| Mon 24 Nov 2008, 7:05 | | NTC - Netcare - Audited group results for the year ended 30 September 2008 |
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NTC
NTC
NTC - Netcare - Audited group results for the year ended 30 September 2008
Netcare Limited
Registration number: 1996/008242/06
(Incorporated in the Republic of SouthAfrica)
JSE share code: NTC ISIN code: ZAE000011953
("Netcare", "the Company" or "the Group")
Audited group results for the year ended 30 September 2008
+17% increase in Group revenue
+13% increase in Group operating profit
+101% of Group EBITDA converted to cash
Group balance sheet
at 30 September
Note 2008 2007
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 29 732 26 683
Goodwill 17 555 16 091
Intangible assets 355 289
Associated companies and loans 3 104 298
Financial assets 558 1 453
Deferred taxation 907 514
Total non-current assets 49 211 45 328
Current assets
Loans and receivables 3 75 56
Inventories 638 600
Trade and other receivables 3 500 2 875
Cash and cash equivalents 1 202 1 361
5 415 4 892
Assets held for sale 4 304 319
Total current assets 5 719 5 211
Total assets 54 930 50 539
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital and premium 1 601 1 819
Treasury shares (5 555) (5 555)
Option premium on convertible bond 172 172
Other reserves 1 685 1 863
Retained earnings 6 590 5 833
Ordinary shareholders` equity 4 493 4 132
Preference share capital and premium 644 644
Minority interest 3 714 3 806
Total shareholders` equity 8 851 8 582
Non-current liabilities
Long-term debt 31 530 28 944
Financial liability - Derivative 1 654 1 156
financial instruments
Post-retirement benefit obligations 126 115
Deferred lease liability 91 63
Deferred taxation 6 681 6 073
Total non-current liabilities 40 082 36 351
Current liabilities
Trade and other payables 3 387 2 570
Short-term debt 2 021 2 086
Taxation payable 268 410
Bank overdrafts 240 461
5 916 5 527
Liabilities in disposal group held for 4 81 79
sale
Total current liabilities 5 997 5 606
Total equity and liabilities 54 930 50 539
Group income statement
for the year ended 30 September
Note 2008 2007 %
Rm Rm change
CONTINUING OPERATIONS
Revenue 21 735 18 607 16,8
Cost of sales (12 842) (10 856)
Gross profit 8 893 7 751
Other income 256 204
Administrative and other (5 779) (4 965)
expenses
Operating profit 5 3 370 2 990 12,7
Financial income 6 279 328
Financial expenses 7 (2 706) (2 463)
Attributable earnings of 2 32
associates
Profit before taxation 945 887 6,5
Taxation (68) 99
Profit for the year from 877 986 (11,1)
continuing operations
DISCONTINUED OPERATION
Profit for the year from 4 105 109 (3,7)
discontinued operation
Profit for the year 982 1 095 (10,3)
Attributable to:
Ordinary shareholders 801 927
Preference shareholders 67 30
Profit attributable to 868 957
shareholders
Minority interest 114 138
982 1 095
Earnings per share (cents)
Basic 63,5 75,4 (15,8)
Continuing operations 55,2 66,5 (17,0)
Discontinued operation 8,3 8,9 (6,7)
Diluted 62,6 71,7 (12,7)
Continuing operations 54,4 63,3 (14,1)
Discontinued operation 8,2 8,4 (2,4)
Reductions of capital per share 32,0 31,0
(cents)
Group cash flow statement
for the year ended 30 September
2008 2007
Rm Rm
Cash flows from operating activities
Cash received from customers 21 099 18 869
Cash paid to suppliers and employees (16 436) (14 895)
Cash generated from operations 4 663 3 974
Interest paid (2 558) (2 355)
Continuing operations (2 550) (2 348)
Discontinued operation (8) (7)
Taxation paid (290) (286)
Continuing operations (268) (269)
Discontinued operation (22) (17)
Preference dividends paid (67) (30)
Reductions of capital paid (407) (347)
Net cash from operating activities 1 341 956
Continuing operations 1 352 882
Discontinued operation (11) 74
Cash flows from investing activities
Purchase of property, plant and equipment (1 268) (1 389)
Continuing operations (1 240) (1 291)
Discontinued operation (28) (98)
Proceeds on disposal of property, plant and 708 40
equipment
Additions to intangible assets (148) (103)
Post-retirement obligation (151)
Decrease/(increase) in investments and loans 171 (52)
Proceeds on disposal of businesses 15 1
Interest received 134 158
Realised gain on cross-currency swap 324
Dividends received 1 1
