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NTC
NTC
NTC - Netcare Limited - Audited Group Results for the year ended 30 September
2009
Netcare Limited
Registration number: 1996/008242/06
(Incorporated in the Republic of South Africa)
JSE share code: NTC ISIN code: ZAE000011953
("Netcare", "the Company" or "the Group")
Audited Group Results
for the year ended 30 September 2009
Commentary
Group financial review
Netcare delivered strong results in the year under review reflecting continued
healthcare demand and the defensive nature of healthcare despite the global
economic downturn.
Group revenue rose 6.9% to R23 232 million (2008: R21 735 million), supported by
higher demand for private healthcare services in SA. The UK showed solid growth
and benefited from the inclusion of newly acquired hospitals and the inclusion
of Nuffield hospitals for the full 12 months.
The Group operating margin increased from 15.5% to 15.9%, largely due to strong
patient volumes and efficiency improvements. The margin translated into 9.8%
growth in Group operating profit to R3 700 million (2008: R3 370 million).
Results for the period include the sale of Netcare`s 50% interest in Ampath
Holdings Trust (Ampath) in February 2009. Gross proceeds from the sale were R1
027 million and a profit of R588 million, after capital gains tax of R90
million, has been included in profit from discontinued operations.
Group net financial expenses reflects 6.9% lower at R2 260 million (2008: R2 427
million) as a result of the lower average exchange rate. The interest benefit
arising from the Ampath proceeds, better working capital management and lower
interest rates in SA also contributed to the reduction.
The effective tax rate increased to 23.9% (2008: 7.5%) mainly due to the
abnormally low rate in the prior year which included a once-off tax credit of
GBP7.5 million in the UK.
Headline earnings per share rose 27.2% to 78.2 cents (2008: 61.5 cents) with
basic earnings per share up 95.0% to 123.8 cents (2008: 63.5 cents). The Group`s
results were impacted by the lower average ZAR:GBP exchange rate in the period,
which reduced headline earnings per share by 3.3 cents.
The final capital reduction of 22.0 cents per share (2008: 18.0 cents) brings
total capital reductions for the year to 38.0 cents per share (2008: 32.0
cents), growing 18.8%.
Net debt at R26 454 million was significantly lower than the R32 589 million
recorded at 30 September 2008, and was down R3 907 million from March 2009.
Contributing to the lower debt level were the depreciation of the British pound
against the rand, which reduced debt by R5 270 million and the net cash proceeds
of R852 million from the Ampath disposal. On receiving the Ampath proceeds, the
Group was able to repurchase convertible bonds with a nominal value of R95
million, as well as repay expensive bank debt.
Equity decreased by R1 718 million mainly due to unfavourable non-cash
mark-to-market fair value adjustments on the UK interest rate swaps. These
adverse adjustments are recognised in the cash flow hedge accounting reserve.
Cash generated by operations declined marginally to R4 640 million (2008:
R4 663 million) primarily as a result of increased working capital requirements
in the UK. The Group converted 94.2% (2008: 101.1%) of its EBITDA into cash.
Capital expenditure for the year was R1 272 million compared to R1 240 million
in the prior year.
During the year, 436 million treasury shares held by Netpartner Investments
Limited and The Netcare Trust were repurchased and cancelled.
Divisional review
South Africa
Revenue was 13.9% higher at R11 832 million (2008: R10 385 million) driven
largely by organic growth in all SA divisions.
EBITDA rose 16,0% to R2 018 million (2008: R1 739 million) and operating profit
increased 18.6% to R1 662 million (2008: R1 401 million). SA`s operating
performance was adversely affected by underwriting losses and higher doubtful
debt provisions in Primary Care.
Cash generated by the SA operations was up 15.0% to R2 270 million (2008: R1 974
million), with the improvement coming mainly from better working capital
management. Investment in capital infrastructure continued with expenditure of
R747 million (2008: R687 million) including investments in hospital
infrastructure and medical equipment.
The SA balance sheet strengthened with a 19.3% year-on-year reduction in net
debt to R3 903 million (2008: R4 837 million). Working capital was well managed
with patient debtors` days at record low levels, while stock was kept at a
minimum throughout the year. The centralisation of the creditors function also
contributed to the improved working capital management.
Netcare is strongly committed to broadening access to quality healthcare in
South Africa. Two new Public Private Partnership (PPP) Hospitals, Settlers
Hospital in Grahamstown and Port Alfred Hospital in the Eastern Cape opened
during the year. Construction of the 425-bed Lesotho Hospital PPP and
refurbishment of four primary care clinics commenced in March 2009. The
performance of the Universitas/Pelonomi Hospital PPP improved significantly
during the year.
