Group Results and Cash Dividend Declaration Unaudited Group results - - PowerPoint PPT Presentation

www.lifehealthcare.co.za

Group Results and Cash Dividend Declaration

Unaudited Group results for the six month period ended 31 March 2015

2

Operational review André Meyer CEO

3

Highlights

Group

SA:

• 3.5% PPD growth
• 90 additional beds
• ±450 additional beds planned
• ver next 18 months
• EBITDA margins stable at 28%
• Continued improvement in clinical

quality metrics

• Good progress implementing energy

saving initiatives

International:

• India:

− Increase in shareholding to 46.25% − Strong revenue growth and continued improvement in EBITDA margins − Additional 78 active beds

• Poland:

− Acquisitions of Sport Klinika and KKA − Good revenue and EBITDA growth − Business integration on track

4

Highlights

Group

• Revenue

+14.1%

to R7 089m

• Normalised EBITDA

+10.8%

to R1 926m

• Normalised EPS from continued operations

excluding funding

+10.4%

to 88.9 cents

• Dividend

+7.9%

to 68 cps

5

SA: Growth

PPDs

800 850 900 950 1 000 1 050 1 100 2012 2013 2014 2015 PPDs (000)

H1 bed growth 154 80 142 90 FY bed growth 292 95 249 268 est 1.5% 2.7% 3.5%

6

SA: Growth

Acute bed growth 2015

Category H1 2015 H2 2015 Total 2015 Capacity expansion at existing facilities 76 84 160 New facilities

• 94

94 Acquisition 14

• 14

Total 90 178 268

• Life Entabeni
• Life Mt Edgecombe
• Life Peglerae
• Life Eugene Marais
• Life Roseacres
• Life Robinson
• Life Westville
• Life Kingsbury
• Life Peglerae
• Life Springs Parklands

Life Hilton Life Genesis

7

SA: Growth

Complementary growth 2015

Category H1 2015 H2 2015 Total 2015 Mental Health

• Acute Rehabilitation
• Renal stations

25 57 82 Oncology units 1 unit 1 unit

• Life Mercantile
• Life St James
• Life Carstenhof
• Life Brenthurst
• Life Midmed
• Life Knysna
• Life LCM
• Life Wilgeheuwel
• Life Gaborone
• Life Hilton
• Life Bayview
• Life Empangeni

Life Vincent Pallotti: Mental Health Life Vincent Pallotti: Oncology

8

SA: Growth

Group business pipeline

• Approved: received Health department licence approval. In the process of obtaining municipal approvals before commencing building
• Applications pending: awaiting approval from the Health departments for bed applications made

Category Total 2015 Forecast 2016 Approved beds* Applications pending Capacity expansion at existing acute facilities 160 174 495 314 New acute facilities 94

• 394

88 Acquisition 14

• Mental Health
• 90

222 259 Acute Rehabilitation

• 25

112 Total 268 264 1 136 773 Renal stations 82 32

• Oncology units

1 unit 1 unit

• Life Bayview
• Life St Mary’s
• Life Kingsbury
• Life Crompton
• Life Mt Edgecombe
• Life Midmed
• Life Vincent Pallotti
• Life Carstenhof

9

SA: Efficiency

Effective use of assets

69,0% 70,6% 70,7% 64% 66% 68% 70% 72% 2013 2014 2015 Group occupancy

Bed growth 95 249 90 - H1

ICU occupancy: 74.8% 16% 38% 30% 16% 2013: Bed occupancy split <60% 60-69% 70-79% 80%+ 12% 32% 44% 13% 2015: Bed occupancy split Beds 70%+

• ccupancy

46%

Beds 70%+

• ccupancy

57%

ICU occupancy: 75.3%

10

SA: Efficiency

Effective use of assets

* Complementary business includes Mental Health and Acute Rehabilitation in the occupancy calculation

68,9 70,1 70,3 70,2 74,9 74,8 69,0 70,6 70,7 60 64 68 72 76 2013 2014 2015 Occupancy split between Acute and Complementary * Acute occupancy Complementary occupancy Group occupancy

Bed growth 75 20 95 249

• 249

90

• 90

11

SA: Efficiency

H1 Normalised EBITDA margin

• Good management of costs in a difficult environment
• Pressure from the weakening Rand, salaries and overhead costs
• Continued focus on driving efficiencies offset increased costs

