Slide 1: Summarised Audited Group Results for the year ended 30 September 2023
Netcare Limited Summarised Audited Group Results for the year ended 30 September 2023
Slide 2: Netcare's unique ecosystem of assets and services
Netcare’s unique ecosystem of assets and services 49 14 Acute hospitals Mental health hospitals 9 903 Netcare Hospitals Netcare Akeso 1 007 Beds Beds 12 Day clinics Netcare 63 92 Netcare 911 Medicross Primary Netcare 911 sites healthcare facilities 8 Cancer care centres providing radiation treatment
Slide 3: Robust financial performance and excellent traction on strategic projects
Robust financial performance and excellent traction on strategic projects Solid performance driven by Strong operating leverage Maintained strong balance Returned R1.1bn to ongoing recovery in activity supported by improved sheet and cash generation, shareholders in dividends off a largely organic b
Slide 4: Robust financial performance
Robust financial performance Total Revenue EBITDA1 EBITDA margin2 Adjusted HEPS Net debt / EBITDA dividends R23 699m R4 115m 19.0% 105.7 cents 65.0 cents 1.2x ▲ 9.5% ▲ 17.7% ▲ 150 bps ▲ 27.0% ▲ 30.0% FY 2022: 1.4x 1 Normalised to exclude exceptional items comprising property impairments in FY 2022 a
Slide 5: Operational Overview
Operational Overview ye.
Slide 6: Hospital and emergency services
Hospital and emergency services Strong improvement in key activity drivers Paid patient days Full week occupancy3 Total1 Acute hospitals2 Mental health Total Acute hospitals2 Mental health 2 447 494 2 193 598 253 896 64.4% 63.5% 72.7% ▲ 6.7% ▲ 6.1% ▲ 12.7% FY 2022: 60.1% FY 2022: 59.3% FY 2022: 68.1
Slide 7: Hospital and emergency services
Hospital and emergency services Rm FY 2023 FY 2022 % Revenue 23 050 21 024 9.6 EBITDA1 3 947 3 333 18.4 Operating profit1 2 759 2 221 24.2 EBITDA margin (%) 17.1 15.9 Operating profit margin (%) 12.0 10.6 Revenue EBITDA margin Accreditation and growth in clinicians Solid paid patient day growth notw
Slide 8: Primary Care
Primary Care Rm FY 2023 FY 2022 % Revenue 663 634 4.6 EBITDA1 168 163 3.1 Operating profit1 82 72 13.9 EBITDA margin (%) 25.3 25.7 Operating profit margin (%) 12.4 11.4 Revenue Margin ▼ 3.1% medical and dental patient visits R2m capital profit on sale of property (1 614 167 patient visits) R7m gener
Slide 9: Financial review
Financial review
Slide 10: Group financial overview
Group financial overview Improved financial performance, solid financial position and strong cash generation Continuing growth trend from Increased occupancy levels and normalisation of operating tight cost control in high inflationary environment and resilient environment delivered excellent demand
Slide 11: Ongoing recovery as post COVID-19 operating environment normalises
Ongoing recovery as post COVID-19 operating environment normalises Revenue (Rm) EBITDA (Rm) 7.4% 12.2% 10 081 10 924 10 311 11 325 11 537 12 162 1 493 1 700 1 625 1 871 2 015 2 100 H1 2021 H2 2021 H1 2022 H2 2022 H1 2023 H2 2023 H1 2021 H2 2021 H1 2022 H2 2022 H1 2023 H2 2023 Operating profit (Rm) N
Slide 12: Summarised Group statement of profit or loss
Summarised Group statement of profit or loss Rm FY 2023 FY 2022 % Revenue 23 699 21 636 9.5 ▲ 120 basis points in EBITDA margin to 17.4% from 16.2% EBITDA1 4 115 3 496 17.7 Operating profit1 2 841 2 293 23.9 Other net financial expenses (464) (358) Interest on lease liabilities (454) (411) Strategic
Slide 13: Analysis of underlying EBITDA margin
Analysis of underlying EBITDA margin1 Reported EBITDA margin grew by 120 basis points EBITDA margin (%) from 16.2% to 17.4% 19.1% 19.0% 0.5% 18.5% ▲ 150 bps Strategic costs of R258m (FY 2022: R249m) equate to 1.1% (FY 2022: 1.1%) impact on EBITDA margin 1.1% ▲ 120 bps Underlying EBITDA margin before
Slide 14: Headline earnings per share (HEPS), dividends and share buybacks
Headline earnings per share (HEPS), dividends and share buybacks Cents per share FY 2023 FY 2022 % Share buybacks FY 2023 H1 2024 Total HEPS 101.0 74.0 36.5 Number of shares (millions) 24.4 9.3 33.7 Adjusted HEPS 105.7 83.2 27.0 Average market price (cents) 1 311 1 319 1 313 Total dividends 65.0 50.
