Netcare Limited UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2012

Transcription

1 Netcare Limited UNAUDITED GROUP RESULTS FOR THE SIX MONTHS ENDED 31 MARCH

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

3 Group overview 3

4 Group overview South Africa (SA) Ongoing efficiencies have enhanced performance Dedicated focus on quality care yielded improved outcomes across all divisions NHI: all hospitals completed DOH* core standards and Primary Care well positioned Innovative integrated health model in Lesotho PPP fully operational United Kingdom (UK) Good performance in challenging economic environment Now the largest independent hospital provider to NHS Choose and Book Focus on core business and driving efficiencies i i Continued focus on Oct 2013 maturity of non-recourse PropCo debt * Department of Health CARE DIGNITY TRUTH PARTICIPATION PASSION 4

5 Group financial overview Revenue R12 654m 11.1% EBITDA R2 477m 9.3% Profit before taxation R870m 15.5% Adjusted HEPS 51.9 cps 16.1% CARE DIGNITY TRUTH PARTICIPATION PASSION 5

6 South Africa 6

7 A comprehensive network of healthcare services 2012 EBITDA margin² Hospitals 51 PPP hospitals¹ 5 Primary health facilities % 17.2% 18.7% 19.6% Dialysis units 56 Emergency vehicles 182 Pharmacies 85 Registered beds Employees¹ H H H H Includes SA and Lesotho 2. Before intergroup rental charge CARE DIGNITY TRUTH PARTICIPATION PASSION 7

8 South Africa Rm % Revenue EBITDA¹ Operating profit¹ EBITDA margin (%) Operating profit margin (%) Weighted average revenue growth across all service lines 13.0% in EBITDA and 90 bps in EBITDA margin due to continuing operating leverage Winner of healthcare sector FM s Top Empowerment Companies 2012 for 4th consecutive year² 1. Before capital charges 2. Source: Financial Mail, April CARE DIGNITY TRUTH PARTICIPATION PASSION 8

9 SA Hospitals and Emergency services Rm % Netcare Hospital division has the Revenue highest complexity network 91 beds added in H EBITDA¹ % in patient days 5.6% gross revenue per Operating profit¹ patient day 45%-50% of revenue now ARM² EBITDA margin (%) Operating profit margin (%) EBITDA margin expansion due to continuing operating leverage Note: EBITDA and operating profit are reflected before rental charges from Netcare property companies. 41 hospital properties, which have been independently valued at R12.4bn, are owned by designated property companies Margins diluted by: 48 retail pharmacies 56 renal centres (621 dialysis stations)³ Netcare 911 Waterfall rental (OpCo only) 1. Before capital charges 2. Alternative Reimbursement Methodology (DRG/capitation/per p diems/fixed fees) 3. 50% ownership of National Renal Care CARE DIGNITY TRUTH PARTICIPATION PASSION 9

10 Primary Care Rm % Revenue EBITDA* Operating profit* EBITDA margin (%) Operating profit margin (%) >1.5 million patient visits > managed care lives > scripts, 9.5% EBITDA growth and margin improvement due to: continuing efficiencies better risk profile * Before capital charges CARE DIGNITY TRUTH PARTICIPATION PASSION 10

11 Primary Care: continued improvement EBITDA* (Rm) 45 Medicross and Prime Cure comprise the largest private national network of GP group practices with 557 doctors and dentists Primary care increasingly more important in the delivery of sustainable and affordable healthcare -20 (16) H H H H Prime Cure well positioned as medical scheme contribution tax credits which could stimulate low income membership * Before capital charges CARE DIGNITY TRUTH PARTICIPATION PASSION 11

12 Significant improvement in quality KPIs October 2011 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 Associated Urinary Tract Infections (CAUTI) 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 CARE DIGNITY TRUTH PARTICIPATION PASSION 12

13 Significant improvement in quality KPIs Enhanced performance over 6 months March 2012 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 Associated Urinary Tract Infections (CAUTI) 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 CARE DIGNITY TRUTH PARTICIPATION PASSION 13

14 Health reform NHI pilots a significant move forward White paper imminent In preparation for NHI, all hospitals completed National DOH¹ core standards assessment Inflation² Netcare s diversified health services well poised for partnership on NHI delivery Competition Commission may probe private healthcare; final decision pending Hospital price inflation well contained Petrol Water Electricity Medical Hospital insurance Department of Health 2. Source: Stats SA CARE DIGNITY TRUTH PARTICIPATION PASSION 14