Netcare employs 20 581 people in SA, and was ranked fifth in the Large Companies
category of the 2009 Deloitte Best Company to Work For Survey. We maintained our
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 which demonstrates our ongoing commitment to
transformation. Netcare was also recognised for clear leadership on
environmental issues in the South African private healthcare market by attaining
14th place on the Carbon Disclosure Project (CDP) Carbon Leadership Index.
Hospitals and Emergency services
The Hospital division delivered strong results underpinned by increases in
patient day growth of 4.9%. Average occupancy, including weekends, rose from
65.4% to 67.0%.
Netcare trained more than 3 800 learners in the year, in line with our
commitment to skills development in SA and specifically to address the shortage
of skilled nursing, pharmacy and paramedic personnel.
Netcare continued to invest in current infrastructure to meet rising demand.
During the year, additional beds were added to our existing facilities, taking
total beds to 8 766. This included the addition of 16 general ward beds at
Netcare Akasia Hospital, 10 high-care (HC) beds at Netcare Kuilsrivier Hospital
and six trauma ICU beds at Netcare Sunninghill Hospital. An oncology and day
ward was built at Netcare Kingsway Hospital and a trauma unit at Netcare
Greenacres Hospital. In addition, an extensive upgrade of ICU, HC and the
pharmacy at Netcare Greenacres Hospital was also completed. The number of beds
is expected to increase by 204 to 8 970 beds next year.
Emergency services division, Netcare 911, recorded 15.1% growth in total lives
under management to 7.5 million lives.
Primary Care
The Primary Care division posted disappointing results, adversely impacted by,
inter alia, issues in the prior year and changes to its organisational
structure.
Revenue rose 10.8% to R1 513 million (R1 365 million) aided by a 10.7% increase
in the Reference Price List (RPL), additional Medicross clinics and expanding
the managed care and risk management services. Prime Cure`s managed care lives
grew 10.3% to 246 205 lives. The division reported an EBITDA loss of R24 million
(2008: R4 million profit).
As communicated previously, the division continues its remedial programme to
address risk matters and underperformance. It is expected to break even for the
2010 financial year.
United Kingdom
Netcare owns a 50.1% stake in General Healthcare Group (GHG) which has hospitals
operating under the BMI brand name, in addition to an NHS outsourcing division
known as Netcare UK.
GHG delivered strong results against the backdrop of the prevailing recessionary
climate within the UK economy. During the year GHG has been successful in
introducing new services to many of its hospitals and growing its geographic
presence. The Woodlands Hospital in Darlington and City Medical consulting
suites were acquired in October 2008, and Fitzroy Square Hospital in London was
purchased in April 2009. In addition, the integration of the seven hospitals
acquired from Nuffield in February 2008 was completed. Almost 90% of the UK
population now lives less than an hour from a BMI facility and GHG`s extended
scale and national coverage are beginning to yield real customer and business
benefits.
Demand for private healthcare facilities has remained relatively strong despite
the economic environment. Overall caseload in the UK grew 7.8% year-on-year,
reflecting both organic growth and the acquisitions noted above. There was a
shift in the business mix with good growth in NHS patients, offsetting some
declines in the self-pay market. Private Medical Insurance (PMI) patients
remained at a stable level on a same site basis. The NHS is expected to remain a
key partner now that the national Choose and Book (C&B) programme has been
introduced, allowing the public, through their GPs, to select private facilities
directly for their treatment. The demographics of an ageing population and
lifestyle diseases are also expected to support growth in private caseload over
the longer term.
Revenue from the UK operations was up 7.6% to GBP831.5 million (2008: GBP772.6
million). Due to the lower average exchange rates during the year, rand
denominated revenue increased marginally by 0.4% to R11 400 million (2008: R11
350 million).
EBITDA rose 8.9% to GBP213.1 million (2008: GBP195.7 million) and operating
profit grew 14.9% to GBP147.9 million (2008: GBP128.7 million). However, due to
exchange rate fluctuations, Rand denominated EBITDA of R2 919 million (2008: R2
885 million) represents a year-on-year increase of 1.2%, while operating profit
was 3.5% higher at R2 048 million (2008: R1 979 million). Restructuring and
retrenchment costs of R71 million (GBP5.2 million) were incurred compared to R97
million (GBP6.6 million) in the prior year. These costs relate to structural
changes to the business, which have reduced its cost base. Profit after tax was
GBP16.0 million (R237 million), an increase of 44.1%.
