GROUP RESULTS YEAR ENDED 30 SEPTEMBER 2014 Date: 14 November 2014 AGENDA 2 Operational Review Financial Review Outlook André Meyer Pieter van der Westhuizen André Meyer CEO CFO CEO HIGHLIGHTS GROUP Revenue Normalised EBITDA 3 +10.2% TO R13 046m +8.2% TO R3 611m Normalised EPS +12.0% TO 168.6 cents Dividend +11.9% TO 141.0 cps Previous years’ numbers where used for comparative purposes have been restated for changes in accounting standards. Normalised earnings exclude non-trading related items such as profit/loss on disposal of assets and businesses and associated costs. HIGHLIGHTS GROUP GROWTH EFFICIENCY 4 QUALITY SUSTAINABILITY HIGHLIGHTS GROUP Operational Review SA growth • PPD growth • New beds GROWTH 2.0% 249 International growth • Concluded shareholding equalisation with Max India • Strong H2 operational performance from MHC • Entered Polish market through acquisitions of Scanmed Multimedis, Weiss Clinic and Gastromed SA Efficiency EFFICIENCY • Occupancy 71.9% • Normalised EBITDA margin 27.9% Max Healthcare efficiency: • Occupancy • Normalised EBITDA margin 5 • 77.0% 9.9% Normalised EBITDA margin : Apr – Sept 10.7% HIGHLIGHTS GROUP QUALITY Operational Review • Continued improvement in clinical outcomes • 94 specialised nurses recruited from India SUSTAINABILITY • 888 nurses graduated • 1 400 students enrolled for 2015 6 SA: GROWTH PPDS Operational Review PPDs (000) 2 200 2.0% 2 000 2.7% 1 800 1 600 1 400 2012 Bed growth 7 292 2013 2014 95 249 SA: GROWTH ACUTE BEDS Operational Review H1 2014 H2 2014 Total beds 142 107 249 Number of beds Number of hospitals ICU/HC beds General beds H1 142 9 37 105 H2 107 7 14 93 Total 249 16 51 198 Category Capacity expansion at existing facilities Bed breakdown • Majority of H2 beds added in August/September • Continued focus on increasing ICU beds • Broad based growth to take advantage of areas with strong demand 8 SA: GROWTH ACUTE BED PIPELINE Operational Review 2014 2015 Approved beds* 249 148 561 339 New facilities - 94 300 88 Acquisition - 50 - - 249 292 861 427 Category Capacity expansion at existing facilities Total Applications pending • Acquisition subject to CC approval – expect decision early 2015: − Operational beds: 50 − Licenced beds: 125 • Strong pipeline of acute beds – consistent growth • Good transition from Applications pending to Approved beds • Retained focus on brownfield growth 9 • 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 SA: GROWTH COMPLEMENTARY BUSINESS Operational Review Redefined our New lines of business as our Complementary businesses: Mental Health 6 facilities 386 beds Acute Rehabilitation 7 facilities 319 beds Renal Dialysis 14 facilities 178 Stations Oncology 1 Radiosurgery and Chemotherapy unit at Life Vincent Pallotti Rm Complementary revenue 600 Renal treatments CAGR 24.1% CAGR 40.0% 400 200 0 10 361 444 556 2012 2013 2014 2012 2013 2014 SA: GROWTH COMPLEMENTARY BUSINESS PIPELINE Operational Review 2014 2015 Approved beds* Mental Health - - 61 249 Acute Rehabilitation - - 15 50 Total - - 76 299 56 34 2 units - Category Renal stations Oncology units 1 unit Applications pending • Renal dialysis business continues to show good growth • Adding a Radiosurgery and Chemotherapy Oncology centre to the new Life Hilton hospital • Considering expanding the Oncology product into other major metropols 11 • 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. SA: GROWTH GROUP BUSINESS PIPELINE 2014 2015 Approved beds* 249 148 561 339 New