Slide 1: Audited Group results for the year ended 30 September 2009
Audited Group results for the year ended 30 September 2009 Richard Friedland | Group CEO Vaughan Firman | Group CFO
Slide 2: Note regarding forward-looking statements
Netcare Limited committed to our values Note regarding forward-looking statements The Company advises investors that any forward-looking statements or projections made by the Company, including those made in these presentations, are subject to risk and uncertainties that may cause actual results to
Slide 3: Presentation outline
Presentation outline United Group South Africa Financial Kingdom Guidance highlights (SA) review (UK) CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 3
Slide 4: Group highlights
Group p highlights g g CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION
Slide 5: Group overview
Group overview Resilient Currency y impact p Continued UK pprofit after tax operational reduced headline investment in SA increased 44,1% performance in earnings per and UK footprint to £16m both SA and UK share by 3,3 cents Significantly All UK debt 436m treasury Final (H2) de-geared SA covenants m
Slide 6: Group financial highlights
Group financial highlights 30 Sep 30 Sep Rm 2008 2009 % Revenue 21 735 23 232 6,9 Revenue growth driven by: • Strong organic growth in SA EBITDA 4 614 4 927 6,8 • UK acquisitions Negatively impacted by currency Operating profit 3 370 3 700 9,8 movements Cash generated from operations 4 663 4 640 Dri
Slide 7: Geographic contributions
Geographic contributions Revenue EBITDA Net interest paid HEPS 51% 49% 59% 41% 20% 80% 13% 87% SA UK CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 7
Slide 8: South Africa (SA) Financial and operating review
South Africa (SA) Financial and operating review CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION
Slide 9: Business overview
Business overview Stable operating p g Ongoing g g Opened p Commenced environment in challenges in Port Alfred and construction of 2009 for Primary Care Grahamstown Lesotho PPP hospitals and operating PPPs emergency environment services Changing Voted 5th in the Most empowered 14th place in SA regul
Slide 10: Continued progress on transformation
Continued progress on transformation Empowerdex Empowerdex Element Weight rating 2008 rating 2009 Ownership p 20 17,04 16,81 Ranked number 3 in SA for skills Management control 10 6,24 6,25 development* Employment equity 15 6,47 7,43 Skills development 15 12,01 12,06 Increased spend with BEE accredi
Slide 11: South Africa
South Africa 30 Sep 30 Sep Organic growth driven by high Rm 2008 2009 % demand for private healthcare services Revenue 10 385 11 832 13,9 EBITDA 1 739 2 018 16,0 Improved financial performance of existing PPPs and contributions Operating profit 1 401 1 662 18,6 from new PPPs Attributable earnings of
Slide 12: SA Hospitals and Emergency services
SA Hospitals and Emergency services 137 beds added Record Increase in Strongg to our existing patient day average working capital facilities in 2009 growth occupancy management of 4,9% to 67% (weekday 72%) 131 new Netcare trained 204 additional Netcare 911 physicians more than 3 800 beds planned liv
Slide 13: Private healthcare benefits from a sound medical scheme environment
Private healthcare benefits from a sound medical scheme environment Total benefits paid per beneficiary per month (R)* The medical scheme environment is financially sound due to: 300 • Strong membership growth since 2000 Hospitals (685 000 members and 870 000 beneficiaries) • 3,5% growth in benefici
Slide 14: SA Hospitals and Emergency services
