Life Healthcare Group Holdings Limited · JSE:LHC

Life Healthcare — H1 2016 Earnings Presentation

44 slides from Life Healthcare's earnings presentation, Mar 31, 2016

  1. Slide 1: Group Results and Distribution for the six month period ended 31 March 2016

    Group Results and Distribution for the six month period ended 31 March 2016 www.lifehealthcare.co.za

  2. Slide 2: Operational Review

    OPERATIONAL REVIEW ANDRÉ MEYER CEO 2

  3. Slide 3: Highlights: Group – Southern Africa

    Highlights Group – Southern Africa • Solid 6 month performance: • Good activity growth • Bed growth on target to meet 2016 goals • Strong management of cost of sales, salaries and overheads • PPD growth 2.7% • Additional beds 91 • Occupancy rate 69.9% • Stable EBITDA margin 27.7% 3

  4. Slide 4: Highlights: Group – International (Poland, India)

    Highlights Group – International Poland India • Good revenue and EBITDA growth • Strong revenue and EBITDA growth • Completed acquisition of Polska Grupa • Completed acquisition of Saket City Medyczna (PGM) for R685 million Hospital (re-­named Max Smart Super • PGM consists of: Speciality Hospital)

  5. Slide 5: Highlights: Group

    Highlights Group • Revenue +10.9% to R7 860m • Normalised EBITDA +9.0% to R2 099m • Headline earnings per share +15.8% to 93.0 cents • Normalised EPS +8.6% to 87.1 cents • Interim dividend +7.4% to 73 cps 5

  6. Slide 6: Southern Africa: Growth

    Southern Africa: Growth H1 PPD Growth PPDs (000) 1 100 • PPD growth to end April 2016: 2.7% − above 3.5% 1 050 3.5% 1 000 2.7% 1.5% 950 900 2012 2013 2014 2015 2016 H1 bed growth 154 80 142 90 91 FY bed growth 292 95 249 253 210 est 6

  7. Slide 7: 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 24 115 Mental Health -­ 95 95 Total b eds 91 119 210 Renal Dialysis stations 17 6 23 Oncology units -­ 1 1 • Life Bayview • Life Flora • Life Vincent Pallotti • Lif

  8. Slide 8: Southern Africa: Growth – Acute and Complementary pipeline

    Southern Africa: Growth Acute and Complementary pipeline Total Approved Applications Category 2016 beds* pending Capacity expansion at existing acute facilities 115 464 382 New acute facilities -­ 300 128 Mental Health / Acute Rehab – new facilities 95 125 535 Mental Health / Acute Rehabilitation –

  9. Slide 9: Southern Africa: Growth – Healthcare Services

    Southern Africa: Growth Healthcare Services Life Esidimeni • Gauteng province: − reduced beds by 200 from April 2015 – impacted revenue growth which was flat on H1 2015 − Non-­renewal of 1 570 mental health beds delayed to 30 June 2016 Occupational Health / Wellness Business • Business closely align

  10. Slide 10: Southern Africa: Efficiency – Effective use of assets

    Southern Africa: Efficiency Effective use of assets Occupancy % 77% 75,8% 75,3% 74,8% • Occupancy 72,3% to end 73% 70,6% 70,7% April: 69,9% 69,0% • 70.3% 69% 65% 2013 2014 2015 2016 Occupancy % ICU occupancy % Bed growth: H2 2013 -­ H1 2016 608 beds ICU bed growth: H2 2013 -­ H1 2016 227 beds (23% i

  11. Slide 11: Southern Africa: Efficiency – Occupancy split

    Southern Africa: Efficiency Effective use of assets Occupancy split between Acute and Complementary* 78 • 2013 was the last year in which 76,1 Easter fell in March 76 74,9 74,8 • Consistent occupancy within 74 the Acute business despite bed growth 72 • Strong demand for 70,6 70,7 Mental Health 70,2

  12. Slide 12: Southern Africa: Efficiency – H1 Normalised EBITDA margin

    Southern Africa: Efficiency H1 Normalised EBITDA margin EBITDA Margin % 30% • Good management of costs in a difficult environment 28,0% 28,0% 28% 27,7% • Pressure from the 27,4% weakening Rand, salaries and overhead costs 26% • Continued focus on driving efficiencies to offset increased 24% costs 22