Acquisition of subsidiaries and businesses, net of (2 112) (169)
cash acquired
Net cash from investing activities (2 175) (1 664)
Continuing operations (2 147) (1 632)
Discontinued operation (28) (32)
Cash flows from financing activities
Proceeds from issue of ordinary shares 48 669
Long-term liabilities raised 974 262
Short-term liabilities repaid (133) (317)
Net cash from financing activities 889 614
Continuing operations 889 617
Discontinued operation (3)
Net increase/(decrease) in cash and cash 55 (94)
equivalents
Translation effects on cash and cash equivalents of (32) 39
foreign entities
Cash and cash equivalents at beginning of the year 900 1 009
Effects of cash in disposal group held for sale 39 (54)
Cash and cash equivalents at end of year 962 900
Group statement of recognised income and expense
for the year ended 30 September
2008 2007
Rm Rm
Effect of translation of foreign entities 130 (93)
Fair value gains/(losses) on investments 93 (24)
Effect of cash flow hedge accounting (427) 600
Actuarial (losses)/gains on defined benefit plans (24) 1
Movement in contingency reserve (9) 6
Disposal of shares in subsidiary (36)
Fair value deficit on disposal of shares (7)
Movements in employee share trust reserve 30
Other reserve movements (20)
Net (loss)/income recognised directly in equity (227) 447
Profit for the year 982 1 095
Total recognised income for the year 755 1 542
Attributable to:
Ordinary shareholders 780 1 062
Preference shareholders 67 30
Minority interest (92) 450
755 1 542
Headline earnings
for the year ended 30 September
2008 2007 %
Rm Rm change
Reconciliation of headline earnings
Profit for the period from continuing 877 986 (11,1)
operations
Less:
Preference shareholders (67) (30)
Minority interest (114) (138)
Earnings used in the calculation of basic 696 818 (14,9)
earnings per share from continuing
operations
Adjusted for:
Impairment of goodwill 1 16
Impairment of intangible assets 40
Impairment of investments 1 1
Impairment of land and buildings 1
Reversal of impairment of land and (17) (11)
buildings
Profit on disposal of property, plant and (28) (1)
equipment
Loss/(profit) on disposal of 2 (1)
subsidiaries/investments
Tax effect of headline adjusting items 6
Minority share of headline adjusting 10 (16)
items
Headline earnings from continuing 672 846 (20,6)
operations
Earnings from discontinued operation 105 109
Adjusted for:
Profit on disposal of property, plant and (2)
equipment
Headline earnings from discontinued 103 109
operation
Headline earnings 775 955 (18,8)
Headline earnings per share (cents)
Basic 61,5 77,6 (20,7)
Continuing operations 53,3 68,8 (22,5)
Discontinued operation 8,2 8,8 (6,8)
Diluted 60,5 73,8 (18,0)
Continuing operations 52,5 65,4 (19,7)
Discontinued operation 8,0 8,4 (4,8)
Notes
for the year ended 30 September
1. Basis of preparation and accounting policies
The condensed financial statements have been extracted from the Group financial
statements which have been prepared in accordance with International Financial
Reporting Standards (IFRS), the Listing Requirements of the JSE Limited and the
South African Companies Act, 1973, as amended.
The accounting policies applied are consistent with those of the prior year,
except for the following:
- IFRS 7 Financial Instruments: Disclosures
- Amendment to IAS 1 Presentation of Financial Statements: Capital Disclosures
- IFRS 2 Share-based payment: Amendments to vesting conditions and cancellations
2. Acquisition of businesses
The following significant business combinations took effect during the year:
2.1 With effect from 2 October 2007, the Group acquired the remaining 56,25%
interest in Community Hospital Group (Proprietary) Limited (Community) for a
consideration of R169 million. The acquisition consideration was settled through
the issuance of 14,2 million Netcare shares on 5 October 2007 at the closing
Netcare share price of R11,89 at the acquisition date. In addition, the Group
assumed debt of R171 million and capital commitments of R53 million for the
projects in progress. The Group increased their shareholding in Bougainville
Hospital which forms part of Community for an additional consideration of R6
million. The results of Community have previously been equity accounted.
