Year End Results Presentation For 12 months ended 30 September 2013 - - PDF document

Year End Results Presentation

For 12 months ended 30 September 2013

www.lifehealthcare.co.za

Agenda

Group Group Financial Financial Future Future p Review Review Review Review Guidance Guidance

Michael Flemming Pieter van der Westhuizen Michael Flemming Michael Flemming CEO Pieter van der Westhuizen CFO Michael Flemming CEO

2

Highlights

• SA growth:

PPD l h 2 7% – PPD volume growth 2.7% – Additional beds 95 – Good pipeline of beds for next 3 years

Growth

• Occupancy

71.7%

• Normalised Ebitda margin

28.1%

• Group DSO

31 days

Efficiency

• Continued improvement in clinical outcomes
• Focus on training of specialised nurses and doctors
• Reduction in carbon footprint

Sustainability

3

SA : Growth

PPDs

2 100 2 200 PPDs 3 8% PPD 1 900 2 000 2 100

2.7% 6.1% 5 4%

3.8% PPD growth in H2 1 600 1 700 1 800

4.0% 5.4% 2.5%

1 400 1 500 1 600 2008 2009 2010 2011 2012 2013 Bed growth

101 148 475 234 292 95

growth

4

SA : Growth

Beds

Category New beds 2013 WIP beds Approved beds * Applications pending Capacity expansion at existing facilities 75 231 374 364 New facilities

• 94

150 338

*Approved : received Health department licence approval

and are in the process of obtaining Municipal approvals before commencing building

• Acute Hospitals

B d b d th t t k d t f ith t d d

• Broad based growth to take advantage of areas with strong demand
• 94 bed Life Hilton Private hospital under construction

5

SA : Growth

Beds

Category New beds 2013 WIP beds Approved beds * Applications pending Capacity expansion at existing facilities 75 231 374 364 New facilities

• 94

150 338 NLB - Mental Health / 20 35 432 Acute Rehabilitation 20

• 35

432

*Approved : received Health department licence approval

and are in the process of obtaining Municipal approvals b f i b ildi before commencing building

• New Lines of Business
• 20 Mental health beds added in 2013
• Start construction of 35 bed mental health unit at Life Vincent Pallotti in early 2014
• Current total of 703 NLB beds
• Aim to reach 1,000 NLB beds in 3 years

6

SA : Growth

Beds

Category New beds 2013 WIP beds Approved beds * Applications pending Capacity expansion at existing facilities 75 231 374 364 New facilities

• 94

150 338 Mental Health / 20 35 432 Acute Rehabilitation 20

• 35

432 Total 95 325 559 1 134

• Strong overall pipeline of beds
• Good combination of brownfield, greenfield and mental health / acute rehabilitation
• Cover 8 regions within SA

7

SA : Growth

Other

• Renal Dialysis
• chronic stations added :

42 stations chronic stations added : 42 stations

• total number of stations :

122 stations

• Complete roll-out in 2014:

to 180 stations

• Acute renal dialysis coverage expanding
• NLB (mental health, acute rehabilitation, renal dialysis) revenue growth

361 444 350 400 450 500

CAGR : 37.2% R’000m

172 216 150 200 250 300 350 50 100 150 2010 2011 2012 2013

NLB Revenue

8

SA : Growth

Other

• Oncology
• A new Oncology unit at Life Vincent Pallotti

gy providing both chemotherapy & radiosurgery

• Radiosurgery will be supplied through the

new R46m Novalis Radiosurgery machine g y which provides non-invasive shaped beam radiosurgery

• Only machine in Africa
• The chemotherapy unit opened in 2013 and

the radiosurgery unit will open in Q1 2014

• Affordable Maternity Product

Affordable Maternity Product

• Started piloting the affordable

maternity product O 50 ll d

• Over 50 women enrolled
• Considering extending the pilot to

2 additional facilities

9

SA : Growth

Healthcare Services

• Healthcare Services
• Life Esidimeni
• stable performance
• Renewal of Conradie (WC) : 220 beds and Shiluvana Care Centre (Limpopo) : 160 beds

(potential to add 40 paediatric beds)

• Life Occupational Health
• Continued strong growth in a difficult environment

831.0 636.0 674.0 748.0

600 800 CAGR : 9,3% R’000m 200 400 200 2010 2011 2012 2013 HCS Revenue

10

2010 2011 2012 2013

India : Max Healthcare

Bed Growth

Bed Operational beds Operational beds Unit Bed Capacity beds Sept 2013 beds Sept 2012

