Slide 1: Netcare Limited Unaudited Group interim results
Netcare Limited Unaudited Group interim results for the six months ended 31 March 2011 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 1
Slide 2: Disclaimer
Disclaimer Netcare has acted in good faith and has made every reasonable effort to ensure the accuracy and completeness of the information contained in this presentation, including all information that may be defined as 'forward-looking statements'. Forward-looking statements may be identified by wo
Slide 3: Netcare Limited Unaudited Group interim results
GROUP SOUTH UNITED FINANCIAL GUIDANCE OVERVIEW AFRICA KINGDOM REVIEW 2011 Richard Friedland • Group CEO Vaughan Firman • Group CFO Netcare Limited Unaudited Group interim results for the six months ended 31 March 2011 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 3
Slide 4: Group overview
GROUP OVERVIEW CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 4
Slide 5: Group overview
Group overview South Africa Continued Excellent R1.1bn Reinstated (SA) demand for operational capex on JSE’s private healthcare performance expansion Social programme Responsibility on track Index for 2011 United Kingdom UK private Continued growth Proposed Strong focus on (UK) healthcare sector in
Slide 6: Group financial overview
Group financial overview Overall results EBITDA margin UK EBITDA Group results a tale of improvement declined impacted by UK two countries in SA due to business restructuring costs mix, VAT and and tax changes end of ISTC1 contracts ▲ 7.1%* Cash conversion ▼ R359m Dividend revenue of 87.6% Group net
Slide 7: Geographic contribution
Geographic contribution Revenue (%) EBITDA (%) Net interest paid (%) HEPS (%) 46 43 57 46 79 82 13 5 54 57 43 54 21 18 87 95 2010 2011 2010 2011 2010 2011 2010 2011 SA UK CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 7
Slide 8: South Africa
SOUTH AFRICA CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 8
Slide 9: Business overview
Business overview ▲ 1.5 million ▲ 2.8% ▲ 20.3% SA debt new medical aid organic growth operating profit at five year low beneficiaries in patient days and long term in last 5 years¹ debt upgrade from A- to A 132-bed 425-bed Top Waterfall hospital Lesotho PPP Empowerment in Midrand hospital and CSI to
Slide 10: South Africa
South Africa 31 Mar 31 Mar Rm 2010 2011 % Revenue 6 014 6 472 7.6 ▲ revenue in Hospital division offset by reduction in Primary EBITDA 1 035 1 212 17.1 Care revenue Operating profit 849 1 021 20.3 EBITDA margin (%) 17.2 18.7 ▲ operational efficiency and cost containment in Hospitals and Operating pr
Slide 11: SA Hospitals and Emergency services
SA Hospitals and Emergency services EBITDA (Rm) 1 191 ▲ 9.5% revenue 1 029 943 ▲ 6.7% revenue per patient day ▲ 2.8% patient days ▲ 110 bps EBITDA margin ▲ 18.6% operating profit Hospital debtors days 30.3 days (H1 2010: 38.4 days) Excluding COID* 25.5 days H1 2009 H1 2010 H1 2011 (H1 2010: 31.8 day
Slide 12: Primary Care: the recovery continues
Primary Care: the recovery continues EBITDA (Rm) 21 Continued recovery in profitability: R37m swing since 2009 Improved risk profile with full risk 6 cover reducing to 28.0% of lives ▲ 240 bps EBITDA margin 1.6 million patient visits in the first six months (16) H1 2009 H1 2010 H1 2011 CARE • DIGNIT
Slide 13: Positive reform initiatives in Standards and International Benchmarking
Positive reform initiatives in Standards and International Benchmarking Draft Multi-party Office of International National Pricing Discussion Health Standards Benchmarking Health Insurance Document & Compliance of drugs (NHI) • No update from • Netcare supports • Will reduce cost of • Netcare embrac
Slide 14: United Kingdom
UNITED KINGDOM CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 14
Slide 15: Business overview
Business overview PMI beneficiaries EBITDA decline Pause in GHG’s market and self-pay due to mix of proposed share of NHS demand impacted business, VAT NHS reforms Choose and by economic and end of ISTC results in Book (C&B) has downturn contracts uncertainty increased from 11% to 20% Business Cash