2.2 Effective 12 November 2007, the Group acquired 100% of the shares in
Linkwood Clinic (Proprietary) Limited.
2.3 On 1 February 2008, the Group acquired nine hospitals in the United Kingdom
from Nuffield Hospitals for a total consideration of R2 076 million (GBP140
million) excluding transaction costs of R80 million (GBP5 million). This was an
asset acquisition only whereby the Group acquired property, inventory and
tangible fixed assets. Subsequently, Nottingham Hospital was disposed of in
March 2008 and Gerrards Cross Hospital was disposed of in April 2008.
2.4 With effect from 18 August 2008, the Group acquired 61% of Oxford
Musculoskeletal Clinic LLP in the United Kingdom for a nominal consideration.
From the dates of acquisition to 30 September 2008, the following amounts have
been included in the Group`s income statement:
Community Linkwood Nuffield Oxford Rm
Rm Rm Rm Musculo-
skeletal
Clinic
Rm
Revenue 597 33 501 8 1 139
Operating 50 2 37 (1) 88
profit
The results of the group for the period if the acquisition dates had
been at the beginning of the period are as follows:
Total
Rm
Revenue 22 033
Operating profit 3 381
The following table reflects the fair values at acquisition:
Community Linkwood Nuffield Oxford
Musculo-
skeletal
Clinic
Rm Rm Rm Rm
Property, plant and 534 8 1 799 24
equipment
Investments 4
Inventories 2 24 2
Trade and other receivables 80 3 6
Cash and cash equivalents 44 5 1
Long-term debt (104) (17)
Deferred taxation (81) (237)
Trade and other payables (309) (27) (16)
including short-term debt
Taxation payable (8)
162 (11) 1 586
Minority interest (4)
Fair value of net assets 158 (11) 1 586
acquired
Investment in associate (102)
56 (11) 1 586
Goodwill 119 11 570
Purchase consideration 175 2 156
Less amounts settled by (169)
issue of shares
Cash and cash equivalents (44) (5) (1)
in acquiree
Cash (inflow)/outflow on (38) (5) 2 156 (1)
acquisition
The fair values reflected above are equal to the carrying values at
acquisition except for:
Property plant and equipment Carrying Fair
value value
Rm Rm
Community 234 534
Nuffield 1 458 1 799
30 30
September September
2008 2007
Rm Rm
3. Associated companies and loans
Non-current
Associated companies* 89 282
Other loans and receivables 15 16
104 298
Current
Loans and receivables 75 56
179 354
*Directors` valuation of associated companies 282 466
4. Disposal group and assets held for sale
Assets held for sale
Assets in disposal group - Ampath Holdings 295 275
Trust
Land and buildings held for sale 9 44
304 319
Liabilities in disposal group held for sale
Liabilities in disposal group - Ampath Holdings (81) (79)
Trust
Discontinued operation - Ampath Holdings Trust
The Ampath Holdings Trust has been classified
as a disposal group held for sale. Our 50%
share of the discontinued operation was as
follows:
Revenue 563 507
Other income 2
Administrative and other expenses (426) (380)
Operating profit 139 127
Financial expenses (8) (7)
Profit before taxation 131 120
Taxation (26) (11)
Profit for the year 105 109
The assets and liabilities of the disposal
group are as follows:
Property, plant and equipment 71 54
Goodwill 72 72
Investments and loans 11 5
Inventories 10 8
Trade and other receivables 116 76
Taxation receivable 6
Cash and cash equivalents 15 54
Long-term debt (8) (6)
Post-retirement benefit obligation (9) (10)
Trade and other payables (56) (57)
Taxation payable (4)
Short-term debt (4) (6)
The cash flows are as follows:
Net cash from operating activities (11) 74
Net cash from investing activities (28) (32)
Net cash from financing activities (3)
5. Operating profit
After charging:
Depreciation and amortisation 1 244 1 044
