Year end results presentation 2011 www.lifehealthcare.co.za Year - - PDF document

Year end results presentation 2011

Growth Sustainability Efficiency

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

Notes

www.lifehealthcare.co.za

Year End Results Presentation

For 12 months ended 30 September 2011

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

1

Notes

Group Review

Michael Flemming CEO Michael Flemming CEO

Agenda

2

Roger Hogarth CFO

1

Future Guidance Financial Review

2 3

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Strong SA growth: PPD volume growth : 5.4% ALOS (Average length of stay): : 2.2% Theatre Cases: : 3.6%

Highlights: Solid organic growth

3

Occupancy : 71.0% Normalised EBITDA margin : 25.97% Hospital DSO (excl COID) : 26 Days Net promoter score : 94.8% Introduction of new clinical measures Nurses trained : 1,300 6 year program for the training of specialists : R78m

Growth Efficiency Sustainability

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Strategic Priorities

4

Develop the breadth and depth of Life’s existing hospital network Expand our coverage and penetration of the SA market Leverage off aspirational consumerism Position Life for international expansion – focus on India Continue to enhance

• perational efficiencies:

– occupancy – cost of sales – IT – administrative efficiencies – overhead productivity Maintain LHC’s commitment to world class healthcare Implement sustainable human capital strategies Ongoing partnership and engagement with government on healthcare reform

Growth Efficiency Sustainability

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

4

Notes

Growth SA : Paid patient days (PPDs)

1,400 1,500 1,600 1,700 1,800 1,900 2,000 2006 2007 2008 2009 2010 2011

PPDs

PPDs

5

4.7% 5.4% 2.5% 4.4%

PPD CAGR of 4.9%

4.7% 5.4% 7.5%

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Growth SA : PPDs

2011 PPD growth of 5.4% driven by:

6

Category Sub-category

• f the 5.40%

New beds Life Bay View Life Glynnview Additional Organic growth

1.84%

Existing beds Preferred networks

1.35%

Existing beds LOS, disease burden, ageing, technology

2.21%

Total

5.40%

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Growth SA: Beds

Additional beds 2011 Capacity pipeline 2012

Capacity expansion at existing facilities

142

Expansion at 11 hospitals

122

New lines of business

92

Mental Health beds: Life St Josephs: Durban – open in Nov 2011 Life Poortview: JHB – open in May 2012

137

New facilities Piet Retief – open in November 2011

45

Total

234 304

7

May 2011 our bed forecast was 290 beds for 2011 (excl acquisitions) Difference is Piet Retief and 11 capacity expansion beds which are coming in 2012

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Growth SA: Associates

Continued our strategy of increasing our shareholding in our associates:

– Life Midmed Hospital:

159 beds in Middleburg Increased shareholding from 45% to 57% Effective date – 1 August 2011

– JMH:

5 Hospitals in Durban with 478 beds Made offer to existing shareholders Aim to increase shareholding from 49% to between 60% and 70% Subject to;

– Shareholder agreement – Regulatory approval

Aim to complete transaction by end January 2012

8

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Growth SA: New Lines of Business

New lines of Business:

– Renal:

Increase in stations to 78 Chronic renal facility in each major centre Focus on acute renal

– Mental Health / Acute Rehabilitation:

Number one private market share 21.3% revenue growth 2011 (2.5% of overall revenue) Under -supply of beds High demand:

– Mental illnesses in top 5 of medical schemes disease profiles – WHO Global Burden of Disease Report: The leading cause of Dalys (Disability Adjusted Life Year) in 2030 is projected to be Unipolar depressive disorders – Stroke results in the highest admissions to acute rehabilitation » CAGR of 14.7% over the last 5 years of stroke cases in acute hospitals

9

Business Sept 2011 Sept 2012 Areas

Mental health 223 beds 360 beds JHB, DBN, PE, EL Acute rehabilitation 255 beds 255 beds JHB, PTA, BLM, DBN, EL, CT

