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16 September 2011
Wakefield Health Limited Investor presentation 16 September 2011 - - PowerPoint PPT Presentation
Wakefield Health Limited Investor presentation 16 September 2011 PAGE 1 Important notice The information in this presentation, dated 16 September 2011 (Presentation), is an overview and does not contain all infor mation necessary to
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16 September 2011
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exhaustive summary of certain information relating to Wakefield Health Limited (“WFD”).
Presentation, the offer document will prevail.
relation to insider trading in respect of WFD shares.
including the merits and risks involved. Investors should consult with their own legal, tax, business and/or financial advisors in connection with any acquisition of shares.
adequacy or reliability of any statements, estimates or opinions or other information contained in this presentation, or as to the reasonableness of any assumption any of which may change without notice. To the maximum extent permitted by law, WFD, its directors, officers, employees, agents and advisors (including Cameron Partners Limited and its affiliates and any of their respective directors, officers, employees, representatives or advisers) disclaim all liability and responsibility (including without limitation any liability arising from fault or negligence on the part of WFD, its directors, officers, employees, agents and advisors (including Cameron Partners Limited and its affiliates and any of their respective directors, officers, employees, representatives or advisers)) for any direct or indirect loss or damage which may be suffered by any recipient through use of or reliance on anything contained in, or omitted from, this Presentation.
Shares may not be offered or sold in the United States unless the shares have been registered under the U.S. Securities Act of 1933, as amended (“US Securities Act”), or an exemption from registration is available.
reasonable by WFD, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of WFD, and upon estimates and assumptions with respect to future business decisions which are subject to change. The inclusion of any such information in the Presentation should not be regarded as a representation or warranty with respect to its accuracy
success of the strategies is subject to uncertainties and contingencies beyond WFD’s control, and no assurance can be given that the strategies will be effective or that the anticipated benefits from the strategies will be realised in any particular period. Accordingly, there can be no assurance that such results will be realised and any variance from actual results may be material. Prospective investors are cautioned not to place undue reliance on any such information.
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Executive summary 1. 2. 3. 4. About Wakefield Acquisitions Equity capital raising programme
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WFD is seeking to raise new equity capital to partially fund the recent Norfolk and Endoscopy / Laparoscopy Auckland (EA/LA) acquisitions and maintain balance sheet capacity for future investment needs Placement
Top-up
SPP
Executive summary | About Wakefield | Acquisitions | Capital raising
Share purchase plan (SPP)
Structure Offered to non-placement
$3m maximum permitted to the extent top-up is undersubscribed Price Lower of placement price or average end of day market price of WFD shares
Record Date 5 October 2011
Placement
Structure
shareholders in proportion to current shareholdings (subject to 20% Takeovers Code limit)
to subscribe for their full allocation at the completion of the SPP / top-up, subject to NZX rule 7.3.5, Takeovers Code and programme headroom
existing institutional / cornerstone shareholders, or new investors if there is a material shortfall Price
Top-up
Structure
Allocation based pro-rata on pre capital raise shareholding
New shares will not be entitled to receive the interim dividend for the half year ending 30 September 2011
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The capital will finance, in part, the acquisition of interests in two businesses Equity $15m $7m Debt $16m $24m
Sources Uses
100% of Norfolk
region
surgical services
Epsom, Auckland
target markets
30% of Endoscopy/ Laparoscopy Auckland
