Netcare Limited · JSE:NTC
Netcare — FY2007 Earnings Presentation
39 slides from Netcare's earnings presentation, Sep 30, 2007
Slide 1: Network Healthcare Holdings Limited Group Annual Results
Network Healthcare Holdings Limited Group Annual Results for the year ended 30 September 2007
Slide 2: Outline
Outline Group CEO, Dr Richard Friedland Highlights Strategic review Business review Group CFO, Peter Nelson Financial review Guidance -2- CARE | DIGNITY | PARTICIPATION | TRUTH | PASSION
Slide 3: Group highlights
Group highlights Significant capital invested in SA - R821m capital expenditure - R100m in skills development 27% 20% - Commissioned two new hospitals growth in adjusted growth in final headline earnings reduction of - Acquired remaining interest in per share capital per share Community Hospital G
Slide 4: Strategic review: South Africa
Strategic review South Africa
Slide 5: Investing for increased demand
Investing for increased demand Medical aid membership market growing - 4,3% growth in medical aid membership to 7,1m lives - More than 500,000 GEMS lives - Medical aid inflation at its lowest level in 27 years Self pay market expanding - Accessing selected services such as maternity and casualty
Slide 6: Addressing healthcare access
Addressing healthcare access 15 300 patients treated by Netcare 911 at a cost of R18m More than 5 000 patients treated through various accessibility initiatives at a cost of R11m, including - Sight for Life programme - Cleft Lip and Palate programme - Walter Sisulu Paediatric Cardiac Surgery Cen
Slide 7: Addressing affordability of healthcare
Addressing affordability of healthcare Maintained annual price increases Annual effective price increases (%) within or below inflation, despite 2007 pressures on nursing salaries Netcare’s hospital weighted 5,7 Removal of surgical rebates to effective price increase ensure transparency of prici
Slide 8: Investing in quality care
Investing in quality care Infection rates Per 1000 patient days Netcare International ±200 research publications Benchmark by Netcare doctors Hospital acquired infection 2,6 9,3 International accreditation of our facilities by HQS Trauma and Neonatal Mortality rates clinical governance systems
Slide 9: Investing to eliminate the skills shortage
Investing to eliminate the skills shortage R100m training cost in Netcare Output of professional nurses South Africa 3 200 nurses and 500 paramedics in 2,629 Netcare’s training academies 2,352 Recruitment of South Africans from abroad Recruitment of foreign nurses Employing new models of c
Slide 10: Accelerating normalisation
Accelerating normalisation Empowerdex rated Netcare a Weight Empowerdex Element level 5 (BBB) and Prime Cure a score level 4 (A) contributor in Ownership 20 13.6 August 2007 Netcare is targeting a Level 4 Management control 10 5.1 contributor status in 2008 Employment equity 15 4.4 Netcare has
Slide 11: Business review: South Africa
Business review South Africa
Slide 12: Strong results from South Africa
Strong results from South Africa Revenue growth of 14,9% 30 Sep 30 Sep % R million 2007 2006 - Volumes accelerated in last quarter - Increased contribution from Prime Cure Revenue 8 869 7 720 15 - Inclusion of two new hospitals EBITDA 1 685 1 494 13 Operating profit growth of 13,6% EBITDA margin
Slide 13: Demand driving hospital and trauma growth
Demand driving hospital and trauma growth Revenue growth of 12,7% 30 Sep 30 Sep % R million 2007 2006 - 5,9% growth in total admissions - 4,5% growth in patient days Revenue 7 782 6 907 13 - 5,2% growth in pharmacy scripts EBITDA 1 584 1 403 13 - 5,1% growth in 911 patients EBITDA margin (%) 20,4
Slide 14: Primary care growth accelerated
Primary care growth accelerated Revenue growth of 33,7% 30 Sep 30 Sep % - Inclusion of Prime Cure for full year R million 2007 2006 compared to 8 months in prior year Revenue 1087 813 34 - 9,5% growth in visits EBITDA 101 91 11 - 36,5% growth in managed care lives EBITDA margin (%) 9,3 11,2 Oper