15 Focus areas over the next 18 months Concerted focus on shared services including SAP rollout completion in mid 2013 Procurement efficiencies through standardisation of product portfolio Integrating 85 Hospital and Medicross pharmacy operations into a national offering Brownfield expansion projects: H2 2012: 68 beds 2013: 117 beds Enhancing capacity utilisation in hospitals and expanding oncology offering Driving enhanced patient service levels and quality care: the Netcare Way Implementation of energy saving initiatives from the last quarter of 2012 CARE DIGNITY TRUTH PARTICIPATION PASSION 15

16 United Kingdom 16

17 Business overview Macro economic environment remains very challenging Continued recovery in Self-pay and strong NHS demand Decline in private medical insurance (PMI) beginning to slow EBITDA margin impacted by payor mix Strong working capital management and record cash of 123m Senior management team further strengthened CARE DIGNITY TRUTH PARTICIPATION PASSION 17

18 UK income statement m % Revenue EBITDA before items below (1.7) Profit on disposal of property 4.4 Other non-recurring items (4.3) (4.1) Reported EBITDA (6.1) EBITDA margin (%) Reported EBITDA margin (%) % in inpatient and day case admissions EBITDA impacted by increased mix of NHS vs. private patients EBITDA margin a blend of: Owned hospitals, 22.3% margin Leased and managed hospitals (acquired for nominal cash outlay), 17.8% margin Care and Transform CARE DIGNITY TRUTH PARTICIPATION PASSION 18

19 UK income statement: H1 segmental analysis m OpCo PropCo Consolidation journals WholeCo Revenue (66.7) EBITDAR (66.7) 98.9 Rentals - External (10.2) (10.2) - Internal (66.7) 66.7 EBITDA Depreciation and amortisation (21.7) (13.3) (35.0) Operating profit Net interest paid (7.9) (55.0) (62.9) Swap fair value adjustments (0.3) (7.0) (7.3) Loss before taxation (7.7) 7) (8.8) 8) (16.5) Taxation 14.2 Loss after taxation (2.3) CARE DIGNITY TRUTH PARTICIPATION PASSION 19

20 Funder mix continues to be impacted by economy Caseload* 18.0% in NHS cases NHS represents 27.3% of overall caseload (2011: 23.7%) Largest independent provider under Choose and Book 7.8% in Self-pay cases Self-pay continues to recover off a low base driven by NHS waiting lists 4.8% in PMI cases H H H H Insured Self-pay NHS * Excludes Transform and Abbey CARE DIGNITY TRUTH PARTICIPATION PASSION 20

21 UK health reform Patient Choice introduced in 2007 now entrenched As a result, private sector playing an increasing role in the delivery of public health Fiscal constraints in UK impacting on NHS delivery, creating opportunity for independent sector NHS 20bn productivity improvement challenge remains Health & Social Care Act passed in March 2012 Structural reorganisation under way within NHS Competition Commission to investigate healthcare; spans providers and funders CARE DIGNITY TRUTH PARTICIPATION PASSION 21

22 Financial review 22

23 Factors influencing results Exchange rate Average exchange rate of R12.42 (2011: R11.02) Closing rate of R12.25 (March 2011: R10.85; September 2011: R12.54) Interest rate swaps Ineffective portion of UK interest rate swaps: non-cash flow charge of R100m ( 8.1 m) (2011: R60m ( 5.4m)) Prior year UK property sale Sale of BMI Duchy Hospital (Harrogate) in January 2011, resulting in a R47m ( 4.4m) capital profit Taxation STC charge of R47m in SA; no STC in 2011 Reduction in UK statutory tax rate of 1% (2011: 1%) Benefit of non-cash deferred tax release of R163m ( 13.6m) (2011: R155m ( 14.0m)) CARE DIGNITY TRUTH PARTICIPATION PASSION 23

24 Summarised Group income statement Rm % Growth in both geographies Revenue EBITDA Operating profit Net financial expenses (948) (973) (2.6) Attributable t bl earnings of associates Profit before taxation Taxation (54) (164) (203.7) Profit for the period % SA Lower UK results softened by currency impact 2011 R47m profit on sale of UK property 44.5% SA 2.1m UK cash interest Swap ineffectiveness of R100m (2011: R60m) STC of R47m UK tax rate reduction of R163m (2011: R155m) CARE DIGNITY TRUTH PARTICIPATION PASSION 24

25 Constant currency yperformance Revenue Operating profit Net interest expense SA UK Exchange rate CARE DIGNITY TRUTH PARTICIPATION PASSION 25

26 Headline earnings per share Headline earnings per share (cents) Cents per share Headline earnings per share % Adjusted* headline earnings per share SA UK (1.6) (2.9) (81.3) H H H * Adjusted to exclude, inter alia, ineffective portion of interest rate swaps, fair value adjustments and UK tax rate change CARE DIGNITY TRUTH PARTICIPATION PASSION 26