Capital expenditure including intangible assets amounted to R653 million
(GBP46.5 million) compared to R689 million (GBP51.2 million) in 2008 as GHG
continued to invest in its hospital infrastructure, including a major
refurbishment of reception areas and wards, the acquisition of leading edge
scanning and imaging equipment, and the implementation of business-enabling IT
systems.
Net debt increased by GBP7 million to GBP1 887 million (2008: GBP1 880 million)
and was impacted by higher working capital arising from both the underlying
growth in the business and the increased NHS caseload, at longer payment cycles.
Cash collection remains a key focus to limit the impact of this industry-wide
shift. GHG continued to meet its financial covenants and has sufficient headroom
for the remaining debt term. The debt relating to the UK is without recourse to
the SA operations.
Outlook
Netcare is wholly committed to working with the SA and UK governments both to
meet increasing demand for, and improve access to, quality healthcare.
The global debate on affordable and equitable healthcare delivery and reform
continues to evolve. Whilst demand for healthcare services in both the Group`s
markets is expected to increase due to a higher burden of disease, particularly
in SA, and an ageing population particularly in the UK, regulatory pressure to
provide greater access and reduce pricing is inevitable. Given the capital
intensive nature of delivering tertiary healthcare, it is important that
consensus on pricing which allows for an adequate return on capital and routine
replacement of existing infrastructure is reached.
In SA, through our Primary Care network, Netcare is well positioned to assist
government in meeting the healthcare-related Millennium Development Goals for
2015. In addition, Netcare welcomes the establishment of the National Health
Insurance (NHI) Advisory Committee to the Minister of Health and we remain
committed to working with the Department of Health in addressing the challenges
outlined in the Department`s 10 Point Plan.
In the UK, recessionary pressures are expected to subdue the growth of PMI and
self-pay spending on private healthcare in the short term, but this is likely to
be largely offset by growth in NHS activity. However, the underlying
fundamentals of the UK private healthcare sector remain intact, with NHS
budgetary pressures likely to further increase demand for private facilities.
GHG is well positioned to make progress in the current market and increasingly
well positioned to benefit from a future economic upturn.
Board and management changes
Vaughan Firman was appointed Chief Financial Officer of the Netcare Group and
Financial Director of Netcare Limited from 12 February 2009, following the
resignation of Peter Nelson on 5 December 2008.
On 20 July 2009, it was announced that Ingrid Davis resigned as Director
effective 31 December 2009. The Board thanks Ingrid sincerely for her very
significant contribution to Netcare over the last 15 years.
Joel Wolpert will be retiring as Group Company Secretary with effect from 1
December 2009. The Board expresses its wholehearted appreciation for his
contribution to the Group over the last 16 years. The Board has appointed Bert
Kok as Group Company Secretary with effect from 1 December 2009.
Audit opinion of the independent auditors
These condensed financial statements have been extracted from the Group audited
annual financial statements on which Grant Thornton have issued an unqualified
audit report. This report is available for inspection at the Company`s
registered office.
Declaration of capital reduction number 21
In accordance with the authority given to the directors by way of an ordinary
resolution passed on 30 January 2009, the Board of Directors declared on
Thursday, 19 November 2009 a final capital reduction (number 21) out of share
premium of 22.0 cents per ordinary share, payable on Monday 25 January 2010, to
shareholders recorded in the register of the Company as at Friday, 22 January
2010.
In terms of Article 54.12 of the Company`s Articles of Association, all capital
reductions with a value of R5,00 or less will be donated to a registered charity
approved by the directors of the Company.
In compliance with the requirements of Strate, the following dates are
applicable:
Last day to trade cum the capital reduction
(LDT) Friday, 15 January 2010
Trading ex capital reduction commences Monday, 18 January 2010
Record date Friday, 22 January 2010
Date of payment Monday, 25 January 2010
Share certificates may not be dematerialised nor rematerialised between
Friday, 15 January 2010 and Friday, 22 January 2010, both days inclusive.