SA Hospitals and Emergency services 30 Sep 30 Sep • Patient day growth of 4,9% Rm 2008 2009 % • Revenue per patient day of 10,5% Revenue 9 020 10 319 14,4 • 15,1% 15 1% increase in Netcare 911 lives under management EBITDA 1 735 2 042 17,7 Operating profit 1 414 1 703 20,4 Capital investment include
Slide 15: Hospital Private Public Partnerships
Hospital Private Public Partnerships Universitas and Port Alfred Grahamstown Lesotho UCT (University Bronkhorstspruit Pelonomi of Cape Town) Academic • Co-location • Co-location • Co-location • 425 beds • Co-location • 14 public beds • 214 beds • 90 beds • 251 beds (35 private) • 124 beds within Net
Slide 16: Primary Care Division
Primary Care Division Treated 3,7 million • Administered 42 As reported p in H1, The division is patients in 107 scheme options Primary Care results expected to medical and dental • 9,0% growth in below expectation: break-even in 2010 centres managed care lives • Underpricing to 256 243 • Normalisin
Slide 17: Primary Care
Primary Care 30 Sep 30 Sep Rm 2008 2009 % Revenue 1 365 1 513 10,8 Revenue growth driven by: • RPL increase of 10,7% EBITDA 4 (24) • 9,0% growth managed lives IBNR shortfall 28 11 EBITDA impacted by: Debtor write-offs 34 • Increased I d underwriting d iti costs t • Debtor write-offs Adjusted EBITDA
Slide 18: Primary Care operating environment 2010
Primary Care operating environment 2010 Growth in managed care lives Change in risk profile 300 000 250 000 200 000 40% 41% 48% 150 000 100 000 70% 50 000 90% 10% 52% 60% 59% 30% 0 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 Forecast Forecast Net reduction in managed lives due to end of GEMS F
Slide 19: United Kingdom (UK) Financial and operating review
United Kingdom (UK) Geographical coverage Financial and operating review
Slide 20: Geographical coverage
Geographical coverage 5 new sites added to portfolio (total 64), increasing GHG’s national coverage 2006/07 48 existing BMI hospitals 2006/07 3 Netcare UK NHS sites 2007/08 8 sites added - 7 Nuffield + Oxford Clinic 2008/09 5 sites added: • Woodlands Private Hospital • Nottingham Primary Care Centre
Slide 21: UK independent hospital sector - market share (beds)
UK independent hospital sector - market share (beds) Source: Sou ce Laing a g & Buisson, u sso , April p 2009 009 CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 21
Slide 22: Business overview
Business overview The UK’s Revenue The efficiency y number 1 growth of 7,6% program remains independent of which on track healthcare 4,1% is organic, provider EBITDA growth of 8,9% Increased Five new sites All debt NHS volumes added and covenants met offset self pay significant with sufficient volum
Slide 23: UK income statement
UK income statement 30 Sep 30 Sep £m 2008 2009 % Revenue 772,6 831,5 , 7,6 • Stable PMI • Strong NHS growth more than EBITDA before items below 202,3 219,8 8,7 offsetting self pay decline Non-recurring items (6,6) (6,7) Significant growth in PBT due to strong t EBITDA growth th and d fixed fi d Repo
Slide 24: Growth trajectory – GHG
Growth trajectory – GHG Revenue (£m) EBITDA (£m) EBITDA margin (%) CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 24
Slide 25: Growth trajectory – OpCo continues to grow strongly
Growth trajectory – OpCo continues to grow strongly BMI OpCo revenue (£m) BMI OpCo EBITDA (£m) BMI PropCo rent (£m) CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 25
Slide 26: Analysis of caseload
Analysis of caseload Inpatient growth of 6% Within this: • Organic growth of 1% • Insured volumes stable • NHS Choose and Book growing steadily Looking ahead PMI is holding up, self pay now stable and NHS continues to grow CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 26
Slide 27: Outlook for caseload