Slide 15: Summarised Group statement of financial position
Summarised Group statement of financial position Rm 30 Sep 2023 30 Sep 2022 Our policy Assets Netcare’s policy on capital structure is to maintain PPE1, goodwill and intangible assets 15 760 15 312 a strong statement of financial position and to retain an investment grade credit rating while Right o
Slide 16: Debt position
Debt position Comfortable leverage and strong cash generation Rm 30 Sep 2023 30 Sep 2022 Interest environment Gross debt1 7 307 6 374 • South African interest rates currently at 14-year high Cash (2 279) (1 499) • 45.4% of gross debt at fixed rates Net debt 5 028 4 875 Net debt to EBITDA2 (times): G
Slide 17: Debt facilities
Debt facilities Access to R3.7bn cash and committed facilities with manageable maturity profile Cash and debt facilities (Rm) Debt maturity profile1 (Rm) 2 130 Uncommitted facilities 1 525 2 279 Committed facilities 1 300 1 185 1 100 3 612 Cash 1 420 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 1 Promiss
Slide 18: Strategic update
Strategic update —S
Slide 19: Strategic update
Strategic update Netcare’s strategy responds … and leverages off our unique … to create sustainable decisively to the three global ecosystem of assets and services … competitive advantage healthcare megatrends … for the Group 01 Customer centricity Person centred health 02 Digitisation + = and care,
Slide 20: Principles of capital allocation
Principles of capital allocation Netcare remains prudent in managing its capital resources Investment strategy Deployment of capital Cash generation Identifying opportunities Return on capital must safely exceed Target annual cash conversion ratio of 100% linked to Group strategy the cost of capital
Slide 21: Investment in key strategic projects in line with budget and timeframes
Investment in key strategic projects in line with budget and timeframes Declining FY 2024 expenditure as strategic projects move to completion Capex Opex To FY 2022 FY 2023 FY 2024 To FY 2022 FY 2023 FY 2024 Digital platforms • CareOn (acute hospitals) 199 82 40 183 108 57 • EMR: Netcare Akeso, Prim
Slide 22: Quantifying the costs and benefits of CareOn
Quantifying the costs and benefits of CareOn Rm Projected opex vs. benefits Roll out capex to April 2024 321 Implementation opex to April 2024 348 Benefits realised (gross) FY 2022 37 FY 2023 104 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 IRR >21% Benefits Opex 22
Slide 23: Overview of our digitisation journey
Overview of our digitisation journey Building the business case The common view in 2017 was that most IT projects cost three times more than originally budgeted, took twice as long to complete and produced a fraction of the benefits Given the size and scale, the significant costs involved and the ri
Slide 24: And so we built our own business case
And so we built our own business case Quantifiable benefits Medical Printing and File Nursing Administration liability stationery storage Managing records consumes a large Significant increase in medical Baseline spend of R60m p.a. Baseline spend of R12m p.a. Automation of administration part of nur
Slide 25: Our global partners in delivering our strategy
Our global partners in delivering our strategy Deutsche Apple: Capsule IBM Watson SAP: Telekom (Clinical iOS mobile Technologies: Health Finance, Solutions): operating platform Digital integration Micromedix: administration, Electronic medical of all medical Drug interaction, billing, records equipm
Slide 26: The challenge we faced was this …
The challenge we faced was this … ICU chart for the first heart transplant patient - 1967 Patient ICU chart at Netcare Milpark Hospital - 2018 26
Slide 27: More than 50 years later, very little had changed in our record keeping
More than 50 years later, despite huge advances in medicine and surgery, very little had changed in our record keeping ICU chart for the first heart transplant patient - 1967 Patient ICU chart at Netcare Milpark Hospital - 2018 27