On behalf of the Board
Jerry Vilakazi Chairman
Richard Friedland Chief Executive Officer
Vaughan Firman Chief Financial Officer
Sandton
20 November 2009
Group statement of financial position
at 30 September
2009 2008 2007
Note Rm Rm Rm
Assets
Non-current assets
Property, plant and equipment 25 097 29 732 26 683
Goodwill 14 303 17 555 16 091
Intangible assets 366 355 289
Associated companies and loans 4 130 104 298
Financial asset - Derivative
financial instruments 558 1 453
Deferred taxation 1 147 689 514
Total non-current assets 41 043 48 993 45 328
Current assets
Loans and receivables 4 54 75 56
Inventories 621 638 600
Trade and other receivables 3 416 3 274 2 875
Cash and cash equivalents 803 1 202 1 361
4 894 5 189 4 892
Assets held for sale 5 4 304 319
Total current assets 4 898 5 493 5 211
Total assets 45 941 54 486 50 539
Equity and liabilities
Capital and reserves
Ordinary share capital and premium 1 065 1 601 1 819
Treasury shares (767) (5 555) (5 555)
Option premium on convertible bond 169 172 172
Other reserves 231 1 685 1 863
Retained earnings 3 446 6 590 5 833
Equity attributable to owners of the
parent 4 144 4 493 4 132
Preference share capital and premium 644 644 644
Non-controlling interest 2 345 3 714 3 806
Total shareholders` equity 7 133 8 851 8 582
Non-current liabilities
Long-term debt 25 423 31 530 28 944
Financial liability - Derivative
financial instruments 2 797 1 654 1 156
Post-retirement benefit obligations 297 126 115
Deferred lease liability 114 91 63
Deferred taxation 5 041 6 463 6 073
Provisions 48 56 90
Total non-current liabilities 33 720 39 920 36 441
Current liabilities
Trade and other payables 2 924 3 105 2 480
Short-term debt 1 745 2 021 2 086
Taxation payable 330 268 410
Bank overdrafts 89 240 461
5 088 5 634 5 437
Liabilities in disposal groups held
for sale 5 81 79
Total current liabilities 5 088 5 715 5 516
Total equity and liabilities 45 941 54 486 50 539
Group income statement
For the year ended 30 September
2009 2008 % 2007
Note Rm Rm Change Rm
Continuing operations
Revenue 23 232 21 735 6.9 18 607
Cost of sales (13 701) (12 842) (10 856)
Gross profit 9 531 8 893 7 751
Other income 232 256 204
Administrative and other
expenses (6 063) (5 779) (4 965)
Operating profit 6 3 700 3 370 9.8 2 990
Financial income 7 171 294 328
Financial expenses 8 (2 431) (2 721) 10.7 (2 463)
Attributable earnings of
associates 27 2 32
Profit before taxation 1 467 945 55.2 887
Taxation (350) (68) 99
Profit for the year from
continuing operations 1 117 877 27.4 986
Discontinued operation
Profit for the year from
discontinued operation 5 634 105 109
Profit for the year 1 751 982 78.3 1 095
Attributable to:
Owners of the parent 1 564 801 927
Preference shareholders 73 67 30
Profit attributable to
shareholders 1 637 868 957
Non-controlling interest 114 114 138
1 751 982 1 095
Earnings per share (cents)
Basic 123.8 63.5 95.0 75.4
Continuing operations 73.6 55.2 33.3 66.5
Discontinued operation 50.2 8.3 8.9
Diluted 122.6 62.6 95.8 71.7
Continuing operations 72.9 54.4 34.0 63.3
Discontinued operation 49.7 8.2 8.4
Capital reduction per
share (cents) 38.0 32.0 18.8 31.0
Group statement of comprehensive income
for the year ended 30 September
2009 2008 2007
Rm Rm Rm
Profit for the year 1 751 982 1 095
Other comprehensive income, net of tax (3 086) (535) 938
Actuarial (losses)/gains on defined
benefit plans (130) (49) 28
Effect of cash flow hedge accounting (2 086) (790) 1 136
Effect of translation of foreign entities (870) 304 (226)
Total comprehensive (loss)/income for the (1
year 335) 447 2 033
Attributable to:
Owners of the parent (48) 480 1 435
Preference shareholders 73 67 30
Non-controlling interest (1 360) (100) 568
(1 335) 447 2 033
Group statement of cash flows
for the year ended 30 September
2009 2008 2007
Rm Rm Rm
Cash flows from operating activities
Cash received from customers 22 921 21 099 18 869
Cash paid to suppliers and employees (18 281) (16 436) (14 895)
Cash generated from operations 4 640 4 663 3 974
Interest paid (2 430) (2 558) (2 355)
Continuing operations (2 425) (2 550) (2 348)
Discontinued operation (5) (8) (7)
Taxation paid (526) (290) (286)
Continuing operations (520) (268) (269)
Discontinued operation (6) (22) (17)
Ordinary dividends paid by subsidiaries (3) (1)
Preference dividends paid (73) (67) (30)
Capital reductions paid (430) (406) (347)
Net cash from operating activities 1 178 1 341 956
