinancing after 2014¹ relates primarily to OpCo facilities B and C repayable in 2015¹ and 2016¹ respectively 1. Reflecting financial year ending 30 September CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 3
Slide 39: South African debt position
South African debt position Cost of debt Rm Facilities Utilised % Convertible bond¹ 1 417 1 417 5.9 Purchased R225m of convertible bond during period of share Preference shares 252 252 8.7 weakness DMTN 3 500 2 110 89 8.9 DMTN facility increased by R1bn Long term bank debt 3 219 340 9.2 during cours
Slide 40: Interest rate swaps
Interest rate swaps Derivative financial instruments – financial liability 30 Sep 30 Sep Rm 2009 2010 Movement Net interest rate swaps (UK) 2 771 4 089 1 318 Represents mark-to-market valuation on five interest rate Net interest rate swaps (SA) 26 24 (2) swaps Total 2 797 4 113 1 316 Movement in UK
Slide 41: Cash generated from operations
Cash generated from operations SA (Rm) UK (£m) 113 0%¹ 113.0%¹ 109 6%¹ 109.6%¹ 81 7%¹ 81.7%¹ 93 9%¹ 93.9%¹ 228 213 214 2 428 2 270 2 215 2 009 174 2009 2010 2009 2010 EBITDA Cash flow from operations 1. Cash conversion ratio (calculated with EBITDA including capital items) CARE • DIGNITY • TRUTH • P
Slide 42: Working capital
Working capital 30 Sep 30 Sep 2009 2010 Movement SA (Rm) Inventory 361 413 (52) Record Hospital debtors’ days at 30 5 days 30.5 A Accounts t receivable i bl 1 794 1 693 101 Accounts payable (1 675) (1 764) 89 Successful integration of Taxation (302) (250) (52) centralised creditors Net working capit
Slide 43: Growth in distributions
Growth in distributions Distribution cover of 2.1 times Distributions (cents per share) Distributions determined after having regard for • Degearing benefits 27.5 • SA leverage ratios • Investment opportunities 22.0 • HPFL BEE shareholder h h ld requirements i t • Non-recurring items affecting SA re
Slide 44: Guidance 2011
GUIDANCE 2011 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 44
Slide 45: Guidance 2011
Guidance 2011 SA UK Revenue Estimated revenue growth upper Continued modest revenue growth in growth single digit light of challenging UK economy Margin Expecting marginal improvement in Margin dilution in line with case mix EBITDA margins Capital expenditure Estimated R950m £50m CARE • DIGNITY • TR
Slide 46: Thank you
Th k you Thank CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 46