Slide 1: Netcare Limited Audited Group Results
Netcare Limited Audited Group Results for the year ended 30 September 2012
Slide 2: Presentation format
Presentation format RICHARD FRIEDLAND GROUP CEO Group overview South Africa United Kingdom KEITH GIBSON GROUP CFO Financial review Guidance
Slide 3: Group overview
Group overview You're in safe hands
Slide 4: Group overview
Group overview South Africa Strong and Enhanced ▲21.5% ▲19.6% (SA) improved trading tangible quality profit after tax HEPS performance in initiatives Hospitals and throughout Primary Care all divisions United Kingdom Challenging Results impacted Strategic focus Strong cash (UK) operating by material
Slide 5: Geographic contribution
Geographic contribution¹ Revenue (%) EBITDA (%)² Net interest paid (%) Adjusted HEPS (%)³ 41 42 45 43 81 89 1 (8) 59 58 55 57 19 11 99 108 2011 2012 2011 2012 2011 2012 2011 2012 SA UK 1. Continuing operations 2. Before capital charges and impairment of goodwill 3. Adjusted to exclude, inter alia, r
Slide 6: Group financial overview
Group financial overview Revenue R25 174m ▲11.5% EBITDA¹ R5 134m ▲8.5% Adjusted HEPS² 113.2 cps ▲8.7% Final dividend 34 cents ▲9.7% 1. Before capital charges and impairment of goodwill 2. Continuing operations CARE | DIGNITY | PARTICIPATION | TRUTH | PASSION 6
Slide 7: South Africa
South Africa You're in safe hands
Slide 8: A comprehensive network of healthcare services
A comprehensive network of healthcare services Hospitals 51 PPP Hospitals PPP hospitals¹ 5 Primary health facilities 86 Dialysis units 58 Emergency vehicles 182 Pharmacies 85 Registered beds 9 262 Employees¹ 21 421 1. Includes SA and Lesotho CARE | DIGNITY | PARTICIPATION | TRUTH | PASSION 8
Slide 9: South Africa
South Africa 30 Sep 30 Sep Rm 2011 2012 % • Price inflation below 6%, performance a function of Revenue 13 361 14 607 9.3 growth in volumes EBITDA¹ 2 608 2 901 11.2 • ▲8.8% in pharmacy scripts to 3.4 million Operating profit¹ 2 220 2 461 10.9 Operational leverage and margin enhancement due to strong
Slide 10: Hospitals and Emergency Services
Hospitals and Emergency Services ▲2.8% 66.3 % 2 814 admitting 26.8% in patient days occupancy specialists (▲3.6% H2) Revenue ▲121 new 72.9% specialists joined during week 73.2% in 2012 Medical Surgical Training of 190 new beds ▲8.3% registrars in added in 2012 in retail pharmacy partnership with to
Slide 11: SA Hospitals and Emergency Services
SA Hospitals and Emergency Services 30 Sep 30 Sep Rm 2011 2012 % Revenue 12 089 13 219 9.3 • ▲5.7% revenue per patient day • ▲2.8% patient day growth EBITDA¹ 2 543 2 818 10.8 • Average length of stay 3.53 days Operating profit¹ 2 182 2 409 10.4 EBITDA margin (%) 21.0 21.3 Margin enhancement due to H
Slide 12: Expansion programme
Expansion programme Hospital Number of beds Commission date Completed 190 Mulbarton 34 October 2011 Linmed 31 November 2011 The Bay 65 December 2011 Kingsway 35 March 2012 Christiaan Barnard Memorial 4 April 2012 Sunninghill 7 September 2012 Jakaranda 14 September 2012 In progress 47 Alberlito 6 Mar
Slide 13: Acute Network and Centres of Excellence
Highest ratio of Highest number Offer the only Leaders in Specialised high acuity beds of cardiac mechanical paediatric Paediatric in private sector catheterisation and heart/bridge cardiothoracic Head Trauma and electrophysiology to transplant surgery at Netcare Drowning Unit at laboratories progra
Slide 14: Care | Dignity | Participation | Truth | Passion
CARE | DIGNITY | PARTICIPATION | TRUTH | PASSION 14
Slide 15: Primary Care
Primary Care 30 Sep 30 Sep • ±3.2 million patient visits Rm 2011 2012 % • Average visits per Medicross centre ▲2.3% Revenue 1 272 1 388 9.1 • >1.9 million scripts, ▲9.2% EBITDA* 65 83 27.7 Healthy improvement in EBITDA Operating profit* 38 52 36.8 due to improved risk profile in managed care divisio
Slide 16: Health Policy: access and affordability an imperative
Health Policy: access and affordability an imperative At least 40% of formally employed households in SA access private health care* 17% 41% 16% 38% 15% 35% 14% 32% 05 06 07 08 09 10 11 05 06 07 08 09 10 11 % of population on medical scheme % of formal labour force on medical scheme* * Source: Light
Slide 17: Price inflation comparators: 2002-2012
Price inflation comparators: 2002-2012 Relative comparisons demonstrate that hospital inflation is well contained HIGH SCHOOL FEES/yr PETROL/litre IWISA maize meal/2.5kg (Grey College Bloem) ▲239% ▲213% ▲194% RICOFFY/750g COKE CANS/6 pack PnP MILK/litre ▲191% ▲172% ▲158% PRIVATE HOSPITAL GROUP LAYS
Slide 18: Health Policy: access and affordability an imperative