Continuing operations 1 179 1 352 882
Discontinued operations (1) (11) 74
Cash flows from investing activities
Purchase of property, plant and equipment (1 283) (1 268) (1 389)
Continuing operations (1 272) (1 240) (1 291)
Discontinued operations (11) (28) (98)
Proceeds on disposal of property, plant
and equipment 60 708 40
Additions to intangible assets (144) (148) (103)
Post-retirement benefit obligation (151)
Decrease/(Increase) in investments and
loans 40 128 (52)
Proceeds from disposal of subsidiaries,
net of cash 852 15 1
Interest received 150 134 158
Realised gain on cross-currency swap 324
Dividends received 1 44 1
Acquisition of subsidiaries and
businesses, net of cash acquired (9) (2 112) (169)
Net cash from investing activities (333) (2 175) (1 664)
Continuing operations (322) (2 147) (1 632)
Discontinued operations (11) (28) (32)
Cash flows from financing activities
Proceeds from issue of ordinary shares 31 48 669
Repurchase of shares (11)
Settlement of derivatives (19)
Long-term liabilities (repaid)/raised (840) 974 262
Short-term liabilities repaid (139) (133) (317)
Net cash from financing activities (978) 889 614
Continuing operations (974) 899 617
Discontinued operations (4) (3)
Net (decrease)/increase in cash and cash
equivalents (133) 55 (94)
Translation effects on cash and cash
equivalents of foreign entities (115) (32) 39
Cash and cash equivalents at beginning of
the year 962 900 1 009
Effects of cash in disposal group held for
sale 39 (54)
Cash and cash equivalents at end of the
year 714 962 900
Statement of changes in equity
For the year ended 30 September
Ordinary
share Option Foreign
capital premium on currency
and Treasury convertible translation
Rm premium shares bond reserve
Balance at 1 October 2006 1 497 (5 555) 1 414
Shares issued during the
year 669
Capital reduction (347)
Option premium on
convertible bond 172
Disposal of shares in a
subsidiary (29)
Settlement of zero cost
collar
Share-based payments
reserve movements
Preference dividends paid
Other reserve movements
Total comprehensive income
for the year (93)
Balance at 30 September
2007 1 819 (5 555) 172 1 292
Shares issued during the
year 188
Capital reduction (406)
Revaluation of land and
buildings following
a business combination
Movement in employee share
trust reserve
Share-based payments
reserve movements
Capital gains tax on
capital reductions
attributable
to treasury shares
Preference dividends paid
Other reserve movements
Disposal of shares in a
subsidiary
Dividends paid by
subsidiaries
Total comprehensive income
for the year 130
Balance at 30 September
2008 1 601 (5 555) 172 1 422
Shares issued during the
year 31
Capital reduction (430)
Repurchase of shares (137) 4 788
Repurchase of convertible
bond (3)
Movement in employee share
trust reserve
Share-based payments
reserve movements
Capital gains tax on
capital reductions
attributable
to treasury shares
Preference dividends paid
Other reserve movements
Acquisition of shares in
subsidiary
Dividends paid by
subsidiaries
Total comprehensive income (446)
for the year
Balance at 30 September
2009 1 065 (767) 169 976
Cash flow
hedge
accounting Other Retained
Rm reserve reserves earnings
Balance at 1 October 2006 (299) 242 4 938
Shares issued during the year
Capital reduction
Option premium on convertible bond
Disposal of shares in a subsidiary 5 (19)
Settlement of zero cost collar (24)
Share-based payments reserve
movements 27
Preference dividends paid (30)
Other reserve movements 20 (14)
Total comprehensive income for the
year 958
Balance at 30 September 2007 306 265 5 833
Shares issued during the year
Capital reduction
Revaluation of land and buildings
following a business combination 93
Movement in employee share trust
reserve 30
Share-based payments reserve
movements 5
Capital gains tax on capital
reductions attributable
to treasury shares (10)
Preference dividends paid (67)
Other reserve movements (9) (10)
Disposal of shares in a subsidiary
Dividends paid by subsidiaries
Total comprehensive income for the
year (427) 844
Balance at 30 September 2008 (121) 384 6 590
Shares issued during the year
Capital reduction
Repurchase of shares (4 583)
Repurchase of convertible bond 7
Movement in employee share trust
reserve 1
Share-based payments reserve
movements 32
Capital gains tax on capital
reductions attributable
to treasury shares (7)
Preference dividends paid (73)
Other reserve movements 54 (54)
Acquisition of shares in subsidiary
