NETCARE LIMITED AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2016 CARE DIGNITY TRUTH PARTICIPATION PASSION

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Brittany Townsend
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1 NETCARE LIMITED AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2016

2 PRESENTATION OUTLINE Group Overview South Africa United Kingdom Financial Review Guidance

3 GROUP OVERVIEW

4 4 Group A comprehensive network of healthcare services Hospitals Hospital beds Primary healthcare centres¹ Retail pharmacies Renal dialysis facilities Netcare 911 sites Netcare training colleges Employees 1. Includes primary care clinics, day clinics and sub-acute facilities

5 5 Group Overview South Africa (SA) Good financial performance in line with guidance Integration of 584 new beds added in FY 2015 Competition Authority approval of retail pharmacy outsourcing to Clicks¹ Acquisition² of Akeso Clinics, a national network of 12 mental health facilities United Kingdom (UK) Solid trading performance Independent hospitals increasingly an integrated part of UK public health delivery Strong growth in NHS GP referrals Rent transaction heads of terms agreed with PropCo 1. Includes 37 Medicross pharmacies and 45 hospital retail pharmacy front shops 2. Subject to regulatory approvals

6 6 Group Financial overview 50% Revenue 50% 75% EBITDA 25% 94% Adjusted HEPS 6% South Africa United Kingdom Revenue R37 796m 12.1% EBITDA R5 539m 11.2% Adjusted HEPS cents 5.6% Final dividend 57.0 cents 5.6% Total dividend 95.0 cents 3.3%

7 SOUTH AFRICA

8 8 SA Healthcare network Hospitals Public Private Partnership hospitals Beds¹ Day clinics PHC² and sub-acutes Renal dialysis stations Netcare 911 sites Nursing and paramedic students 1. SA = ; Lesotho = PHC: Primary Healthcare Centres and travel clinics

9 9 SA Financials Rm 30 Sep Sep 2016 % Revenue EBITDA Operating profit EBITDA margin (%) Operating profit margin (%) Strong revenue performance driven by volume growth Margin pressure: + Cost inflation running ahead of price inflation + Higher growth in medical cases

10 SA Hospital and Emergency Services business update 4.7% patient days; + 2.8% H1 2016 + 6.6% H2 2016 Full week occupancy of 67.2% + 64.4% H1 2016 + 70.

10 10 SA Hospital and Emergency Services business update 4.7% patient days; + 2.8% H % H Full week occupancy of 67.2% % H % H new hospital beds including acquired umhlanga Eye Institute (21 beds) 164 specialists with practising privileges 1.6% shift in patient mix + Surgical 60.6% + Medical 39.4% 45 hospital retail pharmacy front shops to be outsourced to Clicks 1 February 2017

11 11 SA Hospital and Emergency Services Rm 30 Sep Sep 2016 % Revenue EBITDA Operating profit EBITDA margin (%) Operating profit margin (%) Note: EBITDA and operating profit are reflected before rental charges from Netcare property companies (eliminate on consolidation) + 2.4% patient days excluding Netcare Polokwane and Netcare Pinehaven + 5.2% revenue per patient day Negatively impacted by higher growth in medical cases + H margin 22.6% + depreciation arising from greenfield hospitals and brownfield beds added in 2015

Afrika s Orange Index 1 st place in private

across 33 industries Internal survey Patient

12 12 SA Patient satisfaction and customer service External survey Netcare awarded Ask Afrika s Orange Index 1 st place in private hospital category and 6 th place overall across 33 industries Internal survey Patient experience: How many patients would recommend a Netcare hospital?¹ (%) Never or sometimes Usually Always surveys completed FY 2016

