Life Healthcare Group Holdings Limited · JSE:LHC
Life Healthcare — FY2017 Earnings Presentation
47 slides from Life Healthcare's earnings presentation, November 2017
Slide 1: Audited summarised consolidated results for the year ended 30 September 2017
AUDITED SUMMARISED CONSOLIDATED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2017, DECLARATION OF SCRIP DISTRIBUTION WITH CASH DIVIDEND ALTERNATIVE AND TRADING STATEMENT. Life Health Care Well-being and quality Clinical excellence in Quality, service, respect of life world-class facilities and empathy fo
Slide 2: FY 2017 overview
FY 2017 overview Group Life Healthcare Group: • Good overall performance – revenue up 26.8% and EBITDA up 15.9% against last year • Acquisition of Alliance Medical Group represents an expansion of our complementary lines of business and further diversifies the Group internationally • Group results i
Slide 3: FY 2017 overview
FY 2017 overview Group Scanmed (S.A.): • Completed the signing of 4-year contracts with the NFZ covering 85% of the business with better overall pricing. This will add stability to the business going forward • Changes made to the business to cater for the tariff cuts in cardiology revenue • Normalis
Slide 4: FY 2017 overview
FY 2017 overview Group REVENUE NORMALISED EBITDA NORMALISED EPS +26.8% +15.9% -44.6% to R20.8 billion to R5.0 billion 93.9 cents Revenue (%) EBITDA (%) Acute vs non-acute revenue (%) 24 19 28 72 76 81 SA International SA International Non-acute Acute 30 September 2016: 30 September 2016: 30 Septembe
Slide 5: Life Healthcare business
Life Healthcare business Group Our vision: To be a market leading, international, diversified healthcare provider. Our mission: We improve the lives of people through the delivery of high quality cost-effective care. SA UK Europe India ✓ 12 facilities ✓ 50 facilities ✓ 12 cardiac units Acute hospita
Slide 6: CEO Appointment
Life Healthcare business CEO Appointment Appointment of Group CEO: • Appointment of Dr Shrey Viranna as Group Chief Executive Officer • Effective 1 February 2018 ‒ a medical doctor by training ‒ was a partner at a global management consulting firm where he spent 12 years working across the pharmaceu
Slide 7: Cautionary announcement
Life Healthcare business Cautionary announcement Cautionary announcement: • Life Healthcare shareholders are advised that the Company is in discussions regarding a potential transaction which, if successfully concluded, may have a material effect on the price of the Company’s shares. Accordingly, Li
Slide 8: Operational review
OPERATIONAL REVIEW PIETER VAN DER WESTHUIZEN ACTING GROUP CEO ADAM PYLE GROUP IR & STRATEGY EXECUTIVE 8
Slide 9: Operational review: Southern Africa
Operational review Southern Africa 30 Sept 30 Sept Change 2017 2016 % Revenue R15 890m R15 230m 4.3 Normalised EBITDA R4 049m R4 194m (3.5) Normalised EBITDA margin 25.5% 27.5% PPD growth -1.7% +4.0% • Revenue per PPD: + 6.3% ‒ Tariff increase: + 6.1% ‒ Case mix impact: + 0.2% • Pressure on acute ho
Slide 10: Operational review: Southern Africa PPD
Operational review Southern Africa PPD (%) Positive impact of Easter falling in H2 2 1 0.40 • Improved PPD 0 performance during -1 H2 finishing with a -0.50 -1.00 +0.4% PPD growth -2 -1.70 in Q4 -3 -2.70 -2.70 • Improved outlook Oct-Feb H1 2017 Oct-Apr May-Sept Jul-Sept 2017 FY for 2018 PPD (%) excl
Slide 11: Operational review: Southern Africa revenue