  13. Slide 13: Southern Africa: Efficiency – Rand and Employee Cost pressures

    Southern Africa: Efficiency Rand and Employee Cost pressures Rand / $ Employee cost/PPD 17,00 16,00 6.9% 8.0% 15,00 4.6% 14,00 13,00 12,00 11,00 10,00 9,00 8,00 2013 2014 2015 2016 • Employee costs = 29.5% of revenue • Impact on surgicals / consumables -­ 17% of revenue with a 90% forex • Increases

  14. Slide 14: Southern Africa: Quality – Measuring Clinical Outcomes

    Southern Africa: Quality Measuring Clinical Outcomes Outcome 31 Mar 2016 31 Mar 2015 Standard Patient incident rate 2.69 2.72 Per 1 000 PPDs HAI (Healthcare Associated Infection) 0.35 0.33 Per 1 000 PPDs VAP (Ventilator Associated Pneumonias) 1.72 1.27 Per 1 000 VAP days SSI (Surgical Site Infection

  15. Slide 15: Southern Africa: Sustainability – Competition Commission Healthcare Market Inquiry

    Southern Africa: Sustainability Competition Commission (CC) Healthcare Market Inquiry • Made a detailed submission on the subject matter of the Inquiry • Submitted a further response to the public submissions focusing on: − Market power / medical scheme bargaining power − Profitability − Pricing & P

  16. Slide 16: Southern Africa: Sustainability – Environmental Management System

    Southern Africa: Sustainability Environmental Management System Environmental certification • On track to obtain an ISO 14001:2004 environmental certification in 2016 Energy-­saving initiatives • Solar − Next project will commence at Life F ourways Hospital: › installation of 580 kWp › 1 780 solar p

  17. Slide 17: International: Poland – Scanmed

    International: Poland Scanmed Strategy to build an integrated countrywide network of healthcare facilities • Focus on growth through M&A and increased NFZ business • Good pipeline of potential M&A targets • Driving efficiency through integration of assets and through improved case mix Growth: • NFZ

  18. Slide 18: International: Poland – Scanmed

    International: Poland Scanmed H1 2016 H2 2015 H1 2015 Beds 617 334 294 Cardiac units 12 7 6 Medical Centres 43 36 29 Primary care lives 130 000 130 000 130 000 Revenue PLN 150m PLN 103m PLN93m Normalised PLN 20.2m PLN 16.6m PLN11m EBITDA Normalised 13.5% 16.1% 11.8% EBITDA margin 18

  19. Slide 19: International: India – MHC

    International: India MHC 2016 H1 focus: • Bedding down Vaishali Hospital and Max Smart (Saket City) acquisitions • Continued good revenue growth • Improving margins Phase 3 Acquired Acquired Phase 1 76% of Max Smart hospitals operating Phase 2 Gradual opening of Vaishali (Saket City) Phase 2 being b

  20. Slide 20: International: India – MHC Bed Growth

    International: India MHC Bed Growth Operational Operational Operational Bed beds beds beds capacity 31 Mar 2016 30 Sep 2015 31 Mar 2015 Phase 1 Total: Phase 1 1 123 1 095 1 095 1 101 Phase 2 Total: Phase 2 859 729 698 654 Phase 3 Total: Phase 3 640 496 260 -­ Total: Combined 2 622 2 320 2 053 1 755

  21. Slide 21: International: India – MHC Occupancy

    International: India MHC Occupancy Operational Operational beds Occupancy beds Occupancy 31 Mar 2016 31 Mar 2016 31 Mar 2015 31 Mar 2015 Phase 1 Total: Phase 1 1 095 74% 1 101 76% Phase 2 Total: Phase 2 729 65% 654 69% Phase 3 Total: Phase 3 496 65% -­ -­ Total: Combined 2 320 70% 1 755 73% Occupanc

  22. Slide 22: Financial Review

    FINANCIAL REVIEW PIETER VAN DER WESTHUIZEN CFO 22

  23. Slide 23: Highlights

    Highlights Paid p atient d ays +2.7% Revenue +10.9% to R7 860m Normalised EBITDA +9.0% to R2 099m Normalised EPS +8.6% to 87.1 cents Dividend +7.4% to 73 cents Increase in investments in India and Poland R989 million Funding raised in Poland PLN240 million at 3.7% 23

