Life Healthcare Group Holdings Limited · JSE:LHC
Life Healthcare — H1 2013 Earnings Presentation
56 slides from Life Healthcare's earnings presentation, 2013
Slide 1: Interim Results Presentation
Interim Results Presentation For 6 months ended 31 March 2013 www.lifehealthcare.co.za
Slide 2: Agenda
Agenda Group Michael Flemming Review CEO Financial Fi i l Roger Hogarth Review CFO Future Michael Flemming Guidance CEO 2
Slide 3: SA: Overview
Group SA : Overview Review • Tougher market conditions: • SA Economy • Slower growth of new private medical scheme members • Rand weakening • Seen an increase in the proportion of medical over surgical cases: • A negative impact on revenue • A positive impact on Ebitda margin • Volumes impacted by:
Slide 4: Highlights
Group Highlights Review •S SA g growth: o Growth – PPD volume growth 1.5% – Additional beds 80 – Extension E tension of Life Esidimeni and ne new LOH contracts • Occupancy p y 69% Efficiency • Normalised Ebitda margin 27.4% • Group DSO 32 days • Continued improvement in clinical outcomes • Reduction
Slide 5: SA: H1 PPD Growth
Group SA : H1 PPD Growth Review PPD CAGR: 4.6% 1.5% 1 000 6.0% 950 6.4% 900 850 800 750 700 650 600 550 500 2010 2011 2012 2013 PPDs 5
Slide 6: SA: PPD Growth: YTD April 2013
Group SA : PPD Growth: YTD April 2013 Review Measuring PPD growth YTD April removes impact of March public h lid holidays. PPD growth YTD April: 2.8% 1 100 2.8% 1 000 1.5% 6.0% 6.4% 900 800 700 600 500 2010 2011 2012 2013 2013 Apr 2010 2011 2012 2013 2013 Apr 6
Slide 7: SA: Bed Growth – Acute care
Group SA : Bed Growth – Acute care Review Total New beds H1 2013 beds 2013-2015 Category g y 2010 - 2013 WIP A Approved d* 2012 Capacity expansion at existing facilities 420 60 178 342 New facilities 219 94 150 Acquisitions 269 - - Total 908 60 272 492 • Acute Hospitals: p *Approved : received Healt
Slide 8: SA: Bed Growth – New Lines of Business
Group SA : Bed Growth – New Lines of Business Review Total New beds H1 2013 2013-2015 Category g y 2010 - 2013 WIP A Approved d* 2012 New lines of 254 20 0 25 business Total 254 20 0 25 • New Lines of Business: • Mental Health / Acute Rehabilitation: • Continued strong performance • 20% increase in
Slide 9: SA: Growth - Other
Group SA : Growth - Other Review • Renal Dialysis: • Chronic renal dialysis: • R2,500/chronic patient day (circa) • 97 chronic stations operational (87 September 2012) • 49 chronic stations in development • Acute renal dialysis: • R3,000/acute patient day (circa) • Acute renal dialysis now in 14 hos
Slide 10: SA: Growth – Healthcare Services
Group SA : Growth – Healthcare Services Review • Healthcare Services: • Life Esidimeni: • Stable performance • Two existing contracts renewed for a further 5 years: • Conradie ((WC): ) 220 beds • Shiluvana Care Centre (Limpopo): 160 beds with potential to add 40 paediatric beds • Life Occupational H
Slide 11: SA: Efficiency
Group SA : Efficiency Review • 2013 - more challenging environment: • Inflationary pressures – salaries, salaries overheads overheads, utilities • Weakening of the Rand (R/$ 7.64 – 9.25 from 01/04/12 to 31/03/13) • Requires R i a more stringent i ffocus on: • Cost of sales procurement and product mi
Slide 12: SA: Efficiency - Ebitda Margin
Group SA : Efficiency - Ebitda Margin Review • Case mix change: positive margin impact • Strong management of consumables procurement • Continued management of overheads and administrative costs % 28 27.4% 26.0% 26 0% 26 24.7% 24 23 5% 23.5% 22 20 2010 2011 2012 2013 12
Slide 13: SA: Efficiency - Effective use of assets
Group SA : Efficiency - Effective use of assets Review Measuring Occupancy YTD April removes impact of March public holidays. % Occupancy YTD April: 69 5% 69.5% 72 70.3 70 69.5 69.0 69.5 68.2 68 66 64 2010 2011 2012 2013 2013 April 218 beds b d added dd d 2010: H1 Bed Occupancy Split 2013: H1 Bed Oc
Slide 14: SA: Efficiency - Working capital management
Group SA : Efficiency - Working capital management Review 55 51 51 • Excellent improvement in 50 50 49 49 DSO: 46 46 • Total DSO: 45 32 days (2012: 37) 42 • Hospital DSO: 40 38 38 37 37 30 days (2012: 34 days) 35 35 • Hospital DSO excluding COID: 32 26 days (2012: 30 days) • Improvement in governmen