Existing Hospitals 1 080 1 040 1 014 New Hospitals: Shalimar Bagh 288 150 78 Mohali 204 141 95 Bathinda 205 56 83 Dehradun 201 89 48 Total new 898 436 304 C bi d t t l 1 943 1 476 1 318 Combined total 1 943 1 476 1,318

467 beds still to become operational

11

p

India : Max Healthcare

Occupancy

Bed Operational beds Operational beds Occupancy Occupancy at Unit Bed Capacity beds Sept 2013 beds Sept 2012 Occupancy Q2 2014 at 30 Sept 2013

Existing Hospitals 1 080 1 040 1 014 79.1% 85% New Hospitals: Shalimar Bagh 288 150 78 84.2% 100% Mohali 204 141 95 72.8% 80% Bathinda 205 56 83 56.6% 55% Dehradun 201 89 48 73.8% 73% Total new 898 436 304 74.7% 82% C bi d t t l 1 943 1 476 1 318 77 8% 84% Combined total 1 943 1 476 1,318 77.8% 84%

12

SA : Efficiency

Ebitda Margin

• Case mix change: positive margin impact
• Strong management of consumables procurement

g g p

• Continued management of overheads and administrative costs

28 30

%

28.1% 26 28 24.7% 26.0% 26.6% 22 24 20 2010 2011 2012 2013

13

SA : Efficiency

Case Mix Impact

6%

Asthma

Incidence of Chronic Diseases of Lifestyle Amongst LHC Admissions

4% 5%

Asthma Coronary Artery Disease Diabetes Mellitus Type 2 Hyperlipidaemia

3% 4%

Diabetes Mellitus Type 1 Cardiac Failure Epilepsy H poth roidism

1% 2%

Hypothyroidism Dysrhytmias Chronic Obstructive Pulmonary Disease Chronic Renal Disease

0% 1% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Rheumatoid Arthritis HIV

• The overall incidence of chronic diseases of lifestyle (CDL) amongst patients admitted

to LHC facilities has doubled from 16% in 2003 to 33% in 2012

14

SA : Efficiency

Effective use of assets

71.0 71.2 71.7 72

%

H2 occupancy: 74.3% 69.5 68 70 74.3% 64 66 2010 2011 2012 2013 9 24 2013: Bed Occupancy Split 13 21 2012: Bed Occupancy Split 27 40 24 13 24 42 21

< 60% 60 - 69% 70 - 79% 80%+

40 42

80%

Beds above 70% occupancy: 63% Beds above 70% occupancy: 64%

15

Efficiency

Administrative - Working capital management

55 54 54

• Consistent good performance in working

capital management

49 51 49

• DSO
• Total DSO:

31 days (2012: 30)

34 36

• Hospital DSO:

29 days (2012: 29 days)

• Hospital DSO excluding COID:

25.8 24 6 25.5 34 33 31 30 31

25 days (2012: 25 days)

• Stock cover
• Rigorous processes in place to ensure

23.7 24.3 24.6 24.3

2008 2009 2010 2011 2012 2013

Rigorous processes in place to ensure continuity of supply

008 009 0 0 0 3 Stock cover DSO Days payables outstanding

16

SA : Efficiency

Programs

• Cost of sales management
• Cost of Sales inflation: 2.2%

17.3

15 20 Rand depreciation

%

Cost of Sales inflation: 2.2%

• Strong procurement performance
• Product utilisation

5.9 2.2

5 10 Rand CPI LHC COS Rand depreciation CPI LHC COS Inflation

• Pathology - Blood Gas tests in ICU
• Completing roll out of the in-house delivery of blood gas pathology tests in ICUs

Fi i l b fit h d ith di l h

depreciation Inflation

• Financial benefits shared with medical schemes
• Positive contribution to Ebitda in 2014
• Central Laundry

Central Laundry

• Opened in-house laundry for the Inland region, covering 28 hospitals (4 100 beds)
• Centralised credit services
• Centralisation of Inland Credit services bringing operational efficiencies and

cost savings

17

SA : Efficiency

Programs

• Systems driven efficiency through Impilo
• Focus on driving standardisation reduction in administrative costs & economies

Focus on driving standardisation, reduction in administrative costs & economies

• f scale
• Completion and rollout of the e-dispensing module using bar coding technology
• e-theatre billing module will be ready for piloting at the end of the 2013. Using multi-touch

technology the hospitals will benefit from a paperless real time billing process

• Environment
• Implementing Environmental Management system – objective of obtaining an ISO

14001 environmental certification

• Energy efficiency projects
• Energy efficiency projects
• A real-time, online electrical metering system has been installed
• Converting existing geysers and gas-fired boilers to more efficient heat pump hot water

ti t A d ti f 3 illi k f CO i i t d t generation systems. A reduction of over 3 million kg of CO2 emissions to date

