Slide 1: Netcare Limited Audited Group Results for the Year Ended 30 September 2018
CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION Netcare Limited AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2018
Slide 2: We are firmly focused on leading positive change in health and care delivery
WE ARE FIRMLY FOCUSED ON LEADING POSITIVE CHANGE IN HEALTH AND CARE DELIVERY At our interim results Investing substantially We have determined the we set out our operating on how we deliver optimal capital structure pillars and priorities, with further enhanced value and and committed ourselves a cl
Slide 3: Significant changes over the last year
SIGNIFICANT CHANGES OVER THE LAST YEAR Successful Exited from UK Achieved ISO 9001 Continuing to acquisition and and deconsolidated certification across design the Netcare integration BMI Healthcare all service platforms of tomorrow of Akeso Clinics¹ (British Standards through digitisation Institute
Slide 4: Financial overview - continuing operations
FINANCIAL OVERVIEW - CONTINUING OPERATIONS Revenue Normalised Adjusted HEPS² Final dividend Special dividend R20 717m EBITDA¹ from continuing 60.0 cents 40.0 cents ▲8.4% R4 209m operations ▲5.3% ▲5.9% 171.6 cents Total dividend ▲0.6% 104.0 cents ▲9.5% 1. Normalised to exclude impairment of contractu
Slide 5: Operational overview
Operational overview
Slide 6: Netcare's operating platform
NETCARE’S OPERATING PLATFORM 867 56 National Renal Care Acute hospitals dialysis stations DIALYSIS HOSPITALS (10 520 beds)¹ 22 146 MENTAL 12 Employees EMPLOYEES HEALTH Akeso facilities PERSON 2 568 (834 beds) Nurses and paramedics trained PRIMARY EMERGENCY CARE SERVICES 90 Primary CANCER 80 healthca
Slide 7: Hospital and emergency services
HOSPITAL AND EMERGENCY SERVICES Level of growth Mental health ▲5.9% in H1 for acute demand total patient days hospitals not remained strong ▲1.7%¹ sustained into H2, through Q4 acute patient days with a weak Q4 Acute occupancy:¹ New capacity: ▲114 Full week: 66.6% 6 acute and 23 specialists (2017: 6
Slide 8: Hospital and emergency services - financial performance
HOSPITAL AND EMERGENCY SERVICES - FINANCIAL PERFORMANCE 30 Sep 30 Sep Rm 2017 2018 Revenue 18 403 20 000 8.7 Akeso consolidated for 6 months EBITDA¹ 3 875 4 163 7.4 Acute hospitals: Operating profit 3 276 3 490 6.5 + ▲5.5% revenue per patient day + ▲1.0% length of stay (3.83 days) EBITDA margin¹ (%)
Slide 9: Looking forward - focus on capacity utilisation and select projects
LOOKING FORWARD - FOCUS REMAINS ON INCREASED CAPACITY UTILISATION AND INVESTMENT IN SELECT PROJECTS No additional acute beds 44 mental health beds Netcare Milpark expansion: to be added in 2019, to be added in 2019: 100 beds (FY 2020) conversion of 52 beds Akeso Parktown: 15 beds Specifically invest
Slide 10: Netcare Union and Netcare Clinton relocation
NETCARE UNION AND NETCARE CLINTON RELOCATION Netcare Union (222 beds) Netcare Clinton (170 beds) The two facilities Built in 1954 Walking distance from Netcare are managed as one as a maternity hospital for Union, built as community clinic Significant capacity constraints railway workers and familie
Slide 11: Primary care - financial performance
PRIMARY CARE - FINANCIAL PERFORMANCE 30 Sep 30 Sep Rm 2017 2018 Revenue 711 717 0.8 + 3 new Medicross medical and dental centres opened and EBITDA 108 109 0.9 2 centres closed + Solid H1 offset by challenging Operating profit 63 59 (6.3) H2, notably in last quarter + Network of 15 day clinics EBITDA
Slide 12: External benchmarking
EXTERNAL BENCHMARKING External accreditation of Patient World class Quality Management System satisfaction sustainability programmes ISO 9001 Certification by Overall winner in 2020 Healthcare Climate British Standards Institute Private Hospital category of Challenge 2017 Awards + Hospital Division
Slide 13: Deepening Netcare's quality and value proposition
Deepening Netcare’s quality and value proposition…
