Slide 1: Netcare Limited Interim results presentation
Netcare Limited Interim results presentation For the six months ended 31 March 2008 1
Slide 2: Note regarding forward looking statements
Note regarding forward looking statements Highlights • 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 South Africa results to differ materia
Slide 3: Highlights
Highlights Highlights Chairman appointment Group highlights Group financial highlights Geographical contribution 3
Slide 4: Appointment of new Chairman enhances independence of board
Appointment of new Chairman enhances independence of board Jerry Vilakazi Non-executive Chairman Netcare Limited • Appointed as independent non-executive Chairman with effect from 1 June 2008. • BA (Unisa), MA (Thames Valley), MA (London) and MBA (California Coast University). • CEO of Business Unit
Slide 5: Group highlights
Group highlights • Strong organic and acquisitive growth in SA • 11% increase in basic earnings per share hospitals • Strong growth of managed care products for • 11% increase in profit lower income markets before taxation • Awarded Africa’s largest healthcare PPP in • 8% increase in the interim Les
Slide 6: Group financial highlights
Group financial highlights R million 31 March 31 March % Strong revenue growth of 2007 2008 16% fuelled by Nuffield and Community Revenue1 8 938 10 343 15,7 acquisitions, supported by 12% organic growth Operating profit1 1 444 1 584 9,7 Core operating profit1 1 477 1 635 10,7 Excluding once-off char
Slide 7: Geographical contribution
Geographical contribution Group revenue1 contribution Group operating profit1 contribution at 31 March 2008 at 31 March 2008 59% 53% 47% 41% South Africa United Kingdom South Africa United Kingdom 1. Before excluding minorities 7
Slide 8: South Africa
South Africa Business highlights Financial highlights South Africa Revenue growth Operating costs Capital plan Management priorities 8
Slide 9: Highlights
Highlights • Fundamental change in billing, coupled with below inflationary tariff increases – 6,2% average price per admission increase • Addressing the challenges posed by power outages and escalating costs – Focus on core operations and sale of non-core assets • Continued investment for growth –
Slide 10: New business heads appointed for South African operations
New business heads appointed for South African operations Jacques Dr Charmaine Tumi du Plessis Pailman Nkosi Managing Director Managing Director Managing Director Hospital Division Primary Care Division Netcare 911 10
Slide 11: South African financial highlights
South African financial highlights Strong revenue growth of R million 30 March 30 March % 17%, ahead of forecast, 2007 2008 13% organic growth Revenue1 4 189 4 907 17,1 Profit on sale of peripheral Core operating profit1 615 646 5,0 businesses of R25m, offset by write-off of R7m Non-recurring items
Slide 12: Strong revenue growth impinged by cost pressures
Strong revenue growth impinged by cost pressures • Revenue growth in hospital and trauma South Africa: Hospital and trauma business of 15% R million 31 March 31 March % – Acquisitions fuelling growth 2007 2008 – 11% organic growth supported by 4,7% Revenue 3 709 4 275 15,3 increase in patient days E
Slide 13: Successfully penetrating the lower income market
Successfully penetrating the lower income market • Strong revenue growth of 32% in South Africa: Primary care primary care business R million 31 March 31 March % – 35% growth in managed care lives to 2007 2008 208 000 (GEMS) Revenue 480 632 31,7 – 23% growth in network of participating EBITDA 48 52
Slide 14: Continued investment to support growth
Continued investment to support growth • Netcare South Africa’s beds increased by Netcare SA capital expenditure 767 beds 31 March (Rm) – Acquisition of Community (636 beds) – Acquisition of Linkwood (33 beds) 386 – Expansion to existing facilities (98 beds) • New projects recently completed – Milpa
Slide 15: Management priorities for the year ahead
Management priorities for the year ahead Pricing and Submission of NHRPL proposals regulations Low income model Low income product development with funders and administrators Cost efficiencies Focus on cost and working capital management Sale of surplus assets SAP rollout Rollout of final phase of S
Slide 16: United Kingdom
United Kingdom Business highlights Financial highlights Revenue growth Operational efficiencies Kingdom United Capital plan Management priorities 16
Slide 17: Business highlights
Business highlights • Delivered bottom line profit within two years from acquisition date – UK hospitals now profitable after debt servicing • Acquisition of Nuffield hospitals and OFT approval – Net purchase consideration of £109m for seven hospitals • Solid revenue growth, programmes in place to d
Slide 18: GHG delivers a profit in the period
GHG delivers a profit in the period £ million 30 March 30 March % Strong revenue growth of 2007 2008 11,6%, organic revenue growth of 8,6% Revenue 337 376 11,6 Core operating profit 59 68 15,3 Once-off costs of £4.1m One-off items (1) (4) incurred largely for Operating profit 58 64 10,3 restructurin
Slide 19: Revenue growth driven by good admission growth
Revenue growth driven by good admission growth • Revenue growth of 11,6% (In Pound Sterling) Growth in total admissions1 31 March 2007 – GHG organic revenue growth in of 8,6% – Netcare UK contribution increases from £12m to £ 21m as new projects gain 571,882 momentum 565,807 • 3% growth in total adm
Slide 20: Strong growth in core EBITDA of 14%
Strong growth in core EBITDA of 14% Volume growth offset slightly by negative mix variance from 2 increased NHS cases 5 2 99 4 98 95 6 Head office amalgamation, Two month head count Once-off costs 88 contribution largely for reduction, ward from nine labour restructuring Nuffield and Nuffield effici