Health Policy: access and affordability an imperative Hospital prices over national wage settlements¹ Collective bargaining Individual negotiation 2.4% Private hospital price inflation² well contained post collective bargaining Prescribed Minimum Benefits (PMB): Netcare charges the same tariff for P
Slide 19: Focus areas over the next months
Focus areas over the next 18 months Concerted 9 Procurement 9 Integrating Brownfield 9 focus on shared efficiencies 85 Hospital and expansion services including through Medicross projects: SAP rollout standardisation of pharmacy H2 2012: 68 beds completion product portfolio operations into a in mid
Slide 20: United Kingdom
United Kingdom You're in safe hands
Slide 21: Business overview: BMI Healthcare
Business overview: BMI Healthcare Economic Growth in Private Sector Differential impact conditions have like-for-like playing an on individual hindered activity and increasing role PMI companies growth of health revenue in a in the delivery although insurance market¹ challenging of public health som
Slide 22: OpCo income statement, continuing operations
OpCo income statement, continuing operations 30 Sep 30 Sep £m 2011 2012 % Revenue 830.3 834.0 0.4 • ▲2.1% in inpatient and day case admissions • 71% Private: 29% Public EBITDA before items below 184.4 180.2 (2.3) Inter-company property rental (132.1) (133.9) • EBITDA impacted by business mix in favo
Slide 23: Caseload
Caseload • ▲20.0% in NHS activity with NHS focus on waiting lists • NHS reforms well under way with the passing into law of Health and Social Care Act • ▼3.7% in private activity with Self-pay growth slowing in H2, no recovery in PMI caseload in H2 2010 2011 2012 Private NHS CARE | DIGNITY | PARTICI
Slide 24: Outlook
Outlook No further NHS activities Lower volumes disruption in PMI expected and acuity have expected with to continue driven efficiency multi-year to grow, albeit savings. contracts at a slower rate Well geared for for ±60% funders PMI recovery Cash resources Outcome of Continued focus may present Co
Slide 25: UK experience and relevance to SA operations
UK experience and relevance to SA operations Any Qualified Same Quality Provider (AQP) NHS tariffs and outcomes scheme in UK across all independently allows multiple providers of monitored parties to offer service to NHS by the NHS services to NHS Competition Currently Accreditation of Such a scheme
Slide 26: Financial review
Financial review eft You're in safe hands
Slide 27: UK structure
UK structure • Acquired a majority stake in GHG in May 2006 • Post-acquisition GHG was restructured into an OpCo and 2 PropCos • Each of these 3 groups individually and separately 50.7% raised third party debt • All UK debt is non-recourse to SA • Debt of the 3 groups is ring-fenced from each other
Slide 28: GHG PropCo 1 refinancing update
GHG PropCo 1 refinancing update £1.5bn GHG PropCo 1 Solution non-recourse Board actively will be debt facility engaged in challenging matures in working on and will October 2013 a solution take time Engaging with Refinancing Lack of certainty debt holders prior to has prompted on various the maturit
Slide 29: Exceptional items relating to GHG PropCo 1 debt
Exceptional items relating to GHG PropCo 1 debt Non-cash accounting adjustments due to uncertainty on GHG PropCo 1 refinancing Rm £m • Goodwill no longer tested for impairment on a ‘value in use’ Impairment of goodwill (10 773) (811.4) basis • Fair value of properties now Interest rate swaps (2 960)
Slide 30: GHG PropCo 1: exceptional items
GHG PropCo 1: exceptional items No commercial effect on financial status of Netcare: Non-cash Ring-fenced Non-recourse accounting structure adjustments Secure No impact No obligation long-term leases on existing to act as (19 years debt facilities underwriter with a 10-year of last resort renewal op
Slide 31: Other factors influencing results
Other factors influencing results • Average exchange rate of R12.68 (2011: R11.09) Exchange rate • Closing rate of R13.42 (2011: R12.54) Discontinued • Disposal of Care and deconsolidation of Transform operations Prior year • Two properties sold: Duchy Hospital (Harrogate), Harbour Hospital (Poole)
Slide 32: Summarised Group income statement: reported
Summarised Group income statement: reported Actual GHG PropCo 1 Normalised actual Rm 30 Sep 2012 exceptional items 30 Sep 2012 Revenue 25 174 25 174 EBITDA 5 136 5 136 Goodwill impairment (10 773) (10 773) Operating (loss)/profit (6 961) (10 773) 3 812 Net financial expenses (4 795) (2 960) (1 835)
Slide 33: Summarised Group income statement: normalised
