Life Healthcare Group Holdings Limited · JSE:LHC
Life Healthcare — FY2019 Earnings Presentation
43 slides from Life Healthcare's earnings presentation, Nov 21, 2019
Slide 1: Group Results for the Year Ended 30 September 2019
GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2019, CASH DIVIDEND DECLARATION AND TRADING STATEMENT
Slide 2: Group Overview
Group Overview 2 Excellent revenue growth and investments in programmes to target sustainable future margins Revenue Normalised Cash from Final EBITDA operations dividend +9.3% +3.5% +7.7% +6.0% to R25.7 billion to R5.7 billion to R5.9 billion to 53.0 cps Max Healthcare Institute Limited (Max) dispo
Slide 3: Our Vision
Our Vision 3 To be a market-leading, international, diversified healthcare provider Global healthcare provider with a Continue to grow our southern Africa business dual strategy offering an GROWTH while establishing a sizeable international 1 integrated healthcare model in business, and diversify ou
Slide 4: 2019 Group Overview: Solid operational performance
2019 | Group Overview 4 Solid operational performance Life Healthcare SA • Strong growth in revenue across acute, complementary and healthcare services businesses • Revenue growth largely driven by: − good paid patient days (PPDs) growth in H2 FY2019: 1.8% − positive case mix change, resulting in a
Slide 5: 2019 Group Overview: Solid operational performance
2019 | Group Overview 5 Solid operational performance Scanmed • The Group is exploring strategic options to potentially exit the business Growth initiatives • Build out of a diagnostic imaging services business in SA is progressing according to plan • Expansion across the continuum of care is progre
Slide 6: Group diversification
2019 | Group Overview 6 Group diversification Continued progress made on the implementation of diversifying across business lines and territories Revenue (%) Normalised EBITDA (%) Acute vs non-acute revenue (%) 24 27 28 19 23 24 28 35 33 76 74 72 81 77 76 72 65 67 2017 2018 2019 2017 2018 2019 2017
Slide 7: Operational excellence
2019 | Group Overview 7 Operational excellence International Southern Africa Operational excellence DOMINO: sustainable clinical excellence • Investment in analytics and management information supporting a • Launched end of FY2018 - focus on delivering sustainable clinical number of multi-site cost
Slide 8: Focus on future growth
2019 | Group Overview 8 Focus on future growth MARKET SIZE GROWTH OPPORTUNITY Complementary services • Fastest growing segment of the SA business – 14.7% CAGR over past four years • Future growth through the geographic expansion of acute rehabilitation, renal dialysis and select mental health facili
Slide 9: Operational Review: Southern Africa
Operational Review Southern Africa Shrey Viranna | Group CEO
Slide 10: Southern Africa Business overview
Southern Africa 10 Business overview Acute hospitals Complementary services Healthcare services Occupancy (%) Proportion of R16 152 million R1 061 million R1 259 million SA revenue 87.4% 5.8% 6.8% 76.0 75.2 74.8 74.6 Four-year 74.4 6.6% 14.7% 9.8% revenue CAGR 74.0 49 acute 16 500 admissions 10 PPP
Slide 11: Southern Africa Business review
Southern Africa 11 Business review: good overall performance on the back of an excellent H2 % 2019 2018 change • PPD growth driven by strong growth in H2 FY2019 of 1.8% PPD growth 0.8% 1.1% • Good revenue per PPD growth of 5.8% driven by: − a 4.8% tariff increase Revenue (R’m) 18 472 17 240 7.1 − a
Slide 12: Business review: operational trends
Southern Africa 12 Business review: operational trends Revenue growth rate: 2018 - 2019 PPD growth rate:2018 - 2019 10.0% 2.0% 1.8% 8.4% 7.1% 1.5% 5.8% 1.0% 0.8% 5.0% 0.5% 0.0% 0.0% -0.5% -0.3% H1 H2 FY H1 H2 FY Normalised EBITDA margin: 2019 - 2018 Normalised operations EBITDA* margin: 2019 - 2018
Slide 13: Business review: medical / surgical trend
Southern Africa 13 Business review: medical / surgical trend Revenue R’m FY2019 Total medical / surgical split as a % of PPDs 18 000 1 259 7.2% 1 122 1 061 12.2% Medical Surgical 16 000 972 871 60.0% 849 853 54.9% 55.3% 55.6% 14 000 720 53.4% 54.5% 866 9.2% 614 12 000 50.0% 10 000 8 000 15 146 16 15
Slide 14: Market dynamics frame the opportunity for growth in our acute business