Dividends paid by subsidiaries
Total comprehensive income for the
year (1 095) 1 566
Balance at 30 September 2009 (1 216) 471 3 446
Equity
attribut- Preference
able share Total
to owners capital Non- share-
of the and controlling holders`
Rm parent premium interest equity
Balance at 1 October
2006 2 237 644 3 355 6 236
Shares issued during the
year 669 669
Capital reduction (347) (347)
Option premium on
convertible bond 172 172
Disposal of shares in a
subsidiary (43) (117) (160)
Settlement of zero cost
collar (24) (24)
Share-based payments
reserve movements 27 27
Preference dividends
paid (30) (30)
Other reserve movements 6 6
Total comprehensive
income for the year 1 465 568 2 033
Balance at 30 September
2007 4 132 644 3 806 8 582
Shares issued during the
year 188 188
Capital reduction (406) (406)
Revaluation of land and
buildings following
a business combination 93 - 93
Movement in employee
share trust reserve 30 30
Share-based payments
reserve movements 5 5
Capital gains tax on
capital reductions
attributable
to treasury shares (10) (10)
Preference dividends
paid (67) (67)
Other reserve movements (19) (19)
Disposal of shares in a
subsidiary - 9 9
Dividends paid by
subsidiaries - (1) (1)
Total comprehensive
income for the year 547 (100) 447
Balance at 30 September
2008 4 493 644 3 714 8 851
Shares issued during the
year 31 31
Capital reduction (430) (430)
Repurchase of shares 68 68
Repurchase of
convertible bond 4 4
Movement in employee
share trust reserve 1 1
Share-based payments
reserve movements 32 32
Capital gains tax on
capital reductions
attributable
to treasury shares (7) (7)
Preference dividends
paid (73) (73)
Other reserve movements -
Acquisition of shares in
subsidiary (6) (6)
Dividends paid by
subsidiaries (3) (3)
Total comprehensive
income for the year 25 (1 360) (1 335)
Balance at 30 September
2009 4 144 644 2 345 7 133
Headline earnings
for the year ended 30 September
2009 2008 % 2007
Rm Rm change Rm
Reconciliation of headline earnings
Profit for the period from continuing 1
operations 117 877 27.4 986
Less:
Preference shareholders (73) (67) (30)
Non-controlling interest (114) (114) (138)
Earnings used in the calculation of basic
earnings per share from continuing
operations 930 696 33.6 818
Adjusted for:
Impairment of goodwill 1 16
Impairment of intangible assets 40
Impairment of investments 2 1 1
Impairment of land and buildings 13 1
Reversal of impairment of property, plant
and equipment (17) (11)
Profit on disposal of property, plant and
equipment (5) (28) (1)
Loss/(profit) on disposal of
subsidiaries/investments 2 (1)
Tax effect of headline adjusting items 2 6
Non-controlling share of headline
adjusting items 10 (16)
Headline earnings from continuing
operations 942 672 846
Earnings from discontinued operation 634 105 109
Adjusted for:
Profit on disposal of property, plant and
equipment (2)
Profit on disposal of discontinued
operation (678)
Tax effect of headline adjusting items 90
Headline earnings from discontinued
operations 46 103 109
Headline earnings 988 775 27.5 955
Headline earnings per share (cents)
Basic 78.2 61.5 27.2 77.6
Continuing operations 74.6 53.3 40.0 68.8
Discontinued operation 3.6 8.2 (56.1) 8.8
Diluted 77.5 60.5 28.6 73.8
Continuing operations 73.9 52.5 41.3 65.4
Discontinued operation 3.6 8.0 (55.0) 8.4
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 Companies Act of South Africa.The
accounting policies applied in the preparation of these financial
statements are consistent with those applied for the year ended 30
September 2008, except for the following:
- IAS 1 Revision of International Accounting Standard 1 Presentation of
Financial Statements
2. Acquisition of businesses
The following business combinations took effect during the year:
2.1 Effective 1 October 2008, the Group acquired 50% of the shares in The
Thornbury Radiosurgery Centre Limited in the United Kingdom.
2.2 With effect from 17 October 2008, the Group acquired 100% of the shares in
City Medical Limited in the United Kingdom.
2.3 On 31 October 2008, the group acquired 100% of the business, excluding
certain assets of Woodlands Hospital in the United Kingdom for a nominal
consideration. A lease agreement was entered into with the seller for the
rental of the premises and use of the excluded assets.
2.4 Effective 14 April 2009, the Group acquired the business of the St Luke`s
Hospital in central London for a nominal consideration.