Summarised Group income statement: normalised 30 Sep 30 Sep 2011 2012 Driven by growth in SA and Rm restated Normalised % currency impact Continuing operations • ▲10.9% in SA Revenue 22 584 25 174 11.5 • Lower UK results softened by EBITDA 4 828 5 136 6.4 currency impact Operating profit 3 644 3 812
Slide 34: Constant currency performance
Constant currency performance Revenue Normalised operating profit Net interest expense 1 303 146 206 1 198 9 264 1 438 9 223 1 386 1 369 13 361 14 607 2 206 2 468 327 187 2011 2012 2011 2012 2011 2012 SA UK Exchange rate CARE | DIGNITY | PARTICIPATION | TRUTH | PASSION 34
Slide 35: Headline earnings per share (HEPS): continuing operations
Headline earnings per share (HEPS): continuing operations Adjusted HEPS (cents) 30 Sep 30 Sep Cents per share 2011 2012 % SA Group 122.1 113.2 Headline earnings 116.2 95.2 (18.1) 104.1 per share 103.2 96.0 SA 101.2 121.0 19.6 85.1 UK 15.0 (25.8) Adjusted* headline 104.1 113.2 8.7 earnings per share
Slide 36: Dividends
Dividends 9.7% increase in final dividend Distributions determined after having regard for: • Earnings growth • HPFL B-BBEE shareholder requirements • SA credit/financial markets • New dividend withholding tax of 15% • SA leverage ratios 31 34 • De-gearing benefits • Capital expenditure and investme
Slide 37: Summarised statement of financial position: assets
Summarised statement of financial position: assets 30 Sep 30 Sep Forex Rm 2011 2012 effect Movement Assets PPE* and intangible assets 26 782 28 005 1 414 (191) • R10 773m impairment of GHG PropCo 1 Goodwill 15 034 5 099 913 (10 848) • R75m disposal of Care and deconsolidation of Transform Deferred t
Slide 38: Summarised statement of financial position: equity and liabilities
Summarised statement of financial position: equity and liabilities 30 Sep 30 Sep Forex Rm 2011 2012 effect Movement Equity and liabilities Equity attributable to owners of 5 155 1 002 147 (4 300) the parent Preference share capital and 644 644 premium Non-controlling interest 1 886 (2 666) 131 (4 68
Slide 39: Movement in Group PPE and intangible assets
Movement in Group PPE* and intangible assets Rm 1 395 1 414 28 005 26 782 (1 346) (240) Sep 2011 Capital Depreciation Disposals Exchange rate Sep 2012 expenditure and amortisation and other impact * Property, plant and equipment CARE | DIGNITY | PARTICIPATION | TRUTH | PASSION 39
Slide 40: Working capital
Working capital 30 Sep 30 Sep 2011 2012 Movement SA (Rm) Inventories 431 494 (63) ▲R17m stock up in preparation Trade and other receivables 1 594 1 825 (231) for the truck drivers strike Trade and other payables (2 231) (2 332) 101 • Hospital debtors: 19.5 days Taxation payable (164) (154) (10) (Sep
Slide 41: SA debt
SA debt 30 Sep 30 Sep Rm 2011 2012 Gross debt 3 471 3 975 • R2.0bn 3-year amortising notes (raised January and July 2012) Cash (168) (483) • R0.2bn 1-year amortising note (raised in July 2012) Net debt 3 303 3 492 Interest cover (times) 6.7 13.2 Facility utilisation (Rm) 4 739 Applied to fund: SA op
Slide 42: UK debt: BMI OpCo
UK debt: BMI OpCo 30 Sep 30 Sep £m 2011 2012 Gross debt 271.3 236.1 • £18.1m scheduled debt repayments Cash (126.6) (144.4) • £20.2m Transform debt deconsolidated Net debt 144.7 91.7 Swap liability 14.8 8.5 Facility utilisation (£m) Cost of debt (%) 7.8 4.9 144.4 Net interest paid 2012 15.2 14.5 36.
Slide 43: UK debt: GHG Property Businesses
UK debt: GHG Property Businesses GHG GHG £m PropCo 1 PropCo 2 Total Gross debt 1 578.9 45.8 1624.7 Scheduled capital repayments: • GHG PropCo 1: £23.8m Cash (3.5) (3.5) • GHG PropCo 2: £1.9m Net debt 1 578.9 42.3 1 621.2 All debt is fully performing: Swap liability 537.4 4.4 541.8 • Interest and cap
Slide 44: Deconsolidation of GHG Property Businesses
Deconsolidation of GHG Property Businesses Deconsolidation GHG Property Businesses will be deconsolidated from FY13 Equity accounting Netcare’s interests in the GHG Property Businesses will be equity accounted Better presentation of Equity accounting achieves better presentation of Netcare’s commerc
Slide 45: Pro forma unaudited summarised statement of financial position
Pro forma unaudited summarised statement of financial position after deconsolidation of the GHG Property Businesses 30 Sep 2012 30 Sep 2012 audited unaudited Effect of Rbn actual pro forma deconsolidation Assets Property, plant and equipment 27.7 9.6 (18.1) Secured property assets and Goodwill 5.1 3
Slide 46: Guidance
Guidance eft You'r ands
Slide 47: 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 CARE | DIGN
Slide 48: Thank you
Thank you You're in safe hands