Southern Africa 14 Market dynamics frame the opportunity for growth in our acute business Ageing Implications % PPDs/revenue from patients aged 50+ • Increasing proportion of PPDs and revenue come from patients above 2014 2018 2019 50 years of age 56 56 % 49 49 51 Difference 45 LOS differential pati
Slide 15: Business review: capex
Southern Africa 15 Business review: capex R’m 2019 2018 2017 Total SA capex 1 008 1 278 1 296 Growth 279 411 609 Property acquisitions - 166 - Maintenance 729 701 687 Maintenance capex as % of revenue 3.9% 4.1% 4.3% Group Results 2019
Slide 16: Quality
Quality 16 Continued focus on quality outcomes and patient experience 2019 2018 Measure Patient experience - inpatient 8.4 8.4 Healthcare associated infection • Consistent patient 0.41 0.41 Per 1 000 PPDs experience and HAI scores (HAI) • Good improvement in Patient safety adverse events 2.44 2.68 P
Slide 17: Healthcare services
Healthcare services 17 Revenue and normalised EBITDA Revenue (R’m) EBITDA (R’m) EBITDA margin 11.7% 11.8% 12.2% 1 259 13.0% 148 1 122 131 • Secured contracts for Life Esidimeni • Good growth in both Life Esidimeni and Life Employee Health Solutions revenue • Good management of costs to ensure stable
Slide 18: Operational Review: International
Operational Review International Shrey Viranna | Group CEO
Slide 19: International: Alliance Medical Overview
International: Alliance Medical 19 Overview United Kingdom (UK) Italy Ireland Other geographies • DI static sites 33 Spain Netherlands Germany Finland • PET-CT national • Owned clinics 34 • Operating sites 27 contract sites 36 • Static sites 8 • Mobiles 44 Bulgaria Norway Switzerland Austria • Reven
Slide 20: Strong growth in scan volumes
International: Alliance Medical 20 Strong growth in scan volumes MRI and CT Scans PET-CT Scans 350 000 100 000 95 000 300 000 90 000 250 000 85 000 • 8.9% increase in overall scan 80 000 200 000 volumes (excl. mobiles) across 75 000 Alliance Medical 150 000 70 000 • 15.9% increase in PET-CT 65 000 1
Slide 21: Stable overall performance
International: Alliance Medical 21 Stable overall performance Change • Good revenue growth compared to FY2018 mostly driven by: 2019 2018 % − growth in PET-CT scan volumes in the UK − the Italian and UK acquisitions Revenue (£’m) 304.4 279.6 8.9 − a good showing from the mobile business in the UK •
Slide 22: Alliance Medical UK: Molecular Imaging
International: Alliance Medical 22 UK Molecular Imaging (MI) MI as a % of UK revenue 100% • PET-CT wave 1 80% − MI growth underpinned by 10-year PET wave 1 contract 60% − Pricing certainty until December 2025 40% 52% 57% • PET-CT wave 2 20% 42% 46% 0% − Successful with all four PET wave 2 contracts
Slide 23: Alliance Medical UK: Diagnostic Imaging
International: Alliance Medical 23 UK Diagnostic Imaging (DI) Growth in longer-term contracts Short-term Long-term • Strategic focus continues to be partnership solutions 100 with hospital trusts 44 59 64 50 • UK DI impacted by lower-volume growth compared 56 41 to recent trend 36 0 2017 2018 2019 •
Slide 24: UK Radiopharmacy: Future proofing
International: UK Radiopharmacy 24 Future proofing • With strong growth in PET-CT the planned refurbishment plan has resulted Refurb Period in operational challenges whilst the business has operated three of the four cyclotron sites • Limiting capacity during this period has negatively impacted cost
Slide 25: Italy and Ireland
International: Alliance Medical - other key markets 25 Italy and Ireland Italy • Strong revenue growth at 10.1% on the back of increasing volumes and acquisitions • Growth in clinics enables growth in private volumes • Strong growth in insurance revenues • Acquisition of clinics during FY2018 perfor
Slide 26: Operational Review: Growth initiatives
Operational Review Growth initiatives Shrey Viranna | Group CEO
Slide 27: Imaging services in SA
Imaging services in SA 27 • The market is R8.5 billion revenue with 28% coming from Life Healthcare hospitals. This excludes the public sector opportunity • Key pillar of future growth to provide imaging services in our SA hospitals • Aim to create a national imaging footprint across SA • Develop an
Slide 28: Delivering imaging services in SA
Delivering imaging services in SA 28 Leveraging Alliance Medical’s world class capability 887k 104k Percent of sites rated good or 734k higher for quality of outpatient and diagnostic imaging services Imaging Focus on 97.0% services clinical provision 12k excellence Bench at scale mark 67.0% Total M