Outlook for caseload Previous Next Thereafter 12 months 18 months • Short term pressure due to level Insured of UK unemployment • Demographics of UK and lack of funding for the NHS expected to drive future PMI growth • Decline has bottomed out Self Pay • NHS funding pressure is likely to increase wa
Slide 28: UK segmental analysis 2009
UK segmental analysis 2009 Revenue EBITDA Netcare etca e U UK’s s op ophthalmic t a c cocontract t act co completed p eted April p 2009 009 a and d Netcare etca e U UK’s sGGMSC SC co contract t act will e end d in May ay 2010 0 0 CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 28
Slide 29: Operational efficiencies
Operational efficiencies Ward labour hours The efficiency program is ongoing Nurse skill and agency mix Theatre utilisation Fi ed cost rationalisation Fixed This will continue to support Finance shared service centre underlying activity margin growth Procurement PACs/RIS Pathology Cost savings targe
Slide 30: Other achievements during the year
Other achievements during the year Staff: Patient Patient contact: 12 BMI hospitals satisfaction: dedicated were listed in the 99% rating of contact centre Nursing Times good, very good established to Top 100 or excellent* improve service Primary care: Staff training: Environment: dedicated team 3 0
Slide 31: Financial review
Financial review Structural factors impacting results Summary financials Group debt Cash generation C it l reduction Capital d ti
Slide 32: Structural factors impacting results
Structural factors impacting results Sale of Ampath Interest rate swaps Exchange rate impact • Gross proceeds of R1 027m • UK interest rates dropped to • Closing exchange rate improved • Proportionately consolidated until record lows from R14,76 to R11,95 28 Feb 2009 • Significant mark-to-market imp
Slide 33: Exchange rate impact – no currency hedging
Exchange rate impact – no currency hedging Strengthened R/£ exchange rate 20 GHG acquisition 12 May y 2006 – R11,73 , p 2008 – R14,76 30 Sep , 30 Sep p 2009 – R11,95 , 18 16 14 12 10 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 33
Slide 34: Exchange rate impact
Exchange rate impact Reported Reported Constant currency Prior year Rm 2008 2009 2009 change % Revenue 21 735 23 232 24 046 10,6 Operating profit 3 370 3 700 3 926 16,5 HEPS 61,5 78,2 81,5 32.5 Total assets 54 182 45 937 54 705 1,0 Net debt 32 589 26 454 31 751 2,6 CARE | DIGNITY | TRUTH | PARTICIPA
Slide 35: Summarised group income statement
Summarised group income statement 30 Sep 30 Sep Rm 2008 2009 % Revenue 21 735 23 232 6,9 • Both geographies delivered Operating profit 3 370 3 700 9,8 improved margins • 16,5% increase in constant Net financial expenses (2 427) (2 260) 6,9 currency Attributable earnings of associates 2 27 • Prior ye
Slide 36: Headline earnings per share
Headline earnings per share 30 Sep 30 Sep Cents 2008 2009 % Basic HEPS 61,5 , 78,2 , 27,2 , Increase of 32 32,5% 5% in headline earnings per share excluding exchange rate fluctuations From continuing operations 53,3 74,6 40,0 From discontinued operation p 8,2 , 3,6 , ((56,1) , ) South Africa 52,5 68
Slide 37: Operating profit margin analysis
Operating profit margin analysis SA UK CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 37
Slide 38: Summarised statement of financial position | assets
Summarised statement of financial position | assets 30 Sep 30 Sep Forex Rm 2008 2009 effect Movement Non-current assets 48 993 41 043 ((8 218)) 268 Capex of R747m in SA and R525m in UK, offset PPE 29 732 25 097 (4 703) 68 by depreciation Goodwill and intangible 17 910 14 669 (3 327) 86 assets Contin
Slide 39: Summarised statement of financial position | equity and liabilities