Slide 28: The task was enormous
The task was enormous Moving from being totally paper-based and manual to being fully digitised and mobile 2018 2023 28
Slide 29: Change management and adoption of electronic medical records was our greatest risk
Change management and adoption of electronic medical records was our greatest risk • This programme was the highest risk project ever undertaken in Netcare • We had to fully integrate all our equipment and seamlessly link all radiology and pathology requests and reports into the EMR • With more than
Slide 30: Change management and adoption of electronic medical records was our greatest risk
Change management and adoption of electronic medical records was our greatest risk Many of our nurses had not used computers regularly, so we started with the very basics, using Candy Crush to familiarise them with the technology Nurses have embraced this digital revolution with passion and commitme
Slide 31: Our nurses have fully embraced using the CareOn platform
Our nurses have fully embraced using the CareOn platform 31
Slide 32: Netcare's electronic medical record system
Netcare’s electronic medical record system Current st Digitisation of our hospitals, real-time, mobile enabled clinical Hospitals digitised Beds records integrating all Medical devices connected aspects of healthcare iPads in use delivery Active users1 Concurrent live users of EMR Electronic scripts
Slide 33: Netcare's electronic medical record system: current stats
Netcare’s electronic medical record system Current stats Digitisation of our Netcare is H1 2023 Current hospitals, real-time, single cust mobile enabled clinical in Souther Hospitals digitised 30 38 Beds 6 722 8 645 records integrating all Medical devices >9 500 >13 000 connected aspects of healthca
Slide 34: Digitisation of electronic medical records largely complete across our seven delivery platforms
Digitisation of electronic medical records largely complete1 across our seven delivery platforms CareOn Netcare Hospitals CareOn Aria Netcare Akeso Netcare Cancer Care Netcare website Heal Care@Work Netcare Medicross Netcare Netcare app Occupational Health CareOn NephrOn Netcare 911 National Renal C
Slide 35: The next phase of patient and person centred engagement
The next phase of patient and person centred engagement The Netcare app • Tailored medical appointments • Virtual consultations • Geolocated emergency services • Online pre-admissions • Purchase of gap cover • Summary of Care 35
Slide 36: Providing a Summary of Care
Providing a Summary of Care Giving patients access to a full summary of the care they received at Netcare 36
Slide 37: Leveraging our data advantage
Leveraging our data advantage Future benefit of machine learning models – clinician decision support The most common cause of death in Machine learning models can detect risk of The model is currently running in our ICU is sepsis or blood stream sepsis in ICU patients 8 to 10 hours before developmen
Slide 38: Leveraging our data to include the voice of our patients
Leveraging our data to include the voice of our patients Examples of measuring the effectiveness of our care Treatment of depression Depression is pervasive, ever increasing and a leading cause of disability on a global basis It is critical to understand the effectiveness of the programmes provided
Slide 39: Digitisation's profound impact on enhancing patient safety
Digitisation’s profound impact on enhancing patient safety Up to 60% of all prescribing errors in hospital arise from the misinterpretation of a doctor’s written script1 The provision of electronic scripting can eliminate errors of legibility or misinterpretation Netcare’s digital e–scripting approv
Slide 40: NetcarePlus
NetcarePlus Providing affordable access to Netcare’s ecosystem Innovative products Building a Industry recognition sustainable business 40 40
Slide 41: Netcare Diagnostics – gaining traction
