Centered around you HEALTH & CARE - NETCARE LIMITED
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
NETCARE LIMITED Unaudited Interim Group Results for the six months ended 31 March 2018 HEALTH & CARE Centered around you
Significant changes over the
last 6 months
SA healthcare market Acquisition of Akeso Designing the Netcare Strategic decision to
returned to growth and Clinics enabling growth of tomorrow through exit UK market
Netcare grew market in mental health and digitisation of clinical,
share care services nursing and patient
systems
2
Review of investment
in United Kingdom
3
Original UK investment rationale and market changes
Acquisition - May 2006 2008/9 global financial crisis GHG PropCo 1
• Paid £219m1 for 52.6% of GHG2 • PMI4 membership impacted by • Near-zero interest rates pushed
• Payor mix: 97.5% Private; 2.5% large scale job losses swaps out-of-the-money
NHS3 • By 2018 PMI market still to • Large swap liability a hindrance
• Restructured into OpCo and recover to 2013 debt refinance
PropCo • NHS caseload now ±45% but at • Disciplined capital allocation
• Long-term interest rate swaps lower tariffs approach informed Netcare’s
to fix cost of debt • Several restructures at BMI decision not to invest further
Healthcare to right-size cost funds to secure refinancing
base • Equity taken over by distressed
debt investors
1. Investment made at R11.73 : £1
2. GHG - General Healthcare Group 4
3. NHS - National Health Service
4. PMI - Private Medical Insurance
Strategic decision to exit UK market
Strategic review of UK Rent negotiations BMI funding Conclusion
market
• > 5 years of • Inadequate return for • Netcare acceded to
• Constrained negotiations Netcare if further lenders’ demands
healthcare landscape • Not able to conclude funds invested • Strategic decision to
expected to persist in a rent reduction that • Extension of funding exit UK market
medium to would: by lenders
longer-term - facilitate investment conditional on
• Onerous long-term in estate shareholders
leases and limited - generate an relinquishing control
capital hinders ability appropriate risk- of boards
to adapt adjusted return for
Netcare shareholders
5
So what’s the story…
OUR CORE PURPOSE AND STRATEGY
Driving improved economic value whilst contributing to the transformation and sustainability of our society
• Portfolio of quality healthcare • Advancement in medical technology
assets • Brownfield and Greenfield expansion
• Clinical excellence • New verticals:
• Patient care • Cancer Care
• Attraction and retention of • Mental health
doctors • Day theatres
• Inclusion in funder networks • New opportunities in foreign markets
• Quality outcomes • ‘Asset lighter’ strategy – transferring
• Administrative efficiency hospital beds to higher demand
• Training and development disciplines and/or facilities
• Transformation • Reviewing portfolio performance to
• Community initiatives and ensure optimum returns on capital
social impact
DIGITALLY ENABLING THE NETCARE OF TOMORROW
7FINANCIAL OVERVIEW – CONTINUING OPERATIONS
Revenue Normalised EBITDA1 Adjusted HEPS2 from Interim dividend
continuing operations
R9 966m R2 080m 44.0 cents
▲8.2% ▲8.1% 87.7 cents ▲15.8%
▲8.5%
1. Normalised to exclude impairment of contractual economic interest in BMI Healthcare debt and profit on sale of old Netcare Christiaan Barnard Memorial Hospital land and buildings
2. Adjusted to exclude Competition Commission costs, settlement loss on forward exchange contract, non-cash gains/(losses) on derivative financial instruments, impairments, UK 8
restructure costs and Akeso related transaction costsGlobal industry fundamentals driving local growth