27 Summarised statement of financial position Rm 31 Sep Forex effect Movement Assets PPE*, goodwill and intangible assets (808) (94) Other non-current assets (99) 428 Current assets (83) 298 Total assets (990) 632 Equity and liabilities Total shareholders equity (276) 485 Borrowings (553) 635 Other liabilities (161) (488) Total equity and liabilities (990) 632 Acquisition of economic interest in UK OpCo debt Deferred tax liability R4 871m (Sep 2011: R5 178m) Swap liability R5 309m (Sep 2011: R5 319m) * Property, plant and equipment CARE DIGNITY TRUTH PARTICIPATION PASSION 27

28 Movement in Group PPE* and intangible assets Rm (659) (12) (808) Sep 2011 Additions Depreciation Disposals Exchange rate Mar 2012 and amortisation and other impact * Property, plant and equipment CARE DIGNITY TRUTH PARTICIPATION PASSION 28

29 Acquisition of economic interest in UK OpCo debt Key figures m Rm Face value Cash outlay Discount on purchase of interest H H2 (estimate) * Pre-taxation earnings impact Total OpCo gross debt 230.5m 29.7% discount to face value Economic benefit to Netcare to be recognised in financial income over remaining OpCo debt term ( ) Interest income is also earned * Based on average exchange rate applicable to H CARE DIGNITY TRUTH PARTICIPATION PASSION 29

30 Group borrowings at ch 2012 Gross borrowings Net cash Net borrowings Facility utilisation UK ( m) (123.1) UK (Rm) (1 508) SA (Rm) (94) Group (Rm) (1 602) UK ( m) Cost of debt (%) UK SA (Rm) SA Group Utilised Cash Available CARE DIGNITY TRUTH PARTICIPATION PASSION 30

31 SA gross debt Rm Sep DMTN Preference shares Convertible bond Long-term bank debt Gross debt Applied to fund: SA operating activities Economic interest in UK OpCo debt 582 R1bn 3-year amortising note raised January 2012 Maintained GCR rating (Jan 2012) - A Long-term - A1 Short-term R176m improvement despite increased outlay of R250m in tax, dividends and capex Interest cover improved to 11.8x (Sep 2011: 6.7x) CARE DIGNITY TRUTH PARTICIPATION PASSION 31

32 UK gross debt m Sep OpCo All bank covenants satisfied Transform PropCo PropCo Accrued interest Amortised finance charges (15.8) (12.1) (8.5) All UK debt is non-recourse to SA operations The 4 categories of debt are ring-fenced from each other There is no cross-default across the debt categories 19.5m of debt repaid during H1 Finance leases and other Gross debt CARE DIGNITY TRUTH PARTICIPATION PASSION 32

33 UK debt m PropCo 1 PropCo 2 OpCo Transform Debt Cash (0.4) (3.2) (119.1) (0.4) Net debt Swap liability %d debt at tfixed rates 100% 100% 65% 84% Fixed interest rate 6.3% 7.3% 7.1% 7.6% Interest paid H Debt term Oct 2013 Jan Swap term Reduction in OpCo net tdebt of 46.5m during last 12 months October 2013 debt maturity remains an active work stream Working closely with advisors to fashion a solution Complex debt structure with many parties involved Swaps have seniority (current market value estimated at c 500m*) * Depicts economic value before IFRS adjustment for counterparty valuation adjustment CARE DIGNITY TRUTH PARTICIPATION PASSION 33

34 Working capital Movement SA (Rm) Inventories (60) Trade and other receivables (113) Hospital debtors 25.5 days (Mar 2011: 25.8 days) excluding COID* Marginal timing impact of period close falling over weekend Trade and other payables (1 777) (1 850) 73 Taxation payable (182) (120) (62) R47m STC paid Net working capital (162) UK ( m) Net working capital Strong improvement sustained from September 2011 * COID: Compensation for Occupational Injuries and Diseases CARE DIGNITY TRUTH PARTICIPATION PASSION 34

35 Dividends Distributions determined after having regard for: Enhanced earnings HPFL BEE shareholder requirements SA credit/financial markets New dividend withholding tax of 15% SA leverage ratios De-gearing benefits Working towards sustainable dividend id d cover of x H1 H2 CARE DIGNITY TRUTH PARTICIPATION PASSION 35

36 Guidance 36

37 Guidance 2012 South Africa Estimated revenue growth upper single digit Continued focus on efficiencies and cost reductions Capex ±R1bn United Kingdom Challenging trading conditions expected to continue Continued softness in PMI market Capex < 50m CARE DIGNITY TRUTH PARTICIPATION PASSION 37

38 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 sector 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. CARE DIGNITY TRUTH PARTICIPATION PASSION 38