Life Healthcare Group Holdings Limited · JSE:LHC
Life Healthcare — FY2015 Earnings Presentation
51 slides from Life Healthcare's earnings presentation, Nov 13, 2015
Slide 1: Group Results – Year ended 30 September 2015
Group Results – Year ended 30 September 2015 13 November 2015 www.lifehealthcare.co.za
Slide 2: Operational review
Operational review André Meyer CEO 2
Slide 3: Highlights – Group
Highlights Group • Revenue +12.3% to R14 647m • Normalised EBITDA +12.1% to R4 048m • HEPS +1.2% to 179.9 cents • Normalised EPS from continued operations +12.2% to 195.9 cents excluding funding + 9.2% to 154 cps • Total dividend (Final dividend – 86 cps) 3
Slide 4: Highlights – Group South Africa
Highlights Group – South Africa • PPD growth 3% • Additional beds 253 • Occupancies 71.9% • Stable EBITDA margin 28.3% • Good progress in efficiency projects • Continued improvement in clinical quality metrics 4
Slide 5: Highlights – Group International
Highlights Group – International Poland India (joint control) • Good revenue growth • Strong revenue and EBITDA growth • Strong EBITDA margin improvement: of 31% 9.1% to 14% • Completed acquisition of Pushpanjali • 3 Acquisitions in 2015 Crosslay (re-named Max Vaishali) hospital • Business integrati
Slide 6: South Africa: Growth
South Africa: Growth PPDs PPDs (000) Occupancy % 2 300 73% H2 Occupancy: 73.1% 71.9% 71.9% 2 200 72% 71.7% 71.2% 3.0% 2 100 2.0% 71% 2.7% 2 000 70% 1 900 69% 2012 2013 2014 2015 PPDs Occupancy % FY bed growth 292 95 249 253 6
Slide 7: South Africa: Growth – Acute bed growth 2015
South Africa: Growth Acute bed growth 2015 H1 H2 Total Category 2015 2015 2015 Capacity expansion at existing facilities 76 69 145 New facilities - 94 94 Acquisition 14 - 14 Total 90 163 253 • Life Entabeni • Life Eugene Marais • Life St Georges • Life Mt Edgecombe • Life Roseacres • Life St Dominic
Slide 8: South Africa: Growth – Group business pipeline
South Africa: Growth Group business pipeline Total Forecast Approved Applications Category 2015 2016 beds* pending Capacity expansion at existing acute facilities 145 108 484 272 New acute facilities 94 - 300 88 Acquisition 14 - - - Mental health - 102 270 305 Acute rehabilitation - - 55 187 Total 2
Slide 9: South Africa: Growth – Complementary Services
South Africa: Growth Complementary Services Complementary Services • Renal Dialysis − 64 additional chronic stations − 6 additional facilities offering renal dialysis • Mental health − Strong PPD growth of 4.5% despite no new beds • Acute rehabilitation − Business impacted by sub – acute and some do
Slide 10: South Africa: Growth – Healthcare Services
South Africa: Growth Healthcare Services Life Esidimeni • Revenue flat • Gauteng reduced beds by 200 from April 2015 • In March 2014 the Matikwana contract came to an end Life Occupational Health • Closely aligned to the economy, particularly large manufacturing and mining • Revenue flat • Pressure
Slide 11: SA: Efficiency – Effective use of assets
SA: Efficiency Effective use of assets 2014: Bed occupancy split 2015: Bed occupancy split 14% 9% 11% 23% <60% Beds 70%+ 60-69% Beds 70%+ 20% occupancy 22% 70-79% occupancy 64% 80%+ 69% 60% 41% Group occupancy ICU occupancy: 78% ICU occupancy: 76% ICU occupancy: 75% 74% 71.7% 71.9% 71.9% 72% 70% 68%
Slide 12: South Africa: Efficiency – Occupancy split
South Africa: Efficiency Effective use of assets Occupancy split between Acute and Complementary* 80 76 72 68 64 71.5 72.6 71.7 71.5 76.7 71.9 71.5 76.3 71.9 60 2013 2014 2015 Bed growth 75 20 95 249 - 249 253 - - Acute occupancy Complementary occupancy Group occupancy * Complementary business inclu
Slide 13: South Africa: Efficiency – EBITDA margin
South Africa: Efficiency EBITDA margin – Continuing basis EBITDA margin 30% 28.2% 27.9% 28.3% 28% 26.6% 26% 24% 22% 20% 2012 2013 2014 2015 • Medical/surgical split Medical/surgical split (%PPDs) − Increase in medical cases in 2015 56 − Positively impacts margin 52 − Continuation of long-term trend
Slide 14: South Africa: Efficiency – Impact of ageing