Slide 21: High investment return capex pipeline identified
High investment return capex pipeline identified Capital expenditure GHG capital budget of £60m for 2008 £m • £22m spent in first 6 months Maintenance spend • Refurbishment for 20 hospitals 13 Other spend • Rollout of imaging – fast growing market and 9 ‘gatekeeper’ to future caseload • Theatre capa
Slide 22: Management priorities for the year ahead
Management priorities for the year ahead Top-line growth Continue rollout of Consultant Relationship Directors (CRD) and Doctor Liason Managers (DLM) New regional services offering rolled out across 10 regions Continued focus on revenue growth supporting capital expenditure Operational Continue effo
Slide 23: Financials
Financials Factors impacting results Summary financials Group debt Cash generation Capital distributions Financials 23
Slide 24: Factors impacting results: Acquisitions
Factors impacting results: Acquisitions • Acquisition of Community (682 beds) – Community was acquired in October 2007 for 14,2m Netcare shares issued at R11,89, goodwill arising of R101m – Netcare assumed R171m in debt and R53m in capital commitments – R8m write off (after tax and interest) for var
Slide 25: Factors impacting results: Exchange rate and interest rate
Factors impacting results: Exchange rate and interest rate • Net derivative assets now in a net Net derivative instruments - liability liability position of R533m 30 Sep 31 March Change – No cash flow impact R million 2007 2008 • The UK 10 year swap rates decreased Net interest rate swaps 109 (921)
Slide 26: Summarised group income statement
Summarised group income statement ZAR million 31 March 31 March % 2007 2008 Impacted by Community acquisition (including Revenue 8 938 10 343 16 pre-acquisition write-offs Operating profit 1 444 1 584 10 of R8m), and the disposal of Healthshare Net financial expense (1 102) (1 185) 8 Attributable ea
Slide 27: Core headline earnings per share growth of 12%
Core headline earnings per share growth of 12% Cents per share 31 March 31 March % Net profit on the sale of 2007 2008 properties and investments Basic earnings per share 22,9 25,3 11 Headline adjustments 0,8 (1,6) Non-recurrding items Basic headline earnings per share 23,7 23,7 - include R8m impair
Slide 28: Calculation of fully diluted earnings per share
Calculation of fully diluted earnings per share Movement in shares in issue Calculation of diluted earnings per share m 31 March R million 2008 Shares at 30 September 2007 1 841 Headline earnings 298 Share options 2 Fully diluted headline earnings 298 Community transaction 14 Fully diluted headline
Slide 29: Summarised group balance sheet - assets
Summarised group balance sheet - assets Sale of Nottingham, 30 Sep 31 March Acquisitions Currency Difference Gerrard’s Cross R million 2007 2008 impact classified in current assets and the sale Non-current assets 45 328 53 025 2 564 6 086 (953) of 3 SA properties PPE 26 683 32 291 2 548 3 535 (475)
Slide 30: Summarised group balance sheet – equity and liabilities
Summarised group balance sheet – equity and liabilities Fair value losses on interest rate 30 Sep 31 March Acquisitions Currency Difference swap derivatives R million 2007 2008 impact in UK Total shareholders equity 8 582 8 788 1 031 (825) Non-current liabilities 36 351 43 674 355 5 160 1 808 Long t
Slide 31: Group debt
Group debt Net debt at 31 March 2008 Fixed versus floating interest rate at 31 March 2008, % (Assumes Ampath proceeds) Facilities Utilised UK Debt (£m) 2 093 1 923 98 UK Debt (Rm) 33 655 30 783 SA Debt (Rm) 7 904 6 051 Net debt (Rm) 41 559 36 834 Cost of debt (%) 30 Sep 31 March 2007 2008 2 UK Debt
Slide 32: South African debt position
South African debt position • Proceeds from the sale of Ampath in 2008 SA debt at 31 March 2008* will substantially reduce debt Debt Cost % • Net debt at March 2008 impacted by late Rm debtors payments due to Easter and new billing mechanisms Convertible bond1 1 476 6,0 – Net debt at end of April wa
Slide 33: UK debt position
UK debt position £m 30 Sep 31 March Cost • UK debt financing in place for next 2007 2008 % 5½ years Propco 1 644 1 640 6,3 – Property debt repayable in quarterly capital installments, Opco 214 232 7,7 increasing annually, with a final bullet payment of £1,528m on Nuffield 93 6,9 10 October 2013 Othe
Slide 34: Cash flow generation impacted by Easter
Cash flow generation impacted by Easter Group cash generated from operations Net working capital for the group R million 30 Sep 31 March 2,186 R million 2007 2008 1,967 Inventory 600 668 Accounts receivable 2 875 3 774 1,579 1,522 Accounts payable (2 570) (3 094) Taxation (410) (477) 495 871 Mar-07
Slide 35: Growth in capital distributions
Growth in capital distributions • 8% increase in the interim reduction of Distribution per share capital of 14 cents per share Cents per share • Distribution cover of 1,8 times • Capital distributions determined after having regard for 18 – Degearing benefits – SA Leverage ratios – Investment opport
Slide 36: Guidance
Guidance South Africa United Kingdom Guidance 36
Slide 37: South African guidance
South African guidance Original guidance Updated guidance cRevenue Estimated SA revenue growth of between 12% and 14% Estimated SA revenue growth of between 15% and 16% growth (including new investments) dOperating Expect margins to reduce by approximately 100 basis points EBITDA expectations remain
Slide 38: United Kingdom guidance
United Kingdom guidance Original guidance Updated guidance cRevenue Estimated UK revenue growth of between 6% and 8% Estimated UK revenue growth of between 6% and 8% growth (before Nuffield transaction) (before Nuffield transaction) dOperating Operational efficiencies on track subject to one-off cha
Slide 39: Helping care for the health of humankind
Helping care for the health of humankind