• Life Hilton Private Hospital will be the first greenfield hospital within Life Healthcare to be

designed according to the new specifications - anticipate the hospital being 20% more efficient

18

SA : Sustainability

Quality - Measuring clinical outcomes

Measure Outcome Sept 2013 Outcome Sept 2012 Standard Patient incident rate 3.24 3.80 Per 1,000 PPDs VAP (Ventilator Associated Pneumonias) 2.69 4.02 Per 1,000 VAP days SSI (S i l Sit I f ti ) 0 74 0 97 P 1 000 th t (Surgical Site Infections) 0.74 0.97 Per 1,000 theatre cases CLABSI (Central Line Associated Blood Stream Infections) 0.83 1.11 Per 1,000 central line days ) y CAUTI (Catheter-related Urinary Tract Infections) 0.57 0.68 Per 1,000 catheter days FIM/FAM Score 1.14 1.00 > 0.9

• Continuous improvement in clinical quality indicators
• A reduction in the HAI (Hospital associated infection) rate: 0.52 (2012: 0.65)

19

SA : Sustainability

Regulatory environment

• Competition Commission (CC) market inquiry
• To date the final terms of reference have not been released by the CC Expect

To date the final terms of reference have not been released by the CC. Expect early December 2013

• The Group believes that if the inquiry is to achieve it’s objectives it needs to:
• be an independent, factual and impartial inquiry which includes the participation of

all major stakeholders

• cover the entire industry, including the public sector and not just review the hospital,

co e t e e t e dust y, c ud g t e pub c secto a d

• t just e e

t e

• sp ta ,

doctor and insurance sectors

• have detailed analysis of the factors that drive healthcare expenditure

i th t t l i ffi i i f th i d t d k d ti t

• review the structural inefficiencies of the industry and make recommendations to

remove them

20

SA : Sustainability

Skills development Category Description

Specialist training

• Year 2 of R78m 6 year funding program
• Focus on Cardiology, Nephrology, Maternity, Paediatrics, Oncology

Nurse training

• Enrolled 920 students enrolled
• Life College of Learning now 15 years old – graduated over 10 000 nurses
• Set-up nursing academy in Delhi in conjunction with MHC. Focus on

Set up nursing academy in Delhi in conjunction with MHC. Focus on specialised nursing – critical care and theatre nurses.

Pharmacist training

• Life Healthcare launched the Clinical Pharmacy Practice certificate course

in collaboration with NMMU

• 87 pharmacist assistants in training

Management training

• 107 participants graduated from The Life School of Management, an

accredited UK based Institute of Leadership and Management (ILM) for accredited UK-based Institute of Leadership and Management (ILM) for Front Line Management

21

Financial Financial Review

Pi t d W th i Pieter van der Westhuizen CFO

www.lifehealthcare.co.za

22

Highlights

Revenue Growth Excellent normalised Strong cash generation Increased dividend Growth EPS growth generation dividend +17 4% +17 4% +17 4% +8 3% +8 3% +8 3% +12 2% +12 2% +12 2% To To To

Revenue +8 3% to R11 843m

+17.4% +17.4% +17.4% +8.3% +8.3% +8.3% +12.2% +12.2% +12.2% To 126 cps To 126 cps To 126 cps

Revenue +8.3% to R11 843m Operating profit +16.0% to R2 948m Profit before tax +17.5% to R2 833m EPS + 17.9% to 169.7 cents HEPS +20.6% to 169.7 cents Normalised EPS +17.4% to 162.1 cents Dividend +20.0% to 126.0 cps

Normalised earnings exclude non-trading related items such as profit/loss on disposal of businesses and PPE, impairment of intangibles and ti t f d l /d fi it

23

retirement fund surpluses/deficits.

Financial results

Sept 2013 Sept 2012 %

R 11 843 10 937 8 3% Revenue 11 843 10 937 8.3% Normalised Ebitda 3 332 2 907 14.6% Normalised Ebitda margin 28.1% 26.6% g

• Revenue growth in hospitals
• 2 7% increase in PPDs (3 8% increase in H2)

2.7% increase in PPDs (3.8% increase in H2)

• 5.3% increase in revenue/ppd
• Continued strong growth of medical cases - dilutes revenue/ppd

N li d Ebitd i

• Normalised Ebitda margin
• Positive impact on Ebitda margin due to growth in medical cases
• Excellent management of procurement and overheads
• Continue to leverage efficiencies across the group

24

Financial results

Medical / Surgical split Acute: Medical / Surgical split

52 54 56 46 48 50 40 42 44 2008 2009 2010 2011 2012 2013 Surgical Medical

S f

• Since 2011 experienced a faster growth in medical cases in the acute hospitals
• Combination of LHC patient mix & the disease burden

