Slide 1: Audited Group Results for the Year Ended 30 September 2013
New Netcare Christiaan Barnard Memorial Hospital Netcare Limited AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2013
Slide 2: Agenda
Agenda RICHARD FRIEDLAND GROUP CEO Group overview South Africa United Kingdom KEITH GIBSON GROUP CFO Financial review CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 2
Slide 3: Group overview
Group overview CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 3
Slide 4: Group overview: South Africa (SA)
Group overview: South Africa (SA) Triple Aim of best patient experience, Primary Care best outcome, and EBITDA cost effective care, Consistent maintained, embedded across Awaiting NHI growth, under revised all divisions Good operating White Paper; largely organic business model leverage and Netcare
Slide 5: Group overview: United Kingdom (UK)
Group overview: United Kingdom (UK) BMI OpCo Short-term successfully extension to Improved refinanced GHG PropCo 1 performance debt facilities debt agreed in a challenging Deconsolidation¹ environment of GHG PropCo² better reflects Focus on Awaiting commercial reality targeted areas UK Competition o
Slide 6: A comprehensive network of healthcare services
A comprehensive network of healthcare services SA Revenue (%) Adjusted EBITDA (%)² Hospitals 50 42 44 15 17 Public Private Partnership hospitals 4 Hospital beds 9 289 Primary healthcare facilities 87 Renal dialysis facilities 58 ¹ Emergency bases/sites 96 Retail pharmacies 85 UK Hospitals 61 Hospita
Slide 7: Group financial overview
Group financial overview¹ Revenue R27 801m ▲10.4% EBITDA (before GHG PropCo rent)² R5 891m ▲14.7% Adjusted HEPS 142.0 cents ▲25.4% Final dividend 40.5 cents ▲19.1% 1. Continuing operations 2. Excluding profit on deconsolidation of GHG Property Businesses CARE • DIGNITY • TRUTH • PARTICIPATION • PASS
Slide 8: South Africa
South Africa CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 8
Slide 9: Demand driven by growth in lives covered, ageing and burden of disease
Demand driven by growth in lives covered, ageing and burden of disease Increased prevalence of chronic diseases (2006-2011) per 1 000 beneficiaries¹ 2 million additional SLE² 37.5% medical scheme beneficiaries Renal disease 50.0% Significant since 2000 growth in Parkinson’s 60.0% (8.6 million burden
Slide 10: South Africa
South Africa 30 Sep 30 Sep Rm 2012 2013 % Revenue 14 607 15 517 6.2 • Revenue growth in Hospital and Emergency Services offset by a EBITDA¹ 2 901 3 241 11.7 decline in Primary Care revenue • Price inflation contained below Operating profit¹ 2 461 2 748 11.7 6%, with additional growth derived from in
Slide 11: Netcare has embedded the Triple Aim as a foundational principle and philosophy
Netcare has embedded the Triple Aim as a foundational principle and philosophy Netcare Quality System (8 pillars, multi divisional) Best National Core Standards patient experience Improvement capability Most Best cost • Science based improvement outcomes effective skills and processes • Robust integ
Slide 12: We have developed a bespoke Netcare Quality System
We have developed a bespoke Netcare Quality System… Netcare Quality System (8 pillars, multi divisional) Assessment DoH of performance by National Core Standards National site was verified Core Standards by independent rolled out in subject matter all five divisions Expanded experts to include Impro
Slide 13: … and embedded improvement capability culture
… and embedded improvement capability culture … with broad Netcare Quality System measurable (8 pillars, multi divisional) Group-wide improvements skills in outcomes development National Core Standards in improvement science… … resulting in a ground swell of front-line Improvement staff driven All u
Slide 14: A quality system now embedded across all division
A quality system now embedded across all division Netcare’s Quality System A system designed for a Group-wide reach Core standards Clinical partnerships The Netcare Way Antibiotic stewardship IPC (care bundles) Clinical outcomes Health and safety Compliments and complaints Patient experience outcome
Slide 15: … and we continue to drive efficiencies in Hospitals and Emergency Services
… and we continue to drive efficiencies in Hospitals and Emergency Services 30 Sep 30 Sep Rm 2012 2013 % Revenue 13 219 14 354 8.6 • ▲5.7% revenue per patient day • ▲2.7% patient day growth EBITDA¹ 2 818 3 158 12.1 • LOS constant • Average occupancy of 67.4% Operating profit¹ 2 409 2 699 12.0 (2012:
Slide 16: Investing in Hospital portfolio
Investing in Hospital portfolio Hospital portfolio changes: 2013 • 42 beds at Netcare Montana • 20 neonatal and paediatric ICU beds across facilities Netcare Montana Paediatric Ward • 8 beds at Netcare Rehabilitation • 56 underutilised acute beds converted to psychiatric beds ICU and theatre refurbi
