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NTC
NTC
NTC - Netcare Limited - Audited Group results for the year ended 30 September
2010
Netcare Limited
("Netcare", "the Company" or "the Group")
Registration number: 1996/008242/06
(Incorporated in the Republic of South Africa)
JSE share code: NTC
ISIN code: ZAE000011953
Audited Group results for the year ended 30 September 2010
19.6% increase in profit before taxation
101.4% conversion of EBITDA into cash
Final distribution of 27.5 cents per share
Group financial review
Notwithstanding challenging economic conditions, the Group is pleased to
announce a 26.2% increase in basic headline earnings per share to 98.7 cents
on a constant currency basis.
Currency conversion had a major impact on both the year-end results and
financial position of the Group, due to the prevailing strength of the Rand
relative to the Pound Sterling (Pound) during the year. The average exchange
rate used for converting income and expenditure was R11.63 to the Pound
compared to R13.73 in the prior year, a change of 15.3%. The closing exchange
rate used to convert assets and liabilities at 30 September 2010 was R10.93
to the Pound compared to R11.95 at 30 September 2009, a change of 8.5%.
In their respective local currencies, revenue grew in both South Africa (SA)
and the United Kingdom (UK). However, due to the Rand appreciation Group
revenue decreased by 3.3% to R22 474 million (2009: R23 232 million).
The operating margin improved from 15.9% to 16.5%, largely due to efficiency
improvements and cost control. Operating profit was impacted by costs of R35
million relating to preparatory work undertaken for the Initial Public
Offering (IPO) of General Healthcare Group (GHG) Operating Company (Opco) on
the London Stock Exchange.
Net financial expenses were 12.5% lower at R1 978 million (2009: R2 260
million). Reduced interest rates in SA, lower average levels of debt and the
lower average exchange rate applicable to UK borrowing costs assisted the
decrease. Financial expenses were negatively affected by a R103 million non-
cash charge, representing the ineffective portion of the fair value
adjustment of interest rate swaps for the year. The Group hedges its exposure
to interest rate fluctuations through interest rate swaps, and fair value
adjustments are recognised directly in equity to the extent that hedging
proves to be effective.
Group taxation of R294 million, representing an effective tax rate of 16.8%,
was favourably impacted by a deferred tax release of R157 million (GBP13.7
million) following a 1% reduction in the UK company tax rate to 27%
(effective from 1 April 2011), and non-taxable items in GHG that are expected
to reverse in future. Excluding the impact of the rate change, the Group`s
effective tax rate was 25.7%.
A final distribution of 27.5 cents per share has been declared by way of a
capital reduction out of share premium of 6.5 cents per share and a dividend
of 21.0 cents per share.
Net debt of R24 197 million reduced from R26 454 million at 30 September
2009. The strengthening of the closing exchange rate accounted for R1 912
million of the reduction. In the UK, GHG reduced net debt by GBP11.9 million,
despite taking on GBP20.0 million of debt through acquisitions. The SA
operations reduced debt levels to R3 706 million.
The Group`s cash position remains strong, with net cash and cash equivalents
of R1 285 million at year-end (2009: R714 million). Cash generated from
operations of R4 934 million (2009: R4 640 million) was underpinned by a
stringent focus on working capital optimisation. These efforts improved the
conversion ratio of EBITDA into cash to 101.4% (2009: 94.2%). The Group
invested R1 284 million in capital expenditure, while R521 million was
returned to shareholders in capital reductions.
Divisional review
South Africa
Revenue grew 6.0% to R12 541 million from R11 832 million, while operating
profit rose 14.3% to R1 899 million (2009: R1 662 million). The operating
profit margin improved from 14.0% to 15.1%. The SA operations contributed
88.1% (2009: 87.1%) to basic headline earnings per share.
Cash generated by the SA operations increased by 7.0% to R2 428 million
(2009: R2 270 million), benefitting from focused working capital management
and centralised shared services. Total capital expenditure was R787 million
(2009: R747 million) of which R502 million was spent on replacement and R285
million on expansionary expenditure.
Netcare Education celebrated 21 years of providing education to the
healthcare sector. The Group continued with its significant contribution
during the year, helping address the shortage of skills in the country by
training more than 3 700 nurses, paramedics and management students in 2010.
For the 2010 FIFA World CupTrade Mark, 22 Netcare hospitals were designated
as strategic healthcare providers and Netcare 911 was awarded a tender by
National Treasury to provide emergency services during the event.