Life Poortview

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Strategic Priorities

10

Develop the breadth and depth of Life’s existing hospital network Expand our coverage and penetration of the SA market Leverage off aspirational consumerism Position Life for international expansion – focus on India Continue to enhance

• perational efficiencies:

– occupancy – cost of sales – IT – administrative efficiencies – overhead productivity Maintain LHC’s commitment to world class healthcare Implement sustainable human capital strategies Ongoing partnership and engagement with government on healthcare reform

Growth Efficiency Sustainability

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

10

Notes Efficiency strategy requires putting all the pieces of the jigsaw into place:

• 1. ARM pricing strategy which creates

the right incentives

• 2. Focus on cost of sales management

and efficiency

• 3. Leveraging our fixed cost base

through increasing occupancies and brownfield expansion

• 4. Driving efficiency programs across

the group utilising improved systems and work processes

• 5. Gaining the support, input and buy-

in of the doctors

20 21 22 23 24 25 26 27

2006 2007 2008 2009 2010 2011

EBITDA Margin %

EBITDA Margin %

Efficiency

11

%

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Efficiency 1: ARM

Pricing strategy which drives:

– the right behaviours – sets the correct incentives

65% of our revenue is on our ARM:

– Combination of fixed fees and per diems: Assume risk on:

– Surgical pricing and utilisation – Ethical utilisation

Models continuously reviewed and updated All hospital data run through our DRG model to enable comparisons and benchmarking across hospitals, disciplines, doctors

12

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Significant investment in information systems, data warehouses, structures and models Detailed analysis of complex utilisation data Production of timeous, detailed reports for the business Stock Classification:

– Surgical Consumables and Medicines are continuously being analysed and categorised into a “functional classification” in order to enable cost comparisons and identify savings

• pportunities

Formulary Management:

– Individual hospital compliance to our formulary is reported on – Formulary changes are managed closely

Favourable procurement environment:

– Low CPI and a strong currency

COS management and the favourable environment contributed 0.47% to the increase in the Ebitda margin

Efficiency 2: Cost of Sales (COS) Management

13

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Efficiency 3: Increase in occupancies

14

• Occupancy improvement:

– Increased from 69.5% to 71.0% – Demand driven by:

Aging Disease burden/technology Preferred networks Growth of medical scheme members

– Impacted by capacity expansion:

Over 1,200 beds added since 2006

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Under 1 1 - 4 5 - 9 10 - 14 15 - 19 20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59 60 - 64 65 - 69 70 - 74 75 - 79 80 - 84 85+

PPDs (%) Age

% PPDs per Age Category

2006 2011

67 68 69 70 71 72 73 2006 2007 2008 2009 2010 2011

Occupancy % Occupancy %

3 3.1 3.2 3.3 3.4 2006 2007 2008 2009 2010 2011

ALOS

(Average length of stay)

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

27.6 27.6 25.8 23.7 24.3 24.6 37 37 34 36 33 31 48 52 55 54 49 51

2006 2007 2008 2009 2010 2011 Stock cover DSO Days payables outstanding

Good improvement in our DSO:

– Hospital DSO at 29 days – Excluding COID hospital DSO at 26 days

Stock cover:

– 9% below budget – Rigorous processes in place to ensure continuity of supply

Efficiency 4: Efficiency Programs

15

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Efficiency 4: Efficiency Programs

16

Impilo case management:

– completed re-engineering of case management, – Benefits include:

Standardisation of processes and structures Effective utilisation of skilled resources Reduction in costs Reduction in the billing cycle (IDSO – Internal Days Sales Outstanding)

The new Multi Touch system will:

– manage and process accommodation charges – create the platform for real time accommodation billing – provide the following benefits:

Real time census management: Real time management of changes in LOC and LOS Removes the dependency on tariff knowledge from the staff members

1 1.5 2 2.5 3 3.5

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sept

2010 2011

IDSO

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Growth of preferred networks:

– Forecast continuing fast growth of preferred networks in both the low and middle sections of the market – Geographic spread of facilities, our ARM and COS management - positions LHC to continue to take advantage of this growth

Doctor shareholding

– Key LHC strategy:

• Attract and retain doctors
• Assist in improving quality and

managing costs – Shareholding is at Group, region and local levels:

• Minority shareholding of 13.7%

100 125 150 175 200 225 250 275 300 325 2006 2007 2008 2009 2010 2011

Network PPD Growth

Efficiency 5: Doctor support

17

%

Increase off 2006 network PPD base

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Strategic Priorities

18

Develop the breadth and depth of Life’s existing hospital network Expand our coverage and penetration of the SA market Leverage off aspirational consumerism Position Life for international expansion – focus on India Continue to enhance

• perational efficiencies:

– occupancy – cost of sales – IT – administrative efficiencies – overhead productivity Maintain LHC’s commitment to world class healthcare Implement sustainable human capital strategies Ongoing partnership and engagement with government on healthcare reform

Growth Efficiency Sustainability

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Sustainability: Quality - Patient experience

Measure September 2011 September 2010 Target 2011

Net promoter score 94.8% 94.6% All hospitals over 90% CSF Score 98.2% 98.0% Patient incident rate 4.2 per 1 000 PPD’s 4.3 per 1 000 PPD’s 5.5 per 1 000 PPD’s

19

92.5 93.0 93.5 94.0 94.5 95.0 95.5 96.0 96.5 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Net Promoter Score

2010 2011

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

1.31 1.11 1.08 0.95 1.08 1.06 1.15 0.98 1.08 0.81 0.99 0.95 0.86 0.86 0.85 0.82 0.92 0.73 0.73 0.74 0.69 0.70 0.73 0.70

0.65 0.85 1.05 1.25

Oct 09 Nov 09 Dec 09 Jan 10 Feb 10 Mar 10 Apr 10 May 10 Jun 10 Jul 10 Aug 10 Sep 10 Oct 10 Nov 10 Dec 10 Jan 11 Feb 11 Mar 11 Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11

HAI Rate per 1,000 PPD's Acute

Quality : Clinical experience

20

Measure Compliance Outcome YTD 2011 Outcome YTD 2010 Standard

VAP (Ventilator Associated Pneumonias) 94% 6.00 8.79 Per 1,000 VAP days SSI (Surgical Site Infections) 90% 1.09 1.25 Per 1,000 theatre cases CLABSI (Central Line Associated Blood Stream Infections) 91% 1.15 2.54 Per 1,000 central line days CAUTI (Catheter-related Urinary Tract Infections) 94% 0.95 2.26 Per 1,000 catheter days

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Sustainability: Human Capital

Doctors:

– Invest R13m / year for 6 years – Train 60 Specialists - cost of R78 million – Managed through the College of Medicines

Nurses:

– Only fully accredited college with10 learning centres – Trained 1,300 nurses

Pharmacists: – Training:

12 pharmacy interns / 24 basic level pharmacy assistants / 10 post basic pharmacy assistants

Staff:

– 26,727 training interventions – 10,078 staff

21

Category SA Comparison Doctors Training 1,300 / year 0.55 / 1,000 Brazil: 1.70 / 1,000 Nurses Increasing shortage of specialised nursing Pharmacists 0.24 / 1,000 WHO: 0.44 / 1,000 Brazil: 0.58 / 1,000

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Sustainability: Health Policy

National Health Insurance:

– The Green paper outlines governments intentions as regards NHI – look forward to providing open and constructive input – Green paper highlights both the complexity and magnitude of introducing an NHI. Implementation will be difficult and challenging – Welcome the:

recognition of a shortage of healthcare professionals commitment to increasing the numbers of doctors, nurses and pharmacists in training financial investment in the public sector hospitals phased approach to the introduction of the NHI

Office for Standards Compliance: (OSC)

