Slide 1: Netcare Limited Unaudited Group Interim Results, Six Months Ended 31 March 2013
Netcare Limited UNAUDITED GROUP INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2013 1
Slide 2: Presentation Format
PRESENTATION FORMAT RICHARD FRIEDLAND • GROUP CEO | GROUP OVERVIEW • SOUTH AFRICA • UNITED KINGDOM KEITH GIBSON • GROUP CFO | FINANCIAL REVIEW • GUIDANCE 2
Slide 3: Group Overview
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Slide 4: Group Overview
GROUP OVERVIEW South Africa Good trading Price inflation Dedicated focus Two greenfield (SA) performance, well contained on quality care hospitals largely organic across yielded improved all divisions outcomes in the Hospital division United Kingdom Good Positive Netcare Deconsolidation¹ (UK) perfor
Slide 5: A Comprehensive Network of Healthcare Services
A COMPREHENSIVE NETWORK OF HEALTHCARE SERVICES SA Revenue (%) Adjusted EBITDA (%)² Hospitals 51 43 45 44 47 Public Private Partnership hospitals 4 Hospital beds 9 266 Primary healthcare facilities 90 Renal dialysis facilities 59¹ Emergency bases/sites 106 Pharmacies 85 UK Hospitals 61 Hospital beds
Slide 6: Group Financial Overview
GROUP FINANCIAL OVERVIEW Revenue R13 344m ▲8.5% Adjusted EBITDA¹ R2 803m ▲14.7% Profit after tax² R916m ▲29.9% Adjusted HEPS² 62.7 cents ▲20.8% Interim dividend 27.0 cents ▲22.7% 1. Adjusted to exclude the profit on deconsolidation of R3 270m and rentals paid to GHG PropCo of R703m post deconsolidat
Slide 7: South Africa
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Slide 8: South Africa
SOUTH AFRICA 31 Mar 31 Mar Rm 2012 2013 % Revenue 6 983 7 375 5.6 • Revenue growth in Hospital and Emergency Services offset by a EBITDA¹ 1 369 1 479 8.0 decline in Primary Care • March trading impacted by Operating profit¹ 1 145 1 235 7.9 public holidays but normalised in April EBITDA margin (%) 19
Slide 9: Hospitals and Emergency Services
HOSPITALS AND EMERGENCY SERVICES ▲2.3% Revenue per Expansion of in patient days patient day further 89 beds (▲1.8% ▲4.8%, reflects planned H1 2012) efforts to contain for H2 hospital inflation below CPI 50 new doctors Committed to granted admitting quality leadership privileges in the within SA last
Slide 10: Quality: International Benchmarking of Patient Experience
QUALITY: INTERNATIONAL BENCHMARKING OF PATIENT EXPERIENCE Patient feedback 86% 84% 81% 83% 78% 80% 72% 70% 67% 67% Doctors Nursing Responsiveness Hospital environment Average overall rating Netcare: H1 2013 US average: Jul 2011 - Jun 2012¹ 1. Source: http://www.hcahpsonline.org SOUTH AFRICA CARE | D
Slide 11: SA Hospitals and Emergency Services
SA HOSPITALS AND EMERGENCY SERVICES 31 Mar 31 Mar Rm 2012 2013 % Revenue 6 327 6 767 7.0 • Case mix largely unchanged • Length of stay constant at EBITDA¹ 1 324 1 443 9.0 3.54 days • Alternative Reimbursement Operating profit¹ 1 114 1 215 9.1 Models comprise ±50% of revenue EBITDA margin (%) 20.9 21
Slide 12: Primary Care
PRIMARY CARE 31 Mar 31 Mar Rm 2012 2013 % Transition of Prime Cure from risk Revenue 656 608 (7.3) taking managed healthcare model EBITDA¹ 45 36 (20.0) for low cost medical scheme options to managed healthcare Operating profit¹ 31 20 (35.5) model focused on administrative services EBITDA margin (%)
Slide 13: Outlook
OUTLOOK Confident that Ongoing demand for brownfield private healthcare expansion will continue of 89 beds growing with licences pending for more Construction Private of new hospitals Healthcare in Polokwane Market Inquiry and Pinehaven by Competition (West Rand) Commission imminent SOUTH AFRICA CAR
