Life Healthcare Group Holdings Limited · JSE:LHC
Life Healthcare — H1 2019 Earnings Presentation
40 slides from Life Healthcare's earnings presentation, Mar 31, 2019
Slide 1: Unaudited Group Results for the period ended 31 March 2019
UNAUDITED GROUP RESULTS FOR THE PERIOD ENDED 31 MARCH 2019, CASH DIVIDEND DECLARATION AND TRADING STATEMENT
Slide 2: Our Vision
Our Vision 2 To be a market-leading, international, diversified healthcare provider Global healthcare provider with a Continue to grow our southern Africa business dual strategy offering an GROWTH while establishing a sizeable international 1 integrated healthcare model in business, and diversify ou
Slide 3: Group Overview
Group Overview 3 Excellent revenue growth Revenue Normalised EBITDA Interim dividend +9.5% +2.2% +5.3% to R12.4 billion to R2.7 billion to 40 cps Max Healthcare Institute Limited (Max) transaction completed: c.R3.9 billion expected to flow by financial year end Investment for growth: 2.7% of normali
Slide 4: H1 2019 Group Overview
H1 2019 | Group Overview 4 Good operational performance in a challenging environment Life Healthcare southern Africa (SA): • Strong growth in revenue across the business • Paid patient days (PPDs) impacted by lower Q1 volumes • Strong growth in complementary services • Operational efficiency initiat
Slide 5: Strategic focus areas
2019 H1 | Group Overview 5 Strategic focus areas Continued progress made on the implementation of diversifying across business lines and territories Revenue (%) EBITDA (%) Acute vs non-acute revenue (%) 21% 26% 18% 22% 24% 20% 29% 31% 33% 79% 82% 78% 76% 80% 74% 71% 69% 67% 2017 2018 2019 2017 2018
Slide 6: Highlights to date
H1 2019 | Group Overview 6 Operational excellence DOMINO: Sustainable clinical excellence • Launched towards the end of FY2018 to sharpen our focus on delivering sustainable clinical excellence • DOMINO changes the way we work along five integrated dimensions: nursing excellence, quality efficient c
Slide 7: Focus on future growth
2019 H1 | Group Overview 7 Focus on future growth MARKET SIZE GROWTH OPPORTUNITY Complementary services: • Fastest growing segment of the SA business – 14.6% CAGR over past four years • Future growth through the geographic expansion of mental health, acute rehabilitation and renal dialysis Insured 8
Slide 8: Focus on future growth
2019 H1 | Group Overview 8 Focus on future growth GROWTH OPPORTUNITY UK PET-CT: • Alliance Medical has contracted with the National Health Service (NHS) to provide c.70% of UK PET-CT scanning requirements under seven-year fixed price contracts (with a three-year term extension option) Alliance Medic
Slide 9: Operational Review: Southern Africa
Operational Review Southern Africa Dr Shrey Viranna | Group CEO
Slide 10: Southern Africa Business review
Southern Africa 10 Business review Complementary Acute hospitals Healthcare services services Proportion of R 7 735 million R 503 million R 609 million SA revenue 87.4% 5.7% 6.9% Four year revenue 6.4% 14.6% 9.9% CAGR 7 acute rehabilitation units 50 acute hospitals 10 PPP facilities 319 beds 8 247 b
Slide 11: Southern Africa Business review
Southern Africa 11 Business review: above inflation revenue growth; marginal decline in PPDs and EBITDA to invest for growth 31 March 31 March % 2019 2018 change • PPD decline largely due to quieter Q1 volumes; medical scheme benefit changes and ongoing funder managed care initiatives (MDC04) PPD -0
Slide 12: Business review: medical / surgical trend
Southern Africa 12 Business review: medical / surgical trend Acute Complementary Healthcare Services Total medical / surgical split as a % of PPDs 7.1% 609 2019 H1 Medical Surgical 568 503 54.1% 54.5% 54.9% 467 56.0% 53.8% 399 7.2% 52.5% 446 405 417 330 52.0% 292 47.5% 7.7% 48.0% 46.2% 45.9% 45.5% 4
Slide 13: Business review: operational trends
Southern Africa 13 Business review: operational trends Revenue growth rate: 2018 - 2019 6.7% 7.4% 8.0% 6.0% 4.8% 6.3% • Revenue impacted by lower Q1 FY2019 volumes and 4.0% funder initiatives 2.0% 0.0% Q1 Q2 Q2+ April YTD April PPD growth rate: 2018 - 2019 1.0% 0.2% 0.4% • PPD growth rates have impr