13 13 SA Netcare Christiaan Barnard Memorial Hospital Phase 1: 2016 Phase 2: Phase 3: Relocating to new site in December registered acute beds + 11 theatres and 2 cardiac catheterisation labs + A&E unit and first emergency helistop in Cape Town + Hybrid lease model Netcare to rent shell but responsible for fit-out + Medicross family medical and dental centre + Day clinic, 20 beds + Sub-acute facility, 36 beds + National Renal Care + Radiation and chemotherapy units + Conversion of 8 th floor parking and other open areas to provide an additional 96 acute beds Largest medical precinct in South Africa encompassing primary, secondary and tertiary facilities

14 14 SA New business pipeline HOSPITALS ONCOLOGY Netcare Akasia 9 beds + Netcare Kingsway 4 beds + Netcare Kuilsriver 22 beds + Netcare Margate 4 beds + Netcare Milpark 14 beds¹ + Netcare St Augustine s 10 beds Acquisition + Akeso Clinics² 10 mental health facilities 698 beds 2 greenfield facilities 175 beds + Gamma Knife - Netcare Milpark + Radiotherapy Netcare CBMH Netcare Montana Netcare Pinehaven Netcare Polokwane + Chemotherapy Netcare CBMH Netcare Milpark Netcare Montana Netcare Pinehaven 1. Transferring 110 beds and 5 theatres from Netcare Rand Hospital to Netcare Milpark hospital with 100 of these beds opening in Subject to regulatory approvals

15 15 SA Primary Care Rm 30 Sep Sep 2016 % Revenue EBITDA Operating profit EBITDA margin (%) Operating profit margin (%) Revenue impacted by fall in Prime Cure revenue as a result of strategy to downscale managed care division Higher margin due to termination of low margin contracts Sub-acute facilities acquired: + 16 beds in Pietermaritzburg + 20 beds in Amanzimtoti

16 SA Primary Care business update 37 retail pharmacies to be outsourced to Clicks as of 1 December 2016 Focus on expanding national network of day clinics and sub-acute

16 16 SA Primary Care business update 37 retail pharmacies to be outsourced to Clicks as of 1 December 2016 Focus on expanding national network of day clinics and sub-acute facilities Day clinics: + Kimberley¹ + Upington + Richards Bay + Cape Town Sub-acute facilities: + Hillcrest + Cape Town + Richards Bay 1. Commenced operations mid October 2016

17 17 SA Regulatory update National Health Insurance (NHI) + Draft NHI White Paper published in December Davis Tax Committee called for submissions on funding of NHI in October Market awaits final White Paper Private Healthcare Market Inquiry (HMI) + Netcare made comprehensive submissions in 2014, 2015 and HMI yet to publish any position papers but a series of documents are expected during November and December HMI intends publishing revised timetable by 1 December 2016

18 UNITED KINGDOM

19 19 UK Hospital network Flagship hospital Large hospital 59 Hospitals¹ 196 Theatres London area Beds Employees hospitals, 3 clinics

20 Self-pay PMI 20 UK PMI and Self-pay PMI funder loss ratios² 1.8%¹ in PMI membership in 2015 but payouts to hospital providers remain in decline Insurance Premium Tax + Nov 2015: 9.5% + Nov 2016: 10.0% 80% 75% Increase in Self-pay elective procedures driven by growing NHS waiting lists Growth supported by packaged pricing and marketing initiatives 70% 65% Sector-wide shift towards day treatment and outpatient activity 60% Data for two large UK-based funders 1. Source: LaingBuisson, 4th edition, Source: Health Cover UK Market Report, LaingBuisson and published accounts

21 21 UK NHS Department of Health capital expenditure per financial year ( m)¹ (5.3%) CAGR NHS has seen significant funding constraints with insufficient investment in NHS estate Increased waiting lists and lower consumer confidence benefit private providers NHS admissions in independent sector hospitals² % CAGR bn forecast NHS funding gap by 2021 if no efficiency savings are achieved 1. Source: NHS England Five Year Forward View, the Health Foundation, Department of Health annual accounts 2. Source: Hospital Episode Statistics (NHS Digital)

22 22 UK NHS GP referrals to independent sector providers (rolling quarter) (>1 000 referrals) Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Ramsay BMI Spire Care Circle Nuffield Source: NHS England