During the Public Sector strike in 2010, Netcare made its facilities and
personnel available to assist critically ill patients in need of
hospitalisation or care, despite capacity constraints. Netcare 911
transported emergency public patients to Netcare facilities, and over 800
patients who needed urgent medical care were admitted, including more than
200 babies and children. National Renal Care assisted an additional 450
patients requiring urgent dialysis. No charges were levied by Netcare, the
doctors or specialists, including radiologists and pathologists, for these
services, and Netcare`s contribution was approximately R16 million. Netcare
and Netcare 911`s ability to effectively manage the impact of the strike was
mostly due to having a robust disaster management plan, which was refined for
the 2010 FIFA World CupTrade Mark.
Netcare 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 demonstrates
our continued commitment to transformation. Netcare maintained its position
as the most empowered company in the JSE`s healthcare sector and was ranked
thirteenth most empowered listed company overall in the Financial Mail`s Top
Empowerment Companies Survey.
Netcare maintained a top 10 position in the Large Companies category of the
Deloitte Best Company to Work For Survey for the sixth consecutive year.
Netcare supports the Government`s initiatives to broaden access to quality
healthcare to all South Africans. The ANC tabled a discussion document on the
National Health Insurance (NHI) scheme at its National General Council.
However, details on implementation, funding and resourcing are yet to be
finalised. Following Cabinet approval, a Green Paper will be tabled for
public comment. We congratulate Dr Gwen Ramokgopa on her appointment as
Deputy Minister of Health.
In July 2010, the "Regulations Relating to the Obtainment of Information and
the Process of Determination and Publication of Reference Price List (RPL)"
were declared invalid and set aside in the High Court. As a result the
Department of Health (DoH) will have to establish a revised process for
determining reference prices for the private health sector. Subsequently the
DoH and the Council for Medical Schemes have published a discussion document
proposing two parallel processes - the creation of a public price
determination authority and the initiation of voluntary interim tariff
negotiations. These processes will only commence after an exemption from the
Competition Act is obtained.
As per the SENS announcement on 9 November 2010, Netcare is pleased to advise
that the charges in the organ transplant case brought against Netcare and its
Chief Executive Officer, Dr Richard Friedland, have been withdrawn. Netcare
Kwa-Zulu (Proprietary) Limited (NKZ) pleaded guilty to certain offences as it
became evident that some former employees of NKZ not only contravened the law
but also disregarded Netcare`s own internal policies in the period between
2001 and 2003. NKZ agreed to pay a fine and confiscation order of R7.8
million. The employees who were involved in wrongdoing are no longer in the
employ of Netcare or NKZ.
Hospitals and Emergency services
Revenue from Hospitals and Emergency services grew 8.2% to R11 167 million
(2009: R10 319 million), and operating profit rose 11.2% to R1 893 million
(2009: R1 703 million) due to solid operational leverage and improved cost
control.
Demand for hospital services was maintained and Hospitals increased patient
days by 0.6%, off the high base of 4.9% growth achieved in 2009. Revenue per
patient day increased by 8.3%.
The number of registered beds increased from 8 766 to 8 874 during the year
as Netcare continued to invest in its infrastructure. This included the
addition of 28 surgical, five paediatric and four high care beds at Netcare
Kuilsriver Hospital, commissioning a 30-bed bone marrow transplant unit at
Netcare Pretoria East Hospital, renovating the trauma and intensive care unit
(ICU) and adding five trauma ICU beds at Netcare Sunninghill Hospital, and
refurbishing an epilepsy monitoring unit and 11 theatres at Netcare Milpark
Hospital.
The construction of the 132-bed private hospital in Waterfall, Midrand, with
our empowerment partners is progressing well and we anticipate it will open
during August 2011. The construction of the 425-bed Lesotho Hospital Public
Private Partnership (PPP) remains on track and is scheduled to open in
September 2011. Three primary care clinics that form part of the overall PPP
delivery model commenced operations in May 2010.
Our Emergency services division, Netcare 911, has 7.6 million lives under
management. Netcare 911 achieved European Air Medical Institute (EURAMI)
accreditation earlier in the year, recognising its focus on delivering
service excellence to its clients.
Netcare 911 was also awarded the prestigious "Air Ambulance Provider of the
Year" adjudicated by the International Travel Insurance Journal. This is a
first for an African based service provider and Netcare 911 competed against
130 international service providers, including CEGA (UK) and Sky Services
(Canada) in the final round.