Operational review Southern Africa Revenue* (R’m) Total CAGR: 7.9% 16 000 853 • Complementary services: 720 14 000 614 849 871 − Strong growth in complementary 536 866 12 000 444 864 services revenue (+18.5%) 734 10 000 − Driven by additional mental health 8 000 beds, 2 new oncology centres and 13 6
Slide 12: Operational review: capacity growth and occupancy
Operational review Southern Africa H1 H2 Total • Life Flora Capacity growth 2017 2017 2017 • Life Queenstown Capacity expansion at existing facilities 22 29 51 • Life Kingsbury • Life Peninsula Eye Mental health 60 22 82 • Life St Dominic’s Total beds 82 51 133 • Life Hilton Private • Life Fourways
Slide 13: Operational review: medical/surgical split
Operational review Southern Africa TOTAL medical / surgical split as a % of PPDs 56% 54.5% 54.9% 53.1% 52.8% 53.4% 53% 52.4% • Continued growth of medical cases 50% on the back of 47.6% 47.2% 46.9% 46.6% 47% 45.5% faster 45.1% complementary 44% growth 2012 2013 2014 2015 2016 2017 Medical Surgical A
Slide 14: Operational review: ageing and PPDs
Operational review Southern Africa PPDs (000) 300 • The shift in ageing 250 continues to impact 200 our PPDs. In a flat 150 market this trend is expected to 100 continue 50 0 • Ageing impacts the LOS – the average 0 >75 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50 51-55 56-60 62-65 66-70 71-75 1-
Slide 15: Operational review: quality outcomes
Operational review Southern Africa 30 Sept 31 Mar 30 Sept Quality outcome 2017 2017 2016 Standard Patient experience – recommend 70.0% 69.4% 68.7% Patient experience 83.0% 83.0% 80.6% Patient incident rate 2.69 2.83 2.69 Per 1 000 PPDs HAI (Healthcare associated infection) 0.42 0.49 0.35 Per 1 000 P
Slide 16: Operational review: Healthcare services
Operational review Southern Africa 30 Sept 30 Sept Change H2 H2 Change Healthcare services 2017 2016 % 2017 2016 % Revenue 871 849 2.6 472 403 17.1 EBITDA 121 120 0.8 62 45 37.8 EBITDA margin 13.9% 14.1% 13.1% 11.2% • Healthcare services: ‒ Strong H2 performance with revenue up 17.1% and EBITDA incr
Slide 17: Operational review: professionals and regulatory environment
Operational review Southern Africa • Healthcare professionals: − Net recruitment of 84 doctors during 2017 − 1 500 nurses in training − 311 nurse graduates including: › 232 registered nurses › 49 specialised nurses • Regulatory environment: − HMI: › Latest timetable notice has provisional report pub
Slide 18: Operational review: Alliance Medical
Operational review Alliance Medical 30 Sept 30 Sept Change For 12 months* 2017 2016 % Revenue (£’m) 261 233 12.0 EBITDA (£’m) 69 62 11.3 EBITDA margin (%) 26.4 26.6 EBITA (£’m) 42 40 5.0 EBITA margin (%) 16.1 17.2 • Good growth on a 12-month basis: ‒ Revenue: 12.0% ‒ EBITDA: 11.3% • Strong molecular
Slide 19: Operational review: Alliance Medical UK
Operational review Alliance Medical • UK: − Diagnostic imaging (DI: MRI / CT): › 37 MRI / CT sites; 45 mobile units › Good performance in static sites despite BMI repatriating their work following change of control › Mobile utilisation remains high, but pricing pressure being experienced with additi
Slide 20: Operational review: Italy, Ireland, Northern Europe
Operational review Alliance Medical • Italy: ‒ 13 clinics; 22 static sites ‒ Good growth in clinics revenue, benefiting from the Albaro clinic acquisition ‒ Diversified customer base, both geographically and by customer channel, with a growing private / public revenue split within the clinic divisio
Slide 21: Operational review: Poland Scanmed S.A.