  24. Slide 24: Financial results

    Financial results Group 31 Mar 2016 31 Mar 2015 Change Rm Rm % Revenue 7 860 7 089 10.9 Southern Africa 7 288 6 734 8.2 Poland 572 355 61.1 Normalised EBITDA 2 099 1 926 9.0 Southern Africa 2 022 1 884 7.3 Poland 77 42 83.3 Normalised EBITDA margin 26.7% 27.2% Southern Africa 27.7% 28.0% Poland 13.5

  25. Slide 25: Financial results

    Financial results Group 31 Mar 2016 31 Mar 2015 Change Rm Rm % Revenue 7 860 7 089 10.9 Normalised EBITDA 2 099 1 926 9.0 Normalised EBITDA margin 26.7% 27.2% Operating profit: 1 826 1 645 11.0 Southern Africa 1 720 1 628 5.7 Poland 37 18 >100 Transaction costs on international acquisitions (11) (11

  26. Slide 26: Financial results

    Financial results Group 31 Mar 2016 31 Mar 2015 Change Rm Rm % Revenue 7 860 7 089 10.9 Normalised EBITDA 2 099 1 926 9.0 Normalised EBITDA margin 26.7% 27.2% Operating profit 1 826 1 645 11.0 Associates and joint ventures: (1) 2 Max Healthcare (7) (1) Poland 2 -­ Other 4 3 26

  27. Slide 27: Financial results

    Financial results Group 31 Mar 2016 31 Mar 2015 Change Rm Rm % Revenue 7 860 7 089 10.9 Normalised EBITDA 2 099 1 926 9.0 Normalised EBITDA margin 26.7% 27.2% Operating profit 1 826 1 645 11.0 Associates and joint ventures (1) 2 Attributable p rofit: 965 832 16.0 Southern Africa 1 000 946 5.7 Poland

  28. Slide 28: Financial results: Southern Africa segmental revenue

    Financial results Southern Africa: segmental revenue 31 Mar 2016 31 Mar 2015 Change Rm Rm % Revenue 7 860 7 089 10.9 Southern Africa Hospital division 6 842 6 317 8.3 Healthcare services 446 417 7.0 Hospital division: • PPD growth: + 2.7% • Revenue/ppd: + 5.6% − Tariff impact: + 5.9% − Case mix: -­

  29. Slide 29: Financial results: Group segmental review

    Financial results Group segmental review 31 Mar 2016 31 Mar 2015 Change Rm Rm % Revenue 7 860 7 089 10.9 Southern Africa Hospital division 6 842 6 317 8.3 Healthcare services 446 417 7.0 Poland Hospitals 572 355 61.1 Operating p rofit b efore amortisation, p rofit/loss on disposals, impairment o f i

  30. Slide 30: Five year review

    Five year review Southern Africa Revenue* (Rm) Normalised EBITDA (Rm) 8 000 7% 2 500 CAGR 8.7% CAGR 10.5% 6% 2 000 6 000 2 022 5% 1 884 4% 1 500 1 728 4 000 1 533 3% 1 356 1 000 2% 2 000 500 1% 2 886 3 311 3 581 3 957 0 0% 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Hospital HCS Complementar

  31. Slide 31: Financial results: Poland revenue and margin

    Financial results Poland revenue and margin PLN million EBITDA margin % 160 15% 13.5% 11,8% 12% 120 48 9% 80 6% 40 3% 93 102 0 0% H1 2015 H1 2016 Organic Growth EBITDA margin 1PLN = ZAR3.96 31

  32. Slide 32: India: Max Healthcare – revenue growth

    Financial results India: Max Healthcare – revenue growth: 6 months to March MHC 2016 MHC 2015 Change Net revenue Rs Crore Rs Crore % Net revenue – Phase 1 hospitals 689 635 8.5 Net revenue – Phase 2 hospitals 274 230 19.3 Net revenue – Phase 3 hospitals (Vaishali & Smart) 142 -­ 100.0 Total n et rev