Operating lease charges 345 190
6. Financial income
Dividends received 1 1
Fair value gain on cross-currency swap 136
contracts
Fair value gain on interest rate swaps 8 65
Foreign exchange gains (net) 104
Interest received 134 158
279 328
7. Financial expenses
Fair value loss on cross-currency swap 115
contracts
Foreign exchange losses (net) 156
Interest paid 2 550 2 348
2 706 2 463
8. Commitments
Capital commitments 753 1 031
South Africa 258 492
United Kingdom 495 539
Operating lease commitments 4 496 5 413
South Africa 1 460 395
United Kingdom 3 036 5 018
9. Contingent liabilities (guarantees and
suretyships)
South Africa 253 236
United Kingdom 118 112
371 348
Segment report
for the year ended 30 September
2008 2007 %
Rm Rm change
INCOME STATEMENT
Revenue 21 735 18 607 16,8
South Africa 10 385 8 869 17,1
Hospitals and Emergency Services 9 020 7 782 15,9
Primary care 1 365 1 087 25,6
United Kingdom 11 350 9 738 16,6
EBITDA 4 614 4 034 14,4
South Africa 1 739 1 685 3,2
Hospitals and Emergency Services 1 735 1 584 9,5
Primary care 4 101 (96,0)
United Kingdom 2 885 2 411 19,7
Capital items (10) (62)
South Africa 20 (29)
United Kingdom (30) (33)
Operating profit 3 370 2 990 12,7
South Africa 1 401 1 406 (0,4)
Hospitals and Emergency Services 1 414 1 328 6,5
Primary care (13) 78 (116,7)
United Kingdom 1 979 1 646 20,2
Capital items (10) (62)
South Africa 20 (29)
United Kingdom (30) (33)
Net interest paid 2 416 2 190 10,3
South Africa 518 456 13,6
United Kingdom 1 898 1 734 9,5
BALANCE SHEET
Total assets 54 626 50 220 8,8
South Africa 10 956 7 387 48,3
United Kingdom 43 670 42 833 2,0
Debt net of cash 32 589 30 130 8,2
South Africa 4 837 5 246 (7,8)
United Kingdom 27 752 24 884 11,5
The segment report excludes the disposal group and assets held for
sale
Salient features
for the year ended 30 September
2008 2007
Share statistics
Ordinary shares
Total shares in issue (million) 1 262 1 245
Weighted average number of shares (million) 1 261 1 230
Diluted weighted average number of shares 1 280 1 293
(million)
Market price per share (cents) 825 1 193
Currency conversion guide (R:GBP)
Closing exchange rate 14,76 14,03
Average exchange rate for the year 14,65 14,13
Commentary
Netcare Limited, an investment holding company listed on the JSE Limited, which
operates through its subsidiaries the largest private hospital networks in South
Africa (SA) and the United Kingdom (UK), announces audited group results for the
year ended 30 September 2008. The financial information in this announcement has
been prepared in accordance with International Financial Reporting Standards
(IFRS), the Listings Requirements of the JSE Limited and the South African
Companies Act, 1973, as amended.
Group financial highlights
- Group revenue up 17% to R21 735 million
- Group operating profit up 13% to R3 370 million
- Group cash conversion to EBITDA ratio of 101%
- Cash generated from operations up 17% to R4 663 million
-?2008 reductions of capital of 32 cents per share
Group business highlights
-?Treated over four million patients in SA and UK
-?Acquired 14 hospitals (eight in the UK and six in SA)
-?UK delivered strong operating performance
-?Achieved Level 3 B-BBEE accreditation (dti), and Empowerdex AA rating
-?Netcare 911 recognised as SA`s top healthcare brand
-?Awarded R1,1 billion healthcare PPP in Lesotho post year end
Group financial performance
Group revenue increased by 16,8% to R21 735 million with the SA business
contributing 48% and the UK business contributing 52%. Performance was driven by
organic and acquisitive growth in both countries and the impact of the increased
average ZAR/GBP exchange rate during the year.