25

Financial results

Medical / Surgical split Acute: Medical / Surgical split Group: Medical / Surgical split

52 54 56 52 54 56 46 48 50 46 48 50 40 42 44 40 42 44 2008 2009 2010 2011 2012 2013 Surgical Medical 2008 2009 2010 2011 2012 2013 Surgical Medical

f

• The impact of Mental Health and Acute Rehabilitation only increases the number
• f medical cases

26

Four year review

Revenue Normalised Ebitda

444

12000 14000 Hospital HCS NLB

2 907 3 332

3 200 3 600

CAGR : 15.3% CAGR : 10.5%

R’000 m R’000 m

636 674 748 831 172 216 361

8000 10000 12000

2 173 2548

2 000 2 400 2 800

7978 8922 9828 10568

2000 4000 6000 400 800 1 200 1 600

C

2010 2011 2012 2013 400 2010 2011 2012 2013

Hospital revenue includes other revenue

• Consistent growth in revenue
• Improvement in efficiencies assisted growth in normalised Ebitda

27

Financial results

Revenue breakdown 2010 2013

24.7% 2.7% 1.3% 8.9% 28.1% 10 2% 3.2% 1.1% 8.4% 12.1% 10.2% 16.7% 33 3% 15.7% 33.6% 33.3%

Normalised EBITDA Employee benefits expense COS Surgical COS Ethicals Occupational expenses Repairs and maintenance Other

Financial results

Sept 2013 Sept 2012 % REVENUE 11 843 10 937 8.3% Normalised Ebitda 3 332 2 907 14.6% Normalised Ebitda margin 28 1% 26 6% Normalised Ebitda margin 28.1% 26.6% Operating profit 2 948 2 542 16.0% Associates 65 85 Attributable earnings 1 761 1 496 17.7%

• Associates include
• JMH

JMH

• MHC included for 12 months compared to last year 8 months

Attributable earnings is defined as earnings attributable to ordinary shareholders

29

Attributable earnings is defined as earnings attributable to ordinary shareholders

Financial results

Sept 2013 Sept 2012 % EPS 169.7 143.9 17.9%

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

0.4 (0 4) (2.5) (0 7)

• Profit on disposal of property, plant and equipment

(0.4) (0.7) HEPS 169.7 140.7 20.6%

• Retirement funds

(6 0) (2 6) Retirement funds (6.0) (2.6)

• Gain on de-recognition of finance lease liability

(1.6)

• Normalised EPS

162.1 138.1 17.4% Normalised EPS – excl. impact of MHC 170.1 144.2 18.0%

• 2014: new accounting standards impact EPS and HEPS. The retirement fund surplus will

not form part of the EPS & HEPS calc lation If applied to 2013 EPS & HEPS

• ld both

not form part of the EPS & HEPS calculation. If applied to 2013, EPS & HEPS would both be 163.7 cps respectively.

30

Financial results

Normalised EPS

138.1 162.1 160.0 180.0 CAGR: 20.5% 92 7 119.3 138.1 100 0 120.0 140.0 92.7 60.0 80.0 100.0 20.0 40.0

• 2010

2011 2012 2013

31

Financial results

Segmental review

Sept 2013 Sept 2012 % REVENUE 11 843 10 937 8.3% Hospital division 11 010 10 185 8.1% Healthcare services 831 748 11.1% Healthcare services 831 748 11.1% Other 2 4

• Hospital Division: Improved H2 for hospital division with revenue growing 9.5%
• HCS division:

Good overall performance from HCS despite slightly softer H2

32

Financial result

Segmental review

Sept 2013 Sept 2012 % REVENUE 11 843 10 937 8.3% Hospital division 11 010 10 185 8.1% Healthcare services 831 748 11.1% Healthcare services 831 748 11.1% Other 2 4 Operating profit before amortisation, profit on disposals and impairment of intangible assets 2 982 2 598 14.8% Hospital division 2 694 2 242 20.2% Healthcare services 167 121 38.0% Other 121 235 (48.5)%

• Hospital Division: Improved operating efficiencies resulted in 22 3% growth in
• Hospital Division: Improved operating efficiencies resulted in 22.3% growth in

Operating profit in H2

• HCS Division:

Impairment charge in Life Esidimeni of R20m in 2012.