Slide 15: Management priorities for South Africa
Management priorities for South Africa Performance against 2007 priorities 2008 Priorities Commission two Integrate Community Hospital Greenfield hospitals 99 Group SAP rollout 9 Continue SAP rollout Implement risk sharing pricing Review of central costs 99 models with funders Develop high-volume, P
Slide 16: Strategic review: United Kingdom
Strategic review United Kingdom
Slide 17: An increasingly competitive market
An increasingly competitive market New acquisitions setting new valuation watermarks - BUPA and Capio Hospitals Consolidation of market gaining momentum Demographics for long-term growth remain favourable NHS procurement – a shift from central to local - Cancellation of “Phase 2” ISTC projec
Slide 18: Business review: United Kingdom
Business review United Kingdom
Slide 19: Strong profitability growth in UK
Strong profitability growth in UK Underlying revenue growth of ~6% 30 Sep 30 Sep - 1,7% growth in overall cases 2007 2007 - 3,1% growth in self pay cases Rm £m - 3,1% growth in outpatient cases Revenue 9 738 689 Underlying core EBITDA growth of ~14% EBITDA 2 411 171 - Before non-recurring charge
Slide 20: Management priorities for United Kingdom
Management priorities for United Kingdom Performance against 2007 priorities 2008 Priorities Continue integration of Further organisational GHG 99 efficiencies Doctor engagement 9 Doctor engagement Increase referral activity to Diagnostic service review 9 BMI hospitals Rollout of Extended Capturing
Slide 21: Group financial review
Group financial review
Slide 22: Group financial highlights
Group financial highlights Refinancing of SA debt through the issue of the convertible bond 11% 16% Repayment of Netpartner debt and unwinding of zero cost collar growth in SA group basic adjusted1 operating profit Finalised GHG PropCo and Opco structures and debt HEPS margin R1.1bn hedge pr
Slide 23: Restatement 2006 HEPS
Restatement 2006 HEPS Cents Basic HEPS Previously reported 56.2 Adjustment (11.9) Restated basic HEPS 44.3 Restated for Circular Relates to costs incurred to implement debt financing 8/2007 issued by structure at GHG SAICA on 31 July Diluted HEPS 2007 Previously reported 53.9 Adjustment 1 (11.4) New
Slide 24: Reclassification of 2006 comparatives
Reclassification of 2006 comparatives Previous Ampath Reclassified New Operating profit 1 568 (104) 114 1 578 Net financial expense (824) 11 (114) (927) Financial income 700 (137) 563 Financial expenses (1 524) 11 23 (1 490) Attributable earnings of associates 28 28 Profit before taxation 772 (93) 6
Slide 25: Summarised group income statement
Summarised group income statement 30 Sep 30 Sep % R million 2007 2006 Revenue 18 607 11 152 67 Operating profit 2 990 1 578 90 Net financial expense 2 135 927 Attributable earnings of associates 32 28 Profit before taxation 887 679 31 Taxation 99 (229) Profit for the period 986 450 119 Profit from d
Slide 26: GHG impact on earnings per share
GHG impact on earnings per share 30 Sep 30 Sep % Cents per share 2007 2006 South African basic adjusted1 headline earnings per share 77,1 69,7 11 Abnormal items (HPFL BEE share expense) - (4,5) South African basic2 headline earnings per share 77,1 65,2 18 GHG dilution to headline earnings (15,3) (20
Slide 27: Strong organic and acquisitive revenue growth
Strong organic and acquisitive revenue growth Group revenue Group revenue contribution 30 Sep 30 Sep % R million 2007 2006 Revenue from continuing 18 607 11 152 67 operations South Africa 8 869 7 720 15 52% United Kingdom 9 738 3 432 184 48% Revenue from 507 465 9 discontinued operation* 19 114 11 6
Slide 28: GHG acquisition enhances margins