*Source: Capital IQ 7 September 2009. Based on $15m capital raised, share price of $5.10, acquisition costs as above and balance financed with debt. Net debt calculated using FY11 figures, and includes interest swap liability of $519k
Net debt / EV*
Pre-capital raise & acquisitions 16.3% Post-capital raise & acquisitions 25.6%
Executive summary | About Wakefield | Acquisitions | Capital raising
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Exposure to favourable long- term trends
The proposed equity capital raise provides exposure to favourable long-term trends, at a discount to comparable peers
...through quality assets... ....at a discount to comparable peers... ...without liquidity challenges
peers
Executive summary | About Wakefield | Acquisitions | Capital raising
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EA / LA (30% ownership)
Auckland based 2 Endoscopy rooms 1 operating theatre 10 beds High-volume, specialist producer of endoscopy and laparoscopic services
Royston (100% ownership)
3 operating theatres Endoscopy suite Day surgery unit 31 beds including 3 patient suites Radiology service The only private surgical hospital in Hawkes Bay
Wakefield (100% ownership)
Wellington based 7 operating theatres 5 bed intensive care unit Endoscopy suite Cardiac catheter lab 71 beds Radiology services Tertiary level hospital
Bowen (100% ownership)
Wellington based 3 operating theatres 41 beds 2 bed high dependency unit Endoscopy suite Radiology service Currently undergoing major redevelopment
Grace (60% ownership)
Tauranga based 6 operating theatres 50 beds Day stay unit Minor procedures / endoscopy room Modern facility (built 2007) Bay of Plenty’s only private surgical hospital
Together Wakefield, Bowen and Royston treat ~15,000 patients annually through 145 beds, 13 theatres, 4 endoscopy procedure rooms and a cardiac catheter lab
Boulcott (12% ownership)
Based in Lower Hutt 3 operating theatres
Executive summary | About Wakefield | Acquisitions | Capital raising
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Theatre Medical equipment Nursing staff Other
WFD
Service fee ($)
Patient Surgeon / specialist
WFD provides surgical facilities and post-operative care. Its success is driven principally, by the following:
privately funded elective procedures and ACC / DHB contracts)
WFD provides surgical facilities and post operative care. Its success is driven by WFD’s ability to manage yield per patient, capacity utilisation and control costs
Medical supplies
Bulk funding contract ($)
DHB / ACC bulk contracts DHB / ACC contracts
Service fee ($) Sub-contract fee ($)
Executive summary | About Wakefield | Acquisitions | Capital raising
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WFD employs a three-tiered strategy to create shareholder value
1. Protect & grow existing business 2. Growth & diversification through M&A 3. Build capacity & capability for future growth
meet these future opportunities, eg. Bowen redevelopment, ongoing development of Wakefield Hospital Executive summary | About Wakefield | Acquisitions | Capital raising
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The GFC and other demand factors impacted top-line revenue growth and profitability. Pre-GFC, WFD expanded margins as it built economies of scale
Source: Capital IQ 7 September 2011. Revenue / admission figures provided by management *FY11 NPAT includes $4.3m one-off tax expense relating to changes in depreciation deductibility on buildings and tax rates
FY10 and FY11 were impacted by:
contracting
elective surgery as a result of weak economic conditions
procedures as patients ‘trade down’ health insurance policies
NZ$ million (to 31 March) FY06 FY07 FY08 FY09 FY10 FY11 Revenue 51 65 78 86 77 76 revenue growth 17.9% 25.7% 20.9% 10.4% (10.8)% (1.2)% revenue / admission ($) na na na 4,277 4,141 4,285 EBITDA 11 15 19 22 16 15 EBITDA margin 22.0% 22.8% 23.8% 25.7% 21.4% 19.5% NPAT 4 4 7 10 6 1* Total assets 101 104 111 124 127 124 Net debt 23 22 15 6 6 14 gearing (net debt to EV) 23.4% 15.7% 13.1% 4.6% 5.4% 16.9% Operating cash flow 8 10 13 19 13 12 EV/EBITDA 8.9x 9.5x 6.3x 6.1x 6.9x 5.6x PE 22.2x 30.4x 13.8x 12.5x 16.7x nm P/NTA 2.1x 2.5x 1.7x 1.8x 1.4x 1.1x Share price ($) 5.10 Market cap ($m). 72
Executive summary | About Wakefield | Acquisitions | Capital raising
PAGE 13 5.8x 10.5x 9.4x 7.9x 5.6x Wakefield Health Ltd. Pulse Health Limited Ramsay Health Care Ltd. Primary Health Care Ltd. Abano Healthcare Group Ltd.