• Other:

Streamlining of property structures and internal rentals

33

Other: Streamlining of property structures and internal rentals

India : Max Healthcare

Revenue Growth

350 350 Rs in Cr Rs in Cr 270 290 310 330 270 290 310 330 190 210 230 250 190 210 230 250 150 170 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Total 150 170 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Existing New

Revenue (Rs.Crore) H1 14 H1 13 % Q2 14 Q2 13 %

Revenue – Existing hospitals 528 484 9.1% 271 242 12.0% Revenue Existing hospitals 528 484 9.1% 271 242 12.0% Revenue – New hospitals 139 52 167.3% 78 32 143.8% Revenue Total 667 536 24.4% 349 274 27.4% Financial year end: March

34

Financial year end: March

India : Max Healthcare

Ebitda Growth

40 40 Rs in Cr Rs in Cr 20 30 10 20 30 10

• 20
• 10

Ebitd (R C ) H1 14 H1 13 % Q2 14 Q2 13 %

• 10

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Total

• 30

Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Existing New

Ebitda (Rs.Crore) H1 14 H1 13 % Q2 14 Q2 13 %

Ebitda – Existing hospitals 58 48 17.2% 33 18 83.3% Ebitda – New hospitals (9) (23) 156% (1) (13) 1200% Ebitd T t l 47 25 88 0% 32 5 540% Ebitda - Total 47 25 88.0% 32 5 540% Ebitda margin – Existing hospitals 11.0% 9.9% 12.2% 7.4% Ebitda margin – Total hospitals 7.0% 4.7% 9.2% 1.8% Financial year end: March

35

Financial year end: March

Cash generated vs normalised EBITDA

120% 4 000 R 000m 103% 101% 105% 103% 100% 120% 3 000 3 500 4 000 60% 80% 2 000 2 500 3 000 2 233 2 562 3 042 3 414 40% 60% 1 000 1 500 2 000 0% 20% 500 1 000 % 2010 2011 2012 2013 Cash generated from operations Cash generated as % of normalised EBITDA

36

Capital Expenditure

13% 14% 1 600 R 000m 13% 12% 14% 1 200 1 400 1 600 9% 8% 7% 8% 10% 800 1 000 1 200 813 780 1 433 829 4% 6% 400 600 800 813 780 0% 2% 200 400 % 2010 2011 2012 2013 Capex as a % of revenue

37

Financial results

Capex

1000 R 000m 650 600 800 1000

• 75 acute new beds
• 20 mental health new beds
• Land for 94 bed Life Hilton hospital
• Property for Life Peglerae extension

105 111 488 650 200 400 600 Property for Life Peglerae extension

• Oncology equipment at Life Vincent Pallotti
• Capex on maintenance & equipment

188 157 105 111 200 2012 2013

• Repairs & maintenance but not included

under Capex  Capex Upgrades expansion  Capex Maintenance  Repairs & Maintenance

Excludes Capex spent on acquisitions

• 2012: R823m of purchase of 26% shareholding in MHC
• 2013: R68m used to maintain 26% shareholding in MHC

38

• 2013: R68m used to maintain 26% shareholding in MHC

Summarised statement of financial position

Assets

Sept 2013 Sept 2012 Movement NON-CURRENT ASSETS 8 343 7 771 572 PPE 4 518 4 010 508 Intangibles 2 084 2 181 (97) g ( ) Other 1 741 1 580 161 Current assets (excl cash) 1 327 1 239 88 Current assets (excl. cash) 1 327 1 239 88 Cash 300 246 54 Total assets 9 970 9 256 714

• Non-current assets: Other includes Max Healthcare with an additional R68m investment

made to maintain current shareholding

• Own 84% of registered beds

39

Summarised statement of financial position

Equity and liabilities

Sept 2013 Sept 2012 Movement TOTAL SHAREHOLDERS EQUITY 5 607 4 878 729 Non-current liabilities 2 150 2 445 (295) Interest bearing borrowings 1 657 1 929 (272) g g ( ) Other non-current liabilities 493 516 (23) Current liabilities 2 213 1 933 280 Total equity and liabilities 9 970 9 256 714 Total equity and liabilities 9 970 9 256 714 Net debt (as per covenants) 2 115 2 205 (90) N t d bt t li d Ebitd ( t 3 ) 0 63 0 73 Net debt to normalised Ebitda (covenant 3 x) 0.63 0.73

• Max Healthcare acquisition financed through R820 million in five year redeemable

preference shares p

• Finance cost of R49m for preference shares
• Preference shares are included in interest bearing borrowings

40

Dividend

Distributions Cents/share Rand % of Normalised EBITDA Cover* Interim 2012 45 R469 million 34.2% 1.47 Final 2012 60 R625 million 40.7% 1.34 Total 2012 105 R1 094 million 37.6% 1.39 Interim 2013 54 R563 million 36.4% 1.39 Final 2013 72 R750 million 42.1% 1.32 Total 2013 126 R1 313 million 39.4% 1.35