From the dates of acquisition to 30 September 2009, the following amounts
have been included in the Group`s income statement:
The
Thornbury
City Radiosurgery
Medical St Luke`s Centre Woodlands
Rm Limited Hospital Limited Hospital Total
Revenue 4 8 11 100 123
Operating profit (6) 4 10 8
The following table reflects the fair values at acquisition:
City The Thornbury
Medical Radiosurgery
Rm Limited Centre Limited
Property, plant and equipment 15
Trade and other receivables 1
Cash and cash equivalents 1 4
Long-term debt (15)
Trade and other payables including short term
debt (5)
Fair value of net assets acquired (3) 4
Goodwill 10 3
Purchase consideration 7 7
Cash and cash equivalents in acquiree (1) (4)
Cash outflow on acquisition 6 3
The fair values reflected above are equal to
the carrying values at acquisition.
3. Reclassification of comparative information
3.1 Statement of financial position reclassifications
The following reclassifications to the statement of financial position have been
made:
As
previously As
Rm reported Adjustments reclassified
2008
Assets
Deferred taxation 907 (218) 689
Trade and other receivables 3 500 (226) 3 274
Liabilities
Deferred taxation 6 681 (218) 6 463
Provisions 56 56
Trade and other payables 3 387 (282) 3 105
2007
Liabilities
Provisions 90 90
Trade and other payables 2 570 (90) 2 480
3.2 Income statement reclassifications
The following reclassifications to the September 2008 income statement have been
made:
Financial income and expenses
The ineffectiveness arising on the cash flow hedge of R15 million, previously
included with the fair value gain on interest rate swaps, has been reclassified
from financial income to financial expenses.
2009 2008 2007
Rm Rm Rm
4. Associated companies and loans
Non-current
Associated companies * 122 89 282
Other loans 8 15 16
130 104 298
Current
Loans 54 75 56
184 179 354
* Directors` valuation of associated companies 395 282 466
5. Disposal group and assets held for sale
Assets held for sale
Assets in disposal group - Ampath Holdings Trust 295 275
Land and buildings held for sale 4 9 44
4 304 319
Liabilities in disposal groups held for sale
Liabilities in disposal group - Ampath Holdings
Trust (81) (79)
5.1 Discontinued operation - Ampath Holdings Trust
Sale of our interest in Ampath Holdings Trust was
completed in February 2009, following Competition
Commisioner approval. The sale of our units and
claims amounted to R1 027 million.
Our 50% share of the discontinued operation was as
follows:
Revenue 267 563 507
Other income 2
Administrative and other expenses (198) (426) (380)
Operating profit 69 139 127
Financial expenses (5) (8) (7)
Profit before taxation 64 131 120
Taxation (18) (26) (11)
Profit for the year before profit on disposal 46 105 109
Profit on disposal of discontinued operation, net
of tax 588
Profit for the year from discontinued operations 634 105 109
The profit on the sale of Ampath Holdings Trust can be reconciled as follows:
Rm
Sale of units and claims 1 027
Less: Carrying value (349)
Claims settled (174)
Net asset value (175)
Profit on disposal 678
Less: Capital gains tax (90)
Profit on disposal of discontinued operation, net of tax 588
2009 2008 2007
Rm Rm Rm
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 (1) (11) 74
Net cash from investing activities (11) (28) (32)
Net cash from financing activities (4) (3)
5.2 Land and buildings held for sale
Certain land and buildings were classified as
held for sale. A reversal of impairment amounting
to R17 million was recognised in 2008 and R11
million in 2007.
Land and buildings held for sale 4 9 44
6. Operating profit
After charging:
Depreciation and amortisation 1 227 1 244 1 044
Operating lease charges 410 345 190
7. Financial income
Dividends received 1 1 1
Fair value gain on cross-currency swap contracts 136
Ineffectiveness recognised in the income
statement arising from cash flow hedges (net) 65
Foreign exchange gains (net) 104
Recycling of cash flow hedge reserve 20 23
Interest received 150 134 158
171 294 328
8. Financial expenses
Fair value loss on cross-currency swap contracts 115
Foreign exchange losses (net) 1 156
Ineffectiveness recognised in the income
statement arising from cash flow hedges (net) 5 15
Interest paid 2 425 2 550 2 348
2 431 2 721 2 463
9. Commitments
Capital commitments 869 753 1 031
South Africa 441 258 492
United Kingdom 428 495 539
Operating lease commitments 3 215 4 496 5 413
South Africa 1 369 1 460 395
United Kingdom 1 846 3 036 5 018
10. Contingent liabilities (guarantees and
suretyships)
South Africa 632 253 236
United Kingdom 118 112
632 371 348
The Group has guaranteed R410 million covering the obligations of pathologists
to a banking institution following the sale of Ampath.