On a last twelve months EV/EBITDA basis, WFD appears attractively priced relative to selected Australasian comparable peers
Australia New Zealand
2.0x 4.0x 6.0x 8.0x 10.0x $1.00 $3.00 $5.00 $7.00 $9.00 $11.00 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11
Price is down & WFD is trading close to NTA
Share price (LHS) P/NTA (RHS) EV/EBITDA (RHS) 1.1x
WFD appears attractively priced in the context of its listed peer group, its share price history and NTA
WFD appears attractively priced:
selected Australasian comparable peers
Source: Capital IQ 7 September 2011. Based on last twelve months EBITDA Source: Capital IQ 7 September 2011 Abano does not own a material amount of land and buildings and has a proportion of minority shareholders in its investments
Executive summary | About Wakefield | Acquisitions | Capital raising
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Since 31 March 2011…
associated with the first attempted takeover of Norfolk in the prior year) Looking forward…
associated with acquisitions
associate earnings)
EBITDA is up 6.8% for the four months to 31 July 2011, and the acquisitions of Norfolk and EA/LA are expected to provide an immediate positive contribution to earnings
Executive summary | About Wakefield | Acquisitions | Capital raising
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Although health insurance cover has declined…
people covered in December 2008
increases in policy uptake …pressure on public finances is expected to drive private healthcare growth in the long term…
catalyst for increased private sector participation in the provision
Although present industry dynamics are challenging, long-term trends are expected to support future performance
Source: New Zealand Treasury Publication – Challenges & Choices: Modelling New Zealand’s Long-term Fiscal Position January 2010 (100)% 0% 100% 200% 300% 400% 500% 1950 1970 1990 2010
Public healthcare expenditure appears unsustainable
Health expenditure - cumulative % change GDP - cumulative % change 417% 133% 1.25m 1.27m 1.29m 1.31m 1.33m 1.35m 1.37m 1.39m 1.41m Mar-06 Dec-06 Sep-07 Jun-08 Mar-09 Dec-09 Sep-10
Health insurance cover
2.1% decline 3.0% increase Source: Health Funds Association
Publication - Health Insurance Statistics June 2011
Executive summary | About Wakefield | Acquisitions | Capital raising
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…and an aging population is anticipated to support demand
An aging population is expected to support demand for healthcare in the long term
0.0m 0.3m 0.5m 0.8m 1.0m 1.3m 1.5m 1950 1970 1990 2010 2030 2050
Population aged 65+
Forecast Source: Statistics New Zealand Report - Demographic aspects of New Zealand’s Aging Population March 2006 Source: New Zealand Treasury Publication – Challenges & Choices: Modelling New Zealand’s Long-term Fiscal Position January 2010 3,000 6,000 9,000 12,000 15,000
5 25 45 65 85 Cost weight (2005/06 dollars)
Healthcare costs rise sharply with age
Male Female
Executive summary | About Wakefield | Acquisitions | Capital raising
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Regions exhibit varying exposure to underlying demographic trends
population growth and growth in
the national growth rates on both measures
growth rate is below the mean, its expected total population growth rate is higher than most other regions, and well above the population mean
The Auckland and Bay of Plenty regions are better positioned than most regions to capitalise on favourable demographic trends
Nelson Marlborough Mid Central Lakes Hutt Otago Hawkes Bay Southland Taranaki South Canterbury Wairarapa West Coast Tairawhiti Bay of Plenty Waitemata Auckland Counties Manakau Whanganui Northland Waikato Capital Coast Canterbury 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5
0.0 0.5 1.0 1.5 2.0
Annual % growth 2008–26 population 65+ Annual % growth 2008–26 total population
Mean New Zealand annual growth in 65+ Mean New Zealand annual population growth
Source: Ministry of Health presentation 19 November 2009
Manukau Bubble size represents population of DHB catchment area
Executive summary | About Wakefield | Acquisitions | Capital raising
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Norfolk Southern Cross Southern Cross Hospitals Ltd Norfolk Ventures Ltd Norfolk Investments Ltd WFD