Primary Care
The division achieved a significant turnaround, following a strategic review
of the Primary Care business. The division terminated loss making managed
healthcare contracts and poorly performing Medicross clinic administration
contracts. Revenue decreased by 9.2% to R1 374 million (2009: R1 513 million)
mainly due to a 29.0% contraction in managed care lives in Prime Cure.
Operating profit increased significantly to R6 million compared to a R41
million loss in the prior year.
The division is coordinating Netcare`s participation in the National HIV
Counselling and Testing (HCT) campaign launched by the Minister of Health in
April 2010.
United Kingdom
GHG delivered positive results notwithstanding the recessionary environment
and significant political change in the UK. During the year, the business was
successful in extending its services and geographic presence. GHG acquired
the Southend Day Care Centre (Essex), added the Kingston NHS Private Patient
Unit (PPU) in London and opened the BMI Syon Clinic (London). In May 2010,
GHG completed the acquisition of the Abbey Group, consisting of three
hospitals with a total of 70 registered beds, as well as a 42.5% stake in the
Transform cosmetic surgery business.
Caseload grew by 5.8%, with 50% attributable to acquisitions. This was driven
by strong growth in NHS cases through the Choose and Book (C&B) programme,
which affords public patients the choice to be treated in a private facility.
The C&B programme gained traction during the year and growing demand for C&B
procedures is entrenching the private healthcare sector as a key partner to
the NHS. GHG has established itself as a significant provider in this market
and grew its monthly caseload six fold during the course of the year. Private
Medical Insurance (PMI) patient volumes declined in the second half of the
year. Demand for self-pay procedures remains below historical norms as
consumers continue to be affected by the recession, particularly rising
unemployment and diminishing disposable income. This in turn places a greater
burden on the NHS, underpinning the important role of C&B service providers.
Revenue grew by 2.8% to GBP855.0 million (2009: GBP831.5 million). EBITDA
increased 3.9% to GBP221.5 million (2009: GBP213.1 million) and operating
profit was 1.6% higher at GBP150.3 million (2009: GBP147.9 million).
Operating expenses include IPO preparatory costs of GBP2.5 million. Financial
expenses were adversely impacted by an GBP8.7 million non-cash charge,
representing the ineffective portion of the movement in interest rate swaps.
The net tax credit included a GBP13.7 million benefit following the
substantive enactment of a 1% decrease in UK tax rates to 27%. Profit after
tax grew 87.5% from GBP16.0 million to GBP30.0 million.
Capital expenditure amounted to GBP43.2 million compared to GBP37.6 million
in 2009 as GHG continued to invest in its hospital infrastructure to maintain
its market-leading position. Major projects included equipping the new BMI
Syon Clinic in London, commencing the refurbishment and regeneration of the
BMI Park Hospital in Nottingham, and the phased upgrade of seven operating
theatres at the BMI Alexandra Hospital in Manchester.
Net debt reduced by GBP11.9 million to GBP1 875.2 million (September 2009:
GBP1 887.1 million) despite the consolidation of a further GBP20.0 million of
debt on the acquisition of Transform. This debt is without recourse to GHG.
Working capital was tightly controlled and improved over the year. Cash
collection remained a key operational focus, serving to mitigate the impact
on resources as the business mix shifts towards increased NHS caseload at
longer payment cycles. All financial covenants were achieved with sufficient
headroom. All UK debt is without recourse to the SA operations.
As per the SENS announcement on 8 December 2009, Netcare`s partners in GHG,
in accordance with the terms of the Partnership Agreement, informed Netcare
of their desire to pursue an IPO of the GHG OpCo on the London Stock
Exchange. While preparations have progressed well, prevailing market
conditions have delayed a final decision on the IPO and its timing.
Shareholders will be updated as and when the position changes.
Outlook
Netcare remains confident that the demand for private healthcare at both
primary and tertiary levels will be sustained in SA over the medium and long
term. The benefits gained in the past year from lower interest rates are not
expected to be repeated in 2011.
Recessionary pressures in the UK economy are expected to constrain the growth
of PMI and self-pay spending on private healthcare in the short term. Growth
in NHS activity through C&B is expected to continue, provided NHS funding
does not come under further financial pressure. The proposed UK DoH`s White
Paper reforms are positive for the private sector in the longer term, but
they may take a few years to implement and could be disruptive over the short
term.
Audit opinion of the independent auditors
These condensed financial statements have been extracted from the Group
audited annual financial statements on which Grant Thornton has issued an
unqualified audit report. This report is available for inspection at the
Company`s registered office.