Group operating profit increased by 12,7% to R3 370 million while the Group
operating profit margin declined from 16,1% to 15,5% as a result of sub-optimal
tariff levels in SA, underwriting costs in Primary Care and non-recurring costs
in both SA and UK amounting to R132 million. Included in operating profit are
restructuring costs of R135 million and transaction costs of R53 million on the
acquisition of seven Nuffield hospitals (Nuffield acquisition), all of these
offset by a profit on the curtailment of the UK defined benefit pension fund of
R76 million.
Group net financial expenses increased by 13,7% to R2 427 million, due to
marginally higher prevailing interest rates and increased debt associated with
the consolidation and acquisition of Community Hospital Group (Community) and
Nuffield hospitals. The prior year had included a R58 million gain on the UK
interest rate swaps.
Group taxation at R68 million, representing an effective tax rate of 8%, was
favourably affected by the restructuring of previously trapped UK tax losses and
accounting for deferred tax credits in the UK. Notably, the prior year credit of
R99 million had been favourably impacted by a R372 million deferred tax release
following a 2% reduction in the UK statutory tax rate to 28%.
The abovementioned deferred tax release boosted prior year headline earnings per
share (HEPS) by 15,9 cents and distorts any year on year comparisons. Adjusting
the prior year to exclude this release, results in adjusted HEPS of 61,7 cents
in line with the 61,5 cents reported for 2008. Reported HEPS for 2007 was 77,6
cents.
Net debt rose by 8,2% to R32 589 million mainly as a result of the ZAR/GBP
exchange rate movements and the Nuffield acquisition. The debt relating to the
UK is without recourse to the SA operations, with financing secured for a
further five years.
Capital expenditure of R1 240 million was incurred for additions and upgrading
of existing facilities.
Cash generated from operations increased by 17,3% to R4 663 million. The Group
converted 101,1% (2007: 98,5%) of its EBITDA into cash.
South African operations
Netcare acquired the balance of the shareholding in Community in October 2007,
adding five hospitals and 667 beds and Linkwood Clinic, a natural-birth
maternity unit with 33 beds, in November 2007. During the financial year
Netcare`s SA businesses were restructured into three focused divisions:
Hospitals, Primary Care and Emergency Services.
Employing 19 651 people, Netcare was again ranked as one of the top 10 large
companies to work for in South Africa in a survey conducted by Deloitte. We also
achieved an AA-rating from Empowerdex, equivalent to Level 3 compliance in terms
of the Department of Trade and Industry (dti) Codes of Good Practice for Broad-
Based Black Economic Empowerment. This represents excellent progress from the
Level 5 attained last year and demonstrates Netcare`s commitment to
transformation.
Netcare`s hospital management expertise was recognised by the Lesotho government
and the International Finance Corporation in the award to Netcare of the largest
healthcare Public Private Partnership (PPP) yet in Africa. With our consortium
partners we will construct a 390-bed referral hospital in Maseru and refurbish
three primary care referral clinics, as well as delivering all clinical
services. The agreement was signed on 27 October 2008.
Financial performance
Netcare SA grew revenue by 17,1% to R10 385 million, boosted by the acquisition
of Community and Linkwood Clinic, the increased revenue contribution from
Primary Care and the incorporation of our two newly built hospitals, Alberlito
and Blaauwberg. Organic revenue growth in SA was 13,2%.
EBITDA increased by 3,2% to R1 739 million. SA`s operating performance was
adversely impacted by sub-optimal tariff levels across all divisions,
inflationary cost pressures, higher underwriting costs (including approximately
R20 million relating to the prior year) in Primary Care, together with
restructuring costs of R12 million. This resulted in an operating margin of
13,5%. Adjusting for non-recurring items of R32 million, operating profit rose
1,9% to R1 433 million at an operating profit margin of 13,8%.
Capital expenditure for the year amounted to R687 million, which included
investments in hospital infrastructure, new medical equipment, and plant and
equipment.
Working capital management improved significantly, particularly in the last six
months, achieving a cash conversion of 167% (113% for the full year).
Divisional review
Hospitals
Total patient bed days grew by 13% of which 3% was organic, and 10% as a result
of the Community and Linkwood acquisitions as well as Alberlito and Blaauwberg.
The average length of stay remained unchanged. Average weekday occupancy
increased to 73%, including Alberlito and Blaauwberg.