Acquire 100% 60% 40%
Key terms
2011 and closed 1 September 2011. WFD received 99.9% acceptances and has the
Strategy behind acquisition
The acquisition will provide exposure to a quality facility, positioned for future growth
facility
growth, particularly its aging population. Grace is the only private surgical hospital in the Tauranga / Whakatane region
Southern Cross Health Trust Tauranga Partnership Ltd
100%
Grace hospital is a scarce and high quality opportunity. It is a modern and high quality facility that is uniquely positioned to capitalise on favourable demographic trends
Grace Hospital
100% 100%
Executive summary | About Wakefield | Acquisitions | Capital raising
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10,000 20,000 30,000 40,000 50,000 1981 1986 1991 1996 2001 2006 2011 2016 2021 2026 2031 Population
Tauranga’s population is expected to grow
0–14 years 15–39 years 40–64 years 65+ Estimated Projected
Demographics in the Tauranga region support growth
114,300 which is the seventh largest centre in New Zealand
Tauranga exhibits the growing and aging population trend more strongly than most other New Zealand regions
Source: Statistics New Zealand data – Local Population Trends December 2010 Source: Statistics New Zealand data – Sub-national Population Estimates 30 June 2010
Executive summary | About Wakefield | Acquisitions | Capital raising
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Source: Independent Advisor Report by Grant Samuel August 2011. Opex is net of other income
NZ$ 000 (to 30 June) FY11A Cash & equivalents 1,525 PPE 31,853 Term debt 13,608 Net assets 20,432 Norfolk Southern Cross NZ$ 000 (to 30 June) FY09A FY10A FY11A FY12B FY13F Patient numbers (#) 6,883 7,027 6,992 7,103 7,245
2,808 2,987 3,175 3,239 3,303 Revenue 19,327 20,992 22,202 23,004 23,933 revenue growth 8.6% 5.8% 3.6% 4.0% Gross profit 7,064 8,067 7,991 8,401 8,804 Opex 1,796 2,190 1,817 2,209 2,258 EBITDA 5,268 5,877 6,174 6,192 6,546 EBITDA margin 27.3% 28.0% 27.8% 26.9% 27.4% Depreciation 2,343 2,480 2,458 2,605 2,733 EBIT 2,925 3,397 3,716 3,587 3,813 Net interest expense 1,573 951 1,116 1,082 998 Share of profit / (loss) from Da Vinci Robot JV (39) (33) (40) nd nd NPBT 1,313 2,413 2,560 2,505 2,815 Capex 1,158 1,787 1,914 nd nd FCF 2,486 3,169 2,674 nd nd
Executive summary | About Wakefield | Acquisitions | Capital raising
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WFD’s acquisition of Norfolk was priced at a lower historic EV/EBITDA multiple than selected precedent comparable transactions
On an EV/EBITDA basis, the Norfolk acquisition appears fairly priced
Source: Cameron Partners’ analysis based on data provided by the Grant Samuel Independent Advisor ‘s Report August 2011. Excludes cash held in Norfolk Source: Capital IQ 26 August 2011. Transaction screen for Australasian takeovers where the target owns and
11.1x 11.1x 10.3x 10.0x 9.6x 9.0x 8.8x Community Private Health Care / Pulse Health (12 Dec 07) 14 hospitals - Ramsay Health Care / Healthscope (5 Sep 05) Nova Health / Healthscope (30 Mar 05) Healthscope / TPG Capital; The Carlyle Group (13 May 10) Royston Hospital / Wakefield (13 Sep 05) Healthe Care / Archer Capital (1 Jun 11) Affinity Health / Ramsay Health Care (14 Apr 05)
Selected precedent EV/EBITDA transaction multiples
Average: 10.0x Target / Acquirer
Norfolk Southern Cross Historical Projected Year end 30 June FY11 FY12 FY13 EV/EBITDA 1.9x 1.9x 1.8x EV/EBIT 3.1x 3.2x 3.0x
Executive summary | About Wakefield | Acquisitions | Capital raising
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Key terms
Laparoscopy Auckland Ltd. Option to increase stake in these businesses up to 50% over the next five years (WFD holds call options and the vendor holds put options)
years time
EA/LA have preeminent positions in the growing Auckland market
Auckland
Zealand’s busiest dedicated endoscopy unit
performance of laparoscopic general surgery and bariatric procedures
records, and potential for further growth and development
The acquisition of EA/LA is consistent with WFD’s strategy of acquiring quality businesses exposed to favourable population trends
30% 50%
Integrated Hospitals Endoscopy Auckland Laparoscopy Auckland WFD Dunn Trust