Operational review Poland: Scanmed S.A. 30 Sept 30 Sept Change 2017 2016 % Beds 624 624 Cardiac units 12 12 Medical facilities 40 40 Revenue R1 095m R1 174m (6.7) Normalised EBITDA R44m R120m (63.3) Normalised EBITDA margin 4.0% 10.2% • NFZ contracts: ‒ Signed 4-year contracts with the NFZ covering
Slide 22: Operational review: India Max Healthcare
Operational review India: Max Healthcare 30 Sept 30 Sept Change 2017 2016 % Beds 2 375 2 384 Revenue (Rs Crore) 2 528 2 340 8.0 Normalised EBITDA (Rs Crore) 274 256 7.0 Normalised EBITDA margin 10.8% 10.9% • Revenue driven by growth in the phase 2 and 3 hospitals • EBITDA margins stable • Impact of
Slide 23: Operational review: India Max Healthcare
Operational review India: Max Healthcare 2017 2016 2017 2016 Revenue Revenue Change EBITDA EBITDA Change Rs Cr Rs Cr % Rs Cr Rs Cr % Phase 1 hospitals 1 414 1 426 (0.8) 175 192 (8.9) Phase 2 hospitals 637 581 9.6 49 40 22.5 Phase 3 hospitals (Vaishali and Smart) 477 333 43.2 50 24 >100 Total net rev
Slide 24: Financial review
FINANCIAL REVIEW PIETER VAN DER WESTHUIZEN ACTING GROUP CEO 24
Slide 25: Highlights
Highlights REVENUE NORMALISED EBITDA NORMALISED EPS +26.8% +15.9% -44.6% to R20.8 billion to R5.0 billion 93.9 cents ACQUISITION OF ALLIANCE MEDICAL FINAL DIVIDEND ENTERPRISE VALUE 45 cents (R652 million) R13.9 billion 25
Slide 26: Financial results
Financial results Group 30 Sept 2017 30 Sept 2016 Change R’m R’m % Revenue 20 797 16 404 26.8 Southern Africa 15 890 15 230 4.3 Alliance Medical1 3 812 - Poland 1 095 1 174 (6.7) Normalised EBITDA 5 001 4 314 15.9 Southern Africa 4 049 4 194 (3.5) Alliance Medical1 908 - Poland 44 120 (63.3) Normali
Slide 27: Financial results
Financial results Group 30 Sept 2017 30 Sept 2016 Change R’m R’m % Revenue 20 797 16 404 26.8 Normalised EBITDA 5 001 4 314 15.9 Normalised EBITDA margin 24.0 26.3 Operating profit: 3 620 3 660 (1.1) Southern Africa 3 391 3 602 (5.9) Alliance Medical 234 - Poland (34) 35 Retirement benefit asset and
Slide 28: Financial results
Financial results Group 30 Sept 2017 30 Sept 2016 Change R’m R’m % Revenue 20 797 16 404 26.8 Normalised EBITDA 5 001 4 314 15.9 Normalised EBITDA margin 24.0 26.3 Operating profit 3 620 3 660 (1.1) Associates and joint ventures: (15) 8 (>100) Max Healthcare (27) (4) Poland - 3 Alliance Medical 6 -
Slide 29: Financial results
Financial results Group 30 Sept 2017 30 Sept 2016 Change R’m R’m % Revenue 20 797 16 404 26.8 Normalised EBITDA 5 001 4 314 15.9 Normalised EBITDA margin 24.0 26.3 Operating profit 3 620 3 660 (1.1) Associates and joint ventures (15) 8 Attributable profit: 814 1 616 (49.6) Southern Africa 1 961 2 16
Slide 30: Financial results: segmental review
Financial results Group: Segmental review 30 Sept 2017 30 Sept 2016 Change R’m R’m % Revenue 20 797 16 404 26.8 Southern Africa Hospitals and complementary services 15 019 14 381 4.4 Healthcare services 871 849 2.6 Poland Healthcare services 1 095 1 174 (6.7) Alliance Medical Diagnostic services 3 8
Slide 31: Acquisition of Alliance Medical
Financial results Acquisition of Alliance Medical Transaction overview • Life Healthcare acquired approximately 94% of Alliance Medical effective 21 November 2016 • Enterprise value of R13.9 billion • Purchase consideration initially funded through ZAR and GBP debt bridge facilities • Bridge funding
Slide 32: Financial results: EPS reconciliation
Financial results Group 30 Sept 2017 30 Sept 2016 Change cents cents % EPS (as previously reported) 62.2 154.9 Rights offer bonus element * - (10.8) EPS 62.2 144.1 (56.8) Impairment of investment 12.8 33.0 Loss/(profit) on remeasuring previously held interest in (0.4) 2.1 associate Loss/(profit) on
Slide 33: Financial results: normalised EPS
Financial results Group 30 Sept 2017 30 Sept 2016 Change cents cents % Normalised EPS 93.9 169.4 44.6 Southern Africa 149.7 193.4 (22.6) Poland and India (6.0) (0.9) (>100) Alliance Medical 9.6 - Funding costs for international acquisitions (59.4) (23.1) 33
Slide 34: Financial results: normalised EPS analysis