Slide 15: SA: Efficiency - Programs
Group SA : Efficiency - Programs Review • Pathology - Blood Gas tests in ICU • Rolling out in-house delivery of blood gas pathology tests in ICUs • Share financial benefits with medical schemes • Positive contribution to Ebitda • Central Laundry: • In-house laundry process underway for Inland region
Slide 16: SA: Efficiency - Programs
Group SA : Efficiency - Programs Review • Systems driven efficiency through Impilo • Focus on driving standardisation standardisation, reduction in administrative costs & economies of scale: • Product management & formularies, inventory management & pharmacy dispensing • Re-engineering Re engineerin
Slide 17: SA: Sustainability – Quality: Measuring clinical outcomes
Group SA : Sustainability – Quality: Measuring clinical outcomes Review Outcome Outcome Measure Mar 2013 Mar 2012 Standard Net promoter score 96.2% 95.5% Patient incident rate 3.26 4.04 Per 1,000 PPDs VAP (Ventilator Associated Pneumonias) 4.02 4.81 Per 1,000 VAP days SSI (Surgical Site Infections)
Slide 18: SA: Sustainability – Quality: Improving clinical outcomes
Group SA : Sustainability – Quality: Improving clinical outcomes Review Pulmonary Acute Neo-natal Neo- HAI AMI Embolism Rehab outcomes Continued Continued Improved p FIM / FAM best Vermont Oxford improved compliance to AMI screening, practice protocols network protocols compliance to protocol in bot
Slide 19: SA: Sustainability
Group SA : Sustainability Review • Skills development: • Training 1 158 nurses in SA through the Life College of Learning • LHC/Max Healthcare nursing academy established - pipeline of 80 specialised nurses per annum from 2014 – aim to fill a skills gap as well as transfer skills • Competition Commi
Slide 20: India: Max Healthcare Bed Growth
Group India : Max Healthcare Bed Growth Review Operational Operational Unit Bed Capacity Start date b d Mar beds M 2013 b d Sept beds S t 2012 Existing Hospitals: 1 080 1 011 1 014 New Hospitals: Shalimar Bagh 288 126 78 Nov 2011 Mohali 204 102 95 Dec 2011 Bathinda 205 70 83 Dec 2011 Dehradun 201 70
Slide 21: India: Max Healthcare Growth - Revenue
Group India : Max Healthcare Growth - Revenue Review Rs in Cr 650 600 550 500 450 400 350 New Existing 300 H1 12 H2 12 H1 13 H2 13 Comment • Good revenue growth in both existing and new hospitals • 56% increase in revenue between H2 2013 and H1 2012 Fi Financial i l year end: d MMarch h 21
Slide 22: India: Max Healthcare Growth - Ebitda
Group India : Max Healthcare Growth - Ebitda Review Rs in Cr 80 60 40 20 0 -20 -40 New Existing -60 H1 12 H2 12 H1 13 H2 13 Comment • Good Ebitda improvement at Existing hospital level • Ebitda losses decreasing in new hospitals • 129% increase in Ebitda between H2 2013 and H1 2012 Fi Financial i l
Slide 23: Financial Review
Financial Review Roger Hogarth CFO www.lifehealthcare.co.za 23
Slide 24: Financial Highlights
Financial Highlights Review Revenue Good normalised Strong cash Increased G Growth th EPS growth th generation ti di id d dividend + 7.0% 7 0% +14.5% 14 5% + 24.2% 24 2% T 54 cps To Revenue +7.0% +7 0% to R5 638m Operating profit +12.7% to R1 361m Profit before tax +12.7% to R1 300m EPS + 14.8% to 7
Slide 25: Financial results
Financial Financial results Review Mar Mar 2013 2012 % Revenue 5 638 5 271 7.0% Normalised Ebitda 1 547 1 370 12.9% N Normalised li d Ebitda Ebitd margin i 27 4% 27.4% 26 0% 26.0% Comment • Revenue growth in hospitals: • 1.5% increase in PPDs (paid patient days) • 5.0% revenue/ppd increase • Continu
Slide 26: Four year review – 6 months to March
Financial Four year review – 6 months to March Review Revenue Normalised Ebitda CAGR : 10.4% CAGR : 16.4% 5 638 R’000m R’000m 5 271 6 000 1 800 4 718 1 547 1 600 4 186 5 000 1 370 1 400 1166 4 000 1 200 982 2,907 10,937 1 000 2,548 3 000 9,812 800 2 173 2,173 8,786 2 000 600 400 1 000 200 - 0 2010 2
Slide 27: Financial results
Financial Financial results Review Mar Mar 2013 2012 % Revenue 5 638 5 271 7.0% Normalised Ebitda 1 547 1 370 12.9% N Normalised li d Ebitda Ebitd margin i 27 4% 27.4% 26 0% 26.0% Operating profit 1 361 1 208 12.7% Associates 25 47 Attributable earnings 790 690 14.5% Comment • Max Healthcare include