– Agree with the principle of measuring the quality of healthcare establishments and setting national standards – The difficulty will be:

in implementing countrywide across all healthcare establishments (hospitals, doctors, physios etc) In dealing with facilities that “fail”

22

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Sustainability: Pricing

For the period 2006 – 2011 average increase in revenue has been 13%. This is made up

• f:

– Increase in utilisation: 4.9% – Average CPI: 6.8% – Average increase above CPI: 1.3%

Over the same period: – Public sector nursing packages increased by CPI x 2

23

13 4.9 6.8 1.3 2 4 6 8 10 12 14 Ave Rev increase Ave utilisation increase Ave CPI Ave increase above CPI

Average increase above CPI caters for the increase in nursing costs

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Sustainability: PPPs / Life Esidimeni

Public/Private Partnerships:

– Life Esidimeni;

largest PPP in SA 12 Facilities 4,165 Beds 1.52 million ppds Average revenue/day:

– Mental health/Frail care: R240 – Acute hospital: R900

– However, the focus of current PPPs does not include the provision of clinical care - excludes our expertise – Opportunity to pilot the acute Life Esidimeni hospital in the NHI pilots – Model for future PPPs

24

Life Matikwana

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Group Review

Michael Flemming CEO Michael Flemming CEO

Agenda

25

Roger Hogarth CFO

1

Future Guidance Financial Review

2 3

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Highlights

26

Revenue : + 11.7 % to R9,812m Operating profit : + 16.4 % to R2,173m Profit before tax : + 27.4% to R2,089m Cash generated from operations : + 14.7 % to R2,562m EPS : + 91.6 % to 123.6 cents Normalised EPS : + 28.7 % to 119.3 cents

+ 11.7% + 16.4% + 28.7% + 14.7% Good Revenue Growth Healthy Profit conversion Excellent Normalised EPS growth Strong cash generation

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Financial results

27

September 2011 September 2010 %

Revenue 9,812 8,786 11.7 Normalised EBITDA 2,548 2,173 17.3 Normalised EBITDA margin 25.97% 24.73%

Revenue growth: – Driven by Hospitals: – 5.4% increase in PPDs (paid patient days) – 6.5% revenue/ppd increase Normalised EBITDA margin: – Helped by: Increase in occupancies to 71% Leveraging of efficiencies across the group Favourable procurement environment: Strong currency Low CPI Contributed 0.47% to our improved EBITDA margin %

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

1,191 1,452 1,734 1,893 2,173 2,548

• 200

400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2,200 2,400 2,600 2006 2007 2008 2009 2010 2011

Normalised EBITDA

Six year review

28

R’000m

CAGR : 16.4% CAGR : 12.5%

R’000m

5,669 6,548 7,329 7,930 8,786 9,812 5,452 6,146 6,943 7,930 8,786 9,812 217 401 386

2,000 4,000 6,000 8,000 10,000 12,000

2006 2007 2008 2009 2010 2011

Revenue

Total revenue Continuing Discontinued

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Financial results

29

September 2011 September 2010 %

Revenue 9,812 8,786 11.7 Normalised EBITDA 2,548 2,173 17.3 Normalised EBITDA margin 25.97% 24.73% Operating profit 2,173 1,867 16.4 Operating profit margin 22.1% 21.2% Profit before tax 2,089 1,640 27.4 Profit after tax 1,492 835 78.7

Retirement plans / Life Midmed transaction / business disposals: R81 million lower Net finance cost/hedge: R128 million saving Taxes (mainly STC at IPO – R322 million) : R208 million lower

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Financial results

30

September 2011 September 2010 %

EPS 123.6 64.5 91.6

Retirement funds

(0.1) (7.4)

Profit on disposal of business / gain on re-measuring of fair value

(9.3) (0.9)

Impairment of intangible assets

5.1 0.0

Listing related costs

0.0 36.5 Normalised EPS 119.3 92.7 28.7 Normalised EPS (excl Amortisation of intangible assets) 126.9 101.2 25.4