facilities - 94 300 88 Acquisition - 50 - - Mental Health - - 61 249 Acute Rehabilitation - - 15 50 249 292 937 726 Renal stations 56 34 Oncology units - 1 unit 2 units - Category Capacity expansion at existing facilities Total 12 Operational Review Applications pending • 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. SA: EFFICIENCY EFFECTIVE USE OF ASSETS 74% Operational Review Group Occupancy ICU occupancy: 77% 72% 70% 68% 66% 64% Bed growth 71,2% 71,7% 71,9% 2012 2013 2014 292 95 2012: Bed occupancy split 249 2014: Bed occupancy split 13% 21% Beds 70%+ occupancy 14% 23% Beds 70%+ occupancy 24% 63% 22% 64% 42% 41% 13 <60% 60-69% 70-79% 80%+ <60% 60-69% 70-79% 80%+ SA: EFFICIENCY EFFECTIVE USE OF ASSETS 80 Operational Review Occupancy split between Acute and Complementary occupancy* 76 72 68 64 71,3 69,2 71,2 2012 Acute occupancy Bed growth 14 158 134 292 71,5 72,2 71,7 2013 Complementary occupancy 75 20 95 71,5 76,7 71,9 2014 Group occupancy 249 * Complementary business includes Mental Health and Acute Rehabilitation in the occupancy calculation. - 249 SA: EFFICIENCY EBITDA MARGIN – CONTINUING BASIS Operational Review 30% 28% 26% 24% 22% 20% 26,6% 28,2% 27,9% 2012 2013 2014 • Increase in Surgical cases negatively impacted margin • No bed growth in Mental Health and Acute Rehabilitation also negatively impacted the margin • Strong management of cost of sales procurement despite Rand weakness 15 EFFICIENCY IMPROVING AFFORDABILITY OF CARE Cost of Care project: Operational Review 40 000 Number of tests • Key project in driving healthcare efficiency focus on the entire cost of a hospital event • Continuation of efficiency drive to reduce the cost of healthcare Blood Gas project: 30 000 20 000 • Completed blood gas roll-out • Financial benefits are shared with medical schemes • R50m of savings will be passed back to members of medical schemes in 2015 10 000 0 Jan Feb Mar Apr May Jun 16 Jul Aug Sept EFFICIENCY IMPILO RE-ENGINEERING 2011-2013 Deployed and completed: • Patient administration • Case management • Accommodation billing • e-Pharmacy dispensing • e-Theatre billing (pilot) Operational Review 2014 • e-Ward billing • e-Claims • Inventory management • Accounts receivable • Debt management 2015 National rollout of complete HIS system 2016 Clinical information systems (CIS) 2015 Focus • • 17 Reducing cost of care Reducing administrative burden • Improving staff, doctor and patient satisfaction • • Re-engineering current manual processes Leveraging off new technology SA: QUALITY MEASURING CLINICAL OUTCOMES Operational Review Outcome Sep 2014 Outcome Sep 2013 Patient incident rate 2.88 3.24 Per 1 000 PPDs HAI (Healthcare Associated Infection) 0.44 0.51 Per 1 000 PPDs VAP (Ventilator Associated Pneumonias) 1.91 2.69 Per 1 000 VAP days SSI (Surgical Site Infections) 0.76 0.74 Per 1 000 theatre cases CLABSI (Central Line Associated Blood Stream Infections) 0.85 0.83 Per 1 000 central line days CAUTI (Catheter-related Urinary Tract Infections) 0.40 0.57 Per 1 000 catheter days FIM/FAM score 1.14 1.14 >0.9 MHQ14 efficiency (average gain/PPD) 2.39 Standard >1.6 5 4 3 2012 2 2013 1 2014 0 VAP 18 SSI CLABSI CAUTI Patient incident rate SA: SUSTAINABILITY REGULATORY ENVIRONMENT Operational Review Competition Commission (CC) Healthcare Market Inquiry • Recap: − Inquiry will entail an in-depth analysis of the healthcare industry with a focus on the drivers of healthcare costs − Conduct a regulatory impact assessment − Make