  33. Slide 33: India: Max Healthcare – EBITDA growth

    Financial results India: Max Healthcare – EBITDA growth: 6 months to March MHC 2016 MHC 2015 Change EBITDA Rs Crore Rs Crore % EBITDA – Phase 1 hospitals 92 87 EBITDA – Phase 2 hospitals 12 (2) EBITDA – Phase 3 hospitals 13 -­ Total EBITDA 117 85 37.6 EBITDA: 6 months to March 10,6% 120 9,8% 11,0% R

  34. Slide 34: Financial results: EPS and HEPS

    Financial results Group 31 Mar 2016 31 Mar 2015 Change cents cents % EPS 93.0 80.2 16.0 Loss on disposal of property, plant and equipment and disposal of businesses -­ 0.1 HEPS 93.0 80.3 15.8 Reversal of earn-­out (6.4) -­ Other 0.5 (0.1) Normalised EPS 87.1 80.2 8.6 34

  35. Slide 35: Financial results: Normalised EPS

    Financial results Group 31 Mar 2016 31 Mar 2015 Change Rm Rm % Normalised EPS 87.1 80.2 8.6 Southern Africa 97.3 89.2 9.1 Poland & Max Healthcare 1.3 (0.3) Funding costs for international acquisitions (11.5) (8.7) 32.2 35

  36. Slide 36: Cash generated vs normalised EBITDA – Southern Africa

    Cash generated vs normalised EBITDA – Southern Africa R000m 1 600 100% 1 200 90% 83% 81% 79% 800 80% 77% 73% 400 70% 3 042 3 422 3 516 3 842 0 60% 2012 2013 2014 2015 2016 Cash generated from operations Cash generated as % of normalised EBITDA Full year numbers 36

  37. Slide 37: Consolidated condensed statement of financial position

    Consolidated condensed statement of financial position 31 Mar 2016 30 Sep 2015 Rm Rm Non-­current assets 14 571 13 164 PPE 7 350 7 101 Goodwill 2 684 2 089 Intangibles 989 875 Investment in Max Healthcare 2 543 2 230 Other 1 005 869 Current assets (excl cash) 2 441 1 959 Cash 613 812 Total assets 17

  38. Slide 38: Condensed statement of financial position – Southern Africa & Poland

    Condensed statement of financial position – Southern Africa & Poland Southern Africa Poland Total 31 Mar 2016 31 March 30 Sep Rm 2016 2015 Non-­current assets 11 701 2 870 14 571 13 164 PPE 6 366 984 7 350 7 101 Intangibles 1 910 1 763 3 673 2 964 Other 3 425 123 3 548 3 099 Current assets (excl cas

  39. Slide 39: Net debt

    Net debt Weighted Weighted 31 Mar 2016 average cost 30 Sep 2015 average cost Funding Rm of debt Rm of debt (post-­tax) (post-­tax) Acquisition funding ZAR 3 490 7.00 3 271 6.46 PLN 841 3.76 -­ -­ Capex funding 1 697 5.66 1 864 5.47 Poland 220 3.77 346 4.67 IFRS debt 1 000 7.78 706 9.22 Working capit

  40. Slide 40: Dividend

    Dividend • Declared an Distributions Cents/share Rm interim dividend Interim 2015 68 709 of 73 cps • Scrip distribution Final 2015 86 896 alternative Total 2015 154 1 605 • Shareholders Interim 2016 73 765 entitled to receive all or part of their Dividend (cps) distribution in 80 73 cash or in share

  41. Slide 41: Outlook

    OUTLOOK ANDRÉ MEYER CEO 41

  42. Slide 42: H2 Outlook: Southern Africa

    H2 Outlook Southern Africa SA: • Bed growth: − Addition of 119 beds in H2 • PPD growth: − Between 2.5% -­ 3.5% • EBITDA margins: − Margins may come under pressure due to Rand weakness − Between 27.5% -­ 28.5% • Continued focus on improving clinical quality outcomes 42

  43. Slide 43: H2 Outlook: International

    H2 Outlook International Poland: • Continued revenue and EBITDA growth • Focus on completing integration of acquired businesses to drive efficiencies − Secondment of LHC staff • Continue M & A activity India: • Continued focus on bedding down Vaishali Hospital and Max Smart Hospital acquisitions • C

  44. Slide 44: Thank You

    THANK YOU 44

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