Aging, chronic illness and cancer continue to drive increased utilisation of healthcare
Aging Diabetes Mental health Cancer
The number of people Globally, the number Depression is the leading On a global level, the
aged over 60 of people with cause of ill health and incidence of cancer
expected to double by diabetes expected to disability worldwide and expected to increase
20501 increase by 54% by increased 18% between 70% over the next 20
20402 2005 and 20152 years3
1. United Nations, World Population Aging 2017
2. The Economist Intelligence Unit – World healthcare and pharmaceutical outlook June 2017 9
3. World Health Organisation, Cancer—Key Facts, February 2015, http://www.who.int/mediacentre/factsheets/fs297/en/ accessed July 12, 2016.Our local market mirrors the global trend
Aging, chronic illness and cancer continue to drive increased utilisation of healthcare
Chronic diseases are expected to increase by 57% by 20201
79% of deaths worldwide attributable to chronic diseases
occur in developing countries – World Health Organisation1
Number of members with a chronic condition such as diabetes
or high blood pressure continues to increase, and has more
2020 than doubled since 2008 - Discovery Health2
Aging, burden of disease and new technology drives 50% of growth
in total claims - Medscheme3
57%
Increased prevalence of bipolar disorder per 1 000
beneficiaries of 228.6% over 7 years - Council for Medical Schemes4
And 60% of this burden will occur in emerging markets
1. http://www.who.int/nutrition/toncs/2_background/en
2. Claims Tracker 2017 10
3. Medscheme Healthcare Market Inquiry submission
4. Council for Medical Scheme Annual Report 2013Netcare’s operating platform
21 297 66
EMPLOYEES HOSPITALS
7 5
PUBLIC PRIVATE
TRAINING PARTNERSHIP
COLLEGES HOSPITALS
79 11 416
NETCARE 911
BEDS1
SITES
860 422
RENAL DIALYSIS THEATRES
STATIONS
15 10
CANCER CARE
DAY THEATRES
CENTERES
1.
2.
SA = 10 180; Lesotho = 425; Akeso = 811
Medicross medical and dental centres, sub-acute facilities
and travel clinics
95 11
PRIMARY HEALTHCARE FACILITIES2HOSPITAL AND EMERGENCY SERVICES
Expansion hospitals have shown growth above market
Occupancy:
Full week: 65.0% Revenue growth
▲3.5% (H1 2017: 63.2%) 20.0%
patient days
Weekday: 70.8%
(H1 2017: 69.0%)
15.0%
10.0%
No new beds 5.0%
commissioned
30 ▲51
0.0%
specialists with
beds moved to higher FY13 FY14 FY15 FY16 FY17
practising privileges
demand disciplines and All hospitals Expansion hospitals
facilities
12HOSPITAL AND EMERGENCY SERVICES - FINANCIAL PERFORMANCE
31 MAR 31 MAR
Rm 2017 1 2018 % • ▲ 5.1% revenue per patient day
• ▲ 3.5% patient days
Revenue 8 818 9 637 9.3
• Restructure of emergency services
EBITDA 1 874 2 068 10.4 completed and Mozambican operations
Operating Profit 1 577 1 745 10.7 closed
• Normalised to exclude profit on sale of old
EBITDA Margin (%) 21.3 21.5 Netcare CBMH2 land and buildings,
impairment of contractual economic
Operating profit margin (%) 17.9 18.1 interest in BMI Healthcare debt, Akeso
acquisition costs and UK advisory fees of
Note: EBITDA and operating profit are reflected before rental charges from Netcare R39m
property companies (eliminate on consolidation)
• 21.1% inclusive of acquisition and
advisory fees
1. Restated for discontinued Netcare 911 Mozambican operation
2. Christiaan Barnard Memorial Hospital 13PRIMARY CARE - FINANCIAL PERFORMANCE
31 MAR 31 MAR
Rm 2017 2018 %
•
•
Major structural changes in FY2017
Underlying revenue growth of 7.4%
Revenue 389 329 (15.4) • 3 new Medicross medical and dental centres
EBITDA 50 51 2.0 • New day theatres in Upington and
Kimberley ramping up in-line with
Operating Profit 28 27 (3.6) expectations