Slide 17: Enhancing Netcare's hospital portfolio in under-represented growth areas
Enhancing Netcare’s hospital portfolio in under-represented growth areas Hospital portfolio changes: 2014-2016 Netcare Polokwane Additional beds: 98 beds (2014) • Netcare St Anne’s, Netcare Parklands, Netcare Olivedale, Netcare Union New builds¹: • Netcare Polokwane: 109 beds (2015) • Netcare Pineha
Slide 18: Primary Care contribution maintained despite change in business model
Primary Care contribution maintained despite change in business model 30 Sep 30 Sep Rm 2012 2013 % Revenue 1 388 1 163 (16.2) Revenue impacted by transition of Prime Cure business from a EBITDA¹ 83 83 managed healthcare risk model to a managed healthcare Operating profit¹ 52 49 (5.8) administration
Slide 19: Health reform landscape continues to evolve
Health reform landscape continues to evolve National Health Competition NHI Amendment Act Commission White Paper signed terms of reference imminent September 2013 for healthcare market inquiry expected December 2013¹ Office of Health Inquiry Netcare has more than Standards Compliance to take two yea
Slide 20: Working to deliver meaningful clinical outcomes in the public sector
Working to deliver meaningful clinical outcomes in the public sector Background to Lesotho’s New 425 bed integrated healthcare PPP hospital and four³ One of the poorest countries in Africa primary care referral clinics Life expectancy 42-43 years managed by Incidence of TB 632/100 000¹ private secto
Slide 21: Achieving significant improvements in healthcare delivery within constraints of public health budget
Achieving significant improvements in healthcare delivery within constraints of public health budget Comparative data of new PPP Old Hospital New Hospital versus old public hospital (QEII-IN) (QMMH-IN) % Hospital beds 409 425 4 Inpatient admissions 15 465 23 341 51 Inpatient days 91 808 116 648 27 O
Slide 22: SA outlook
SA outlook Continued growth in demand Continued for private strategic focus healthcare services on Triple Aim Enhanced capacity objectives utilisation and Focus on reducing expansion of units environmental in existing facilities impact and related 3 new hospitals at full capacity cost savings planne
Slide 23: United Kingdom
United Kingdom CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 23
Slide 24: Challenging market but signs that UK economy, and healthcare, beginning to turn
Challenging market but signs that UK economy, and healthcare, beginning to turn For the first time in four years Change in private medical insurance membership (%)¹ the number of private insured lives returning to growth, albeit slowly 1.1 PMI² membership growth offset by cover restrictions -4.4 -3.
Slide 25: Improving BMI OpCo performance
Improving BMI OpCo performance¹ 30 Sep 30 Sep Revenue per inpatient ▲6.7% £m 2012 2013 % and day case ▲4.0% reflecting ▲5% in complexity Revenue 834.0 851.3 2.1 • Caseload ▼1.9% on weaker EBITDA private volumes, offset by NHS (before GHG PropCo rent)² 176.6 182.0 3.1 ▲8.6% • PMI 56.5%, NHS 32.2%, GH
Slide 26: Targeting complexity and growth in high demand areas
Targeting complexity and growth in high demand areas Ongoing investment in oncology and nuclear medicine, new imaging equipment, full field digital mammography and state-of-the-art endoscopy BMI BMI BMI BMI The Beardwood Blackheath The Alexandra Mount Alvernia State-of-the-art Undergoing full Flagsh
Slide 27: Regulatory environment continues to evolve
Regulatory environment continues to evolve Health & Social Care Act 2012 Care Quality Commission Competition Commission (CC) • NHS structural changes • Quality standards • August 2013 Provisional implemented overhauled Findings published • All providers of healthcare • In this context, BMI has • BMI
Slide 28: Regulatory update: Competition Commission
Regulatory update: Competition Commission CC Provisional Findings Finding deficiencies Competition Appeal Tribunal CC has investigated the • Weight of evidence does not … “We unanimously conclude market for privately-funded support CC’s conclusions [… that the Commission healthcare services and • CC
Slide 29: UK outlook
UK outlook Regulatory uncertainty as we await Self pay CC final report recovery Insured lives expected after expected Continued growth 2014, driven by in NHS business to continue improving macro growing, forecast. Pace Investment environment albeit slowly may be slower, to expand but BMI well capaci
Slide 30: Financial review
Financial review CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 30
Slide 31: Financial overview