CAGR of 37%

24.4 39.9 64.9 73.5 92.7 119.3

• 50.0

100.0 150.0 2006 2007 2008 2009 2010 2011

Normalised EPS

Normalised EPS

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Financial results – segmental review

31

September 2011 September 2010 %

Revenue 9,812 8,786 11.7 Hospital division 9,136 8,140 12.2 Healthcare services 674 636 6.0 Other 2 10 (80.0)

Hospital revenue increased by 12.2% and represents 93% of Group revenue Mental Healthcare and Acute Rehabilitation experienced growth of 21.3% Life Midmed included from 1 August 2011 as a subsidiary Healthcare services revenue impacted by: – 20.0% growth in Life Occupational Health – Stabilisation of Life Esidimeni after the completion of two contracts in 2010

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Financial results – segmental review

32

September 2011 September 2010 %

Revenue 9,812 8,786 11.7 Hospital division 9,136 8,140 12.2 Healthcare services 674 636 6.0 Other 2 10 (83.2) Operating profit before amortisation, profit on disposals and impairment of intangible assets 2,249 1,874 20.0 Hospital division 1,917 1,595 20.2 Healthcare services 141 118 19.5 Other 191 161 18.6

Hospitals: 85% of operating profit

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Cash generated vs normalised EBITDA

1,349 1,565 1,865 1,895 2,233 2,562 113% 108% 108% 100% 103% 101% 90% 95% 100% 105% 110% 115%

• 500

1,000 1,500 2,000 2,500 3,000 2006 2007 2008 2009 2010 2011 Cash generated from operations Cash generated as % of normalised EBITDA

33

R’000m

Strong cash conversion

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Summarised statement of financial position: Assets

34

Rm 2011 2010 Movement

Non-current assets 6,775 6,194 581 PPE 3,753 3,258 495 Intangibles 2,296 2,220 76 Other 726 716 10 Current assets (excl. cash) 1,293 1,196 97 Cash 400 482 (82) Total Assets 8,468 7,872 596

Own 83% (2010 - 78%) of our beds. Purchase of Life Knysna, Life Springs Parklands , Life Anncron properties and property around Life Glynnwood – R140 million Carrying value : R432 000 / bed

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Summarised statement of financial position: Equity & liabilities

35

Rm 2011 2010 Movement

Total shareholders equity 4,385 3,516 869 Non current liabilities 2,084 2,566 (482) Interest bearing borrowings 1,565 2,024 (459) Other non-current liabilities 519 542 (23) Current liabilities 1,999 1,790 209 Total Equity and liabilities 8,468 7,872 596

Debt Analysis Total Short-term Long-term

Banks 1,478 422 1,056 Finance leases 546 37 509 Cash (400) (400) 2011 1,624 59 1,565 2010 1,992 (32) 2,024

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Net debt Position

2.29 1.60 1.19 1.19 0.92 0.66 0.00 0.50 1.00 1.50 2.00 2.50 500 1,000 1,500 2,000 2,500 3,000 2006 2007 2008 2009 2010 2011 Normalised EBITDA Net Debt Net Debt / Normalised EBITDA

36

Net debt : normalised EBITDA

R’000m

Ratio Sept 2011 Covenant Total interest cover 10.8 3.00 (minimum) Net debt to normalised EBITDA 0.66 3.00 (maximum)

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Cash Distribution

37

Distributions Cents/share Rand % of Normalised EBITDA Cover

Interim 2010 23 R240 million 24.4% 1.77 Final 2010 29 R302 million 25.4% 2.04 Total 2010 52 R542 million 24.9% 1.92 Interim 2011 31 R323 million 27.7% 1.78 Final 2011 54 R562 million 40.7% 1.34 Total 2011 85 R885 million 34.7% 1.50

Revised distribution policy Distribution of 54 cents per share consists of : a dividend of 18 cents a capital reduction out of share premium of 36 cents