Segment report
for the year ended 30 September
2009 2008 % 2007
Rm Rm change Rm
Income statement
Revenue 23 232 21 735 6.9 18 607
South Africa 11 832 10 385 13.9 8 869
Hospitals and Emergency services 10 319 9 020 7 782
Primary care 1 513 1 365 1 087
United Kingdom 11 400 11 350 0.4 9 738
EBITDA 4 927 4 614 6.8 4 034
South Africa 2 018 1 739 16.0 1 685
Hospitals and Emergency services 2 042 1 735 1 584
Primary care (24) 4 101
United Kingdom 2 919 2 885 1.2 2 411
Capital items (10) (10) (62)
South Africa (9) 20 (29)
United Kingdom (1) (30) (33)
Operating profit 3 700 3 370 9.8 2 990
South Africa 1 662 1 401 18.6 1 406
Hospitals and Emergency services 1 703 1 414 1 328
Primary care (41) (13) 78
United Kingdom 2 048 1 979 3.5 1 646
Capital items (10) (10) (62)
South Africa (9) 20 (29)
United Kingdom (1) (30) (33)
Net interest paid 2 275 2 416 (5.8) 2 190
South Africa 463 518 (10.6) 456
United Kingdom 1 812 1 898 (4.5) 1 734
Statement of financial position
Total assets 45 937 54 182 (15.2) 50 220
South Africa 8 611 8 073 6.7 7 387
United Kingdom 37 326 46 109 (19.0) 42 833
Debt net of cash 26 454 32 589 (18.8) 30 130
South Africa 3 903 4 837 (19.3) 5 246
United Kingdom 22 551 27 752 (18.7) 24 884
Statement of cash flows
Cash generated from operations 4 640 4 663 (0.5) 3 974
South Africa 2 270 1 974 15.0 1 538
United Kingdom 2 370 2 689 (11.9) 2 436
The segment report excludes the disposal group and assets held for sale,
except for the cash flow.
Foreign exchange impact
for the year ended 30 September
Reported Adjusted* Reported %
Rm 2009 2009 2008 change
Income statement
Revenue 23 232 24 046 21 735 10.6
South Africa 11 832 11 832 10 385 13.9
United Kingdom 11 400 12 214 11 350 7.6
EBITDA 4 927 5 150 4 614 11.6
South Africa 2 018 2 018 1 739 16.0
United Kingdom 2 919 3 142 2 885 8.9
Capital items (10) (10) (10)
Operating profit 3 700 3 926 3 370 16.5
South Africa 1 662 1 662 1 401 18.6
United Kingdom 2 048 2 274 1 979 14.9
Capital items (10) (10) (10)
Net interest paid 2 275 2 400 2 416 (0.7)
South Africa 463 463 518 (10.6)
United Kingdom 1 812 1 937 1 898 2.1
Statement of financial position
Total assets 45 937 54 705 54 182 1.0
South Africa 8 611 8 611 8 073 6.7
United Kingdom 37 326 46 094 46 109 (0.0)
Debt net of cash 26 454 31 751 32 589 (2.6)
South Africa 3 903 3 903 4 837 (19.3)
United Kingdom 22 551 27 848 27 752 0.3
* The United Kingdom numbers have been recalculated at constant exchange rates
to remove the impact of foreign currency fluctuations.
Salient features
for the year ended 30 September
2009 2008 2007
Share statistics
Ordinary shares
Total shares in issue (million) 1 266 1 262 1 245
Weighted average number of shares (million) 1 263 1 261 1 230
Diluted weighted average number of shares
(million) 1 275 1 280 1 293
Market price per share (cents) 1 037 825 1 193
Currency conversion guide (R:GBP)
Closing exchange rate 11.95 14.76 14.03
Average exchange rate for the period 13.73 14.65 14.13
Registration number: 1996/008242/06
(Incorporated in the Republic of South Africa)
JSE share code: NTC ISIN code: ZAE000011953
Registered office: 76 Maude Street (corner West Street), Sandton 2196, Private
Bag X34, Benmore 2010
Executive directors: RH Friedland (Chief Executive Officer), VE Firman (Chief
Financial Officer), IM Davis, VLJ Litlhakanyane
Non-executive directors: SJ Vilakazi (Chairman), APH Jammine, JM Kahn, MJ
Kuscus, HR Levin, KD Moroka, AA Ngcaba, MI Sacks, N Weltman
Company Secretary: J Wolpert
Sponsors: Nedbank Capital, a division of Nedbank Group Limited. Registration
number: 1951/000009/06, 135 Rivonia Road, Sandown, 2196 Investor relations: +27
11 301 0212; ir@netcare.co.za
www.netcareinvestor.co.za
Date: 23/11/2009 08:00:01 Produced by the JSE SENS Department.
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