Netcare Limited AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2011

Transcription

1 Netcare Limited AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2011

2 Agenda RICHARD FRIEDLAND GROUP CEO Group overview South Africa United Kingdom KEITH GIBSON GROUP CFO Financial review Guidance

3 Group overview

4 Group overview South Africa (SA) Solid performance across all divisions and excellent working capital improvements Continued contribution to job creation, training and skills development Continued investment in infrastructure development Guaranteed minimum wage increases across the board United Kingdom (UK) Tough trading conditions continue Green shoots in self-pay but no recovery in PMI Excellent working capital and cash flow Debt covenants met and refinancing of PropCo receiving attention 4

5 Group financial overview Good SA results but weaker performance in the UK 3.3% revenue 0.2% operating profit 12.3% pre-tax profit Cash conversion of 113.4% (2010: 101.4%) Net debt 10.9% in SA 4.8% in UK R1 492m total reduction 21.2% basic HEPS 14.0% distributions per share (DPS) 5

6 Geographic contribution Revenue (%) EBITDA (%)* Net interest paid (%) HEPS (%) UK SA 6

7 South Africa

8 Business overview Strong performance across EBITDA margin expansion to 19.4% all divisions (2010: 17.7%) Net debt to equity ratio of 52.7% (2010: 68.0%) Cash conversion of 116.0% (2010: 109.6%) 126-bed Waterfall City in Midrand 425-bed Queen Mamohato Memorial Hospital Lesotho PPP 4.9% cumulative bed capacity: 447 beds ( ) - Lesotho PPP 447 beds Hospital debtors days 26.8 days (2010: days) 8

9 South Africa: a comprehensive network of healthcare services Sites Hospitals PPP hospitals¹ 4 5 Primary health facilities Dialysis units Emergency bases Pharmacies Registered beds Employees¹ Patient visits Includes SA and Lesotho 9

10 South Africa Rm 30 Sep Sep 2011 % Revenue EBITDA* Operating profit* EBITDA margin (%) Operating profit margin (%) Cash conversion ratio (%) Revenue growth tempered by reduction in Primary Care revenue Strong operating leverage with focus on quality of earnings and operational efficiencies Record cash conversion * Before capital charges 10

11 Netcare s community reach Employment Inpatient Outpatient Surgical Births growth through economic downturn hospital admissions and primary healthcare visits operations 2 514* > >3.8 million > > Education Closing the wage gap Community sponsorships Partnering in extending free access to healthcare >8 300 people in 2011 (> since inception) 15.4% in 2011: highest minimum wages in hospital sector >R >8 700 patients in 2011 (> since inception) * September 2007 to October 2011, includes Lesotho 11

12 Burden of diseases and new technology will continue driving future healthcare expenditure Increase in medical scheme spend on hospitalisation (pbpm), * 51.2% Real price inflation contributed 4.9% of total increase in private hospital expenditure 4.9% Increased utilisation contributed 44.0% of total increase in private hospital expenditure 44.0% Price regulation will not, in itself, address the challenge of increased health needs CPIX Real price Utilisation * Applying Netcare price increases as a proxy for the private hospital sector Source: Netcare submission: Discussion document: The determination of health prices in the private sector 12

13 Quality leadership: a Group-wide focus and strategy to drive quality care National Department of Health core standards: all 55 hospitals benchmarked by February 2012 in preparation for NHI First accredited Level 1 Trauma Centres in SA (Netcare Milpark and Netcare Union hospitals) Benchmarking against USA hospitals Overall hospital rating: Overall, how satisfied were you with the service you received at our hospital? Netcare¹ 7% 34% 59% US² 8% 24% 68% Never or sometimes Usually Always 1. Netcare data over the period (54 hospitals): May August US data over the period (over hospitals): January December