Financial results Group 30 September 2017 (cents) 180 160 26.7 153.2 140 32.6 126.5 120 93.9 100 80 60 40 20 0 Normalised EPS Non-recurring funding Normalised EPS Amortisation Normalised EPS costs refinanced excluding non-recurring excluding non-recurring by the rights offer funding costs refinanced
Slide 35: Consolidated condensed statement of financial position
Consolidated condensed statement of financial position 30 Sept 2017 30 Sept 2016 R’m R’m Non-current assets 31 459 14 395 PPE 11 131 7 752 Goodwill 12 170 2 288 Intangibles 4 111 908 Investment in Max Healthcare 2 960 2 547 Other 1 087 900 Current assets (excluding cash) 4 004 2 498 Cash 1 176 604 T
Slide 36: Debt
Debt 30 Sept 2017 Weighted avg. 30 Sep 2016 Weighted avg. Funding R’m cost of debt R’m cost of debt (post-tax) (post-tax) Acquisition funding ZAR 4 851 7.32 2 951 6.67 PLN 801 3.77 773 3.76 GBP 992 2.26 - - Capex funding – ZAR 2 498 6.67 1 925 6.06 Poland 148 3.05 181 3.05 Alliance Medical 3 157 1.9
Slide 37: Distribution
Distribution Cents/ • Declared a final Distributions share R’m dividend of 45 cps Interim 2016 73 765 • Scrip distribution alternative Final 2016 92 973 • Shareholders entitled Total 2016 165 1 738 to receive all or part of their distribution in Interim 2017 35 504 cash or in shares • Scrip distribu
Slide 38: Outlook
OUTLOOK PIETER VAN DER WESTHUIZEN ACTING GROUP CEO 38
Slide 39: 2018 Outlook: Southern Africa
2018 Outlook Southern Africa Capacity growth 2018 2019 Acute facility: Capacity expansion at existing facilities 120 - Complementary: Acute rehabilitation - 45 Complementary: Mental health - 100 Total 120 145 Renal dialysis stations 13 - • Capex spend of R1 280 million in 2018, of which R600 million
Slide 40: 2018 Outlook: Alliance Medical
2018 Outlook International Alliance Medical: • Capital commitments of GBP93 million, of which GBP22 million relates to maintenance capex • UK: − Diagnostic imaging (MRI / CT): › Opening of the first Community Diagnostic Centre (CDC) in Q2 › Continued pricing pressure on the mobile business − Molecul
Slide 41: 2018 Outlook: Poland and India
2018 Outlook International Poland (Scanmed S.A.): • Capex commitments of PLN15 million • Complete the contracting with the NFZ governing the remaining 15% of the business • Continued focus on driving efficiencies and grow private business India (Max Healthcare): • Optimising the current network thro
Slide 42: Thank you
THANK YOU 42
Slide 43: Appendices
APPENDICES PIETER VAN DER WESTHUIZEN ACTING GROUP CEO 43
Slide 44: Business review: Alliance Medical geographic split
Business review Alliance Medical: Geographic split UK Italy Ireland Other geographies Spain Netherlands Germany Territorial coverage Finland Bulgaria DI static sites: 37 Owned clinics: 13 Operating sites: 19 PET-CT national Static sites: 22 France contract sites: 31 Mobiles: 45 Norway • MRI • MRI •
Slide 45: Business review: Alliance Medical diagnostic imaging business models
Business review Alliance Medical: Diagnostic imaging business models In diagnostic imaging (DI), Alliance Medical has leveraged its international experience to develop a range of business models which provide operational flexibility and are aligned with local market dynamics Number of CT/MRI Setting
Slide 46: Business review: Alliance Medical UK molecular imaging
Business review Alliance Medical: UK molecular imaging PET-CT scans Five-year survival is markedly lower • UK per capita scan rates significantly below other major • UK is targeting the European 5 year cancer survivorship rate European countries of 67% by 2020 • Creation of new local capacity will s
Slide 47: Business review: Alliance Medical fully integrated diagnostics platform
Business review Alliance Medical: Fully integrated diagnostics platform Proven track record or partnering with national health services e.g. NHS England Overview of end-to-end service provision 1 2 3 4 5 6 7 8 9 Equipment Radiotracer Contract Interim Radiography Staffing, Facility provision Contract
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