Slide 28: Financial results
Financial Financial results Review Mar Mar 2013 2012 % EPS 76.1 66.3 14.8% • Loss on de-recognition of finance lease / Profit on disposal of 0.3 (2.5) business / gain on re-measuring of fair value HEPS 76.4 63.8 19.8% • Retirement funds (3.5) (1.5) • Gain on de-recognition of finance lease liability
Slide 29: Financial results
Financial Financial results Review CAGR: Normalised EPS 23.8% 80.0 71.3 62.3 60.0 51.1 40.0 37.6 20.0 - 2010 2011 2012 2013 29
Slide 30: Financial results - Segmental review
Financial Financial results - Segmental review Review Mar Mar 2013 2012 % Revenue 5 638 5 271 7.0% Hospital division 5 226 4 905 6.5% Healthcare services 410 365 12 3% 12.3% Other 2 1 Comment • Good increase in healthcare services revenue based on improved performance from both Life Esidimeni and Li
Slide 31: Financial result - Segmental review
Financial Financial result - Segmental review Review Mar Mar 2013 2012 % Revenue 5 638 5 271 7.0% Hospital division 5 226 4 905 6.5% Healthcare services 410 365 12 3% 12.3% Other 2 1 Operating O ti profit fit before b f amortisation, ti ti profit fit on disposals di l and d 1 371 1 211 13.2% impairm
Slide 32: Cash generated vs normalised EBITDA (H1)
Financial Cash generated vs normalised EBITDA (H1) Review 1 600 100% 90% 81% 90% 1 400 83% 1 247 73% 80% 1 200 1 069 70% 1 003 1 000 60% 821 800 50% 40% 600 2,233 2,562 3,042 30% 400 20% 200 10% 0 0% 2010 2011 2012 2013 Cash generated from operations Cash generated as % of normalised EBITDA Full y y
Slide 33: Summarised statement of financial position
Summarised statement of financial position Financial Assets Review Mar Sept Mar 2013 2012 2012 Non-current assets 7 881 7 771 7 582 PPE 4 144 4 010 3 791 g Intangibles 2 131 2 181 2 242 Other 1 606 1 580 1 549 Current assets (excl. cash) 1 403 1 239 1 558 Cash 249 246 213 Total assets 9 533 9 256 9
Slide 34: Summarised statement of financial position
Summarised statement of financial position Financial Equity and liabilities Review Mar Sept Mar 2013 2012 2012 Total shareholders equity 5 090 4 878 4 507 Non-current liabilities 2 269 2 445 2 685 Interest bearing borrowings 1 797 1 929 2 213 Other non-current liabilities 472 516 472 Current liabili
Slide 35: Dividend
Financial Dividend Review % of Normalised Distributions Cents/share Rand EBITDA Cover* Interim 2010 23 R240 million 24.4% 1.77 Final 2010 29 R302 million 25.4% 2.04 Total 2010 52 R542 million 24.9% 1.92 Interim 2011 31 R323 million 27.7% 1.78 Final 2011 54 R562 million 40.7% 1.34 Total 2011 85 R885
Slide 36: Future Guidance
Future Guidance Michael Flemming CEO www.lifehealthcare.co.za 36
Slide 37: SA: Future Guidance
SA : Future Guidance Future Guidance • Growth: • Hospitals: • Strong pipeline of bed growth: • WIP beds : 272 beds • Licensed approved beds : 517 beds • Applications pending: 752 beds • New Lines of business: • Establishment of mental health and acute rehab facilities in major centres • Renal R l Di
Slide 38: SA: Future Guidance
SA : Future Guidance Future Guidance • Max Healthcare: Current • Operationalisation of un-utilised un utilised beds in new facilities Focus Area for MHC • Continue to implement efficiency programs: • improve occupancy and Ebitda margin • Planning and commencing next phase of growth: • New Max hospit
Slide 39: Interim Results Presentation
Interim Results Presentation For 6 months ended 31 March 2013 www.lifehealthcare.co.za
Slide 40: Appendix
Appendix www.lifehealthcare.co.za 40
Slide 41: Shareholding
Shareholding Appendix % 60 50 40 30 20 10 0 SA N America UK Europe Rest Mar Mar-12 12 Mar Mar-13 13 41
Slide 42: Glossary of terms
Glossary of terms Appendix AMI Acute myocardial infarction HEPS Headline earnings per share AMS Antimicrobial stewardship ICU Intensive care unit Approved Received Health department licence approval. MHQ 14 Mental Healthcare questionnaire 14 Have not commenced building ARM Alternative reimbursement
Slide 43: Life Healthcare History
Life Healthcare Appendix History Phase Time Period Event C ti Creation 1983 • Af Afrox acquired i d Ammed A d group – 4 h hospitals it l Phase 1 growth 1985 - 1998 • Acquisition of 14 additional individual hospitals • Acquisition of PE Hospital group (5 hospitals), including 1st mental health unit n