Slide 16: UK income statement
UK income statement 31 Mar 31 Mar £m 2010 2011 % Revenue 418.7 445.8 6.5 • Strong NHS growth • Abbey and Transform EBITDA before items below 112.2 94.4 (15.9) acquisitions Gain on bargain purchase 3.7 Affected by: Profit on disposal of property 4.4 • business mix and lower private volumes Other non-
Slide 17: Change in payor case mix volumes in favour of NHS
Change in payor case mix volumes in favour of NHS Caseload H1 2007 H1 2008 H1 2009 H1 2010 H1 2011 PMI Self-pay NHS CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 17
Slide 18: Recession impacting private medical insurance
Recession impacting private medical insurance Growth in private beneficiaries Growth is a function of employment and disposable income ▼ 4.4% private medical aid membership in 2009 ▼ insured caseload in first six months Case-mix continues to swing in favour of lower contribution day cases 2008 2009
Slide 19: Self-pay demand is cyclical
Self-pay demand is cyclical Self-pay as % of private revenue 28% Self-pay demand is a function of 23% economic cycle and NHS waiting lists ▼ self-pay caseload in first 13% 13% six months As NHS spending continues to tighten, waiting lists are increasing 1981 1992 2002 2009 Source: Laing’s Healthcare
Slide 20: NHS: underlying demand will drive growth in the private sector
NHS: underlying demand for healthcare and increasing burden on NHS will drive growth in the private sector ▲ 3.6% pa: ▲ 6.0% pa: Uncertainty Waiting times for patients admitted patients around NHS hospital treatment to NHS hospitals >75 years White Paper highest in over last ten admitted to reforms
Slide 21: UK: medium term outlook
UK: medium term outlook PMI recovery Self-pay recovery Outlook for NHS aligned to a function of both business remains economic recovery economic cycle positive as and growing “choice agenda” NHS backlog not expected to change materially CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 21
Slide 22: Financial review
FINANCIAL REVIEW CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 22
Slide 23: Summarised Group income statement
Summarised Group income statement 31 Mar 31 Mar Rm 2010 2011 % Revenue 11 038 11 392 3.2 Both SA and UK grew revenue EBITDA 2 400 2 266 (5.6) Impacted by business mix Operating profit 1 843 1 698 (7.9) in the UK Net financial expenses (1 005) (948) 5.7 Swap ineffectiveness of R61m (£5.4m) Attributab
Slide 24: Group revenue growth in constant currency of 7.1%
Group revenue growth in constant currency of 7.1% Rm 325 508 11 392 (50) (429) 11 038 H1 2010 Hospital and Primary Care UK Exchange rate H1 2011 Emergency impact services CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 24
Slide 25: Group operating profit movement impacted by reduced UK performance and currency conversion
Group operating profit movement impacted by reduced UK performance and currency conversion Rm 159 13 1 843 15 (278) 1 698 (54) H1 2010 Hospital and Primary Care UK Capital Exchange rate H1 2011 Emergency charges impact services CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 25
Slide 26: Headline earnings per share
Headline earnings per share Cents HEPS 31 Mar 31 Mar 47.8 48.0 Cents 2010 2011 % SA 35.9 45.7 27.3 UK 5.6 2.3 (58.9) Basic 41.5 48.0 15.7 41.5 Diluted 40.0 46.5 16.3 H1 2010 H1 2011 H1 2011 Constant* Actual * Recalculated to remove the impact of foreign currency fluctuations CARE • DIGNITY • TRUTH •
Slide 27: Summarised statement of financial position
Summarised statement of financial position 30 Sep 31 Mar Forex Rm 2010 2011 effect Movement Assets PPE, goodwill and 37 336 36 915 (232) (189) ▼ in deferred tax asset due to intangible assets reduction in UK corporate tax rate Other non-current assets 1 652 1 333 (8) (311) and swap liability Current
Slide 28: Movement in Group property, plant & equipment and intangible assets