• 20% increase in DPS

41

* Cover calculated on normalised EPS excluding amortisation

Four year review

Dividends

39 4 45.0 2.00 162 1 180 Cents

%

34.7 37.6 39.4 30 0 35.0 40.0 1.40 1.60 1.80 119.3 138.1 162.1 120 140 160 1.92 1 50 1 39 24.9 20.0 25.0 30.0 0.80 1.00 1.20 92.7 85 105 126 80 100 120 1.50 1.39 1.35 5.0 10.0 15.0 0.20 0.40 0.60 52 20 40 60 0.0 0.00 2010 2011 2012 2013 Cover % Ebitda 2010 2011 2012 2013 Normalised EPS DPS

• Dividend cover:

1.35 times

• % of Ebitda:

39.4%

• Normalised EPS CAGR:

20.5%

• Normalised DPS CAGR:

34.3%

N li d EPS l di ti ti

42

Normalised EPS excluding amortisation

Future Guidance

Mi h l Fl i Michael Flemming CEO

www.lifehealthcare.co.za

43

Future Guidance

• CEO Change
• Time is right

Time is right

• Leave behind a company:

1. Excellent Management team E i

• Experience
• Depth

44

Future Guidance

Executive 16 years service

CEO Operational Management (3) Enabling Management (4) Support Management (4)

Finance and Admin Procurement Legal HR Company Secretarial Clinical Directorate Nursing and Pharmacy Strategy, Business Development, Funder Management & 2 Hospital Execs 1 Healthcare Services Exec Company Secretarial Information Management Management & Health Policy

Hospital Exec Inland Hospital Exec Coast HCS Exec Rms 17 years service RM WC RM KZN RM PE RM EL RM N RM C RM E RM W 750 beds 555 beds 1 403 beds 751 beds 1 482 beds 1 316 beds 784 beds 1 238 beds Life Occupational Health Life Esidimeni

45

Future Guidance

• CEO Change
• Time is right

Time is right

• Leave behind a company:

2. Primed for growth h it l b d

• hospital beds
• business opportunities

» Renal dialysis » Affordable maternity

46

Geographic spread

Registered beds 2013

MP Beds 2013: 419 Botswana Total Beds 2013: 8 279 NW B d 2013 354 GTN Beds 2013: 132 Beds 2013: 354 GTN Beds 2013:3 617 KZN Beds 2013:1 403 FS Beds 2013: 298 WC B d 2013 750 EC Beds 2013: 298 Beds 2013: 750 EC Beds 2013:1 306

Geographic spread

WIP beds 2013

MP Beds 2013: 419 WIP: 20 Botswana Total Beds 2013: 8 279 WIP: 325 T t l 8 604 NW B d 2013 354 GTN Beds 2013: 132 Total: 8 604 Beds 2013: 354 GTN Beds 2013:3 617 WIP: 106 KZN Beds 2013:1 403 WIP: 132 FS Beds 2013: 298 WC B d 2013 750 EC WIP: 132 Beds 2013: 298 WIP: 16 Beds 2013: 750 WIP: 12 EC Beds 2013:1 306 WIP: 39

Geographic spread

Approved beds

MP Beds 2013: 419 WIP: 20 Botswana Total Beds 2013: 8 279 WIP: 325 A d 559 NW B d 2013 354 Approved: 95 GTN Beds 2013: 132 Approved: 559 Total: 9 163 Beds 2013: 354 Approved: 59 GTN Beds 2013: 3 617 WIP: 106 Approved: 23 KZN Beds 2013:1 403 WIP: 132 FS Beds 2013: 298 WC B d 2013 750 EC WIP: 132 Approved: 107 Beds 2013: 298 WIP: 16 Beds 2013: 750 WIP: 12 Approved: 235 EC Beds 2013:1 306 WIP: 39 Approved: 40

Geographic spread

Licence Pending beds – 50%

MP Beds 2013: 419 WIP: 20 Botswana Total Beds 2013: 8 279 WIP: 325 A d 559 NW B d 2013 354 Approved: 95 Pending: 75 Total: 609 GTN Beds 2013: 132 Approved: 559 Pending: 567 Total: 9 730 Beds 2013: 354 Approved: 59 Pending: 23 Total: 436 GTN Beds 2013: 3 617 WIP: 106 Approved: 23 Pending: 209 KZN Beds 2013:1 403 WIP: 132 FS Beds 2013: 298 Total: 3 935 NC Pending: 75 WC B d 2013 750 EC WIP: 132 Approved: 107 Pending: 37 Total 1 679 Beds 2013: 298 WIP: 16 Total: 314 Beds 2013: 750 WIP: 12 Approved: 235 Pending: 10 Total: 1 004 EC Beds 2013:1 306 WIP: 39 Approved: 40 Pending: 138 T t l 1 524 Total: 1 524