27,4% 28,0% 28,0% 20% 22% 24% 26% 28% 30% 2013 2014 2015

12

SA: Quality

Measuring clinical outcomes

Outcome 31 Mar 2015 31 Mar 2014 Standard Patient incident rate 2.72 2.99 Per 1 000 PPDs HAI (Healthcare Associated Infection) 0.33 0.49 Per 1 000 PPDs VAP (Ventilator Associated Pneumonias) 1.27 1.95 Per 1 000 VAP days SSI (Surgical Site Infections) 0.55 0.77 Per 1 000 theatre cases CLABSI (Central Line Associated Blood Stream Infections) 0.59 1.01 Per 1 000 central line days CAUTI (Catheter-related Urinary Tract Infections) 0.46 0.44 Per 1 000 catheter days FIM/FAM score 1.18 1.16 >0.9 MHQ14 efficiency (average gain/PPD) 2.48 2.36 >1.6 1 2 3 4 VAP SSI CLABSI CAUTI Patient incident rate 2013 2014 2015

13

SA: Sustainability

Competition Commission (CC) Healthcare Market Inquiry

• Made a detailed submission on the subject matter of the Inquiry
• Submitted a further response to the public submissions as requested by the Panel

focusing on the following key themes:

− Market power / medical scheme bargaining power − Profitability − Pricing & Price regulation − Hospital formularies − Quality − Regulations

• Next steps:

− The CC has requested further information − The scheduled public hearings have been delayed until the CC has reviewed all the data − CC due to publish a new timetable

14

SA: Sustainability

Environmental management system

• Environmental Certification:

− on track to obtain an ISO 14001:2004 environmental certification in 2016

• Load shedding has had limited operational impact as hospitals have necessary

back-up facilities

• Energy saving initiatives:

− Solar:

› Life Anncron Clinic: largest hospital solar project in Africa with over 1 700 solar panels. Generate 836 215MWh/annum of solar electricity with an estimated saving of R1million/annum. Considering expansion to 10 further hospitals

− Heat Pumps:

› Converted 33 acute hospitals and 9 Life Esidimeni sites - annual saving of 7.7GWh (approx R8 million). A further 12 sites have been identified for conversion in 2015

− Life Hilton Private Hospital: ›

designed according to our green design policy - target of being 20% more efficient

15

International: India

MHC

India

• Strong economic growth outlook
• Fast growing private healthcare market driven by:

− Growing middle class − Increasing disease burden − Limited public sector provision

• Fragmented and under-developed private hospital market represents an excellent growth
• pportunity

MHC Shareholding equalisation:

• In November completed the MHC shareholding equalisation
• Increased shareholding to 46.25% from 26% for R1.34bn
• Joint control with Max India
• Concluded through a 50% primary issue of new MHC shares and a 50% secondary

acquisition of MHC shares held by Max India.

H1 2015:

• Good revenue growth
• Consistent improvement in EBITDA (margin improved to 10.3% from 8.3% in March 2014)
• Transformation office is managing key operational improvement projects

16

International: India

MHC bed growth

Bed capacity Operational beds 31 Mar 2015 Operational beds 30 Sep 2014 Operational beds 31 Mar 2014 Phase 1 hospitals 1 123 1 101 1 079 1 066 Phase 2 hospitals Shalimar Bagh 288 235 185 158 Mohali 213 213 203 179 Bathinda 186 70 80 59 Dehradun 168 136 130 109 Total Phase 2 855 654 598 505 Combined total 1 978 1 755 1 677 1 571 Consistent bed growth

17

International: India

MHC occupancy

Bed capacity Operational beds 31 Mar 2015 Occupancy 31 Mar 2015 Operational beds 31 Mar 2014 Occupancy 31 Mar 2014 Phase 1 hospitals 1 123 1 101 76% 1 066 76% Phase 2 hospitals Shalimar Bagh 288 235 74% 158 77% Mohali 213 213 71% 179 71% Bathinda 186 70 57% 59 57% Dehradun 168 136 66% 109 69% Total Phase 2 855 654 69% 505 70% Combined total 1 978 1 755 73% 1 571 74% Consistent occupancies

18

International: Poland

Scanmed growth

Poland:

• Fastest growing economy in Europe
• Strong National Health system funding private sector delivery
• Fragmented private hospital market providing a consolidation opportunity
• Good long-term private sector growth