South Africa: Efficiency Impact of ageing PPDs 250 000 200 000 150 000 100 000 50 000 0 0 1-5 6-10 11-15 16-20 21-25 26-30 31-35 36-40 41-45 46-50 51-55 56-60 61-65 66-70 71-75 >75 Age bands 2010FY 2015FY • Changing age profile in our hospitals impacts: 2015 2010 − Length of stay PPD %: patient > 50
Slide 15: South Africa: Efficiency – EBITDA margin and cost management
South Africa: Efficiency EBITDA margin – Continuing basis EBITDA margin 30% 28.2% 27.9% 28.3% 28% 26.6% 26% 24% 22% 20% 2012 2013 2014 2015 • Strong management of cost of sales Cost management procurement ZAR/$ − Increase in cost of sales of under 5% 15 10% − 22% ZAR depreciation since 1 October 201
Slide 16: South Africa: Quality – Clinical outcomes
South Africa: Quality Clinical outcomes Outcome 30 Sep 2015 30 Sep 2014 Standard Patient incident rate 2.66 2.88 Per 1 000 PPDs HAI (Healthcare associated infection) 0.32 0.44 Per 1 000 PPDs VAP (Ventilator associated pneumonias) 1.17 1.91 Per 1 000 VAP days SSI (Surgical site infections) 0.58 0.76
Slide 17: South Africa: Quality – Patient experience
South Africa: Quality Patient experience Patient experience • Focus on improving the overall patient experience • Completed the ‘mystery’ patient initiative in May • Rolling out the CARE programme from October 2015 − Objective is to deliver superior patient experiences across all areas of Life Healt
Slide 18: South Africa: Sustainability – Healthcare professionals training
South Africa: Sustainability Healthcare professionals: training and recruitment • Specialists − Net increase of 106 specialists working in our facilities (85 under 40 years old) • Nurses − 1 165 nurses trained in 2015, with 704 graduating − 131 registered nurses from India working in LHC hospitals −
Slide 19: South Africa: Sustainability – Competition Commission Healthcare inquiry
South Africa: Sustainability Competition Commission Healthcare inquiry • CC inquiry process has been delayed • Remain supportive of a detailed analysis of the healthcare industry which allows for a better understanding of the structural cost drivers • The proposed new timetable is as follows: 1 Aug
Slide 20: South Africa: Sustainability – Environmental management system
South Africa: Sustainability Environmental management system Environmental certification • On track to obtain an ISO 14001:2004 environmental certification in 2016 Energy-saving initiatives • Carbon emissions − Continuous improvement in our carbon footprint • Solar − Life Anncron Clinic: largest hos
Slide 21: International: Poland – Scanmed growth
International: Poland Scanmed growth Poland: • Fastest growing economy in Europe • Strong National Health system funding private sector delivery • Fragmented private hospital market providing a consolidation opportunity • Good long-term private sector growth Strategy to build an integrated countrywi
Slide 22: International: Poland – Scanmed business
International: Poland Scanmed business Outpatient services: 36 medical centres in 19 cities • Primary Healthcare: − 130 000 people – low medical loss ratio − Medical transport – population of 250 000 • Medical centres: − Facilities with treatment rooms, including − Rehabilitation centers, dental and
Slide 23: International: India – MHC
International: India MHC Indian healthcare market • Fast growing private healthcare market driven by: − Growing middle class − Increasing disease burden − Limited public sector provision • Fragmented and under-developed private hospital market represents an excellent growth opportunity Aim to build
Slide 24: International: India – MHC Phase 1 and Phase 2 growth
International: India MHC – Phase 1 and Phase 2 growth Phase 1 hospitals (> 5 years old) 1 500 Net revenue (Rs Cr) • 5 facilities with Saket and Patparganj (PPG) 1 000 making up the majority of the beds 500 • Facilities have been operational since 2005 0 • Good occupancies 2013 2014 2015 Phase 2 hosp
Slide 25: International: India – MHC Phase 3 and Phase 4 growth