23 23 UK Business update 3.2% overall activity 1.1% revenue 3.4% PMI caseload¹ 2.8% Self-pay caseload¹ Caseload¹ and EBITDA margin (%) 7.2% 7.1% 6.6% NHS caseload¹ 9.5% e-referral 3.7% outpatient activity Resilient margin performance notwithstanding payor mix 5.9% PMI Self-pay NHS e-referral NHS spot EBITDA margin² 1. Inpatient and day caseload 2. Excluding restructure costs, fair value gains and reversal of impairment on investment

24 24 UK BMI Healthcare (OpCo) m 30 Sep Sep 2016 % Revenue EBITDA (before items below) (0.3) Restructure costs (11.9) Fair value gain Reversal of impairment 2.0 EBITDA Operating profit EBITDA margin (%)¹ % inpatient and day caseload % is NHS funded caseload + GHG PropCo rent 148.5m (2015: 144.6m) + Other rent 12.2m (2015: 15.3m) + Shift in funder mix to NHS largely offset by efficiency benefits Reported EBITDA margin (%) Operating profit margin (%) Excluding restructure costs, fair value gains and reversal of impairment on investment

25 25 UK Capital investment New hybrid theatre and refurbishment at BMI The Alexandra Hospital New catheterisation lab and refurbishment at BMI The Park Hospital New endoscopy decontamination hubs in the north-west and south-east of England SPECT-CT at BMI The Clementine Churchill Hospital New 1.5T static MRI scanners at BMI Goring Hall Hospital, BMI The Beaumont Hospital and BMI Ridgeway Hospital

26 26 UK BMI Healthcare Quality Indicators 98.6% of patients are satisfied with the overall quality of care 99% of NHS patients would recommend BMI Healthcare to their family and friends Patient satisfaction with overall quality of care 97.2% 98.3% 98.6% BMI Shelburne and BMI Duchy hospitals are ranked number 1 & 2 Hospitals in the UK BMI is fully compliant with the Private Hospital Information Network (PHIN) data requirements All BMI hospitals fully compliant with CQC, HIS and HIW¹ CQC: Care Quality Commission; HIS: Healthcare Improvement Scotland; HIW: Healthcare Inspectorate Wales

27 FINANCIAL REVIEW

28 28 Group Financial overview Pleasing performance driven by new capacity added in 2015 Exceptional non-cash accounting charge on RPI¹ swaps Currency impact on Group asset base Strong balance sheet and comfortable gearing 1. RPI: Retail Price Index

29 29 Group Summarised statement of profit or loss Rm 30 Sep Sep 2016 % Revenue EBITDA Operating profit Net financial expenses (467) (433) Earnings of associates and JVs Normalised profit before taxation Normalised taxation (936) (966) Normalised profit for the year Exceptional items (1 858) Profit for the year GHG PropCo rent R3 124m (2015: R2 683m) + EBITDA margin 14.7% (2015: 14.8%) + Additional depreciation and finance charges from 2015 expansion programme + Effective tax rate 24.9% (2015: 27.7%) + Non-cash fair value RPI swap charge of R1 988m ( 107.9m) + Resultant tax credit of R130m ( 7.0m)

30 30 Group Constant currency performance Revenue (Rm) EBITDA (Rm) 5.5% % SA UK Exchange rate impact Average exchange rate of R21.04: 1 (2015: R18.55: 1) Closing exchange rate of R17.79: 1 (2015: R20.94: 1)

31 31 Group Headline earnings per share (HEPS) Rm 30 Sep Sep 2016 % Adjusted HEPS¹ (cents) HEPS (31.6) SA UK (6.3) (65.1) Adjusted HEPS¹ SA UK SA Group H1 H2 1. Adjusted to exclude Competition Commission costs, impairments, UK restructure costs, non-cash fair value adjustments on derivative financial instruments and changes in tax rates