Declaration of capital reduction number 23 and dividend number 3
The Board of Directors declared a final capital reduction (number 23) out of
share premium of 6.5 cents per ordinary share and a dividend (number 3) of
21.0 cents per ordinary share, on Thursday, 11 November 2010. The final
capital reduction is in accordance with the authority given to the directors
by way of an ordinary resolution passed on 29 January 2010, and the dividend
is in terms of the Company`s Articles of Association.
In compliance with the requirements of Strate, the following dates are
applicable:
Friday, 14 January 2011
Last day to trade cum the capital
reduction/dividend (LDT)
Trading ex capital reduction/dividend Monday, 17 January 2011
commences
Record date Friday, 21 January 2011
Date of payment Monday, 24 January 2011
Share certificates may not be dematerialised nor rematerialised between
Monday, 17 January 2011 and Friday, 21 January 2011, both days inclusive.
On behalf of the Board
Jerry Vilakazi Richard Friedland Vaughan Firman
Chairman Chief Executive Chief Financial Officer
Officer
Sandton
11 November 2010
Group statement of financial position
as at 30 September
Rm Notes 2010 2009 2008
Assets
Non-current assets
Property, plant and equipment 23 852 25 097 29 732
Goodwill 13 153 14 303 17 555
Intangible assets 331 366 355
Associated companies, investments 4 180 130 104
and loans
Financial asset - Derivative 26 558
financial instruments
Deferred taxation 1 446 1 147 689
Total non-current assets 38 988 41 043 48 993
Current assets
Investments and loans 4 45 54 75
Financial asset - Derivative 6
financial instruments
Inventories 652 621 638
Trade and other receivables 3 290 3 416 3 274
Cash and cash equivalents 1 378 803 1 202
5 371 4 894 5 189
Assets held for sale 5 13 4 304
Total current assets 5 384 4 898 5 493
Total assets 44 372 45 941 54 486
Equity and liabilities
Capital and reserves
Ordinary share capital and premium 624 1 065 1 601
Treasury shares (767) (767) (5 555)
Option premium on convertible bond 164 169 172
Other reserves (496) 231 1 685
Retained earnings 4 632 3 446 6 590
Equity attributable to owners of the
parent 4 157 4 144 4 493
Preference share capital and premium 644 644 644
Non-controlling interest 1 728 2 345 3 714
Total shareholders` equity 6 529 7 133 8 851
Non-current liabilities
Long-term debt 21 630 25 423 31 530
Financial liability - Derivative 4 113 2 797 1 654
financial instruments
Post-retirement benefit obligations 179 297 126
Deferred lease liability 122 114 91
Deferred taxation 4 430 5 041 6 463
Provisions 30 48 56
Total non-current liabilities 30 504 33 720 39 920
Current liabilities
Trade and other payables 3 118 2 924 3 105
Short-term debt 3 852 1 745 2 021
Taxation payable 276 330 268
Bank overdrafts 93 89 240
7 339 5 088 5 634
Liabilities in disposal group held 5 81
for sale
Total current liabilities 7 339 5 088 5 715
Total equity and liabilities 44 372 45 941 54 486
Group income statement
for the year ended 30 September
%
Rm Notes 2010 2009 change 2008
Continuing operations
Revenue 22 474 23 232 (3.3) 21 735
Cost of sales (12 893) (13 701) (12 842)
Gross profit 9 581 9 531 0.5 8 893
Other income 255 232 256
Administrative and other (6 128) (6 063) (5 779)
expenses
Operating profit 6 3 708 3 700 0.2 3 370
Financial income 7 106 171 294
Financial expenses 8 (2 084) (2 431) 14.3 (2 721)
Attributable earnings of 24 27 2
associates
Profit before taxation 1 754 1 467 19.6 945
Taxation (294) (350) (68)
Profit for the year from
continuing operations 1 460 1 117 30.7 877
Discontinued operation
Profit for the period from 634 105
discontinued operation 5
Profit for the year 1 460 1 751 (16.6) 982
Attributable to:
Owners of the parent 1 233 1 564 801
Preference shareholders 53 73 67
Profit attributable to 1 286 1 637 868
shareholders
Non-controlling interest 174 114 114
1 460 1 751 982
Earnings per share (cents)
Basic 97.0 123.8 (21.6) 63.5
Continuing operations 97.0 73.6 31.8 55.2
Discontinued operation 50.2 8.3
Diluted 94.6 122.6 (22.8) 62.6
Continuing operations 94.6 72.9 29.8 54.4
Discontinued operation 49.7 8.2
Capital reduction per share 25.5 38.0 32.0
(cents)
Dividend per share (cents) 21.0
Total distribution per 46.5 38.0 22.4 32.0
share (cents)
Group statement of comprehensive income