International: India MHC – Phase 3 & Phase 4 growth Phase 3 growth • Continue rolling out operational beds of phase 2 hospitals • Acquisitions − Vaishali (Pushpanjali Crosslay) › Acquired 76% for Rs 287 Cr – effective mid-July 2015 › 340 bed facility › Situated 4km from Patparganj hospital (PPG) › M
Slide 26: International: India – MHC bed growth
International: India MHC bed growth Bed Operational beds Operational beds Operational beds capacity 30 Sep 2015 30 Sep 2014 30 Sep 2013 Phase 1 hospitals 1 123 1 095 1 079 1 040 Phase 2 hospitals Shalimar Bagh 288 275 185 150 Mohali 217 217 203 141 Bathinda 186 70 80 56 Dehradun 168 136 130 89 Total
Slide 27: International: India – MHC occupancy
International: India MHC occupancy Operational beds Occupancy Operational beds Occupancy 30 Sep 2015 30 Sep 2015 30 Sep 2014 30 Sep 2014 Phase 1 hospitals 1 095 76% 1 079 78% Phase 2 hospitals Shalimar Bagh 275 77% 185 79% Mohali 217 66% 203 71% Bathinda 70 51% 80 76% Dehradun 136 70% 130 73% Total
Slide 28: Financial review
Financial review Pieter van der Westhuizen CFO 28
Slide 29: Highlights
Highlights Normalised EBITDA +12.1% to R4 048m Normalised EPS from southern Africa +9.8% to 194.1 cents continued operations Headline earnings per share +1.2% to 179.9 cents +9.2% to 154.0 cps Total dividend (Final dividend 86.0 cps) Increase in investments in India and Poland R2.2 billion Improved
Slide 30: Financial results
Financial results Group 30 Sep 2015 30 Sep 2014 % R’m R’m Change Revenue 14 647 13 046 12.3 Southern Africa – continued 13 999 12 814 9.2 Southern Africa – discontinued - 57 Poland 648 175 Normalised EBITDA 4 048 3 611 12.1 Southern Africa – continued 3 957 3 581 10.5 Southern Africa – discontinued
Slide 31: Financial results
Financial results Group 30 Sep 2015 30 Sep 2014 % R’m R’m Change Revenue 14 647 13 046 12.3 Normalised EBITDA 4 048 3 611 12.1 Normalised EBITDA margin 27.6% 27.7% Operating profit 3 502 4 093 (14.4) Southern Africa – continued 3 432 3 123 9.9 Southern Africa – discontinued - 9 Poland 44 2 Transacti
Slide 32: Financial results
Financial results Group 30 Sep 2015 30 Sep 2014 % R’m R’m Change Revenue 14 647 13 046 12.3 Normalised EBITDA 4 048 3 611 12.1 Normalised EBITDA margin 27.6% 27.7% Operating profit 3 502 4 093 (14.4) Associates and joint ventures 14 39 (64.1) JMH - 41 MHC 5 (11) Poland 2 - Other 7 9 • JMH sold Febru
Slide 33: Financial results
Financial results Group 30 Sep 2015 30 Sep 2014 % R’m R’m Change Revenue 14 647 13 046 12.3 Normalised EBITDA 4 048 3 611 12.1 Normalised EBITDA margin 27.6% 27.7% Operating profit 3 502 4 093 (14.4) Associates and joint ventures 14 39 (64.1) Attributable profit 1 866 2 774 (32.7) Southern Africa –
Slide 34: Financial results – Group segmental review
Financial results Group segmental review 30 Sep 2015 30 Sep 2014 % R’m R’m Change Revenue 14 647 13 046 12.3 Southern Africa Hospital division 13 133 12 007 9.4 Healthcare services 866 864 0.2 Other - - International Hospitals 648 175 Operating profit before amortisation, profit/loss on disposals, i
Slide 35: Financial results – Southern Africa segmental revenue
Financial results Southern Africa: segmental revenue 30 Sep 2015 30 Sep 2014 % R’m R’m Change Revenue – Southern Africa 13 999 12 871 8.8 Southern Africa Hospital division 13 133 12 007 9.4 Healthcare services – continued 866 809 7.0 Healthcare services – discontinued - 55 Other - - Hospital divisio
Slide 36: Five year review
Five year review Southern Africa: continued Revenue* (R’m) Normalised EBITDA (R’m) 5 000 CAGR 9.3% 614 CAGR 11.8% Ave CPI + GDP 7.5% 536 4 500 866 444 809 Ave CPI + GDP 7.5% 361 3 957 734 4 000 216 657 596 3 581 3 500 3 311 3 000 2 886 2 535 2 500 9 000 9 816 10 553 11 471 12 519 2 000 2011 2012 201
Slide 37: Financial results – Poland
Financial results Poland PLN million 120 18% 103 16.1% 100 15% 93 80 12% 11.8% 60 9% 51 9.0% 40 6% 20 16.6 3% 11.0 4.6 0 0% Apr 14 to Sep 14 Oct 14 to Mar 15 Apr 15 to Sep 15 (incl new acquisitions) (incl new acquisitions) Revenue EBITDA EBITDA margin 1PLN = ZAR3.3 (weighted yearly average) 37
Slide 38: Financial results – India: Max Healthcare revenue growth