Strategy to build an integrated countrywide network of healthcare facilities

• Completed two acquisitions:

− Sport Klinika: › 46 bed orthopaedic clinic − Kardiologii Kliniki Allenort (KKA): › 6 in-patient cardiology centres with 83 beds

• Business benefiting from the fast oncology therapy regulations: 70% increase in oncology patients
• Currently reviewing further acquisition opportunities

19

International: Poland

Scanmed growth

Scanmed business:

• Outpatient services:

− Primary Healthcare: › 130 000 registered people › Profitable structure of registered PHC population groups with low medical loss ratio − Medical centres: › 29 centres in 15 locations › Facilities with treatment rooms, including » Rehabilitation, dentistry, psychiatry and diagnostic services

• Inpatient services:

› St. Raphael Hospital: 135 beds › Weiss Clinic: 22 beds › Gastromed: 8 beds › Sport Klinika: 46 beds › KKA: 83 beds and 6 in-patient cardiac facilities

20

International: Poland

Scanmed integration

Good integration progress made covering key business functions

Weiss Gastromed Sport Klinika KKA IT System Finance and Accounting Personnel and Payroll Organisation and Communication Occupational Health and Safety Sales and Marketing HR Epidemiology Sterilisation Drug Management Infrastructure Management Medical Procurement

21

Financial review Pieter van der Westhuizen CFO

22

Highlights

Normalised EBITDA

+10.8% to R1 926m

Normalised EPS from southern Africa continued operations

+9.8%

to 89.2 cents Headline earnings per share

• 2.9%

to 80.3 cents Dividend

+7.9%

to 68.0 cents Increase in investments in India and Poland

R1.9 billion

India and Poland improved EBITDA margins

23

Financial results

Group

31 Mar 2015 R’m 31 Mar 2014 R’m % Change Revenue 7 089 6 211 14.1 Southern Africa – continued 6 734 6 153 9.4 Southern Africa – discontinued

• 58

Poland 355

• Normalised EBITDA

1 926 1 738 10.8 Southern Africa – continued 1 884 1 728 9.0 Southern Africa – discontinued

• 10

Poland 42

• Normalised EBITDA margin

27.2% 28.0% Southern Africa – continued 28.0% 28.1% Southern Africa – discontinued

• 17.2%

Poland 11.8%

• Polish EBITDA margin 2014: 9.1%

24

Financial results

Group

31 Mar 2015 R’m 31 Mar 2014 R’m % Change Revenue 7 089 6 211 14.1 Normalised EBITDA 1 926 1 738 10.8 Normalised EBITDA margin 27.2% 28.0% Operating profit: 1 645 2 486 (33.8) Southern Africa – continued 1 628 1 492 9.1 Southern Africa – discontinued

• 9

Poland 18

• Transaction costs on international acquisitions

(11)

• Once-off

10 985

25

Financial results

Group

• JMH sold February 2014
• Max 46.25% (2014: 26%)

31 Mar 2015 R’m 31 Mar 2014 R’m % Change Revenue 7 089 6 211 14.1 Normalised EBITDA 1 926 1 738 10.8 Normalised EBITDA margin 27.2% 28.0% Operating profit 1 645 2 486 (33.8) Associates and joint ventures: 2 37 (94.6) JMH

• 41

MHC (1) (7) Other 3 3

26

Financial results

Group

31 Mar 2015 R’m 31 Mar 2014 R’m % Change Revenue 7 089 6 211 14.1 Normalised EBITDA 1 926 1 738 10.8 Normalised EBITDA margin 27.2% 28.0% Operating profit 1 645 2 486 (33.8) Associates and joint ventures 2 37 (94.6) Attributable earnings: 884 1 850 (52.2) Southern Africa – continued 946 878 7.7 Southern Africa – discontinued

• 48

Profit on disposals

• 955

International (3) (7) Transaction costs on international acquisitions (11)

• Currency translation differences

42 1 Funding costs for international acquisitions (90) (25)

27

Financial results

Group segmental review

• Matikwana Hospital: Revenue contributed in 2014 is R55m

31 Mar 2015 R’m 31 Mar 2014 R’m % Change Revenue 7 089 6 211 14.1 Southern Africa Hospital division 6 317 5 769 9.5 Healthcare services 417 441 (5.4) Other