recommendations on appropriate policy and regulatory mechanisms − Make recommendations with regards to competition policy • LHC has made a detailed submission on the subject matter of the Inquiry • Next steps: − 1 March to 30 April 2015: Public hearings − 1 May to 31 July 2015: Analysis and targeted public hearings and information requests 19 INTERNATIONAL: MAX HEALTHCARE OVERVIEW Operational Review Max Healthcare: • In July announced shareholding equalisation: − increasing shareholding to 46.25% from 26% − R1.35bn cost − Concluded on 10 November 2014 • In line with the Company’s growth strategy in India • The transaction concluded through a 50% primary issue of new MHC shares and a 50% secondary acquisition of MHC shares held by Max India. The primary issue will be used to reduce debt and to fund further expansion • LHC has joint control of MHC with Max India • A Transformation office has been set-up to manage key operational projects • A strong performance since March 2014 in terms of capacity growth, revenue and EBITDA margin improvement 20 INDIA: MHC BED GROWTH Operational Review Bed capacity Operational beds Sep 2014 Operational beds Mar 2014 Operational beds Sep 2013 1 080 1 079 1 066 1 040 Shalimar Bagh 288 185 158 150 Mohali 204 203 179 141 Bathinda 205 80 59 56 Dehradun 201 130 109 89 Total new 898 598 505 436 1 978 1 677 1 571 1 476 Phase 1 Hospitals Phase 2 Hospitals Combined total 301 beds still to be operational 21 Beds as of 30 September 2014 106 additional beds opened INDIA: MHC OCCUPANCY Operational Review Bed capacity Phase 1 Hospitals Operational beds 30 Sep 2014 Occupancy Sep 2014 1 080 1 079 78% Shalimar Bagh 288 185 79% Mohali 204 203 71% Bathinda 205 80 76% Dehradun 201 130 73% Total new 898 598 75% 1 978 1 677 77% Phase 2 Hospitals Combined total 22 Beds as of 30 September 2014 Weighted occupancy INTERNATIONAL: POLAND SCANMED ACQUISITION • In April 2014 agreed the purchase of 80.7% of Scanmed Multimedis • Scanmed acquisition has given LHC an ideal entry into the Polish market given its strong management team and leading brand 23 Operational Review INTERNATIONAL: POLAND SCANMED ACQUISITION Operational Review Outpatient services: • Primary Healthcare: − Registered population – 129 000 people at end of 2013 − Highly-profitable structure of registered PHC population groups with the lowest medical loss ratio • Medical centres: − 28 centres in 11 locations; facilities with treatment rooms, including rehabilitation center, dentistry and psychiatry − Diagnostic services Inpatient services: − St. Raphael Hospital › High tech, newly built hospital NHF contract 24 › Strategic location – the only twenty-four-hour, multi-profile hospital in the southern part of Krakow Locations of Scanmed medical centres INTERNATIONAL: POLAND SCANMED Operational Review • Exciting opportunity for consolidation in the Polish healthcare market • Our strategy is to establish a comprehensive network of facilities covering all major cities and disciplines in Poland • Since the initial acquisition: − Acquired the balance of shares in Scanmed − Acquired: › Weiss Clinic: » 22 bed Ophthalmology facility › Gastromed: » An 8 bed Gastroenterology centre in the Lublin region − In the final stages of a transaction to acquire a 46 bed orthopaedic hospital − In the due diligence stage regarding a leading healthcare provider 25 AGENDA 26 Operational Review Financial Review Outlook André Meyer Pieter van der Westhuizen André André Meyer Meyer