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Group Review

Michael Flemming CEO Michael Flemming CEO

Agenda

38

Roger Hogarth CFO

1

Future Guidance Financial Review

2 3

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Future Guidance

Growth SA

– Revenue:

Hospitals:

– low double digits – Combination of price and PPD growth (2.25% on existing beds)

Services:

– In line with inflation

– Completion of JMH transaction – Increase in capacity - 300 additional beds – Capex spend of R686m (excluding acquisitions)

Efficiency:

– Stabilisation of Ebitda margin

Growth International:

– Complete the MHC transaction

39

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Notes

Growth Offshore: Recap

What we said:

– Focus on select emerging markets (India, Turkey, W Africa, E Africa) – Countries with fragmented private hospital markets – Seeking a majority stake – A Partnership arrangement – Start with a relatively small investment:

1,000 – 2,000 beds $100- $200m

– Add value to the business – Participate in the market growth and consolidation of private healthcare

Nigeria option:

– Had signed agreement with pricing based on business plan and subject to DD – Could not come to agreement post DD as reviewed against submitted business plan and financial forecasts

40

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

India: Population: 1,186 billion GDP 2011: 7.9% CPI 2011: 6.8% 10 Year Bond: 9.04% Current account :

• 3.1% of GDP

Indian Healthcare market Indian healthcare sector currently valued at $62bn Growing at 13% per annum and expected to double by 2015 - $125bn Private sector accounts for 80% of India’s healthcare spend Private hospital providers dominate the tertiary/ quaternary segments Hospital insurance is growing fast: expected to account for 9.9% of hospital revenue in 2013 (5.7% in 2008) Highly fragmented hospital sector

Growth Offshore: India

41

Manipal Apollo Fortis-Wockhardt Fortis Max

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

1 2 2 4 2 3 3 5

2 2

5 6 11 12 5 8 7 12

5 5 57 41 10 20 30 40 50 60 70 80 90 100 2001 2012 %

Acute infections Accidents Muscoloskeletal Sense organs Others Asthma Diabetes CNS disorders Other circulatory Heart disease Cancer

Growing middle class and rise in disposable income Ageing population and increased health awareness Rapid growth in health insurance Rapidly changing disease profile: so called lifestyle diseases Growth in medical tourism & telemedicine

92.1 74.1 49.9 107.2 106.0 93.1 20.4 55.1 94.9 33.1

50 100 150 200 250 300 2010 2015E 2025E Family in mn

Globals (>1000) Strivers (500-1000) Seekrs (200-500) Aspirers (90-200) Deprived (<90)

Growth Offshore: India – Demand Side Drivers

42

Source: MGI, Macquarie Research August 2011 Source: CII-McKinsey, Macquarie Research, August 2011

India’s growing middle class

Acute diseases Chronic Diseases

Acute infections on a decline – lifestyle disease increasing

494 713 1127 1472 6207

1000 2000 3000 4000 5000 6000 7000

2006 2007 2008 2009 2015E

Health insurance market (US$m): CAGR: 32%

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

India has 9 beds per 10,000 population Estimated 900,000 bed shortfall Significant barriers to entry give incumbents a significant advantage

– Long gestation periods for green field growth – High cost of real estate – High capital intensity of business – Shortage of key clinical skills

Growth Offshore: India – Supply Side Drivers

43

Source: Fortis Presentation , Macquarie Research, August 2011

31 39 72 83 139 30 22 9 24 23

20 40 60 80 100 120 140 160

Beds per 10,000 people - low

Hospital beds (per 10000 people)

Source: WHO report, Macquarie Research, August 2011

27 21 37 35 21 14 3 6 17 5

5 10 15 20 25 30 35 40

Physicians per 10,000 people - low

Physicians (per 10000 people)

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

MHC is the 3rd largest hospital chain in India – 1,860 owned beds Leading hospital chain in Delhi Strong brand and reputation Business is a subsidiary of Max India:

– Market cap of $1bn – Experienced in partnering with international strategics – Track record of building successful and professionally managed businesses

Growth Offshore: India – Max Healthcare (MHC)

44

Life Insurance Protecting Life Healthcare Caring for Life Health Insurance Enhancing Life Clinical Research Improving Life 26% 26% 26%

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Existing business:

– 8 facilities in Delhi – 968 active beds in FY11 (March 2011) – 1,105 active beds – current

137 beds added to Max Balaji Hospital

– High tech facilities – 68% occupancy in FY11 – 8% Ebitda margin

Growth Offshore: India – Max Healthcare (MHC)

45

Hospitals Profile Beds Max Balaji Hospital, Patparganj (PPG – I and II) Tertiary Care 419 Max Super Specialty Hospital, Saket (East & South) Tertiary Care 301 Max Super Specialty, Saket (West) Tertiary Care 212 Max Hospital, Pitampura (PPA) Multi-Specialty 85 Max Hospital, Gurgaon (GGN) Multi-Specialty 56 Max Hospital, Noida (NDA) Multi-Specialty 32 Max Medcentre, Panchsheel Park (PSH – N) Outpatient

• Max Specialty Clinic, Panchsheel

Park (PSH – S) Ophthal & Dental

• Max Healthcare

1105

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Green field business:

– 4 new hospitals – 880 new beds – Additional 200 beds – up to 2015

Facilities are of a high standard Well positioned to compete

Growth Offshore: India – Max Healthcare (MHC)

46

Hospital Beds Area Start date

Shalimar Bagh 300 North Delhi Nov 2011 Mohali 200 Punjab Dec 2011 Bhantinda 200 Punjab Dec 2011 Dehra Dun 100 Uttarakhand Mar 2012 Completed during 2011

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Growth Offshore: India - Max Healthcare (MHC)

Initial Investment:

– Acquire an initial 26% shareholding – Cost of R850m (516.7 Cr.Rs.) – Life provides a pro rata guarantee of the debts that Max India currently guarantees – circa R130m – Assist MHC in leveraging off Life’s processes, systems and operating model:

Functional business processes Operational systems Management information systems and reporting Functional and line structures Pricing and productivity measures

Stage 2 investment:

– Life provided with an opportunity to increase it’s stake to equality with Max India – Occur either after March 2014 or March 2015 subject to business plan objectives being met

47

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Debt position: post MHC/JMH

MHC:

– Funding of 26% stake in MHC (R850 million):

Indian interest rates higher than SA Direct foreign investment has Reserve Bank of India local funding restrictions Since business is growing do not expect cash flows in initial 2-3 years

JMH:

– Process of completing JMH transaction - subject to regulatory approval – Currently holding 49% - aim to increase to 70% – Business is profitable and cash generative

Use SA preference shares – lowest post tax cost (70% of prime)

48

Covenant Actual Sept 2011 Pro-forma Post-MHC Pro-forma Post MHC & JMH Interest Cover 3.00 10.8 8.4 8.4 Net debt to normalised EBITDA 3.00 0.66 0.97 1.05

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

Questions

49

Life is an opportunity, benefit from it. Life is beauty, admire it. Life is bliss, taste it. Life is a dream, realise it. Life is a challenge, meet it. Life is a duty, complete it. Life is a game, play it. Life is a promise, fulfill it. Life is sorrow, overcome it. Life is a song, sing it. Life is a struggle, accept it. Life is a tragedy, confront it. Life is an adventure, dare it. Life is luck, make it. Life is too precious, do not destroy it. Life is life, fight for it. ~ Mother Teresa

LIFE HEALTHCARE YEAR END RESULTS PRESENTATION 2011

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Notes

www.lifehealthcare.co.za

Appendix

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Notes

• Worldwide Burden of Disease
• The 3 leading causes of Dalys (Disability Adjusted Life Year) in 2030 are projected to be:
• Unipolar depressive disorders
• Ischaemic heart disease
• Road traffic accidents