• 1

International Hospitals 355

• Operating profit before amortisation, profit/loss
• n disposals, impairment of intangible assets,

transaction costs and surpluses on retirement benefits 1 703 1 558 9.3 Southern Africa Hospital division 1 542 1 408 9.5 Healthcare services 76 97 (21.6) Other 67 53 26.4 International Hospitals 18

28

Financial results

Southern Africa: segmental revenue

Hospital division:

• PPD growth:

+3.5%

• Revenue/ppd:

+6.2%

− Tariff impact: +6.3% − Case mix:

• 0.1%
• Complementary revenue growth: +16.0%

31 Mar 2015 R’m 31 Mar 2014 R’m % Change Revenue – Southern Africa 6 734 6 211 8.4 Southern Africa Hospital division 6 317 5 769 9.5 Healthcare services – continued 417 386 8.0 Healthcare services – discontinued

• 55

Other

• 1

29

Financial results

Southern Africa: segmental balance sheet

• 30% of book value now in international assets

31 Mar 2015 R’m 31 Mar 2014 R’m 30 Sep 2014 R’m Assets Southern Africa 9 640 8 657 9 160 International 4 201 823 1 905 Total 13 841 9 480 11 065 Net debt Southern Africa 5 489 2 229 2 620 International 342

• 464

Total 5 831 2 229 3 084

30

4 291 4 736 5 011 5 514 6 025 287 321 365 386 417 99 166 208 252 292 2011 2012 2013 2014 2015 Revenue* (R’m) Hospital HCS NLB 1 156 1 356 1 533 1 728 1 884 500 1 000 1 500 2 000 2011 2012 2013 2014 2015 Normalised EBITDA (R’m)

Five year review

Southern Africa: continued

• Consistent growth in revenue – Group benefits from faster growth in NLB
• Continued improvement in efficiencies assisted growth in normalised EBITDA
• Continued operational leverage assisting margin growth
• Efficiency programme enables the Group to stabilise margins in difficult environment

2 535 2 886 3 311 3 581 Full year numbers CAGR 13.0% CAGR 9.3%

* Hospital revenue includes other revenue

31

Financial results

Poland

51 93 98 20 40 60 80 100 Apr 14 to Sep 14 Oct 14 to Mar 15 (incl new acquisitions) Oct 14 to Mar 15 (incl new acquisitions, as if acquisition took place 1 Oct 14) Revenue PLN’m

1PLN = ZAR3.8

32

Financial results

Poland

4,6 11,0 13,6 9,1% 11,8% 13,8% 0% 5% 10% 15% 5 10 15 Apr 14 to Sep 14 Oct 14 to Mar 15 (incl new acquisitions) Oct 14 to Mar 15 (incl new acquisitions, as if acquisition took place 1 Oct 14) EBITDA PLN’m

1PLN = ZAR3.8

EBITDA margin %

33

Financial results

India: Max Healthcare – revenue growth

Financial year-end: March Total net revenue excludes revenue from the SBU 1 Rs. Crore = R1.8 million

Net revenue MHC 2015 Rs Crore MHC 2014 Rs Crore % Change Net revenue – Phase 1 hospitals 1 235 1 048 17.8 Net revenue – Phase 2 hospitals 449 307 46.3 Net revenue total 1 684 1 355 24.3

506 542 600 635 138 169 219 230 644 711 819 865 September 2013 March 2014 September 2014 March 2015 Phase 1 Phase 2 2014: 1 355 Rs Crore 2015: 1 684 Rs Crore

34

Financial results

India: Max Healthcare – EBITDA growth

Financial year-end: March EBITDA total – operations excludes a once-off 3 Rs. Crore negative impact 1 Rs. Crore = R1.8 million

EBITDA MHC 2015 Rs Crore MHC 2014 Rs Crore % Change EBITDA – Phase 1 hospitals 166 127 30.7 EBITDA – Phase 2 hospitals 7 (14) EBITDA total 173 113 53.1 EBITDA margin – Phase 1 hospitals 13.4 12.1 EBITDA margin – total hospitals 10.3 8.3

58 69 79 87 (9) (5) 9 (2) 49 64 88 85 September 2013 March 2014 September 2014 March 2015 Phase 1 Phase 2 2014: 113 Rs Crore 2015: 173 Rs Crore

35

Financial results

Group

31 Mar 2015 cents 31 Mar 2014 cents % Change EPS 80.2 174.8 (54.1) Profit/loss on disposal of property, plant and equipment and disposal of businesses 0.1 (92.1) HEPS 80.3 82.7 (2.9) Retirement funds (0.9)