CEO CFO CEO CEO HIGHLIGHTS GROUP Revenue Normalised EBITDA Financial Review +10.2% TO R13 046m +8.2% TO R3 516m Cash generated from operations 27 R3 611m EPS +62.3% TO 267.5 cents Normalised EPS +12.0% TO 168.6 cents Dividend +11.9% TO 141.0 cps Previous years’ numbers where used for comparative purposes have been restated for changes in accounting standards. Normalised earnings exclude non-trading related items such as profit/loss on disposal of assets and businesses and associated costs. HIGHLIGHTS GROUP – CONTINUING BASIS Financial Review Revenue +10.2% TO R13 046m Revenue - continuing +10.7% TO R12 989m Normalised EBITDA +8.2% TO R3 611m Normalised EBITDA - continuing +8.6% TO R3 597m Normalised EPS +12.0% TO 168.6 cents Normalised EPS – excluding Poland +12.7% TO 169.7 cents Continuing: • Excludes revenue from discontinued/disposed businesses • Includes revenue from Poland – acquired 80.7% of Scanmed Multimedis on 16 April 2014 28 Previous years’ numbers where used for comparative purposes have been restated for changes in accounting standards. Normalised earnings exclude non-trading related items such as profit/loss on disposal of assets and businesses and associated costs. FINANCIAL RESULTS GROUP Financial Review Change % 30 Sep 2014 Rm 30 Sep 2013 restated Rm 10.2 13 046 11 834 8.2 3 611 3 337 27.7% 28.2% 4 093 2 874 39 70 2 796 1 767 Revenue Normalised EBITDA Normalised EBITDA margin Operating profit Associates and Joint Ventures Attributable earnings 42.4 (44.3) 58.2 Associates and Joint Ventures JMH (58.2) 41 98 MHC 68.6 (11) (35) Joint Ventures and Other 28.6 9 • JMH sold in February 2014 29 Attributable earnings is defined as earnings attributable to ordinary shareholders 7 FINANCIAL RESULTS GROUP SEGMENTAL REVIEW Change % 30 Sep 2014 Rm 30 Sep 2013 restated Rm 10.2 13 046 11 834 Hospital division 9.1 12 007 11 001 Healthcare services 4.0 864 831 - 2 175 - 9.0 3 256 2 987 11.4 2 905 2 607 135 167 213 213 3 - Revenue SA Financial Review Other International Poland Operating profit before amortisation, profit on disposals and impairment of intangible assets SA Hospital division Healthcare services Other International 30 Poland (19.2) NORMALISED EBITDA GROUP Normalised EBITDA Financial Review Change % 30 Sep 2014 Rm 30 Sep 2013 restated Rm 8.2 3 611 3 337 (14) (26) Discontinued operations Normalised continuing EBITDA 8.6 3 597 3 311 Southern Africa 8.2 3 581 3 311 16 - Poland 31 FINANCIAL RESULTS SOUTH AFRICA Financial Review Change % 30 Sep 2014 Rm 30 Sep 2013 restated Rm 8.8 12 871 11 834 9.2 12 814 11 731 7.7 3 595 3 337 8.2 3 581 3 311 27.9% 28.2% 27.9% 28.2% Revenue Continuing revenue Normalised EBITDA Continuing EBITDA Normalised EBITDA margin Continuing EBITDA margin 32 Continuing revenue excludes the revenue from closed and disposed businesses FINANCIAL RESULTS SOUTH AFRICA: SEGMENTAL REVENUE Financial Review Change % 30 Sep 2014 Rm 30 Sep 2013 restated Rm 8.8 12 871 11 834 Hospital division 9.1 12 007 11 001 Healthcare services 4.0 864 831 – 2 Revenue SA Other Hospital division: • PPD growth: 2.0% • Revenue/ppd: 7.1% − Tariff impact: 6.6% − Case Mix: 0.5% • Complementary revenue growth: 25.2% HCS division: 33 • Growth in continuing revenue: 10.2% • Growth in Occupational Health: 17.5% FIVE YEAR REVIEW SOUTH AFRICA: CONTINUING Financial Review Revenue (R m)* Normalised EBITDA (R m) 556 CAGR: 9.9% 444 361 172 565 216 596 3 311 809 734 657 3 581 CAGR: 13.4% 2 886 2 535 2 164 8 049 9 000 9 816 10 553 11 