Slide 14: Quality
Quality 14 Continued focus on quality outcomes and patient experience 31 March 2019 31 March 2019 Target 2018 Measure “ Patient experience Definitely recommend % 70.8 71.0 70.5 Life Healthcare is the first private hospital Group in South Africa to publish our hospital quality scores on Patient exper
Slide 15: Healthcare services
Healthcare services 15 Revenue and EBITDA Revenue (R’m) EBITDA (R’m) Life Esidimeni: EBITDA margin • Renewed government contracts +7.2% 12.5% 11.5% require higher nursing to patient ratios 609 71 568 70 resulting in increased labour costs Life Employee Health Solutions: • Loss of one large contract
Slide 16: Operational Review: International
Operational Review International Dr Shrey Viranna | Group CEO
Slide 17: Alliance Medical Overview
Alliance Medical 17 Overview UK Italy Ireland Other geographies • DI static sites 34 • PET-CT national • Owned clinics 34 Spain Netherlands • Operating sites 24 contract sites 35 • Static sites 10 • Mobiles 45 Germany Finland • Revenue (%) 48 • Revenue (%) 29 • Revenue (%) 10 Bulgaria Norway • Reven
Slide 18: Strong growth in scan volumes
Alliance Medical 18 Strong growth in scan volumes Alliance Medical scan volumes for the period 160 000 140 000 120 000 100 000 12.5% increase in 80 000 overall scan volumes 60 000 (excl mobiles) across 40 000 Alliance Medical 20 000 0 DI (MRI+CT PET DI (MRI+CT) DI (MRI+CT) PET DI (MRI+CT) PET DI (MR
Slide 19: Alliance Medical (excluding LMI)
Alliance Medical (excluding LMI) 19 Stable overall performance with investment in future growth 31 Mar % % • Good revenue growth compared to the For 6 months 2019 H1 2018 change H2 2018 change H12018 driven largely by growth in PET-CT Revenue (£’m) 149.8 135.0 11.0 144.0 4.0 scan volumes and the acq
Slide 20: Alliance Medical UK
Alliance Medical 20 UK MI as a % of UK revenue Molecular Imaging (MI): 100% • PET wave 1 80% − MI growth underpinned by 10-year PET wave 1 contract 60% − Pricing certainty until December 2025 40% • PET wave 2 20% 42% 46% 52% 58% − Successful with four PET wave 2 contracts 0% − Fixed price contracts
Slide 21: Alliance Medical UK Diagnostic Imaging
Alliance Medical 21 UK Diagnostic Imaging (DI): Growth in longer-term contracts • Strategic focus continues to be partnership solutions % 100 with hospital trusts 90 • UK DI impacted by lower-volume growth compared to 80 44 recent trend 70 59 69 60 • No negative pricing impact for H1 FY2019 and imma
Slide 22: Rest of Europe
Rest of Europe 22 Italy, Ireland, Northern Europe, Scanmed Italy: • MRI and CT volumes increased 18.9% on the back of increased volumes and acquisitions • Growth in clinics enables growth in private volumes • Lower margin static contracts were exited Ireland: • Continues to show solid volume growth
Slide 23: Life Molecular Imaging (LMI)
Life Molecular Imaging (LMI) 23 • Current established product: Revenue (GBP’m) − Focus on driving sales of Neuraceq – radioactive tracer used to identify Amyloid plaques in the brain in order to diagnose Alzheimer’s disease. Looking to sell Neuraceq in China 3.8 3.7 3.7 − Positive results from US ID
Slide 24: Financial Review
Financial Review Pieter van der Westhuizen | Group CFO
Slide 25: Highlights
Highlights 25 Revenue Normalised EBITDA Interim dividend +9.5% +2.2% +5.3% to R12.4 billion to R2.7 billion to 40 cps Strong revenue growth Loss on Max hedges of R256 Cash from operations at 95% million (net of tax) of EBITDA Unaudited Group Results 2019
Slide 26: Financial statutory results
Financial statutory results 26 Group 31 Mar 2019 31 Mar 2018 % • EBITDA impacted by: R’m R’m change Revenue 12 399 11 323 9.5 − lower activity in SA acute business Normalised EBITDA 2 733 2 673 2.2 − increased growth in SA healthcare Normalised EBITDA margin (%) 22.0 23.6 services at lower margin EB
Slide 27: Constant currency results