20%
EA / LA NZ$ million (to 31 March) EBITDA FY11 3.8 Ownership acquired 30.0% Share of EBITDA 1.1 Acquisition cost (EA / LA hold no debt) 6.8 Implied multiple 6.0x
Executive summary | About Wakefield | Acquisitions | Capital raising
Source: EA/LA unaudited management accounts and Cameron Partners analysis
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NZ$000 (to 31 March 2011) EA LA Combined
Capex 349 11 360 EA / LA Balance sheet EA LA Combined NZ$000 (as at 31 March 2011)
Cash 1,125 721 1,846 PPE 945 207 1,152 Other assets 391 478 869 Total assets 2,461 1,406 3,867 Finance lease 481
Other liabilities 786 503 1,289 Total liabilities 1,267 503 1,770 Equity 1,194 903 2,097
Executive summary | About Wakefield | Acquisitions | Capital raising
Source: EA/LA unaudited management accounts
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* Excludes deferred tax adjustment and swap revaluation. EPS based on $15m raised at $4.85 / share ** Pro forma EBITDA is indicative, since Norfolk and EA/ LA earnings are equity accounted, and therefore will not form part of financially reported EBITDA *** Source: Capital IQ 7 September 2011 **** Includes interest rate swap of ~$0.5m
Pro forma WFD Group EV/EBITDA FY11 ($m)
WFD enterprise value*** 86.4 Value of Norfolk 24.2 Value of 30% EA / LA 6.8 Pro forma EV 117.4 WFD EBITDA (unaudited) 14.8 60% Norfolk Southern Cross EBITDA (FY11) 3.7 30% EA / LA EBITDA (FY11) 1.1 Pro forma EBITDA** 19.6 Pro forma EV / EBITDA 6.0x WFD Income statement to 31 March 2011 ($m) Unaudited Revenue 75.9 75.9 Expenses (61.1) (61.1) EBITDA 14.8 14.8 Depreciation and amortisation (6.6) (6.6) EBIT 8.2 8.2 Interest (0.7) (1.0) (1.7) Associate earnings 0.1 2.3 2.4 Profit before tax 7.6 8.9 Tax (2.5) (0.2) (2.7) Net profit (normalised*) 5.1 6.2 EPS (normalised*) 0.36 0.36 Acquisitions / capital raising Current Pro forma WFD Balance sheet as at 31 July 2011 ($m) Unaudited PPE 90.1 90.1 90.1 Investments 1.6 18.9 20.5 20.5 Goodwill 21.1 11.6 32.7 32.7 Other intangibles 1.7 1.7 1.7 Other assets 9.7 9.7 9.7 Total assets 124.2 154.7 154.7 Net debt**** 15.7 30.5 46.2 (15.0) 31.2 Other liabilities 18.9 18.9 18.9 Equity 89.6 89.6 15.0 104.6 Total liabilities & equity 124.2 154.7 154.7 Net debt / net debt + equity 14.9% 34.0% 23.0% Current Acquisitions Post acquisitions Capital raising Pro forma
Executive summary | About Wakefield | Acquisitions | Capital raising
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Maintain prudent gearing
acquisition of EA / LA
~16.3% pre-issue/acquisitions Opportunity for all shareholders to participate Timely execution
Executive summary | About Wakefield | Acquisitions | Capital raising
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Key terms for the issue include the following:
shareholders in proportion to current holdings subject to Takeovers Code 20% threshold
participants will be offered the opportunity to complete their full subscription entitlement if scaled back, for legal reasons, prior to the SPP and top-up
placement participants on a pro-rata basis (based on original entitlements) or new institutional investors
Source: Capital IQ 7 September 2011. VWAP based on daily volume and closing price Normalised PE excludes deferred tax adjustment and swap revaluation.
NZ$ Current price Offer price Price 5.10 4.85 Discount to current price 4.9% Discount to VWAP 30 day VWAP 5.08 4.4% 60 day VWAP 5.14 5.6% 90 day VWAP 5.18 6.4% 180 day VWAP 5.26 7.8% Implied multiple (FY11) EV/EBITDA 5.6x EV/EBIT 10.1x PE (normalised)* 13.2x P/NTA 1.1x
Executive summary | About Wakefield | Acquisitions | Capital raising
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Key terms for the issue include the following:
period
Executive summary | About Wakefield | Acquisitions | Capital raising
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Date Event 16-Sep 2011 Announcement of results of placement and SPP / top-up offer and interim dividend 5-Oct 2011 Interim dividend Record Date and SPP Record Date 6-Oct 2011 Placement: Settlement and allotment 12-Oct 2011 SPP / top-up: Open date 28 Oct 2011 Payment of interim dividend 1-Nov 2011 SPP / top-up: Close date 2-Nov 2011 SPP / top-up: Pricing and allotment date Executive summary | About Wakefield | Acquisitions | Capital raising