EBITDA Margin (%) 12.9 15.5
• Transformation of the business reflected in
Operating profit margin (%) 7.2 8.2 higher margins
14Enabling Netcare’s participation in mental health
Akeso’s unique mental health & care offering
12 hospitals1 Specialised programmes:
811 beds
28% market share Akeso’s ultimate aim is to • Integrated and family-oriented
treatment for a range of psychiatric,
psychological and addictive disorders
change the direction of patients’ • Run by multi-disciplinary teams
• Guiding principle is to plan for life
Specialised units: lives by providing strategies for beyond the initial programmes
• General psychiatric
• Dual diagnosis
• Young adult
sustainable mental health
• Substance abuse
• Geriatric
• Eating disorder
1. Akeso George closed for 2018 due to expansion project
16Established person centered clinical programmes delivered by multidisciplinary clinicians 17
AKESO’S HISTORY OF CONTINUED GROWTH
Arcadia - 2018 Total number of beds
2017 - Nelspruit 928
Umhlanga - 2016 872
811
2016 - George
741
Milnerton - 2015
654
2015 - Montrose Manor
Stepping Stones - 2013 529
2013 - Kenilworth Clinic
432
404
Parktown - 2012
2011 - Alberton 290
Pietermaritzburg - 2011 218
2008 - Randburg
85
2010 2011 2012 2013 2014 2015 2016 2017 Mar-18 Sep-18 Sep-19
18Quality, innovation and sustainability
Driving safer & improved quality of care through innovation
Multi-resistant organisms or “super bugs” pose the greatest threat to global healthcare
Pulsed-ultraviolet light robots Mobile app development
• Netcare is the first in Africa to introduce Hand hygiene App:
pulsed-ultraviolet light robots to disinfect • Monitors compliance to the World Health
our hospitals Organisation’s five crucial moments for
hand disinfection
• Besides bacteria, fungi are also now • Keeps hand disinfection top of mind as a
becoming resistant to treatment and high-priority measurable
Netcare has clinically demonstrated that
these robots are equally effective in Surgical antibiotic App:
eliminating these organisms
• Reviews preventative antibiotic usage
pre-surgery ensuring patients receive the
appropriate antibiotic in terms of type,
dose, time and duration
20Person centered care, digitally enabled
Global partnership to deliver mobile electronic patient records on Apple iOS platform
Improves patient care Allows doctors to Downloads all clinical Improves World leading drug
and safety, accuracy of access records offsite information directly administration and case interaction software
records and allows and respond from various monitors management automatically flags and
patients quick and easy immediately if freeing-up nurses to capabilities prevents potential drug
access to their own necessary spend more time on interactions or
medical records their primary function medication related
of caring for our errors
patients
21Why digital matters
22Committed to enhancing sustainability
Update on Netcare’s 10 year sustainability programme, started in 2013
Now in year 5, achieved 20% reduction in energy Several other initiatives rolled out such as more
intensity, on track to achieve 30-35% over 10 year efficient domestic hot water systems and air-
programme conditioning
One of SA’s largest solar PV1 programmes at 45 New hospitals in Waterfall, Polokwane, Pinehaven
facilities, producing 8.6 MW peak of solar energy and Cape Town foreshore designed to operate at an
and 14 GWh per annum energy intensity of between 30-40% below older
hospitals
Lighting upgrades to replace over 130 000 In addition to cost avoidance benefits, now realising
luminaires at 69 facilities, reducing utilisation a real reduction year-on-year in electricity costs,