448 2010 2011 2012 2013 2014 Hospital HCS 2010 2011 2012 2013 2014 Complementary • Consistent growth in revenue – Group benefiting from faster growth in the complementary business • Continued improvement in efficiencies assisted growth in normalised EBITDA 34 * Hospital revenue includes other revenue FINANCIAL RESULTS INDIA: MAX HEALTHCARE – REVENUE GROWTH Financial Review LHC 2013: 1 239 Rs Crore LHC 2014: 1 530 Rs Crore 105 79 81 88 49 59 248 256 245 261 267 275 294 306 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 43 Phase 1 Phase 2 LHC 2013 LHC 2014 Change % Net Revenue – Phase 1 hospitals 1 010 1 142 13.1 Net Revenue – Phase 2 hospitals 229 388 69.4 1 239 1 530 23.5 Net Revenue (Rs Crore) Net Revenue total 35 114 Financial year-end: March Total net revenue excludes revenue from the SBU 1 Rs. Crore = R1.8 million FINANCIAL RESULTS INDIA: MAX HEALTHCARE – EBITDA GROWTH LHC 2013: 94 Rs Crore 33 32 25 -8 Q3 13 - 12 Q4 13 -8 Q1 14 Financial Review LHC 2014: 151 Rs Crore 33 33 36 -1 -2 -3 Q2 14 Q3 14 Q4 14 Phase 1 4 5 37 41 Q1 15 Q2 15 Phase 2 2013 2014 Change % EBITDA – Phase 1 hospitals 123 147 19.5 EBITDA – Phase 2 hospitals (29) EBITDA (Rs Crore) EBITDA total EBITDA margin – Phase 1 hospitals EBITDA margin – total hospitals 36 Financial year-end: March EBITDA Total – operations excludes a once-off 3 Rs. Crore negative impact 1 Rs. Crore = R1.8 million 4 94 151 12.2 12.9 7.6 9.9 60.6 FINANCIAL RESULTS INDIA: MAX HEALTHCARE – EBITDA GROWTH Financial Review H1 14: 49 Rs Crore H1 15: 88 Rs Crore 33 -8 32 - 12 25 -8 33 33 36 -1 -2 -3 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Phase 1 4 5 37 41 Q1 15 Q2 15 Phase 2 H1 14 H1 15 Change % EBITDA – Phase 1 hospitals 58 79 36.2 EBITDA – Phase 2 hospitals (9) 9 EBITDA total - operations 49 88 11.5 13.2 7.6 10.7 EBITDA (Rs Crore) EBITDA margin – Phase 1 hospitals EBITDA margin – total hospitals 37 Financial year-end: March EBITDA Total – operations excludes a once-off 3 Rs. Crore negative impact 1 Rs. Crore = R1.8 million 79.6 FINANCIAL RESULTS POLAND Financial Review 30 Sep 2014 Rm Revenue 175 EBITDA 16 Attributable loss 38 (17) • Total investment: R621 million • Performance is in line with expectations for the period FINANCIAL RESULTS GROUP EPS Financial Review Change % 30 Sep 2014 Rm 30 Sep 2013 restated Rm 62.3 267.5 164.8 0.1 – Impairment of property, plant and equipment Profit/loss on sale of assets, associates and businesses (89.7) Gain on bargain purchase (0.1) Loss on derecognition of finance lease HEPS 7.9 Profit after tax of businesses sold 0.4 177.8 164.8 – (11.5) (1.5) Retirement funds (1.7) Transaction cost 1.5 – (3.9) – Fair value gain on foreign exchange hedge contract 39 – – (5.1) Gain on derecognition of finance lease (0.4) (1.2) Normalised EPS 12.0 168.6 150.6 Normalised EPS excl Poland 12.7 169.7 150.6 CASH GENERATED VS NORMALISED EBITDA Financial Review Cash generated vs normalised EBITDA 101% 103% 103% 97% 2 233 2 562 3 041 3 422 3 516 2010 2011 2012 2013 2014 R000m 103% Cash generated from operations 40 Cash generated as % of normalised EBITDA R000m FINANCIAL RESULTS CAPEX • • • • +16% 752 650 111 157 + 89% + 30% 2013 • Capex on maintenance and equipment • Laundry 210 • Repairs & maintenance but not included under capex 204 2014 Capex upgrades expansion Capex maintenance Repairs & maintenance 41 249 acute new beds 94 bed Life Hilton hospital WIP Life Claremont relocation Life St Mary’s relocation • Excludes capex spent on acquisitions