14 Learning from best practice internationally and driving clinical quality improvement Improvement outcomes achieved in FY2011 Better than expected On target Less than expected Prevention of Healthcare Associated Infections Ventilator Associated Pneumonia (VAP) Surgical Site Infection (SSI) Central Line Associated Blood Stream Infection (CLABSI) Catheter Related Blood Stream Infections (CRBSI) Antibiotic stewardship Optimising care in Acute Myocardial Infarction (AMI) Prevention of Deep Vein Thrombosis (DVT)* Benchmarking outcomes in neonatal intensive care to the Vermont Oxford Network Elevating cardiopulmonary resuscitation response Netcare 911: monitoring helicopter emergency service outcomes* Netcare 911: monitoring fixed wing emergency service outcomes* National Renal Care: international benchmarks of dialysis outcomes* * Unique to Netcare 14

15 SA Hospitals and Emergency services Rm 30 Sep Sep 2011 % Revenue EBITDA* Operating profit* EBITDA margin (%) Operating profit margin (%) % revenue per patient day 14.4% in 911 road activity 2.2% patient days 178 additional beds 1.4 million pharmacy scripts Strong operating leverage resulting in widening of EBITDA margin * Before capital charges 15

16 Examples of major SA capex projects 76% 100% 64% 52% 50% 24% 36% 48% 50% Netcare Montana Netcare St Anne's Netcare The Bay Netcare Mulbarton Netcare Kingsway 54 beds 63 beds 64 beds 57 beds 35 beds and thereafter 16

17 Netcare Waterfall City Hospital opened in July 2011 in Midrand 17

18 Primary Care: stabilised operations EBITDA (Rm) 65 EBITDA margin improvement from 2.1% to 5.1% pharmacies 568 doctors and dentists 88 medical centres (24) managed care lives (2010: ) 1.7 million pharmacy scripts 3.2 million primary healthcare visits

19 425-bed Queen Mamohato Memorial Hospital opened in October 2011 in Lesotho 19

20 United Kingdom

21 Business overview Trading conditions remain difficult Stephen Collier appointed CEO and management team being strengthened EBITDA margins impacted by funder mix and non-core business mix 4.2% inpatient and day caseload Outstanding working capital Record cash hbalance of 130.6m Net debt reduced by 89.8m and bank covenants met 21

22 GHG is an amalgamation of various businesses BMI facilities Owned hospitals Leased and managed hospitals Transform (cosmetic) 2 2 Care Fertility 4 4 Netcare UK (NHS treatment t t centres) 3 1 Registered beds Employees Patient episodes

23 UK income statement m 30 Sep Sep 2011 % Revenue EBITDA before items below (14.5) Profit on disposal of property Gain on bargain purchase IPO costs (2.5) - Reported EBITDA (9.5) EBITDA margin (%) Reported EBITDA margin (%) Decline in PMI caseload Strong NHS growth Abbey and Transform acquisitions Affected by: business mix and lower private volumes cessation of Netcare UK contracts with NHS VAT increase joint venture provisions stamp duty refund Improvement of EBITDA margin H2 vs H1 23

24 EBITDA margins impacted by lower margin OpCo acquisitions Owned hospitals Leased and managed Transform Care Netcare hospitals (cosmetic) Fertility UK PMI Self-pay NHS EBITDA 24.5% 10.8% 34% 3.4% 31.1% 1% 32.4% Heritage portfolio plus Magnolia* Acquired for nominal Acquired for no Largest independent acquisition cash outlay cash outlay fertility service provider in UK Leeds Commuter Walk-in Centre contract ends Nov 2011 * Hospitals purchased from Nuffield 24

25 Caseload and funder mix continues to be impacted by economy Caseload 23.0% in NHS cases NHS is slowing outsourcing as financial constraints bite Nicholson Challenge remains Self-pay recovering off a low base driven by NHS waiting lists s Unemployment led contraction in insured lives Trend likely to continue in Insured Self-pay NHS 25

26 Financial review

27 Factors influencing results Exchange rate Average rate of R11.09 (2010: R11.63); closing rate of R12.54 (2010: R10.93) Interest rate swaps Liability increased to 422.7m (2010: 374.2m) Ineffective portion was a credit of 2.8m (2010: charge of 8.7m) UK property sales Two properties sold: Duchy Hospital (Harrogate), Harbour Hospital (Poole) Capital profit of 15.0m realised UK tax rate Reductions in UK statutory tax rate of 2% (2010: 1%) Benefit of non-cash deferred tax release of 27.5m (2010: 13.7m) 27