Constant currency results 27 Group 31 Mar 2019 31 Mar 2018 % R’m R’m change • 1 GBP: ZAR17.42 Revenue 12 156 11 323 7.4 • 1 GBP: EUR1.2 Normalised EBITDA 2 684 2 673 0.4 • 1 PLN: ZAR3.66 Normalised EBITDA margin 22.0% 23.6% EBITA 2 080 2 125 (2.1) Amortisation (299) (255) 17.3 Operating profit 1 781
Slide 28: Financial results
Financial results 28 Group 3131 Mar 31 Mar Constant 2019 2018 currency % R’m R’m % Revenue 7.4 12 399 11 323 9.5 Southern Africa 5.8 8 847 8 364 5.8 International 7.1 3 406 2 959 15.1 Growth initiatives¹ 146 - Normalised EBITDA 0.4 2 733 2 673 2.2 31 Mar 31 Mar Southern Africa 3.0 1 900 1 845 3.0 20
Slide 29: Financial results: International EBITDA margin
Financial results 29 International EBITDA margin H1 2019 H2 2018 H1 2018 International¹ 19.7% 22.1% 19.5% Diagnostic services 22.9% 26.4% 22.4% Healthcare services 6.3% 4.1% 9.3% International EBITDA margin (%) 0.8 0.6 19.7 19.5 H1 2018 Healthcare services Diagnostic services H1 2019 ¹ Excludes LMI
Slide 30: Financial results
Financial results 30 Group 31 Mar 2019 31 Mar 2018 % R’m R’m change Revenue 12 399 11 323 9.5 Normalised EBITDA 2 733 2 673 2.2 Normalised EBITDA margin (%) 22.0 23.6 EBITA 2 114 2 125 (0.5) Southern Africa 1 608 1 574 2.2 International 372 323 15.2 Corporate 180 228 (21.1) Growth initiatives¹ (46)
Slide 31: Financial results: Max
Financial results 31 Group Max • Assets classified as held for sale • Shareholders’ purchase agreement signed during December 2018 • Key regulatory approvals were obtained during March 2019 • Transaction completion expected at the end of June 2019 and funds by the financial year end • Entered into a
Slide 32: Financial results: EPS
Financial results 32 Group % Normalised EPS impacted by: 31 Mar 2019 31 Mar 2018 change Weighted average number of shares (million) 1 456 1 423 2.3 • the investments in growth initiatives and EPS (cents) 24.5 54.6 (55.1) Impairment of assets and investments 2.5 1.2 • increased human Profit on dispos
Slide 33: Consolidated condensed statement of financial position
Consolidated condensed statement of financial position 33 31 Mar 2019 30 Sept 2018 R’m R’m Non-current assets 31 229 30 558 Property, plant and equipment 12 338 12 243 Goodwill 13 534 12 991 Intangible assets 3 970 4 093 Other 1 387 1 231 Current assets (excluding cash and asset classified as held f
Slide 34: Cash flow
Cash flow 34 Group R’m 2 800 120% 31 Mar 31 Mar 2019 2018 % R’m R’m change 2 400 100% 100% Cash generated from operations 2 591 2 679 (3.3) 95% Transaction costs paid (30) (8) 2 000 83% 81% 81% 80% Net interest paid (454) (493) 77% 1 600 Tax paid (477) (548) 60% Maintenance capex (527) (309) 1 200 M
Slide 35: Distribution
Distribution 35 Distributions Cents / share R’m Interim 2018 38 556 Final 2018 50 734 Declared an interim cash dividend of 40 cps Total 2018 88 1 290 Interim 2019 40 587 The Group’s dividend policy is to pay a progressive dividend that takes into account the underlying earnings and available funding
Slide 36: Debt
Debt 36 Post Max Weighted avg. 31 Mar 2019 Weighted avg. 30 Sept 2018 Weighted avg. Funding R’m cost of debt R’m cost of debt R’m cost of debt (post-tax) (post-tax) Acquisition funding ZAR - - 2 962 7.08 3 551 7.31 PLN 826 3.76 826 3.76 830 3.75 GBP 2 638 2.48 2 638 2.48 1 311 2.42 Capex funding - Z
Slide 37: 2019 H2 Outlook
2019 H2 Outlook Dr Shrey Viranna | Group CEO
Slide 38: Outlook for H2 2019
Group Overview 38 Outlook for H2 2019 SA: • Positive year-on-year PPD growth expected for H2 FY2019 • Continued improvement in EBITDA margin • Implementation of growth initiatives • Capex spend of approximately R1.1 billion for the full year • Adding 80 mental health beds Alliance Medical: • Continu
Slide 39: Strategic focus areas
2019 H1 | Group Overview 39 Strategic focus areas Continued progress made on the implementation of diversifying across business lines and territories Revenue (%) EBITDA (%) Acute vs non-acute revenue (%) 21% 26% 18% 22% 24% 20% 29% 31% 33% 79% 82% 78% 76% 80% 74% 71% 69% 67% 2017 2018 2019 2017 2018
Slide 40: Questions
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