SUMMARISED STATEMENT OF FINANCIAL POSITION ASSETS Financial Review Movement 30 Sep 2014 Rm 30 Sep 2013 restated Rm Non-current assets 1 351 9 700 8 349 PPE 1 384 5 901 4 517 234 2 318 2 084 (267) 1 481 1 748 Current assets (excl. cash) 368 1 691 1 323 Cash 125 422 297 1 844 11 813 9 969 Intangibles Other Total assets Proceeds from the sale of our 49.3% in JMH: • Payment of a special dividend – 100cps • R300 million being utilised for investment opportunities Total beds owned by LHC: 87% 42 SUMMARISED STATEMENT OF FINANCIAL POSITION EQUITY AND LIABILITIES Financial Review Movement 30 Sep 2014 Rm 30 Sep 2013 restated Rm Total shareholders’ equity 294 5 900 5 606 Non-current liabilities 759 2 909 2 150 Interest bearing borrowings 687 2 344 1 657 Other non-current liabilities 72 565 493 791 3 004 2 213 Total equity and liabilities 1 844 11 813 9 969 Net debt (as per covenants) 1 039 3 084 2 045 0.84 0.63 762 1 385 623 13 85 72 3 597 594 820 820 Current liabilities Net debt to normalised EBITDA (covenant 2.75x) Unsecured borrowings Secured borrowings IFRS debt Preference shares 43 Debt in Poland 464 464 - Net cash on hand 203 (267) (64) DIVIDEND Financial Review 44 Distributions Cents/share R million % of normalised EBITDA Interim 2012 45 469 34.2 1.47 Final 2012 60 625 40.7 1.34 Total 2012 105 1 094 37.6 1.39 Interim 2013 54 563 36.4 1.39 Final 2013 72 750 42.1 1.32 Total 2013 126 1 313 39.4 1.35 Interim 2014 63 657 37.7 1.38 Final 2014 78 813 43.6 1.22 Total 2014 141 1 470 40.7 1.29 Special dividend 100 1 042 • Cover calculated on normalised EPS excluding amortisation • Future dividend growth will be line with normalised SA EPS growth Cover* FIVE YEAR REVIEW DIVIDENDS Financial Review 168,6 34,7 37,6 39,4 40,7 141,1 150,6 141 119,3 126 92,7 24,9 105 85 52 1,92 1,50 1,39 1,35 1,29 2010 2011 2012 2013 2014 Cover 45 2010 2011 2012 2013 % EBITDA • Dividend cover: 1.29 times • Normalised EPS CAGR: 16.1% • % of EBITDA: 40.7% • Normalised DPS CAGR: 28.3% 2014 Dividend numbers exclude the special dividend of 100 cps Normalised EPS excluding amortisation Future dividend growth will be line with normalised SA EPS growth 2014 AGENDA 46 Operational Review Financial Review Outlook André Meyer Pieter van der Westhuizen André Meyer CEO CFO CEO OUTLOOK SOUTH AFRICA Future Outlook guidance Acute Hospitals: • 292 beds: • 148 Brownfield • 94 Greenfield GROWTH • 50 Acquisition Complementary Business: • 34 renal stations • 1 Oncology unit Focus on improving affordability • Cost of Care project EFFICIENCY 47 Continue to drive efficiency programmes across the Group: • Cost of sales management • Impilo programme OUTLOOK SOUTH AFRICA Future Outlook guidance • Continued focus on improving clinical outcomes • Introduction of a patient experience programme QUALITY SUSTAINABILITY 48 • Focused doctor retention and recruitment programme • 1 400 nursing students enrolled for 2015 • Focus on management development and staff retention OUTLOOK Future Future Outlook Guidance guidance INTERNATIONAL Continued focus on driving revenue and improving EBITDA margins Increase bed capacity number in Phase 2 hospitals • INDIA Additional 301 beds Focus on brownfield expansion – 2017 goal: • Patparganj: 150 beds • Mohali: 85 beds • Saket: 150 beds Continued focus on driving revenue and improving EBITDA margins To establish a comprehensive network of healthcare facilities covering all major cities and disciplines in Poland : POLAND • In the final stages of a transaction