32 32 Group Summarised statement of financial position Rm 30 Sep Sep 2016 Forex effect Other movement Assets PPE¹, goodwill and intangible assets (1 354) Other non-current assets (178) (100) Current assets (678) (225) Group capex R2 822m (2015: R2 653m) + SA: R2 054m (2015: R1 895m) + UK: R768m (2015: R758m) Total assets (2 210) Equity and liabilities Total shareholders equity (587) (685) Borrowings (528) (216) Other liabilities (1 095) Group net debt to EBITDA leverage 1.0 times (2015: 1.2 times) + Stable Group interest cover of 11.1 times (2015: 11.2 times) Total equity and liabilities (2 210) PPE: Property, Plant and Equipment

33 33 Group SA debt Rm 30 Sep Sep 2016 Gross debt Cash (1 345) (948) Facility utilisation (Rm) Net debt Net debt to EBITDA (times) Cost of debt (%) Net interest paid Interest cover (times) Cash outlay of R4 391m (2015: R4 432m) for capex, dividends and tax + Comfortable leverage ratio Utilised Cash Available + Capacity of DMTN programme increased to R7.5bn on 1 April % of debt at fixed interest rates

34 34 Group UK debt: BMI Healthcare m 30 Sep Sep 2016 Gross debt Facility utilisation ( m) 57.9 Cash (54.0) (57.9) Net debt Net debt to EBITDA (times)¹ Cost of debt² Net interest paid Debt term Utilised Cash Available + Repaid 23.1m maturing debt tranche in October Revolving credit facility maturity extended to March Comfortable gearing + Fully compliant with debt covenants 1. Excluding restructure costs and reversal of impairment on investment 2. Secured bank debt

35 35 Group UK rent transaction BMI has agreed heads of terms with its major external landlord for a potential rent transaction BMI in process of refinancing existing debt facilities, including funding for the rent transaction Rent transaction offers concrete value to BMI

36 GUIDANCE

37 Guidance SA outlook Resilient demand for private healthcare despite low growth in economy and formal employment Netcare participation in sizable medical scheme efficiency options effective 2017

37 37 Guidance SA outlook Resilient demand for private healthcare despite low growth in economy and formal employment Netcare participation in sizable medical scheme efficiency options effective 2017 will result in margin pressure Capital expenditure ±R1.7bn: + 49 new beds + Netcare CBMH and Netcare Milpark expansion + Oncology, day clinics and sub-acutes Acquisition¹ of Akeso Clinics, a national network of 12 mental health facilities 1. Subject to regulatory approvals

38 38 Guidance UK outlook Further opportunities for NHS growth Continued growth in Self-pay caseload expected Ongoing claims management and additional Insurance Premium Tax continue to weigh on PMI outlook Capital expenditure ± 44m

39 THANK YOU November 2016

40 APPENDICES

41 41 Appendix UK income statement segmental analysis m BMI Healthcare GHG PropCo 2¹ United Kingdom Revenue EBITDA (before GHG PropCo rent and items below) GHG PropCo rent (148.5) (148.5) EBITDA (before items below) Fair value gain Reversal of impairment EBITDA Operating profit Net financial expenses (16.5) (16.5) Earnings of associates and JVs Normalised profit before taxation Normalised taxation Normalised profit after taxation RPI swap fair value adjustment (net of tax) (100.9) (100.9) Profit/(loss) after taxation (85.6) 1.7 (83.9) 1. Comprising 6 hospital properties

42 42 Appendix Group borrowings at 30 September 2016 Gross borrowings Net borrowings Rm 30 Sep Sep Sep Sep 2016 SA BMI Healthcare Group Net debt to EBITDA (times) m BMI Healthcare Closing exchange rate

NETCARE LIMITED UNAUDITED INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2016 CARE DIGNITY TRUTH PARTICIPATION PASSION

NETCARE LIMITED UNAUDITED INTERIM GROUP RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2016 Group Overview South Africa United Kingdom Financial Review Guidance GROUP OVERVIEW 4 Group A comprehensive network