Financial results India: Max Healthcare – revenue growth 2014: 1 530 Rs Crore 2015: 2 005 Rs Crore 1 140 865 819 329 711 219 230 169 542 600 635 811 March 2014 September 2014 March 2015 September 2015 Phase 1 Phase 2 MHC 2015 MHC 2014 % Net revenue Rs Crore Rs Crore Change Net revenue – Phase 1 hosp
Slide 39: Financial results – India: Max Healthcare EBITDA growth
Financial results India: Max Healthcare – EBITDA growth 2014: 151 Rs Crore 2015: 180 Rs Crore 113 88 85 9 64 9 69 79 87 104 (5) (2) March 2014 September 2014 March 2015 September 2015 Phase 1 Phase 2 MHC 2015 MHC 2014 % EBITDA Rs Crore Rs Crore Change EBITDA – Phase 1 hospitals 191 147 29.8 EBITDA –
Slide 40: Financial results – EPS and HEPS
Financial results Group 30 Sep 2015 30 Sep 2014 % cents cents Change EPS 179.9 267.5 (32.7) Profit/loss on disposal of property, plant and equipment - (89.7) and disposal of businesses HEPS 179.9 177.8 1.2 Release of contingent consideration (2.1) - Retirement funds (1.9) (1.7) Transaction costs on
Slide 41: Financial results – Normalised EPS
Financial results Group 30 Sep 2015 30 Sep 2014 % cents cents Change Normalised EPS 177.4 173.8 2.1 Southern Africa – continued 194.1 176.8 9.8 Southern Africa – discontinued - 5.2 International Operations 1.8 (2.2) Funding costs for international acquisitions (18.5) (6.0) 41
Slide 42: Cash generated vs normalised EBITDA
Cash generated vs normalised EBITDA R’000m 4 000 120% 3 500 3 000 110% 2 500 103% 103% 101% 2 000 100% 97% 95% 1 500 1 000 90% 500 2 562 3 041 3 422 3 516 3 842 0 80% 2011 2012 2013 2014 2015 Cash generated from operations Cash generated as % of normalised EBITDA • 2015 impacted by drop in Coid coll
Slide 43: Condensed statement of financial position
Condensed statement of financial position Assets 30 Sep 2015 30 Sep 2014 R’m R’m Non-current assets 13 164 9 700 PPE 7 101 5 901 Intangibles 2 964 2 318 Other 3 099 1 481 Current assets (excl cash) 1 959 1 691 Cash 812 422 Total assets 15 935 11 813 43
Slide 44: Condensed statement of financial position
Condensed statement of financial position Equity and liabilities 30 Sep 2015 30 Sep 2014 R’m R’m Total shareholders’ equity 6 448 5 900 Non-current liabilities 5 873 2 909 Interest-bearing borrowings 5 263 2 344 Other non-current liabilities 610 565 Current liabilities 3 614 3 004 Total equity and l
Slide 45: Net debt
Net debt 30 Sep 2015 Weighted average Funding R’m cost of capital Acquisition funding (post-tax) 3 271 6.46 Capex funding (post-tax) 1 864 5.47 Poland (post-tax) 346 4.67 Capitalised finance leases (post-tax) 706 9.22 Working capital (post-tax) 557 5.23 6 744 5.76 45
Slide 46: Dividend
Dividend DPS (cents) Distributions Cents/share R’m 200 Interim 2014 63 657 154 150 141 Final 2014 78 813 126 Total 2014 141 1 470 100 Special dividend 2014 100 1 042 Interim 2015 68 709 50 Final 2015 86 896 0 Total 2015 154 1 605 2013 2014 2015 • Declared a final dividend of 86 cps • Introduced Scri
Slide 47: Outlook
life. Outlook André Meyer CEO
Slide 48: Outlook – South Africa
Outlook South Africa South Africa • Growth − Addition of › 108 acute brownfield expansion beds › Over 100 mental health beds › 50 renal stations › 1 oncology unit (1 additional unit under construction) − Life Esidimeni › Gauteng DoH not renewing the contract for mental health services in Gauteng › E
Slide 49: Outlook – South Africa
Outlook South Africa South Africa • Efficiency − Continue to drive our Cost of care initiatives with particular emphasis on our cost of sales management • Quality − Continued focus on improving: › clinical quality outcomes › patient experience • Sustainability − Focus on Dr recruitment and retention
Slide 50: Outlook – International
Outlook International Poland • Continued revenue and EBITDA growth • Positioning of the business to maximise our growth in additional NFZ business • Continue M & A activity − Signed an agreement to acquire an asset, subject to regulatory approvals − Expect completion by end December 2015 − Asset wil
Slide 51: Thank you
Life... Thank you
Life Healthcare Group Holdings — FY2015 Earnings Presentation on 6ix