to acquire a 46 bed orthopaedic hospital • In the due diligence stage regarding a leading healthcare provider 49 THANK YOU APPENDICES GLOSSARY OF TERMS 52 Approved Received Health department licence approval. Have not commenced building ICU Intensive care unit ARM Alternative reimbursement model MHQ 14 Mental Healthcare questionnaire 14 Attributable Earnings attributable to ordinary shareholders earnings NHI National Health Insurance CAUTI Catheter-related urinary tract infections Operating profit plus depreciation, amortisation of Normalised intangible assets, impairment of intangible assets EBITDA as well as excluding profit/loss on disposal of assets and businesses and associated costs CC Competition Commission NLB New lines of business – acute rehabilitation, mental health and renal dialysis and oncology CLABSI Central line associated bloodstream infections LOH Life Occupational Healthcare EBITDA Earnings before interest, taxes, depreciation and amortisation PPD Paid patient day FIM/FAM Functional Independence measure Functional assessment measure SSI Surgical site infections HAI Health associated infections VAP Ventilator associated pneumonia HEPS Headline earnings per share WIP Work in progress beds SHAREHOLDING 60% 50% 40% 30% 20% 10% 0% SA N America UK Sep 13 53 Sep 14 Europe Rest SA: MACRO ENVIRONMENT MEDICAL SCHEMES MARKET • Number of privately insured lives continues to grow, but at a slower rate – around 1% • Disease burden and aging continues to drive healthcare utilisation • Demand for quality private healthcare remains Incidence of chronic diseases of lifestyle among LHC admissions Beneficiaries (000) 10 000 6% 5% 8 000 4% 6 000 3% 4 000 2% 2 000 1% 0 1999 2006 2007 2008 2009 2010 2011 2012 2013 54 0% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Asthma Diabetes Mellitus Type 2 Diabetes Mellitus Type 1 Epilepsy Dysrhytmias Chronic Renal Disease HIV Coronary Artery Disease Hyperlipidaemia Cardiac Failure Hypothyroidism Chronic Obstructive Pulmonary Disease Rheumatoid Arthritis SA: QUALITY NEW INITIATIVES • Patient reported outcomes measures (Proms) − Proms programme introduced in 2013 − Measures quality from the patient perspective, initially covering hip and knee replacements − The programme will be rolled out by 2015 • Anti-microbial Stewardship (AMS) − Implemented a multi-disciplinary approach to AMS in all acute care hospitals − A significant investment made in an electronic infection control management solution that is currently being piloted in two hospitals • VTE risk assessment and prophylaxis − The VTE Risk Assessment and Prophylaxis programme is now fully implemented in the Acute Rehabilitation facilities − Successfully piloted and audited in six acute hospitals and will be rolled out in 2015 • Vermont Oxford Network (VON) − VONs are currently available in seven Life Healthcare hospitals and will be rolled out to the remainder of the group’s significant maternity units by 2016 55 INTERNATIONAL: INDIA OVERVIEW 2011 Market value: US$68.4 billion Strong demand Attractive opportunities • Healthcare revenue in India is set to reach US$160 billion by 2017; expenditure is likely to expand at a CAGR of 15.2% over 2011-17 • Rising incomes, greater health awareness, lifestyle diseases & increasing access to insurance will contribute to growth • Investment in healthcare infrastructure is set to rise, benefiting both “hard” (hospitals) and “soft” (R&D, education) infrastructure • Medical tourism