for the year ended 30 September
Rm Notes 2010 2009 2008
Profit for the year 1 460 1 751 982
Other comprehensive loss, net of tax (1 519) (3 085) (505)
Actuarial gains/(losses) on defined 29 (130) (49)
benefit plans
Effect of cash flow hedge accounting
Change in the fair value of cash (1 118) (2 066) (767)
flow hedges
Recycling of cash flow hedge (10) (20) (23)
accounting reserve 7
Effect of translation of foreign (420) (870) 304
entities
Movement in employee share trust 1 30
reserve
Total comprehensive (loss)/income (59) (1 334) 477
for the year
Attributable to:
Owners of the parent 441 (47) 510
Preference shareholders 53 73 67
Non-controlling interest (553) (1 360) (100)
(59) (1 334) 477
Group statement of cash flows
for the year ended 30 September
Rm Notes 2010 2009 2008
Cash flows from operating
activities
Cash received from customers 22 518 22 921 21 099
Cash paid to suppliers and
employees (17 584) (18 281) (16 436)
Cash generated from operations 4 934 4 640 4 663
Interest paid (1 981) (2 430) (2 558)
Continuing operations (1 981) (2 425) (2 550)
Discontinued operation (5) (8)
Taxation paid (565) (526) (290)
Continuing operations (565) (520) (268)
Discontinued operation (6) (22)
Ordinary dividends paid by (1) (3) (1)
subsidiaries
Preference dividends paid (53) (73) (67)
Capital reductions paid (521) (430) (406)
Net cash from operating
activities 1 813 1 178 1 341
Continuing operations 1 813 1 179 1 352
Discontinued operations (1) (11)
Cash flows from investing
activities
Purchase of property, plant and (1 284) (1 283) (1 268)
equipment
Continuing operations (1 284) (1 272) (1 240)
Discontinued operations (11) (28)
Proceeds on disposal of property, 19 60 708
plant and equipment
Additions to intangible assets (86) (144) (148)
(Increase)/decrease in (29) 40 128
investments and loans
Additions to derivatives (32)
Interest received 93 150 134
Realised gain on cross-currency 324
swap
Dividends received 2 1 44
Proceeds from disposal of
subsidiaries, net of cash 852 15
Increase in equity interest in
subsidiaries (2)
Acquisition of subsidiaries and 2 21 (9) (2 112)
businesses, net of cash acquired
Net cash from investing (1 298) (333) (2 175)
activities
Continuing operations (1 298) (322) (2 147)
Discontinued operations (11) (28)
Cash flows from financing
activities
Proceeds from issue of ordinary 80 31 48
shares
Repurchase of shares (11)
Settlement of derivatives (19)
Long-term liabilities 883
raised/(repaid) (840) 974
Short-term liabilities
(repaid)/raised (825) (139) (133)
Net cash from financing
activities 138 (978) 889
Continuing operations 138 (974) 889
Discontinued operations (4)
Net increase/(decrease) in cash 653 (133) 55
and cash equivalents
Translation effects on cash and (82) (115) (32)
cash equivalents of foreign
entities
Cash and cash equivalents at 714 962 900
beginning of the year
Cash flows in disposal group held
for sale 39
Cash and cash equivalents at end 1 285 714 962
of the year
Consisting of:
Cash on hand and balances with 1 378 803 1 202
banks
Short-term money market (93) (89) (240)
borrowings and bank overdrafts
1 285 714 962
Group statement of changes in equity
as at 30 September
Ordinary
share Option Foreign
capital premium on currency
and Treasury convertible translation
Rm premium shares bond reserve
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
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
subsidiary
Dividends paid by
subsidiaries
Total comprehensive 130
income for the year
Balance at 30 September 1 601 (5 555) 172 1 422
2008
Shares issued during the
year 31
Capital reduction (430)
Repurchase of shares (137) 4 788
Repurchase of convertible (3)
bond
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 (446)
income for the year
Balance at 30 September 1 065 (767) 169 976
2009
Shares issued during the
year 80
Capital reduction (521)
Repurchase of convertible (5)
bond
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 (233)
income for the year
Balance at 30 September 624 (767) 164 743
2010
Equity
Cash flow attributable
hedge to owners
accounting Other Retained of the
Rm reserve reserves earnings parent
Balance at 30 September
2007 306 265 5 833 4 132
Shares issued during the 188
year
Capital reduction (406)
Revaluation of land and
buildings following
a business combination 93 93