Netcare Diagnostics – gaining traction Partnered with Black Netcare provides Fully integrated and digitised 192 Point of Care devices female owned pathology equipment and pathology services installed in Netcare practice infrastructure, logistics, specialised units (intensive Quality assured results
Slide 42: Our ongoing transformation journey
Our ongoing transformation journey Level 3 B-BBEE rating retained1 R14.4bn R6.5bn R4.0bn R1.2bn B-BBEE procurement spend Procurement spend with Procurement spend with Procurement spend with (114%; dtic target: 80%) Black owned suppliers Black women owned suppliers qualifying small enterprises (52%;
Slide 43: Africa's largest healthcare environmental sustainability programme
Africa’s largest healthcare environmental sustainability programme Phase One (2013-2023) Phase Two (2021-2030) Substantially outperformed targets ahead of schedule Ambitious targets set for Phase Two First phase of our environmental sustainability strategy successfully completed with significant sav
Slide 44: Environmental sustainability strategy
Environmental sustainability strategy Generator uploads energy Energy generator Consumption of Consumer generated from renewable (NOA) energy from Eskom (Netcare) sources into the Eskom grid Grid wheeling Power Purchase Agreement Netcare pays the generator for energy produced • Renewable Energy (“RE
Slide 45: Guidance
Guidance
Slide 46: Operating environment
Operating environment ”Medical schemes remain financially sound”1 Industry solvency: 47.2% Disposable income pressures perpetuating scheme Medical scheme membership resilient option downgrades Healthcare demand supported by growing disease burden Number of lives (‘000) 2013 2021 % and aging patient
Slide 47: National Health Insurance (NHI) Bill
National Health Insurance (NHI) Bill Legislative process Risks identified • NHI Bill passed by National Assembly on • Impact on the fiscus 13 June 2023; now being considered by • Contagion of uncertainty on doctor sentiment National Council of Provinces (NCOP) • Indirect impact on scheme membership
Slide 48: Guidance
Guidance Total patient days ▲ 2.5% – 3.5% vs. FY 2023 The Netcare Moat Revenue ▲ 7.5% – 9.5% vs. FY 2023 Strategic projects FY 2024: R132m opex | R123m capex EBITDA margin Increased activity will drive further EBITDA margin expansion, with improved earnings and higher ROIC Capex FY 2024: R1.4bn 48
Slide 49: Thank You
Thank You Summarised Audited Group Results for the year ended 30 September 2023
Slide 50: Q&A
Q&A Summarised Audited Group Results for the year ended 30 September 2023
Slide 51: Environmental strategy reduces reliance on national grid
Environmental strategy reduces reliance on national grid Ensuring safe, sustainable care is delivered without disruption Facilities Impact Private sector hospitals not exempt from Electricity equates to approximately 5% of “Administration and other expenses” load shedding The cost of running diesel
Slide 52: Acute hospital patient day: Surgical/medical mix
Acute hospital patient day: Surgical/medical mix 17.1% 19.3% 23.6% 0.1% 5.6% 3.0% 1.3% 1.3% 40.7% 45.7% 47.4% 45.3% 45.6% 31.6% 47.5% 46.8% 30.8% 29.2% 54.3% 52.6% 54.3% 51.3% 49.9% 47.2% 53.7% 51.7% 51.9% 51.2% H1 2019 H2 2019 H1 2020 H2 2020 H1 2021 H2 2021 H1 2022 H2 2022 H1 2023 H2 2023 Surgical
Slide 53: Acute hospital occupancy
Acute hospital occupancy Acute hospital occupancy range 60 80.0% 75.0% 50 70.0% 66.3% 40 64.5% 63.5% Number of hospitals 63.0% 65.0% 62.6% 59.3% 30 60.0% 56.2% 55.7% 52.8% 55.0% 20 50.0% 10 45.0% 0 40.0% FY 2019 FY 2020 FY 2021 H1 2022 H2 2022 FY 2022 H1 2023 H2 2023 FY 2023 <50% 51% - 60% 61% - 70%
Slide 54: Acute hospital revenue: Growth composition
Acute hospital revenue: Growth composition 15.0% 15.0% 12.0% 10.0% 8.9% 10.0% 5.0% 2.6% 5.0% 3.1% 0.0% -5.0% 0.0% -10.0% -5.0% -15.0% -10.0% -20.0% -12.8% -25.0% -15.0% FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 PPD growth (same store) Closed sites Price change Mix change Revenue growth 54