is emerging as one of the most lucrative investment areas in the country ADVANTAGE INDIA • Availability of a large pool of well-trained medical professionals in the country • India has an advantage over its peers in the West and Asia in terms of cost of high-quality medical services offered Quality and affordability 56 • The government aims to develop India as a global healthcare hub • Policy support in the form of reduced excise and customs duty and exemption in service tax • Initiatives like NRHM would boost healthcare in rural areas Policy support 2017F Market value: US$160 billion INTERNATIONAL: POLAND OVERVIEW Operational Review GDP and CPI for Poland, 2011-2018F 4,3% Key drivers of healthcare market growth 3,7% 1,9% 2,2% 2,2% 2,3% 2,6% 1,0% 4,3% 1,9% 1,4% 2,9% 3,3% 3,5% 3,6% 3,7% 2011 2012 2013 2014 2015 2016 2017 2018 GDP growth Ageing population Increasing wealth of society Medical technological advancements Growth in healthcare spending CPI Polish private healthcare market growth, 2009-2015E 6,9% 6,5% 6,1% 5,7% • Poland is the largest CEE country, with a population of 39m 5,4% • Private healthcare market is forecast to continue to grow as demand increases together with ability to pay for services 3,6% 57 • Poland has shown solid economic growth over the last decade on the back of a large domestic market 28 29 31 33 35 37 39 2009A 2010A 2011A 2012A 2013E 2014E 2015E Value (PLN bn) Growth rate % • The Polish private healthcare market is highly fragmented with little corporatisation of inpatient care INTERNATIONAL: POLAND SCANMED Scanmed’s Multimedis 58 Scanmed’s medical offer Share of total revenue Inpatient care 44% Diagnostic imaging 6% Specialist care 26% Holiday and night care, medical transport 5% Primary health care 17% Core line Supporting line Payer Share of funding NHF 69% Private payer 31% NHF 50% Private payer 50% NHF 20% Private payer 80% NHF 38% Private payer 62% NHF 91% Private payer 9% NHF 56% Private payer 42% INTERNATIONAL: SCANMED ST RAPHAEL HOSPITAL • 130 beds with over 10,000 different surgical procedures performed annually • 25% of hospital patients come from Scanmed’s outpatient business line • Inpatient care covers: neurosurgery, general surgery, orthopaedics, plastic surgery, ophthalmology, oncology, urology, anaesthesiology and intensive care, emergency admission • ±69% of provided services were financed from NFZ, private services generated ±31% of revenue 59 Operational Review INTERNATIONAL: SCANMED WEISS CLINIC • One of the leading ophthalmic centers with 22 beds • Company operates in Chorzów and Gliwice • Specialises in laser vision correction, the treatment of cataract and other ophthalmic diseases, as well as procedures in plastic surgery • ±30% of services financed from NFZ, private services generated approximately over 60% of revenue (mainly individuals and also customers of insurance companies and medical centers) 60 Operational Review INTERNATIONAL: SCANMED GASTROMED • Leader of gastroenterology in the region of Lublin with 8 beds • Range of services: endosonography, capsule endoscopy, DGHAL procedures, double-balloon enteroscopyl, liquid based CellPrep cytology • The largest contract with the NFZ in the region of Lublin for the gastrological ambulatory, endoscopic examinations and one day hospitalisation • ±62% of provided services were financed from NFZ, private services generated ±16% of revenue 61 Operational Review
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