Average revenue per patient day was up a modest 6,2%. Revenue was impacted by
Netcare`s decision to honour the request by the former Minister of Health to
hold tariff increases for several months of the calendar year despite the higher
inflationary environment.
In January 2008, a new policy on tariff structures was implemented; namely the
Actual Acquisition Price model (AAP). The AAP model ensures that all surgical
consumables are charged at cost. All pharmaceuticals are charged according to
Single Exit Price (SEP).
Hospital revenue comprises 40% alternative reimbursement fees and 60% fee-for-
service. We continue to develop protocols and guidelines to ensure quality
outcomes at the lowest possible cost.
Retail scripts dispensed from hospital pharmacies rose by 3% in part due to
extended hours and increased customer focus. Netcare continues to pilot in-store
retail pharmacies in partnership with Woolworths.
A significant cost driver remains the shortage of skilled nurses and
pharmacists. Netcare now trains 25% of all nurses in the country although we
manage only 7% of total private and public beds in the country.
Significant progress has been made on the construction of the Eastern Cape PPP`s
- Settlers Hospital in Grahamstown and the Port Alfred Hospital. Both of these
are expected to be fully operational during the 2009 financial year.
Primary Care
The Primary Care division comprises two primary clinic networks (Medicross and
Prime Cure) and the managed healthcare division within Prime Cure.
The clinic services provider platform offers national coverage through 101
Medicross Health Centres and Prime Cure Clinics, hosting 684 independent doctors
and dentists. These facilities recorded 3,7 million patient visits in the
period, up 8% on the prior year.
The managed healthcare division continued to expand its managed care and risk
management services into the previously uninsured section of the healthcare
market in South Africa. The number of managed lives increased by 32,5% to 235
039. Prime Cure experienced an unprecedented migration of clients from primary
healthcare cover to full risk cover, including hospitalisation. The change in
the nature of the business resulted in higher underwriting and servicing costs.
In addition, the contracted network of designated and accredited doctors and
dentists was extended by 19,3% to over 3 700 providers nationally, thereby
improving healthcare access for all our insured members.
Emergency Services (Netcare 911)
Netcare 911 is South Africa`s largest private emergency service providing a
broad range of pre-hospital services on a national basis, comprehensive
international assistance to travellers in Africa and worldwide emergency medical
assistance to several industrial and mining clients. It also operates the
largest private training facility for Emergency Medical Services in Africa.
The division attended to over 214 000 calls during the year and has
approximately 7,5 million members. The increased number of indigent patients
served, compounded by high fuel prices and other cost pressures have
necessitated a review of the business model to mitigate these operational costs.
Health sector developments
In the past year there has been significant regulatory focus on the private
healthcare sector, culminating in the release of the draft National Health
Amendment Bill and Medicines and Related Substances Amendment Bill. Regulations
will be reviewed in 2009 in light of the renewed impetus towards National Health
Insurance for all South Africans.
Netcare welcomes the appointment of Ms Barbara Hogan as Minister of Health. Her
constructive and open approach to healthcare issues heralds an opportunity for
the health sector, both public and private, to collectively confront the
challenges to national health, specifically those posed by the HIV/AIDS and TB
epidemics and the problems in healthcare delivery.
Netcare stands ready to assist government and the Department of Health in
initiatives to broaden access to quality healthcare and ensure better clinical
outcomes. Our commitment is demonstrated in our training of nurses and
paramedics, active involvement in PPPs, servicing of indigent patients by
Netcare 911 and increasing private healthcare access to lower-income families
through Prime Cure.
United Kingdom operations
Netcare`s UK business consists of a 50,1% stake in the General Healthcare Group
(GHG). GHG has 58 hospitals operating under the BMI brand and a National Health
Services (NHS) outsourcing division, Netcare UK. The UK operations have 8 473
full time equivalent employees.
GHG acquired seven of Nuffield`s private charitable hospitals in February 2008,
the Oxford Clinic, a specialist musculoskeletal hospital in August 2008 and the
Woodlands Hospital in Darlington in October 2008. GHG`s substantial organic
growth coupled with an effective acquisition strategy is serving to extend the
Group`s geographic footprint in the UK, enabling it to deliver further cost and
revenue efficiencies with a corresponding improvement in profitability.