by 19 GWh despite electricity tariff and patient volume
increases
1. Photovoltaic
23Self sustainable water provision in the Western Cape
Programme to ensure Desalination plant Boreholes sunk at all Water saving initiatives
sustainability in the installed at Netcare Western Cape have significantly
event of CBMH1 hospitals, several reduced water
Day Zero
Medicross and NRC2 utilisation per patient
facilities
1. Christiaan Barnard Memorial Hospital
2. National Renal Care
24Committed to enhancing sustainability
14 000 hospitals represented - Netcare one of two groups globally to receive awards in all categories
Netcare is included in:
Dow Jones Dow Jones
Sustainability World Sustainability
Market Index Emerging Markets
Index
FTSE Russell/JSE FTSE4 Good
Responsible Emerging Index
Investment Index
25Contributing to alleviating youth unemployment
Playing our role in optimising the potential of our society
Anchor participant in YES campaign Have already partnered with HWSETA1
launched by President Ramaphosa and trained and employed 51 previously
unemployed and unskilled youths
Committed to train and employ Actively training over 3 500 nurses and
1 000 unemployed youths over allied healthcare professionals per year
next 5 years with guarantee of
employment and potential career
progression
1. Health and Welfare Sector Education and Training Authority
26Driving sustainability and enterprise development
New joint venture with Adcock Ingram Critical Care to make shoes for school children from recycled drip bags
Not for profit JV established to recycle drips and
other PVC products
Creates employment and enterprise development
opportunities in areas of PVC sorting, transportation,
recycling and shoe manufacturing
Currently in operation at 5 Netcare hospitals – to be
rolled out across all hospitals
Broader vision for project is to include public sector
facilities in the future
Reduces landfill waste and improves
environmental sustainability
27Financial review
GROUP FINANCIAL OVERVIEW
Robust performance UK exit: Akeso acquisition: Strong Group statement
from SA operations • Results consolidated • Effective of financial position and
for H1 2018 but 27 March 2018 solid cash generation
reclassified as a • Included in Group
discontinued statement of financial
operation position at
• Deconsolidation 31 March 2018
effected at • Trading results will
31 March 2018 only be included
• Creates a structural from H2 2018
change to Group
statement of financial
position
29DISCONTINUED OPERATIONS AND EXCEPTIONAL ITEMS
31 MAR 31 MAR
Rm 2017 2018
Discontinued operations
• Decline in underlying UK trading performance
Trading losses (5) (388)
RPI swap fair value adjustment (net of tax)1 651 (85)
646 (473)
• Economic and contractual rights remain
Exceptional items intact – BMI Healthcare remains liable for
obligations
Impairment of economic interest in BMI debt1 (1 534) • Prudent accounting approach adopted
based on factors in existence at
Profit on loss of control1 4 205
31 March 2018
Profit on sale of Netcare CBMH land and
203
buildings
• Exclusion of negative UK net asset value of
Tax effect (34) 232 R2 229m
• Realisation of Foreign Currency Translation
169 2 903 Reserve of R1 976m
1. Non-cash
30UK - BMI HEALTHCARE
31 MAR 31 MAR
£m 2017 2018 %
• ▼4.5% NHS cases
Revenue 458.0 438.9 (4.2) • ▼9.6% PMI cases
EBITDAR¹ (before items below) 107.1 88.2 (17.6) • ▲2.3% Self-pay cases
Property rentals (83.1) (85.1) (2.4)
• GHG PropCo 1
EBITDA¹ (before items below) 24.0 3.1 (87.1)
£73.8m (2017: £72.1m)
Strategic restructuring costs (9.6) • GHG PropCo 22
EBITDA¹ 24.0 (6.5) (127.1) £3.7m (2017: £3.6m)
• Other