Movement in Group property, plant & equipment and intangible assets Rm 461 24 183 23 858 (568) (134) (84) H2 2010 Additions Depreciation Disposals Exchange rate H1 2011 carrying value and amortisation and other impact carrying value CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 28
Slide 29: Capital expenditure driven by expansion programme in SA
Capital expenditure driven by expansion programme in SA Group capex* (Rm) SA 2011 capex* forecast 1 596 1 370 41% R1 166m 59% 921 1 135 449 461 2010 2011 H1 actual H2 actual H2 forecast Expansion Replacement * Including intangible assets CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 29
Slide 30: Major SA capex projects
Major SA capex projects Rm 119 115 106 78 60 65 57 31 25 40 104 44 42 27 14 11 5 5 8 Montana Waterfall The Bay Mulbarton Kingsway 54 beds 132 beds 70 beds 58 beds 35 beds H1 2011 and prior H2 2011* 2012 and beyond* * Projected amounts CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 30
Slide 31: Netcare hospital projects
Netcare Waterfall Hospital Netcare The Bay Hospital CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION Netcare Mulbarton Hospital Netcare Kingsway Hospital 31
Slide 32: Group debt
Group debt Net debt at 31 Mar 2011 Geographic split of net debt at 31 Mar 2011 Facilities Utilised UK debt (£m) 1 895 1 855 UK debt (Rm) 20 549 20 125 84% SA debt (Rm) 8 595 3 713 Net debt (Rm) 23 838 Cost of debt (%) 31 Mar 31 Mar 2010 2011 UK debt 6.4 6.4 16% SA debt 8.0 7.2 Group debt 6.7 6.5 SA
Slide 33: SA debt position at lowest level in five years
SA debt position at lowest level in five years 4 600 4 556 9 Improved GCR rating in Jan 2011: • A Long-term (Feb 2009 A-) 8 • A1 Short-term (Feb 2009 A1-) 4 400 R1 185m long-term debt raised 7 6.4 subsequent to Mar 2011 at 6 attractive interest rates 4 200 4 164 5 66% of debt hedged post 4.3 Mar 201
Slide 34: UK debt position
UK debt position 31 Mar 30 Sep 31 Mar £m 2010 2010 2011 PropCo 1 1 614 1 605 1 596 £1 535m to be refinanced October 2013 PropCo 2 80 79 67 Various options under consideration OpCo 239 234 244 Three facilities due for refinance Other debt 3 31 31 between October 2013 and October 2015 Total gross debt
Slide 35: Interest rate swaps
Interest rate swaps Derivative financial instruments – financial liability 30 Sep 31 Mar Rm 2010 2011 Movement Net interest rate swaps (UK) 4 089 2 569 (1 520) Recognised in: • Equity (hedged portion): Net interest rate swaps (SA) 24 10 (14) £142.8m benefit • Income statement (ineffective Total 4 11
Slide 36: Group free cash flow (FCF)
Group free cash flow (FCF) Rm • ▲ 25.5% in FCF (H1 2010: R1 264m) • Cash conversion of 87.6% vs 78.9% 2 266 in prior period 1 984 1 932 (282) (52) 1 586 (346) EBITDA: Working Cash PPE¹ and Operating FCF Taxation FCF: H1 2011 capital and generated other investing H1 2011 other non-CF from activity mo
Slide 37: Working capital
Working capital 31 Mar 31 Mar 2010 2011 Movement SA (Rm) Inventories 437 427 10 Hospital debtors days at 30.3 days (H1 2010: 38.4 days) Trade and other receivables 2 024 1 757 267 Trade and other payables (1 663) (1 777) 114 Higher first provisional payment to SARS Taxation payable (203) (182) (21)
Slide 38: Growth in distributions
Growth in distributions Distribution cover of 2.2 times Distributions (cents per share) Distributions determined after having regard for • Enhanced earnings 27.5 • Degearing benefits • SA leverage ratios • HPFL BEE shareholder requirements • SA credit/financial markets 22.0 19.0 • STC payment on div
Slide 39: Guidance 2011
GUIDANCE 2011 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 39
Slide 40: Guidance 2011
Guidance 2011 SA UK Estimated revenue growth Continued modest revenue growth upper single digit in light of challenging UK economy Continued focus on efficiencies Current business mix to prevail in H2 Capex: < R1 200bn Capex: < £50m CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 40
Slide 41: Netcare Limited
Netcare Limited Unaudited Group interim results for the six months ended 31 March 2011 CARE • DIGNITY • TRUTH • PARTICIPATION • PASSION 41