Financial performance
Revenue from the UK business increased by 16,6% to R11 350 million (GBP772,6
million), with organic revenue growth of 7,4%. The seven acquired Nuffield
hospitals contributed 4,8% to the revenue increase and the higher average
exchange rates during the year resulted in an additional 4,4% in ZAR denominated
revenue.
EBITDA in Rand increased by 19,7% to R2 885 million and in GBP increased by
14,6% to GBP195,7 million and includes non-recurring items amounting to net
GBP6,6 million (2007: GBP5,6 million). Adjusting for these, EBITDA for the year
was GBP202,3 million (2007: GBP176,4 million).
Operating profit in Rand increased by 20,2% to R1 979 million and in GBP
increased by 12,5% to GBP128,7 million and includes non-recurring items set out
above plus an at-acquisition goodwill adjustment of GBP3,7 million (set off by a
corresponding credit in deferred tax). Adjusting for these items operating
profit for the year was GBP139,0 million (2007: GBP120,0 million).
Capital expenditure for the year was R553 million (GBP41,9 million). This
capital investment includes the upgrade of ward and theatre facilities, the
purchase of new diagnostics imaging equipment, the roll-out of network-wide
radiology systems (PACS/RIS) and the addition of new operating theatres and
equipment.
Divisional review
Hospitals (BMI)
Overall admissions in the UK grew by 6,1% with patient visits rising 10%. The
increase is attributable to increased general practitioner (GP) engagement,
incremental business development support for consultants and rebranding BMI as
"The Consultants` Choice", as well as the addition of new sites. Private Medical
Insurance (PMI) volumes remained static with an increase in NHS volumes
offsetting a decline in self-pay volume. Significant progress has been made in
transforming the UK business and in improving efficiencies and synergies.
In August BMI opened the Nottingham Primary Care Centre, providing access to
primary care services including diagnostics, outpatient services and specialist
(consultants) services. A joint partnership with Nottingham Emergency Medical
Services will allow the centre to also offer a walk-in service and NHS GP
services, and potentially, after hours emergency primary care services.
Netcare UK (NHS division)
Netcare UK continues to service existing Independent Sector Treatment Centre
(ISTC) contracts successfully. Some of these are the mobile ophthalmic project,
the Greater Manchester Surgical Centre, the Commuter Walk in Centre in Leeds,
which treated 30 000 patients during the year, and the surgical initiative with
the Scottish NHS in Stracathro. The five-year ophthalmic contract to provide 44
000 cataract operations is nearing its successful completion in April 2009.
Regulatory overview
The principal regulator in England is the Healthcare Commission (HCC) which is
to be merged with the Commission for Social Care Inspection, to form a super-
regulator to be known as the Care Quality Commission (CQC). The regulatory
framework is expected to change and the standards applicable to GHG`s hospitals
in England will, with effect from 2011, converge with those applicable to the
state`s NHS units. Furthermore the private (independent) sector is moving to a
more self-inspection oriented regime, with a reduced frequency of on-site
inspection visits from the HCC and the CQC. We believe this reflects the
maturity and credibility of management and systems in place in the independent
sector.
GHG has introduced a specific compliance focus in its quality and risk function
activities to ensure continued improvement in compliance levels across the
business units. GHG participates in a sector-wide project (actively supported by
the HCC and the Department of Health) to establish a clinical outcomes
programme, which will assess effectiveness at an individual patient level. Data
from this project will come on stream in early 2009. Comparatives will be drawn
from across the independent sector and, in time, the NHS.
Outlook
Given ever-changing global economic uncertainties, it is difficult to predict
the impact of the prevailing conditions on the economies of both SA and the UK.
However, the requirement for healthcare continues despite changes in economic
cycles.
However, Netcare remains confident that the demand for private healthcare will
be sustained in SA. This is underpinned by a financially sound and growing
medical scheme market. We are hopeful that real opportunities to partner and
assist government in the improvement of access to healthcare may also be
forthcoming.