Operating profit¹ 6.0 (20.3) (438.3) £7.6m (2017: £7.4m)
EBITDAR margin (%) 23.4 20.1
EBITDA margin (%)³ 5.2 0.7
Reported EBITDA margin (%) 5.2 (1.5)
Operating profit margin (%) 1.3 (4.6)
1. Normalised to exclude onerous lease provision utilisation
2. More information relating to Netcare’s 56.9% interest in GHG Propco 2 is contained on slide 34 31
3. Excluding strategic restructuring costsSUMMARISED GROUP STATEMENT OF PROFIT OR LOSS
31 MAR 31 MAR
Rm 2017 1 2018
%
Revenue 9 207 9 966 8.2
• EBITDA margin
EBITDA2 1 924 2 080 8.1 20.9% (2017: 20.9%)
Operating profit2 1 605 1 733 8.0 • Interest on economic
Net financial expenses (91) (86) interest in BMI debt:
R104m (2017: R77m)
Earnings of associates and JVs 49 43
Profit before taxation² 1 563 1 690 8.1
• Normalised effective
Taxation² (436) (479) tax rate
28.3% (2017: 27.9%)
Profit after taxation from continuing operations² 1 127 1 211 7.5
Discontinued operations 646 (473)
Profit after taxation² 1 773 738
Exceptional items 169 2 903
Profit for the period 1 942 3 641
1. Restated for discontinued operations
2. Normalised to exclude impact of exceptional items separately disclosed 32HEADLINE EARNINGS PER SHARE (HEPS)¹
31 MAR 31 MAR
Cents per share 2017 2018 %
ADJUSTED HEPS² (CENTS)
HEPS 80.3 (10.6) (113.2)
H1 H2
Adjusted HEPS² 80.8 87.7 8.5
89.8
Contribution from Netcare’s
interest in BMI debt
(cents per share) 2017 2018
H1 4.1 5.4
H2 6.3
Full year 10.4 5.4 80.8 87.7
2017 2018
1. Continuing operations
2. Adjusted to exclude Competition Commission costs, settlement loss on forward exchange contract, non-cash gains/(losses) on derivative financial instruments, impairments, UK restructure 33
costs and Akeso related transaction costsSUMMARISED GROUP STATEMENT OF FINANCIAL POSITION
30 SEP 31 MAR FOREX AKESO OTHER
Rm 2017 2018 EFFECT UK EXIT ACQUISITION MOVEMENT
Assets
PPE, goodwill and intangible assets 15 945 13 488 (349) (3 704) 1 489 107
Other non-current assets 4 008 1 401 (192) (2 389) (26)
Current assets 8 116 4 741 (223) (3 039) 99 (212)
Assets classified as held for sale 43 292 (1) 2031 472
Total assets 28 112 19 922 (765) (8 929) 1 588 (84)
Equity and liabilities
Total shareholders’ equity 8 862 9 840 120 927 3 (72)
Borrowings 8 910 6 211 (332) (3 517) 1 337 (187)
Other liabilities 10 340 3 871 (553) (6 339) 248 175
Total equity and liabilities 28 112 19 922 (765) (8 929) 1 588 (84)
1. Netcare’s 56.9% interest in GHG PropCo 2 – six hospital properties with rental cover at operating facilities of approximately 2.0 times
2. Netcare 911 Mozambique operations; Netcare Rand and Netcare Bell Street hospitals 34SA DEBT
FACILITY UTILISATION (Rm)
31 MAR 30 SEP 31 MAR
Rm 2017¹ 2017 2018 Utilised Cash Available
Gross debt 5 047 5 490 6 211
6 689
Cash (323) (1 582) (629)
Net debt 4 724 3 908 5 582
Net debt to EBITDA² (times) 1.2 1.0 1.3
629
Cost of debt (%) 8.9 8.9 8.7
Net interest paid:
6 211
Other net interest paid 168 341 188
Interest received – BMI debt (77) (195) (104)
• Cash outlay of R1 767m (2017: R2 050m) for capex,
91 146 84 dividends and tax
• Akeso acquisition:
• Consideration paid: R1 233m
Interest cover² (times) 17.6 22.8 20.6 • Net debt acquired: R242m
1. Restated for discontinued operation
2. Normalised to exclude impairment of contractual economic interest in BMI Healthcare debt and profit on sale of old Netcare Christiaan Barnard Memorial Hospital land and buildings 35Guidance
Guidance
FY 2018 organic growth Impact of Akeso in H2 Modest EBIDTA margin FY 2018 capital
in patient days 2018 is expected to be expansion expected expenditure
between 2% - 3%; earnings neutral ±R1.4 billion
including Akeso
5% - 6%
37Thank you
You can also read