Future Guidance

• CEO Change
• Time is right

Time is right

• Leave behind a company:

2. Primed for growth I t ti l

• International

» India

• Continued improvement in revenue – additional beds become
• perational
• Continued improvement in Ebitda due to cost saving initiatives
• Equality shareholding with MHC

q y g

• Other growth opportunities

» Africa

• Ghana
• Ghana

» Eastern Europe

• Poland

51

Future Guidance

• CEO Change
• Time is right

Time is right

• Leave behind a company

3. Culture of continuous efficiency improvement C t t f

• Cost management focus
• Strong Procurement system
• ARM pricing and preferred network model
• Detailed analysis and reporting
• Impilo system – no need for an external IT platform
• Always reviewing efficiency opportunities

y g y pp

» Blood gas

52

Future Guidance

• CEO Change
• Time is right

Time is right

• Leave behind a company:

4. Sustainability focus W ld l lit t t

• World class quality management system

» Measurement, reporting & benchmarking of clinical outcomes » Continually reviewing outcome measures

D t h h ldi d l

• Doctor shareholding model

» Doctors hold a non-controlling interest in 54% of registered beds

• Emphasis on clinical training

» R78m 6 year specialist training investment » 920 nurses in training » 87 pharmacist assistants in training

53

Future Guidance

• CEO Change:
• Time is right

Time is right

• Leave behind a company:

5. History of performance

3000 3500 Normalised Ebitda 12 000 14 000 Revenue Growth CAGR: CAGR: 1500 2000 2500 6 000 8 000 10 000 12.9% 19.4% 500 1000

• 2 000

4 000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Normalised Ebitda

• 2000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Revenue

54

Interim Results Presentation

For 12 months ended 30 September 2013

www.lifehealthcare.co.za

Shareholding

60 % 50 60 40 20 30 10 SA N America UK Europe Rest Sep-13 Mar-13 Sep 13 Mar 13

56

Glossary of terms

AMI Acute myocardial infarction HEPS Headline earnings per share AMS Antimicrobial stewardship ICU Intensive care unit Approved Received Health department licence approval. Have not commenced building MHQ 14 Mental Healthcare questionnaire 14 ARM Alternative reimbursement model NHI National Health Insurance CAUTI Catheter-related urinary tract infections Normalised Ebitda Earnings before interest, depreciation and amortisation (defined as

• perating profit plus depreciation, amortisation of intangibles,

impairment of goodwill as well as excluding profit/loss on disposal

• f business/property and surplus/deficits on retirement benefits)

CC Competition Commission NPS Net promoter score CLABSI Central line associated bloodstream infections LOH Life Occupational Healthcare COE Centre of excellence PPD Paid patient day COID Compensation for occupational injuries and diseases PROMS Patient reported outcomes measures DSO Days sales outstanding SSI Surgical site infections EBITDA Earnings before interest, depreciation and amortisation STC Secondary tax on companies FIM/FAM Functional Independence measure Functional assessment measure VAP Ventilator associated pneumonia HAI Health associated infections WIP Work in progress

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p g

Life Healthcare

History

Phase Time Period Event

C ti 1983 Af i d A d 4 h it l Creation 1983

• Afrox acquired Ammed group – 4 hospitals

Phase 1 growth 1985 - 1998

• Acquisition of 14 additional individual hospitals
• Acquisition of PE Hospital group (5 hospitals), including 1st

mental health nit mental health unit

• Built The Glynnwood and Empangeni hospitals
• Purchase of Gaborone Hospital
• Started Occupational Health business

Opened 1st acute rehabilitation unit

• Opened 1st acute rehabilitation unit

Listing 1999

• Merged with Presmed in a reverse listing and changed name

to Afrox Healthcare Ltd Started management of Lifecare (now Life Esidimeni)

• Started management of Lifecare (now Life Esidimeni)

Phase 2 growth 2000 - 2004

• Acquired 55% of Lifecare
• Acquisition of 3 additional independent hospitals
• Acquisition of Amahosp group (4 hospitals)

Acquisition of Amahosp group (4 hospitals)

• Launched renal dialysis
• Built Roseacres and Humansdorp hospitals
• Launched UK project – PHG JV

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Life Healthcare

History

Phase Time Period Event

D li ti d 2005 2009 D li t d Af H lth De-listing and phase 3 growth 2005 - 2009

• Delisted Afrox Healthcare
• Established Life Healthcare
• Acquired remaining stake in Life Esidimeni
• Sold 50% share in PHG JV