28 Exchange rate spike at year end Minimal impact on earnings: Revenue 2.0% EBITDA 1.6% 11 Significant impact on financial position NAV R546m 10 Sep 09 Jan 10 May 10 Sep 10 Jan 11 May 11 Sep 11 28

29 Summarised Group income statement Rm 30 Sep Sep 2011 % Revenue EBITDA Depreciation and amortisation (1 157) (1 213) Operating profit (0.2) Net financial i expenses (1 978) (1 755) 11.3 Attributable earnings of associates Profit before taxation Taxation (294) (114) 61.2 Profit for the period Growth in both geographies in constant currencies Improvement in SA impacted by UK performance Lower debt base and swap ineffectiveness credit of R42m (2010: R103m charge) Benefit of UK tax rate reduction of R301m (2010: R157m) 29

30 Headline earnings and distributions per share HEPS (cents) DPS (cents) H1 H2 H1 H2 30

31 Summarised statement of financial position Rm 30 Sep Sep 2011 Forex effect Movement Assets PPE, goodwill and intangible assets (45) Other non-current assets Current assets Deferred tax asset of R2 165m Investments in associates of R289m Total assets Equity and liabilities Total shareholders equity Reduction in both SA and UK debt Borrowings (1 070) Other liabilities Deferred tax liability of R5 178m Swap liability of R5 319m Total equity and liabilities

32 Movement in Group property, plant & equipment and intangible assets Rm (1 213) (240) 2010 Additions Depreciation Disposals Exchange rate 2011 and amortisation and other impact 32

33 Group debt Geographic split of net debt at 30 Sep 2011 Net debt at 30 September Sep 30 Sep % 87% UK debt ( m) (4.8) UK debt (Rm) SA debt (Rm) (10.9) Net debt (Rm) % Cost of debt (%) UK debt SA UK SA debt Group debt

34 SA debt position at lowest level in five years Improved GCR rating in Jan 2011: A Long-term (Feb 2009 A-) A1 Short-term (Feb 2009 A1-) Convertible bond repaid in September 2011 replaced by R1bn DMTN debt raise in August Gross debt (Rm) Interest cover (times) 1. DMTN: Domestic medium-term notes 34

35 UK debt: ring-fenced and non-recourse to SA operations Secured banking facilities ( m) The 4 categories of UK debt are ring-fenced from each other 47.5 There is no cross-default across debt categories All UK debt is non-recourse to SA operations 20.2 PropCo 1 debt maturity (Oct 2013) OpCo Transform PropCo 1 PropCo 2 Various options under consideration 35

36 Working capital 30 Sep Sep 2011 Movement SA (Rm) Inventories (18) Trade and other receivables Trade and other payables (1 764) (2 250) 486 Taxation payable (250) (164) (86) Net working capital 92 (387) 479 UK ( m) Receivables at record lows in both geographies Result of continued focus on cash collection and alignment of payables and receivables profiles Net working capital

37 Cash conversion SA (Rm) UK ( m) 109.6% 116.0% 93.9% 9% 103.4% EBITDA Cash flow from operations 37

38 Guidance

39 Guidance 2012 South Africa (SA) Estimated revenue growth upper single digit Continued focus on efficiencies and cost reductions Capex: ±R1bn United Kingdom (UK) Tough trading conditions expected to continue Further decline in PMI forecast Capex: < 50m 39

40 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 d as 'forward-looking statements'. t t Forward-looking statements may be identified by words such as 'believe', 'anticipate', 'expect', 'plan', 'estimate', 'intend', 'project', 'target', 'predict' and 'hope'. By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future, involve known and unknown risks, uncertainties and other facts or factors which may cause the actual results, performance or achievements of the Group, or its industry to be materially different from any results, performance or achievement expressed or implied by such forward-looking statements. Forward-looking statements are not guarantees of future performance and are based on assumptions regarding the Group s present and future business strategies and the environments in which it operates now and in the future. No assurance can be given that forward-looking statements will prove to be correct and undue reliance should not be placed on such statements. Netcare does not undertake to update any forward-looking statements contained in this document and does not assume responsibility for any loss or damage whatsoever and howsoever arising i as a result of the reliance by any party thereon. 40

41 Thank you