Summarised statement of financial position | equity and liabilities 30 Sep 30 Sep Forex Rm 2008 2009 effect Movement Total shareholders' equity q y 8 851 7 133 ((1 208)) ((510)) Non-current liabilities 39 920 33 720 (7 154) 954 R840m debt repayment during the year Long term debt 31 530 25 423 (5 267
Slide 40: Group debt
Group debt Net debt at 30 Sep 2009 Geographic split of net debt at 30 Sep 2009 Facilities Utilised UK debt (£m) 2 001 1 927 UK debt (Rm) 23 915 23 035 SA debt (Rm) 7 904 4 133 Net debt (Rm) 31 819 26 454 C t off debt Cost d bt (%) 30 Sep 30 Sep 2008 2009 UK debt 6,5 6,5 SA debt 10,1 8,1 Gross debt 7
Slide 41: South African debt position
South African debt position SA debt at 30 Sep 2009 Proceeds from Ampath sale reduced debt: Rm Cost % • R95m of convertible bonds repurchased • Most expensive bank debt repaid Convertible bonds¹ 1 480 6,0 • Roll-overs not renewed DMTN 1 910 9,4 • Invested in capex Pref shares 466 6,9 Improved debt co
Slide 42: UK debt position
UK debt position UK OpCo PropCo 1 PropCo 2 57 h hospitals it l 36 h hospital it l properties ti 8h hospital it l properties ti • £223m gross debt • £1 621m gross debt • £81m gross debt • 83% fixed @ 7,7% • 100% fixed @ 6,3% • 100% fixed @ 6,9% • Interest: £21m • Interest: £109m • Interest: £6m • Deb
Slide 43: UK debt covenants
UK debt covenants PropCo (£m) PropCo primary covenant is the interest cover ratio. No risk of 200 covenant breach 18 1,8 PropCo secondary covenant is 160 1,7 loan to value ratio triggered if rental cover < 1:4. Current 1,6 1,4 headroom of £49m 120 OpCo primary covenant is cash cover. Forecast headro
Slide 44: Repayment of UK debt
Repayment of UK debt UK (£m) • PropCo 1 - Oct 2013 £1 535m • PropCo 2 - Feb 2015 £70m • OpCo Facility A - Oct 2013 £7m • OpCo Facility B - Oct 2014 £80m y C - Oct 2015 £80m • OpCo Facility 20 27 34 43 1 775 2010 2011 2012 2013 Thereafter CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 44
Slide 45: Interest rate swaps
Interest rate swaps Net derivative instruments - liability 30 Sep 30 Sep Rm 2008 2009 Change Net interest rate swaps (UK) (1 108) (2 771) (1 663) Represents mark-to-market Net interest rate swaps (SA) 12 (26) (38) valuation on four interest rate swaps Total ((1 096)) ((2 797)) ((1 701)) Movement in
Slide 46: Cash generated from operations
Cash generated from operations SA (Rm) UK (£m) 81,7%¹ 112,5%¹ 95,9%¹ 113,5%¹ 1. Cas Cash co conversion e s o ratio at o CARE | DIGNITY | TRUTH | PARTICIPATION | PASSION 46
Slide 47: Working capital
Working capital 30 Sep 30 Sep Movement 2008 2009 SA (Rm) ( ) Record levels of debtors’ days Inventory 328 361 (33) with Hospital Division at 34 days Accounts receivable 1 711 1 794 (83) Accounts payable (1 453) (1 675) 222 Successful integration of Taxation (247) (302) 55 Centralised Creditors Divis
Slide 48: Growth in capital reductions
Growth in capital reductions Capital reductions (cents per share) • Distribution cover of 2,1 times 18 8% 18,8% Capital reductions determined after having regard for • Degearing benefits • SA leverage ratios • Investment opportunities • HPFL BEE shareholder requirements • Non-recurring items affecti
Slide 49: Guidance 2010
Guidance 2010
Slide 50: Guidance 2010
Guidance 2010 SA UK Revenue Estimating E ti ti revenue growth th Estimating flat revenue growth* growth between 7% and 10% Operating Expecting improvement Expecting to maintain efficiencies in EBITDA margins 17% to 18% EBITDA margins Capital Estimating R800m Estimating £55m expenditure * Impacted pa
Slide 51: Audited Group results for the year ended 30 September 2009
Audited Group results for the year ended 30 September 2009 Richard Friedland | Group CEO Vaughan Firman | Group CFO