Global Burden of Disease Report - WHO

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• Demand for healthcare services largely driven by

South Africa’s significant burden of disease

Nearly 40% share of HIV/AIDS in

total disease burden (very high even for developing countries)

Tuberculosis, influenza and

pneumonia as major causes of death

High infection rate among the black

population

High incidence of non communicable

disease such as heart disease, cancer and diabetes

On average South Africa’s disease burden is 2x larger than in developing countries and 4x larger than in developed countries

10,000 20,000 30,000 40,000 50,000 SA Ghana Indonesia Thailand Brazil Colombia Tunisia USA UK Canada Germany DALY's/100,000 of the population

Diseases as % of total burden Burden of disease vs. other countries

Very high infection rate and disease

burden, even compared with developing countries

Burden of HIV/AIDS expected to

continue to grow despite strong government funding for treatment & prevention programmes

SA has substantially higher numbers

• f sick people who are also sicker

than those in other countries Developing markets Developed markets

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% South Africa Brazil Ghana Indonesia USA UK Germany HIV/Aids Other Communicable Non-communicable Injuries Source: Econex calculations from WHO 2009 data. Source: Econex calculations from WHO 2009 data.

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• DALY explanation

Global Burden of Disease Report - WHO

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• South Africa’s population is ageing

Strong increase in 50-and-above-year-old population. Expected to reach 19.1% (10.4 m) of total population in 2030 (from 13.9% in 2005) Ageing not only results in more hospital visits but the average income per visit for patients over 50 is 67% higher than the average for patients under 50 Ageing patterns and larger absolute population size are important demand drivers for healthcare services

South African population by age

Source: UN Population Division.

Millions people TOTAL: 48.1 m 54.7 m 10.4 m 6.7 m (age) 7.0 5.0 3.0 1.0 1.0 3.0 5.0 7.0

74+ 70–74 63–73 60–64 53–63 50–54 43–53 40–44 33–43 30–34 25–33 20–24 15–23 10–14 5–13 0–4

2005A 2030E

Inexorable demographic trends: Ageing population and growing share of pensionable citizens are helping drive demand for hospital services

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• Consolidation of the Medical Administrator Market

40 50 60 70 80 90

2006 2007 2008 2009 2010 2011

Top 5 Administrators

Top 5 Administrators

Hospital revenue for the Top 5 medical administrators

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42 34 25 5 5 5 12 12 10 2 2 2

8 9 11

17 19 20 2 4 5 5 6 9 7 9 13

10 20 30 40 50 60 70 80 90 100 2006 2015E 2025E %

Healthcare Education and Recreation Communication Transportation Personal products and services Household products Housing and utilities Apparel Food, beverages and tobacco

Growth Offshore: India – Demand Side Drivers

56

Discretionary spending Necessities

Source: MGI, Macquarie Research August 2011 Source: Fortis Presentation , Macquarie Research, August 2011

Healthcare spending as % of total spending to increase with rise in disposable income

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Disclaimer

The information contained in this document is or may constitute unpublished price sensitive information. By accepting this document the recipient undertakes to keep this information confidential and not to disseminate such information to any party/parties not authorised to receive such information and to only utilise such information for the purpose for which it has been presented to such recipient. Life Healthcare advises investors that this presentation contains forward-looking statements. It is important to note, that: unless otherwise indicated, forward-looking statements indicate the Group`s` expectations as at 30 September 2011 actual results may differ materially from the Group`s expectations if known and unknown risks or uncertainties affect its business, or if estimates or assumptions prove inaccurate; the Group cannot guarantee that any forward-looking statement will materialize and, accordingly, readers are cautioned not to place undue reliance on these forward-looking statements; and the Group disclaims any intention and assumes no obligation to update or revise any forward-looking statement even if new information becomes available, as a result of future events or for any other reason.

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www.lifehealthcare.co.za

Year End Results Presentation

For 12 months ended 30 September 2011

Notes

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