Slide 14: Netcare's digital vision
NETCARE’S DIGITAL VISION To enable a leading paradigm shift in quality care, safety and outcomes Complete Enable Will drive digitisation of participatory significant all clinical systems health and improvements in across all platforms person centred the quality, safety by 2022 health and care and ou
Slide 15: The rise of participatory health that is digitally enabled
THE RISE OF PARTICIPATORY HEALTH THAT IS DIGITALLY ENABLED Shift in perspective Transformation in The digital revolution toward well-being patient-provider has begun to and wellness relationship, change the way allowing individuals consumers engage to be equal, with healthcare systems responsible pa
Slide 16: Current fragmentation of services across our platforms
CURRENT FRAGMENTATION OF SERVICES ACROSS OUR PLATFORMS HOME AND EMERGENCY COMMUNITY SERVICES Netcare 911 Medicross medical and PRIMARY dental centres National QUATERNARY SECONDARY Renal Care Akeso Netcare Mental Health Centres of Excellence Netcare REHABILITATIVE Cancer Care LONG TERM CARE Netcare T
Slide 17: Removing fragmentation of services across our platforms
REMOVING FRAGMENTATION OF SERVICES ACROSS OUR PLATFORMS HOME AND COMMUNITY EMERGENCY SERVICES Netcare 911 REHABILITATIVE LONG TERM CARE Medicross medical and Netcare PRIMARY dental centres Rehabilitation and supportive care PERSON CENTRED HEALTH & CARE QUATERNARY DIGITALLY ENABLED National SECONDARY
Slide 18: Mobile electronic health records for hospitals
MOBILE ELECTRONIC HEALTH RECORDS FOR HOSPITALS Seamless Electronic Electronic recording from admission medical records of all monitor to discharge across all divisions information and test results, eliminating duplication Efficient digital Access to Seamless ordering interface patient charts and of
Slide 19: Aiming to achieve the highest level of EMR capability
AIMING TO ACHIEVE THE HIGHEST LEVEL OF ELECTRONIC MEDICAL RECORD CAPABILITY AND CLINICAL ADOPTION The HIMSS The seven stage Analytics EMRAM¹ model helps measures adoption, benchmark utilisation and progress and capabilities maturity across per hospital the world Globally over Netcare’s current Level
Slide 20: 7 stages of EMR adoption and maturity per hospital
7 STAGES OF EMR¹ ADOPTION AND MATURITY PER HOSPITAL LEADING TO THE HIGHEST QUALITY IN PATIENT CARE EMR adoption model cumulative capabilities Complete EMR integrates all clinical areas, virtually paperless; external Health “Paperless” patient record 7 Information Exchange (HIE); data analytics used
Slide 21: EMR capabilities correlate with improved patient safety
EMR¹ CAPABILITIES CORRELATE WITH IMPROVED PATIENT SAFETY Hospitals with an “A” Leapfrog Hospital Safety Grade by EMRAM stage A national non-profit The Leapfrog organisation in USA Hospital Safety Grades All hospitals within each EMRAM stage and advocate for evaluate 2 600 acute hospital transparency
Slide 22: Netcare's digital rollout across all divisions
NETCARE’S DIGITAL ROLLOUT ACROSS ALL DIVISIONS Netcare 911 completed 2020 Medicross¹ National 2020 Renal Care 2021 Akeso 2022 Hospitals¹ 1. In progress 22
Slide 23: Health policy
Health policy
Slide 24: Collaboration to ensure access to quality healthcare for all
COLLABORATION TO ENSURE ACCESS TO QUALITY HEALTHCARE FOR ALL Significant inequity The public sector How can Ultimate objective in healthcare delivery remains the bedrock the private sector is to achieve access between public and of healthcare delivery meaningfully partner to quality healthcare priva
Slide 25: How many more people can private hospitals cater for?
HOW MANY MORE PEOPLE CAN PRIVATE HOSPITALS CATER FOR? Overall average Current private hospital Opportunity weekday occupancy capacity can cater for collaboration is 70%, for an additional in tackling while weekend 7.7 million people¹ public hospital sector occupancy is 52% elective surgery and oncol
Slide 26: Can private hospitals help to capacitate public health?