GHG acquisition enhances margins Group operating margin Group operating profit contribution R million I % 16.1 2,990 14.2 54% 1,578 46% Sep-06 Sep-07 South Africa United Kingdom Operating profit (Rm) Operating profit margin (%) - 28 - CARE | DIGNITY | PARTICIPATION | TRUTH | PASSION
Slide 29: Operating profit impacted by capital items
Operating profit impacted by capital items Operating 30 Sep 30 Sep % profit R million 2007 2006 impacted by R280m debt Operating profit from continued operations 2 990 1 578 90 restructuring South Africa 1 406 1 238 14 costs United Kingdom 1 646 218 655 Items of a capital nature (62) 122 - Operating
Slide 30: Group balance sheet - assets
Group balance sheet - assets SAP R94m UK management contracts R85m UK software R107m 30 Sep 30 Sep Restatement Currency R million UK development R3m 2007 2006 impact impact Non-current assets 45 328 45 747 (1 449) Property, plant and equipment 26 683 27 246 (813) Goodwill 16 091 16 745 (162) (567) I
Slide 31: Group balance sheet – equity and liabilities
Group balance sheet – equity and liabilities 30 Sep 30 Sep Restatement Currency R million 2007 2006 impact impact Total shareholders equity 8 582 6 236 (226) Non-current liabilities 36 351 38 133 (1 236) Long term debt 28 944 29 224 (983) Financial liability-Derivative financial liability 1 156 2 15
Slide 32: Lowering the cost of the SA debt
Lowering the cost of the SA debt 30 Sep 2007 30 Sep 2006 Rm Cost of debt Rm Cost of debt Convertible bond1 1 446 6,0 - - DMTN 1 550 9,3 1 550 8,6 Netpartner - - 511 8,4 Other debt 2 059 10,6 3 383 10,5 Total debt 5 055 8,9 5 616 9,5 Bank overdraft/(cash) 191 (172) Net debt 5 246 5 444 1. Convertible
Slide 33: UK debt financing in place for 6 to 8 years
UK debt financing in place for 6 to 8 years 30 Sep 2007 30 Sep 2006 £m Rm Cost of £m Rm debt* (%) Propco debt 1 644 23 067 6,3 1 650 23 968 Opco debt 214 2 995 7,7 214 3 101 Other debt 7 92 5,2 3 45 Total debt 1 865 26 154 6,4 1 867 27 114 Cash (78) (1 089) (58) (836) 1 787 25 065 1 809 26 278 Prepa
Slide 34: Successfully structured debt to lower cost
Successfully structured debt to lower cost Net interest expense 30 Sep 30 Sep R million 2007 2006 SA net interest expense 456 152 SA interest cover (times) 3,1 8,1 UK net interest expense 1 734 679 UK interest cover (times) 0.9 0,3 Group net interest 2 190 831 Group interest cover (times) 1,4 1,9 30
Slide 35: Favourable movement in derivative instruments
Favourable movement in derivative instruments Netpartner zero cost collars Net derivative instruments unwound UK 10 year swap rates increased 30 Sep 30 Sep R million 2007 2006 from 4,89% to 5,40% Zero cost collar - (288) - R65m fair value gain recognised in income Net interest rate swaps 109 (1
Slide 36: Strong cash flow generation
Strong cash flow generation Group cash generated from operations Net working capital for the group R million 30 Sep 30 Sep 4,034 3,974 R million 2007 2006 Inventory 600 571 Accounts receivable 2 875 2 706 Accounts payable (2 570) (2 624) 2,120 2,129 Taxation (410) (138) 495 515 Working capital impac
Slide 37: Growth in capital distributions
Growth in capital distributions 20% increase in the final reduction Distribution per share of capital of 18 cents Cents per share Distribution cover of 2 times Capital distributions determined 18 after having regard for 15 - Degearing benefits - SA Leverage ratios - Investment opportunities 13
Slide 38: Guidance for 2008
Guidance for 2008 cRevenue Estimated SA revenue growth of between Estimated UK revenue growth of between growth 12% and 14% 6% and 8% dOperating Expect margins to remain relatively flat as operating Expect to drive further operating efficiencies but efficiencies leverage gained will be some pressure
Slide 39: Investor Relations
Investor Relations Belinda Williams +27 11 301 0211 belinda.williams@netcare.co.za www.netcareinvestor.co.za
Network Healthcare Holdings Limited (Netcare) — FY2007 Earnings Presentation on 6ix