Slide 44: Life Healthcare History
Life Healthcare Appendix History Phase Time Period Event De-listing D li ti and d 2005 - 2009 • Delisted D li t d Af Afrox H Healthcare lth phase 3 growth • Established Life Healthcare • Acquired remaining stake in Life Esidimeni • Sold 50% share in PHG JV • B ilt Life Built Lif Fourways F • Built L
Slide 45: Private healthcare insurance Industry
Private healthcare insurance Industry Appendix Growth in members Medical scheme lives 000 9 000 8 500 8 000 7 500 7 000 6 500 6 000 2004 2005 2006 2007 2008 2009 2010 2011 2012 Comment • St Strong o g growth g o t in covered co e ed lives es ssince ce 2004 00 • Benefitting from growth in middle clas
Slide 46: Growth in Middle Class
Growth in Middle Class Appendix Middle class lives 000 9 000 8 500 8 000 7 500 7 000 6 500 6 000 5 500 5 000 4 500 4 000 2004 2008 2012 Comment • Middle dd e cclass ass de defined ed as a an adu adultt living g in a household ouse o d with t income co e bet between ee R16,000 6,000 and R50,000 per m
Slide 47: Private healthcare insurance Industry
Private healthcare insurance Industry Appendix Geographic distribution of members % 40 35 30 25 20 15 10 5 0 GTN KZN WC EC MP NW LP FS NC % Source: Council of Medical Schemes 47
Slide 48: Private healthcare insurance Industry
Private healthcare insurance Industry Appendix Earnings breakdown of members Individual taxpayers using medical expenses deduction in 2009 R62,501 and over, 2.4% R0 and less, 2.1% R41,668 to R62,500pm, 3.5% R1 to R2,500pm, 2.2% R33,334 33,33 to R441,667pm, ,66 p , R2,501 , to R5,000pm, , p , 5.9% 3.
Slide 49: Private healthcare insurance Industry
Private healthcare insurance Industry Appendix Consolidation of medical schemes 160 140 120 100 80 60 40 20 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Open Schemes Closed Schemes Source: Council of Medical Schemes 49
Slide 50: Private healthcare insurance Industry
Private healthcare insurance Industry Appendix Health benefits paid in 2011 % of health benefits paid Other, 3.3 Managed care, 2.2 Allied, 7.9 Hospitals, 36.6 Dental, 3.5 GPs, 7.3 Medicines, 16.3 Specialists, 22.8 Comment • Total: R93 billion • Excludes administrator costs of R8.2 billion Source: Co
Slide 51: Private healthcare insurance industry
Private healthcare insurance industry Appendix Growth in number of scheme options Number of scheme options 9 8.5 8 7.5 7 6.5 6 2004 2005 2006 2007 2008 2009 2010 2011 Comment: • Increasing complexity • Increasing patient choice Source: Council of Medical Schemes 51
Slide 52: Private healthcare insurance industry
Private healthcare insurance industry Appendix Growth potential • Growing market 8.5 m people 17% of population Private insured • Growth of 28% since 2004 62% off personall income i ttax(1) market • Further growth expected as new low cost options become available 4.5 m people 9.2% of population Empl
Slide 53: Burden of Disease
Burden of Disease Appendix Worldwide • The 3 leading causes of Dalys (Disability Adjusted Life Year) in 2030 are projected to be: • Unipolar depressive disorders • Ischaemic heart disease • Road traffic accidents Global Burden of Disease Report - WHO 53
Slide 54: DALY's/100,000
Demand for healthcare services largely driven by Appendix South Africa’s significant g burden of disease Diseases as % of total burden Germany • Nearly 40% share of HIV/AIDS in total UK disease burden (very high even for USA developing countries) Indonesia • Tuberculosis, influenza and pneumonia Gha
Slide 55: Burden of Disease
Burden of Disease Appendix Growth in Chronic, Cancer, HIV/AIDS The burden of CDL Chronic Diseases, Cancer and HIV/AIDS in South Africa, 1985 to 2025 Source: IMSA 55
Slide 56: South Africa's population
South Africa’s population Ageing • Strong increase in 50-and-above-year-old population. Expected to reach 19.1% (10.4 m) of total population in 2030 (from 13.9% in 2005) • A i nott only Ageing l results lt in i more hospital h it l visits i it but b t the th average iincome per visit i it ffor patie
Life Healthcare Group Holdings — H1 2013 Earnings Presentation on 6ix