B ilt Lif F

• Built Life Fourways
• Built Life Cosmos

f G Re-listing and phase 4 growth 2010 -

• Re-listed as Life Healthcare Group Holdings Ltd
• Built Life Orthopaedic hospital
• Built Life Beacon Bay
• Acquired Life Bay View Private hospital

O d Lif Gl i Lif St J h d Lif P t i

• Opened Life Glynnview, Life St Josephs and Life Poortview

mental health units

• Opened Life Vincent Pallotti acute rehabilitation
• Built Life Piet Retief hospital

A i d 26% h i M H lth I tit t (MHC)

• Acquired a 26% share in Max Healthcare Institute (MHC)
• Added over 1,000 beds between 2010 and 2012

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Private healthcare insurance Industry

Growth in members

Medical scheme lives

000 8 500 9 000 000 7 000 7 500 8 000 6 000 6 500 2004 2005 2006 2007 2008 2009 2010 2011 2012

Comment

• Strong growth in covered lives since 2004

Source: Council of Medical Schemes

St o g g o t co e ed es s ce 00

• Benefitting from growth in middle class
• Big impact from GEMs and low income schemes (scheme options) such as Keycare

and Boncap

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Source: Council of Medical Schemes

Growth in Middle Class

Middle class lives

000 7 500 8 000 8 500 9 000 000 5 500 6 000 6 500 7 000 7 500 4 000 4 500 5 000 5 500 2004 2008 2012

Comment

• Middle class defined as an adult living in a household with income between R16,000

Source: UCT Unilever Institute of Strategic Marketing

dd e c ass de ed as a adu t g a

• use o d

t co e bet ee 6,000 and R50,000 per month

• 54% growth since 2004
• Driven by strong growth in black middle class (142% increase)

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Source: UCT Unilever Institute of Strategic Marketing

Private healthcare insurance Industry

Earnings breakdown of members

Individual taxpayers using medical expenses deduction in 2009

R0 and less, 2.1% R1 to R2,500pm, 2.2% R2,501 to R5,000pm, 5.9% R33,334 to R441,667pm, R41,668 to R62,500pm, 3.5% R62,501 and over, 2.4% , , p , R5,001 to R7,500pm, 11.2% R25,001 to R33,333pm, 7.1% 33,33 to ,66 p , 3.6% R7,501 to R10,000pm, 14.2% R16,668 to R25,000pm, 15.3% R10,001 to R12,500pm, 15.1% R12,50` to R16,667pm, 17.3% Source: IMSA Policy brief 21

Comment

• Little over half of all members using tax deduction earn under R12 500 per month

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Little over half of all members using tax deduction earn under R12,500 per month

Burden of Disease

Worldwide

• 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

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Global Burden of Disease Report - WHO

Burden of Disease

South Africa

Germany

• Nearly 40% share of HIV/AIDS in total

Diseases as % of total burden

Brazil Ghana Indonesia USA UK Germany

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

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% South Africa

HIV/Aids Other Communicable Non-communicable Injuries

g g population

• High incidence of non communicable

disease such as heart disease, cancer and diabetes

Source: Econex calculations from WHO 2009 data

40 000 50 000 0 of the

• n
• Very high infection rate and disease

burden, even compared with developing countries

Burden of disease vs. other countries

Developing markets Developed markets

10 000 20 000 30 000 S G C S C G DALY's/100,000 populatio

countries

• Burden of HIV/AIDS expected to

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

• SA has substantially higher numbers of

SA Ghana Indonesia Thailand Brazil Colombia Tunisia USA UK Canada Germany

• SA has substantially higher numbers of

sick people who are also sicker than those in other countries

Source: Econex calculations from WHO 2009 data

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

64

than in developed countries

Burden of Disease

Growth in Chronic, Cancer, HIV/AIDS

The burden of CDL Chronic Diseases, Cancer and HIV/AIDS in South Africa, 1985 to 2025

65

Source: IMSA

South Africa’s population

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

g g y p g p p g average for patients under 50

• Ageing patterns and larger absolute population size are important demand drivers for healthcare services

South African population by age South African population by age

74+ 70–74 63–73 60–64 53–63

10.4 m 6.7 m

53 63 50–54 43–53 40–44 33–43 30–34 25–33 20 24

7.0 5.0 3.0 1.0 1.0 3.0 5.0 7.0

20–24 15–23 10–14 5–13 0–4

2005A 2030E

Source: UN Population Division.

TOTAL: 48.1 m 54.7 m

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

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helping drive demand for hospital services