CAN PRIVATE HOSPITALS HELP TO CAPACITATE PUBLIC HEALTH? A National Training Programme can pool resources across public and private sectors to build capacity Proposal to train 50 000 nurses The private hospital sector Private hospitals forms part of the Jobs Summit can play a role in can provide supp
Slide 27: Financial review
Financial review
Slide 28: Group financial overview
GROUP FINANCIAL OVERVIEW Solid trading Structural impacts Strong Clarity on performance of Akeso acquisition balance sheet capital structure and for first 9 months and UK exit and solid distribution policy followed by a tough cash generation 4th quarter 28
Slide 29: Discontinued operations and exceptional items
DISCONTINUED OPERATIONS AND EXCEPTIONAL ITEMS 30 Sep 30 Sep Rm 2017 2018 Discontinued operations + BMI Healthcare’s results for 6 months prior to Trading losses (641) (550) deconsolidation (FY2017 represents full 12 months) Impairment and onerous lease charges (5 563) 168 RPI swap fair value adjustm
Slide 30: Summarised group statement of profit or loss
SUMMARISED GROUP STATEMENT OF PROFIT OR LOSS 30 Sep 30 Sep Rm 2017¹ 2018 % Revenue 19 114 20 717 8.4 EBITDA² 3 975 4 209 5.9 Operating profit² 3 331 3 486 4.7 6 months in 2018 vs. 12 months Interest received – BMI debt 195 104 in 2017 Other net financial expenses (338) (431) Earnings of associates a
Slide 31: Headline earnings per share (HEPS)
HEADLINE EARNINGS PER SHARE (HEPS)¹ 30 Sep 30 Sep Adjusted HEPS² excluding Cents per share 2017 2018 % BMI debt interest (cents) HEPS 169.2 68.8 (59.3) 83.9 83.5 Adjusted HEPS² Including BMI debt interest 170.6 171.6 0.6 Less: contribution from BMI debt interest H1 (4.1) (5.4) H2 (6.3) Excluding BMI
Slide 32: Summarised group statement of financial position
SUMMARISED GROUP STATEMENT OF FINANCIAL POSITION 30 Sep Forex Akeso Other 30 Sep Rm 2017 effect UK exit acquisition movement 2018 Assets PPE, goodwill and intangible assets 15 945 (348) (3 704) 1 499 455 13 847 Other non-current assets 4 008 (41) (2 389) (125) 1 453 Current assets 8 116 (220) (3 006
Slide 33: SA debt
SA DEBT 30 Sep 30 Sep Rm 2017 2018 Gross debt 5 490 6 170 + Cash outlay of R3 634m (2017: R3 838m) for capex, Cash (1 582) (1 365) dividends and tax + Akeso acquisition: Net debt 3 908 4 805 › Consideration paid: R1 233m Net debt to EBITDA¹ (times) 1.0 1.1 › Net debt acquired: R238m Cost of debt (%)
Slide 34: SA debt - manageable debt maturity profile
SA DEBT - MANAGEABLE DEBT MATURITY PROFILE Facility utilisation (Rm) Debt maturity profile (Rm) 5 689 1 365 6 170 1 056 1 294 1 192 2 029 599 Utilised Cash Available 2019 2020 2021 2022 2023 34
Slide 35: Capital structure and distribution
Capital structure and distribution
Slide 36: Netcare's capital allocation framework
NETCARE’S CAPITAL ALLOCATION FRAMEWORK Sources of capital Capital allocation Generated capital Capital from markets Capital deployed Capital distributed Capex and Operating cash flow Equity Equity working capital Asset sales Debt Debt M&A Portfolio review Capital structure Return on capital Equity d
Slide 37: Internally generated capital
INTERNALLY GENERATED CAPITAL Maximise value creation through operational efficiency and re-engineering 37
Slide 38: Capital deployed
CAPITAL DEPLOYED + Healthcare is a continuously + Return on capital must safely Financial discipline when evolving industry and requires exceed the cost of capital allocating capital: financial flexibility + By strengthening our + Expand and digitise business competitive advantages we + Maintain and
Slide 39: Optimal capital structure
OPTIMAL CAPITAL STRUCTURE Reduce cost of capital Retain Optimal Maintain investment capital flexibility capital structure grade credit rating Key ratios 2017 2018 Policy limit Covenant Net debt to EBITDA 1.0x 1.1x < 2.0x < 2.75x EBITDA/net interest 27.2x 12.9x > 5x > 4x 39
Slide 40: Capital distribution
CAPITAL DISTRIBUTION Dividend policy Range of 50% - 70% of future earnings Optimal Special dividend Share buybacks capital structure In absence of investment opportunities, excess capital will be returned to shareholders 40
Slide 41: Deploying a balanced framework
DEPLOYING A BALANCED FRAMEWORK Investing Delivering for value creation shareholder value R1 388m Ordinary dividends R1 234m (2017 final and 2018 interim) Capital expenditure R825m Cash generated Ordinary dividend¹ (2018 final) from SA operations R4 305m R450m R1 233m Share buyback¹ Acquisition capit
Slide 42: Guidance
Guidance
Slide 43: Guidance
GUIDANCE Strong growth Acute patient day Maintain FY2019 in mental health growth expected EBITDA margins capital expenditure patient days to remain at current levels of ±R1.6 billion expected along with under pressure inclusion of Akeso in the near term for a full 12 months 43
Slide 44: Thank you
Thank you
Slide 45: Appendices
Appendices
Slide 46: UK - BMI Healthcare
UK - BMI HEALTHCARE 30 Sep 31 Mar Rm 2017¹ 2018² Revenue 887.1 438.9 + ▼4.5% NHS cases + ▼9.6% PMI cases EBITDAR¹ (before items below) 191.6 88.2 + ▲2.3% Self-pay cases Property rentals (166.5) (85.1) EBITDA¹ (before items below) 25.1 3.1 + GHG PropCo 1 £73.8m Rent transaction costs (6.1) (FY 2017:
Slide 47: UK income statement - 31 March 2018
UK INCOME STATEMENT – 31 MARCH 2018 BMI Exceptional GHG United £m healthcare items Propco 2¹ Kingdom Revenue 438.9 438.9 EBITDAR (before items below) 88.2 88.2 GHG Property Business rentals GHG Propco 1 (73.8) (73.8) GHG Propco 2 (3.7) (3.7) Other rentals (7.6) 9.7 2.1 EBITDA (before items below) 3.