Slide 29: LMI
LMI 29 • Current established product: − Focus on driving sales of Neuraceq – radioactive tracer used to identify Amyloid plaques in the brain in order to diagnose Alzheimer’s disease − Biogen recently announced plans to submit a regulatory filing for Aducanumab, a DMD drug with the FDA − Successful
Slide 30: Outpatient care: Strategy review
Outpatient care 30 Strategy review • Our myLife offering is geared to deliver convenient, high-quality, nurse led, tech-enabled care to the employed and uninsured population in SA • Delivered two standalone clinics servicing more than 4 200 cash-paying customers with 96% patient satisfaction score •
Slide 31: Financial Review
Financial Review Pieter van der Westhuizen | Group CFO
Slide 32: Highlights
Highlights 32 Revenue Normalised EBITDA Final dividend +9.3% +3.5% +6.0% to R25.7 billion to R5.7 billion to 53.0 cps Strong revenue growth Investments of R124 million Strong working capital in efficiency programmes management resulted starting to deliver in cash generated of R5.9 billon Group Resul
Slide 33: Financial statutory results
Financial statutory results 33 Group 2019 2018 % • Normalised EBITDA impacted by: R’m R’m change − investment in new growth initiatives − investment in operational efficiency Revenue 25 672 23 488 9.3 programmes Normalised EBITDA 5 727 5 535 3.5 − operational challenges within Normalised EBITDA marg
Slide 34: Financial results
Financial results 34 Group Constant currency 2019 2018 2019 2018 % R’m R’m % R’m R’m % Revenue 8.1 25 672 23 488 9.3 Corporate 321 455 (29.5) Southern Africa 7.1 18 472 17 240 7.1 Recoveries 1 292 1 218 6.1 International 7.7 6 931 6 182 12.1 Costs (971) (763) 27.3 Growth initiatives¹ 269 66 >100 Cor
Slide 35: Financial results: Max
Financial results 35 Group Max • Sale concluded during H2 FY2019 and funds received in June 2019 • Gross proceeds of R4.3 billion and net proceeds of R3.8 billion (after payment of costs and taxes) • Attributable profit on disposal of R1.0 billion − Gross proceeds R4.3 billion − Book value of invest
Slide 36: Financial results: EPS and HEPS
Financial results 36 Group 2019 2018 % R’m R’m change Weighted average number of shares (million) 1 456 1 451 0.3 • Normalised EPS impacted by: EPS (cents) 176.4 108.6 62.4 − investments in growth initiatives Impairment of assets and investments 9.6 2.3 (net loss of R31 million) Profit on disposals
Slide 37: Consolidated statement of financial position
Consolidated statement of financial position 37 Group 2019 2018 R’m R’m Non-current assets 31 588 30 558 Property, plant and equipment 12 929 12 243 Goodwill 13 140 12 991 Intangible assets 3 829 4 093 Other 1 690 1 231 Current assets (excluding cash and asset classified as held for sale) 4 434 4 24
Slide 38: Cash flow
Cash flow 38 Group 2019 2018 % R’m R’m R’m change 6 000 120% Cash generated from operations 5 927 5 503 7.7 5 500 Net interest paid (excl. interest on finance leases) (809) (863) 5 000 Interest paid on finance leases (115) (136) 4 500 Tax paid (1 185) (1 065) 4 000 Maintenance capex (1 166) (878) 3
Slide 39: Distribution
Distribution 39 Group Distributions Cents / share R’m Interim 2018 38 556 Final 2018 50 734 • Declared a final cash Total 2018 88 1 290 dividend of 53 cps Interim 2019 40 587 Final 2019 53 778 Total 2019 93 1 365 The Group’s dividend policy is to pay a progressive dividend that takes into account th
Slide 40: Impact of IFRS 16 - Leases
Impact of IFRS 16 - Leases 40 Group Impact on FY2020 Increase in normalised EBITDA R220 million - R250 million Increase in depreciation R210 million - R240 million Increase in interest R40 million - R60 million • Impact calculated Decrease in deferred tax R5 million - R10 million based on current av
Slide 41: FY2020 Outlook
FY2020 Outlook Shrey Viranna | Group CEO
Slide 42: Outlook for FY2020
Group Overview 42 Outlook for FY2020 SA • Flat PPDs in a market of increased network arrangements • Stable normalised EBITDA margins through delivery on plans put in place in FY2019 • Capex spend of approximately R1.3 billion for the full year • Approximately 50 brownfield beds and 65 renal stations
Slide 43: Questions
| Li @_ croup HEALTH CARE Questions
Life Healthcare Group Holdings — FY2019 Earnings Presentation on 6ix