In the UK, the recessionary environment is expected to impact out-of-pocket
spend on private healthcare in the short term. GHG is confident that this will
be somewhat offset by the NHS activity which provides much opportunity for
growth as the UK public starts to participate in the Free Choice Programme and
Primary Care Trusts rationalise around purchasing quality. GHG is increasingly
relevant and well positioned to capture the opportunities that exist in the UK
market in the years ahead with a continued focus on outstanding quality and
unrivalled national hospital coverage.
Board and management changes
Mr Motty Sacks retired as non-executive chairman on 31 March 2008 and remains as
a non-executive director. Mr Jerry Vilakazi was appointed independent non-
executive chairman with effect from 1 June 2008. Professor Taole Mokoena
resigned on 4 June 2008, Mr Martin Kuscus was appointed as an independent non-
executive director with effect from 1 July 2008, and Dr Jan van Rooyen resigned
as a non-executive director with effect from 11 August 2008.
On 5 November 2008, Peter Nelson, the Chief Financial Officer gave notice of his
resignation from the company to take up employment outside of the Netcare Group
with effect from 5 December. Vaughan Firman, Financial Director of Netcare`s
South African operations, has assumed the role of Acting Chief Financial Officer
of the Netcare Group with immediate effect.
The Board wishes to express it sincere appreciation to Mr Sacks for his
exceptional contribution to the Group and looks forward to his ongoing
participation. The Board also wishes to thank Professor Taole Mokoena, Dr Jan
van Rooyen and Peter Nelson for their excellent contributions.
Audit opinion of the independent auditors
The Group`s annual financial statements have been audited by Grant Thornton and
their unqualified audit report is available for inspection at the Company`s
registered office.
Declaration of reduction of capital number 19
In accordance with the authority given to the directors by way of an ordinary
resolution passed on 25 January 2008, the Board of Directors declared on 20
November 2008 a reduction of capital (number 19) out of share premium of 18
cents per ordinary share (2007: 18 cents per ordinary share), payable on 26
January 2009, to shareholders recorded in the register of the Company as at 23
January 2009.
In compliance with the requirements of Strate, the following dates are
applicable:
Last date to trade "cum" the reduction
of capital (LDT) Friday, 16 January 2009
Date trading commences "ex" the reduction
of capital Monday, 19 January 2009
Record date Friday, 23 January 2009
Date of payment Monday, 26 January 2009
Share certificates may not be dematerialised nor rematerialised between Monday,
19 January 2009 and Friday, 23 January 2009, both dates inclusive.
On behalf of the board
Jerry Vilakazi
Chairman
Dr Richard Friedland
Chief Executive Officer
Peter Nelson
Chief Financial Officer
Sandton
21 November 2008
Note regarding forward-looking statements
The Company advises investors that any forward looking statements or projections
made by the Company, including those made in this announcement, are subject to
risk and uncertainties that may cause actual results to differ materially from
those projected. Factors that may affect the Group`s operations are described
under "Risk factors" on the investor relations website
www.netcareinvestor.co.za.
Executive directors: Dr RH Friedland (Chief Executive Officer);
PG Nelson (Chief Financial Officer); IM Davis; Dr VLJ Litlhakanyane?Non-
executive directors: SJ Vilakazi (Chairman); Dr APH Jammine; JM Kahn; MJ Kuscus;
HR Levin; Adv KD Moroka SC; Dr AA Ngcaba; MI Sacks; N Weltman
Company secretary: J Wolpert?
Registered office: 76 Maude Street (corner West Street), Sandton 2196; Private
Bag X34, Benmore 2010?
Transfer secretaries: Link Market Services South Africa (Proprietary) Limited;
11 Diagonal Street, Johannesburg 2001; PO Box 4844, Johannesburg 2000
Sponsors: Merrill Lynch South Africa (Proprietary) Limited; (Registration number
1995/001805/07); 138 West Street, Sandown, Sandton 2196?
Investor relations: +27 11 301 0212; ir@netcare.co.za,www.netcareinvestor.co.za
Registration number: 1996/008242/06?
(Incorporated in the Republic of SouthAfrica)?
JSE share code: NTC?ISIN code: ZAE000011953?
("Netcare", "the Company" or "the Group")
Date: 24/11/2008 07:05:09 Produced by the JSE SENS Department.
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