Financial overview Operational leverage translates into solid financial Group results SA business performing well Refinance of and further BMI OpCo strengthening of – less onerous GHG PropCo balance sheet covenants and deconsolidation longer term has simplified stability the structure and complexity
Slide 32: Group results structurally changed after GHG PropCo deconsolidation
Group results structurally changed after GHG PropCo deconsolidation For the year ended 30 September 2013 R1 719m R61m Income statement £118.6m R1 324m £4.1m £91.5m • Non-recurring profit on deconsolidation of R3 257m • Ongoing reporting: › Marginal net effect › GHG Property Businesses equity account
Slide 33: An improved Group performance
An improved Group performance 30 Sep 30 Sep Rm 2012 2013 % Revenue 25 174 27 801 10.4 • Growth in local currencies in SA and UK • R1 498m exchange rate benefit EBITDA (before GHG PropCo rent) 5 136 5 891 14.7 Comparison to prior year GHG PropCo rent (1 719) impacted by deconsolidation EBITDA 5 136 4
Slide 34: Exceptional items relating to GHG PropCo
Exceptional items relating to GHG PropCo 30 Sep 30 Sep Rm 2012 2013 Impairment of goodwill (10 773) Interest rate swap contracts (2 960) Fair value losses on swap contracts not hedge accounted (1 598) Reclassification of the cumulative swap loss to the income statement (1 362) Tax 2 305 Profit on de
Slide 35: Operational leverage achieved at constant currency
Operational leverage achieved at constant currency Revenue EBITDA (before GHG PropCo rent) 8.5% 318 4.5% 1 498 2 327 10 786 10 567 2 228 14 607 15 517 2 908 3 246 2012 2013 2012 2013 SA UK Exchange rate impact CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 35
Slide 36: Continued growth in headline earnings per share (HEPS)
Continued growth in headline earnings per share (HEPS) Adjusted HEPS (cents) 30 Sep 30 Sep Rm 2012 2013 % HEPS 95.2 138.4 45.4 SA 121.0 140.6 16.2 UK (25.8) (2.2) 91.5 Adjusted¹ HEPS 113.2 142.0 25.4 SA 122.1 139.7 14.4 UK (8.9) 2.3 125.8 103.2 122.1 139.7 104.1 113.2 142.0 2011 2012 2013 2011 2012
Slide 37: Lower asset base – marked differential to fair market value
Lower asset base – marked differential to fair market value 30 Sep 30 Sep Decon Forex Other • Gap between accounting Rm 2012 2013 effect effect movement carrying value (historic cost less depreciation) and fair Assets market value PPE and intangible assets 28 005 10 876 (18 935) 1 524 282 • SA hospi
Slide 38: Substantial de-gearing and shareholder equity value restored
Substantial de-gearing and shareholder equity value restored 30 Sep 30 Sep Decon Forex Other Rm 2012 2013 effect effect movement Equity and liabilities Total shareholders’ equity (1 020) 10 432 9 837 600 1 015 Total liabilities ▼R32.7bn post GHG PropCo deconsolidation Borrowings 28 953 6 440 (22 607
Slide 39: SA business is comfortably geared with significant capacity
SA business is comfortably geared with significant capacity 30 Sep 30 Sep • Successful DMTN transaction Rm 2012 2013 thereby improving tenor Gross debt 3 975 3 903 Facility utilisation (Rm) Cash (483) (739) Net debt 3 492 3 164 3 903 Net debt to EBITDA (times) 1.2 1.0 739 Cost of debt (%) 6.9 7.0 4
Slide 40: BMI OpCo debt facilities successfully refinanced
BMI OpCo debt facilities successfully refinanced 30 Sep 30 Sep £m 2012 2013 Gross debt 236.1 156.4 Facility utilisation (£m) Cash (144.4) (51.1) 156.4 Net debt 91.7 105.3 Swap liability 8.5 22.3 Cost of debt (%)1 4.9 4.9 51.1 Cost of debt (%) after A&E1, 2 6.9 Net interest paid3 14.5 8.2 Utilised Ca
Slide 41: BMI OpCo debt maturity profile now comfortably extended
BMI OpCo debt maturity profile now comfortably extended £m 39.2 44.8 80.0 24.1 80.0 23.1 20.5 21.1 56.7 October 2013 October 2014 October 2015 April 2017 April 2018 October 2018 Before After Accrued (PIK) interest CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 41
Slide 42: Short-term extension agreed on GHG PropCo debt maturity
Short-term extension agreed on GHG PropCo 1 debt maturity Key terms of the proposal under 3 month discussion: extension • Raise new subordinated loan to reduce agreed with outstanding senior debt Discussions • 5 year extension of loan maturity date option for continue further 3 months • No prescribe
Slide 43: Thank you
Thank you CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 43
Slide 44: Appendix
Appendix CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 44
Slide 45: Appendix I: UK income statement - segmental analysis
Appendix I: UK income statement - segmental analysis Adjustments and £m BMI OpCo GHG PropCo¹ eliminations WholeCo Revenue 851.3 17.7 (17.7) 851.3 EBITDA (before GHG PropCo rent)² 182.0 19.7 (17.7) 184.0 GHG PropCo rent (136.3) 17.7 (118.6) EBITDA² 45.7 19.7 65.4 Depreciation and amortisation (39.6)