• Transaction costs on international acquisitions

1.1

• Fair value gain on foreign exchange hedge contract

(0.3)

• Normalised EPS

80.2 82.7 (3.0) Discontinued operations

• (4.6)

Funding costs for international acquisitions 8.7 2.4 Normalised EPS from continued operations (excluding funding costs) 88.9 80.5 10.4

36

Financial results

Group

31 Mar 2015 cents 31 Mar 2014 cents % Change Normalised EPS 80.2 82.7 (3.0) Southern Africa – continued 89.2 81.2 9.9 Southern Africa – discontinued

• 4.6

Poland (0.2)

• Max

(0.1) (0.7) Funding costs for international acquisitions (8.7) (2.4)

37

Cash generated vs normalised EBITDA – Southern Africa

1 069 1 003 1 247 1 443 1 532 90% 73% 81% 83% 81% 0% 20% 40% 60% 80% 100% 400 800 1 200 1 600 2 000 2011 2012 2013 2014 2015 R’000m Cash generated from operations Cash generated as % of normalised EBITDA

2 562 3 042 3 422 3 516 Full year numbers

38

Condensed statement of financial position

Assets

31 Mar 2015 R’m 30 Sep 2014 R’m 31 Mar 2014 R’m Non-current assets 12 218 9 700 8 212 PPE 6 389 5 901 4 690 Intangibles 2 890 2 318 2 031 Other 2 939 1 481 1 491 Current assets (excl cash) 1 979 1 691 1 618 Cash 365 422 298 Total assets 14 562 11 813 10 128

39

Condensed statement of financial position

Equity and liabilities

31 Mar 2015 R’m 30 Sep 2014 R’m 31 Mar 2014 R’m Total shareholders’ equity 5 894 5 900 5 650 Non-current liabilities 4 387 2 909 2 547 Interest-bearing borrowings 3 810 2 344 2 036 Other non-current liabilities 577 565 511 Current liabilities 4 281 3 004 1 931 Total equity and liabilities 14 562 11 813 10 128 Net debt 5 765 3 084 2 168 Net debt to normalised EBITDA (covenant 2.75x) 1.52 0.84 0.62 Unsecured borrowings 2 218 1 385 690 Secured borrowings 77 85 103 IFRS debt 707 597 586 Preference shares 2 220 820 820 Debt in Poland 342 464

• Overdraft (net cash on hand)

201 (267) (31)

40

Net debt

Funding 31 Mar 2015 R’m Weighted average cost

• f capital

Acquisition funding (post-tax) 3 297 6.61 Capex funding (pre-tax) 1 218 6.93 Poland (pre-tax) 342 6.36 IFRS debt (pre-tax) 707 12.78 Working capital (pre-tax) 201 7.15 5 765 7.44

41

31 45 54 63 68 20 40 60 80 2011 2012 2013 2014 2015 DPS (cents) 1,78 1,47 1,39 1,38 1,24 0,0 0,5 1,0 1,5 2,0 2011 2012 2013 2014 2015 Dividend cover

Dividend

2014 Dividend numbers exclude the special dividend of 100 cps Normalised EPS excluding amortisation

Normalised DPS CAGR: 21.7%

Distributions Cents/share R million Cover* Interim 2014 63 657 1.38 Final 2014 78 813 1.22 Total 2014 141 1 470 1.29 Special dividend 2014 100 1 042 Interim 2015 68 709 1.24

42

Outlook André Meyer CEO

43

Outlook

SA

SA:

• Addition of 178 beds in H2
• ±450 beds in the next 18 months
• PPD growth of between 3-4%
• Stable margins
• Continued focus on improving clinical quality outcomes
• Continue to participate in the CC healthcare inquiry

44

Outlook

International

India:

• Well positioned to take advantage of the rapidly developing private healthcare sector
• Leveraging off the existing base and growing by:

− Brownfield expansions − Greenfield projects − Acquisitions

• Next 3-4 years:

− Strong visibility to ±3 000 beds − EBITDA margin improvement to ±15% on existing business (2 000 beds)

Poland:

• Continued revenue and EBITDA growth
• Focus on completing integration of acquired businesses to drive efficiencies
• Positioning of the business to maximise our growth in new national health contracts

in 2016

• Continue M & A activity

45

Thank you