Slide 14: United Kingdom
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Slide 15: Business Overview
BUSINESS OVERVIEW UK macro BMI OpCo Volume economic emerges as challenges environment a focused acute continue in both remains very hospital operator PMI¹ and challenging post sale of Care self-pay markets and Transform Strong NHS Core EBITDA Strong volume growth margin working capital strengthened
Slide 16: Evolution of BMI OpCo's Funder Mix
EVOLUTION OF BMI OPCO’S FUNDER MIX 97% 2006 3% 32% 2013 68% Private patients NHS patients UNITED KINGDOM CARE | DIGNITY | PARTICIPATION | TRUTH | PASSION 16
Slide 17: BMI OpCo Income Statement
BMI OPCO INCOME STATEMENT¹ 31 Mar 31 Mar £m 2012 2013 % Revenue 427.9 430.0 0.5 ▼2% caseload ▲3% complex cases EBITDAR (before items below) 98.4 102.5 4.2 GHG PropCo rent charge (66.7) (68.4) EBITDAR impacted by: • Change in funder mix Other rentals (9.2) (8.5) • Increase in complex cases • Ongoing
Slide 18: Regulatory Update
REGULATORY UPDATE Competition Commission Regulation • Independent panel of NHS structural reform 5 persons completed in April 2013, • 25 supporting analysts and Clinical • Provisional findings Commissioning Groups due in June 2013 in place UNITED KINGDOM CARE | DIGNITY | PARTICIPATION | TRUTH | PASS
Slide 19: Outlook
OUTLOOK Expect UK NHS funding Changes in NHS macro-economic to remain flat commissioning conditions and despite 3-4% possibly disruptive private healthcare demand but long term NHS market to remain increase caseload growth challenging expected PMI multi-year Increased contracts are in H2 capex spend
Slide 20: Financial Review
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Slide 21: Structural Change to the Presentation of the Group's Results
STRUCTURAL CHANGE TO THE PRESENTATION OF THE GROUP’S RESULTS Statement of financial position Property assets, along with related debt and interest rate swap liabilities, no longer consolidated Income statement • Rent charge is now a feature on income statement as it is no longer eliminated on consol
Slide 22: Structural Change to the Presentation of Income Statement
STRUCTURAL CHANGE TO THE PRESENTATION OF INCOME STATEMENT For the six months ended 31 March 2013 R703m R552m R15m £50.7m £39.8m £1.1m Rent charge offset by reduced depreciation and interest expense R136m £9.8m Rent Depreciation Interest Net charge effect¹ 1. Excludes non-cash fair value adjustments
Slide 23: Summarised Group Income Statement
SUMMARISED GROUP INCOME STATEMENT 31 Mar 31 Mar Rm 2012 2013 % Revenue 12 295 13 344 8.5 • Growth in local currencies in SA and UK EBITDA before GHG PropCo rent 2 444 2 803 14.7 • R631m exchange rate benefit GHG PropCo rent charge (703) Comparison to prior year EBITDA 2 444 2 100 (14.1) impacted by
Slide 24: Headline Earnings Per Share (HEPS)
HEADLINE EARNINGS PER SHARE (HEPS) 31 Mar 31 Mar Cents per share 2012 2013 % Adjusted HEPS (cents) Headline earnings 62.1 62.7 52.8 65.8 24.6 per share 54.8 51.9 SA 54.1 62.7 15.9 46.3 44.7 UK (1.3) 3.1 338.5 Adjusted¹ headline 51.9 62.7 20.8 earnings per share SA 54.8 62.1 13.3 UK (2.9) 0.6 120.7 H
Slide 25: Summarised Statement of Financial Position: Assets
SUMMARISED STATEMENT OF FINANCIAL POSITION: ASSETS 30 Sep 31 Mar Decon. Forex Other Rm 2012 2013 effect effect movement Assets Structural change in asset base after deconsolidation PPE and intangible assets 28 005 9 933 (18 935) 995 (132) Group capex R455m Goodwill 5 099 3 045 (2 252) 198 (H1 2012:
Slide 26: Summarised Statement of Financial Position: Equity and Liabilities
SUMMARISED STATEMENT OF FINANCIAL POSITION: EQUITY AND LIABILITIES 30 Sep 31 Mar Decon. Forex Other Rm 2012 2013 effect effect movement Equity and liabilities ▼R32.7bn GHG PropCo Total shareholders’ equity (1 020) 8 979 9 860 (228) 367 liabilities post deconsolidation Borrowings 28 953 7 404 (22 607
Slide 27: SA Debt: Comfortably Geared with Significant Capacity
SA DEBT: COMFORTABLY GEARED WITH SIGNIFICANT CAPACITY 31 Mar 30 Sep 31 Mar Rm 2012 2012 2013 • Successful DMTN activity • GCR credit rating maintained Gross debt 4 312 3 975 4 253 Cash (94) (483) (104) Facility utilisation (Rm) Net debt 4 218 3 492 4 149 3 886 Cost of debt (%) 7.5 6.9 7.0 104 Net in
Slide 28: UK Debt: BMI OpCo
UK DEBT: BMI OPCO 31 Mar 30 Sep 31 Mar £m 2012 2012 2013 Debt facilities maturity: • 2014: £53.6m Gross debt 264.5 236.1 226.4 • 2015: £80.0m • 2016: £80.0m Cash (119.5) (144.4) (132.2) Net debt 145.0 91.7 94.2 Facility utilisation (£m) Swap liability 12.4 8.5 7.4 132.2 Cost of debt (%)¹ 6.0 4.9 4.8
Slide 29: GHG PropCo Debt Maturity - Making Progress
GHG PROPCO 1 DEBT MATURITY - MAKING PROGRESS GHG PropCo 1 General engaged in alignment on discussions seeking a with lenders consensual and orderly solution Netcare’s position remains unchanged FINANCIAL REVIEW CARE | DIGNITY | PARTICIPATION | TRUTH | PASSION 29
Slide 30: Guidance
GUIDANCE 30
Slide 31: Guidance 2013
GUIDANCE 2013 South Africa Organic Continued focus Capex revenue growth on efficiencies ± R800m upper single digit and margin enhancement United Kingdom Macro Continued focus Capex economic on efficiency ± £40m environment programmes to remain and well geared challenging for PMI recovery GUIDANCE CA
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Slide 33: Appendices
APPENDICES 33
Slide 34: Appendix I: UK Income Statement - H1 Segmental Analysis
APPENDIX I: UK INCOME STATEMENT - H1 SEGMENTAL ANALYSIS Adjustments and £m BMI OpCo GHG PropCo¹ eliminations WholeCo Revenue 430.0 17.7 (17.7) 430.0 EBITDAR (before items below) 102.5 17.5 (17.7) 102.3 Rentals (76.9) 17.7 (59.2) EBITDA (before items below) 25.6 17.5 43.1 Non-recurring items 1.5 1.5
Slide 35: Appendix II: Pro Forma Group Income Statement
APPENDIX II: PRO FORMA GROUP INCOME STATEMENT GHG 31 Mar 2013 PropCo¹ 31 Mar 2013 Rm as reported adj pro forma Revenue 13 344 13 344 Prepared on the basis that the EBITDA before GHG PropCo rent 2 803 1 2 804 deconsolidation was effected on 1 October 2012 GHG PropCo rent charge (703) (246) (949) EBIT
Slide 36: Appendix III: Group Borrowings at 31 March 2013
APPENDIX III: GROUP BORROWINGS AT 31 MARCH 2013 Gross borrowings Net borrowings 31 Mar 30 Sep 31 Mar 31 Mar 30 Sep 31 Mar Rm 2012 2012 2013 2012 2012 2013 SA 4 312 3 975 4 253 4 218 3 492 4 149 BMI OpCo 3 240 3 170 3 151 1 777 1 231 1 311 GHG PropCo 20 024 21 808 19 979 21 761 Group 27 576 28 953 7
Slide 37: Appendix IV: Glossary
APPENDIX IV: GLOSSARY • BMI OpCo UK operating business • CCG Clinical Commissioning Group • CPI Consumer price index • EBITDA Earnings before interest, tax, depreciation and amortisation • EBITDAR Earnings before interest, tax, depreciation, amortisation and property rentals • GCR Global Credit Rati
Slide 38: Thank You
THANK YOU You’re in safe hands