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 (9) (10) (19)
Disposal of shares in
subsidiary
Dividends paid by
subsidiaries
Total comprehensive
income for the year (427) 30 844 577
Balance at 30 September
2008 (121) 384 6 590 4 493
Shares issued during the
year 31
Capital reduction (430)
Repurchase of shares (4 583) 68
Repurchase of convertible
bond 7 4
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 54 (54)
Acquisition of shares in
subsidiary
Dividends paid by
subsidiaries
Total comprehensive
income for the year (1 095) 1 1 566 26
Balance at 30 September
2009 (1 216) 471 3 446 4 144
Shares issued during the
year 80
Capital reduction (521)
Repurchase of convertible
bond 2 (3)
Share-based payments
reserve movements 26 26
Capital gains tax on
capital reductions
attributable to
treasury shares (7) (7)
Preference dividends paid (53) (53)
Other reserve movements 54 (57) (3)
Acquisition of shares in
subsidiary
Dividends paid by
subsidiaries
Total comprehensive
income for the year (574) 1 301 494
Balance at 30 September
2010 (1 790) 551 4 632 4 157
Preference
share Total
capital Non- share-
and controlling holders`
Rm premium interest equity
Balance at 30 September 2007 644 3 806 8 582
Shares issued during the year 188
Capital reduction (406)
Revaluation of land and buildings
following a business combination 93
Share-based payments reserve
movements 5
Capital gains tax on capital
reductions attributable to
treasury shares (10)
Preference dividends paid (67)
Other reserve movements (19)
Disposal of shares in subsidiary 9 9
Dividends paid by subsidiaries (1) (1)
Total comprehensive income for the
year (100) 477
Balance at 30 September 2008 644 3 714 8 851
Shares issued during the year 31
Capital reduction (430)
Repurchase of shares 68
Repurchase of convertible bond 4
Share-based payments reserve
movements 32
Capital gains tax on capital
reductions attributable to
treasury shares (7)
Preference dividends paid (73)
Other reserve movements
Acquisition of shares in subsidiary (6) (6)
Dividends paid by subsidiaries (3) (3)
Total comprehensive income for the
year (1 360) (1 334)
Balance at 30 September 2009 644 2 345 7 133
Shares issued during the year 80
Capital reduction (521)
Repurchase of convertible bond (3)
Share-based payments reserve
movements 26
Capital gains tax on capital
reductions attributable to
treasury shares (7)
Preference dividends paid (53)
Other reserve movements (3)
Acquisition of shares in subsidiary (63) (63)
Dividends paid by subsidiaries (1) (1)
Total comprehensive income for the
year (553) (59)
Balance at 30 September 2010 644 1 728 6 529
Headline earnings
for the year ended 30 September
%
Rm 2010 2009 change 2008
Reconciliation of headline earnings
Profit for the year from continuing
operations 1 460 1 117 30.7 877
Less:
Preference shareholders (53) (73) (67)
Non-controlling interest (174) (114) (114)
Earnings used in the calculation of basic
earnings per share from continuing
operations 1 233 930 32.6 696
Adjusted for:
Gain on bargain purchase (81)
Impairment of goodwill 9 1
Impairment of investments 8 2 1
Impairment of property, plant and
equipment 19 13 1
Reversal of impairment of land and
buildings (1) (17)
Loss/(profit) on disposal of property,
plant and equipment 1 (5) (28)
Loss on disposal of
subsidiaries/investments 2
Tax effect of headline adjusting items 2 6
Non-controlling share of headline
adjusting items 38 10
Headline earnings from continuing
operations 1 226 942 672
Earnings from discontinued operation 634 105
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
Headline earnings 1 226 988 24.1 775
Headline earnings per share (cents)
Basic 96.5 78.2 23.4 61.5
Continuing operations 96.5 74.6 29.4 53.3
Discontinued operation 3.6 8.2
Diluted 94.1 77.5 21.4 60.5
Continuing operations 94.1 73.9 27.3 52.5
Discontinued operation 3.6 8.0
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
Listings Requirements of the JSE Limited and the Companies Act of
South Africa.
The accounting policies applied in the preparation of these
statements are consistent with those applied for the year ended
30 September 2009, except for the following:
- IFRS 3 Business Combinations (revised) and IAS 27 Consolidated
and Separate Financial Statements (revised)
- IFRS 7 Financial Instruments: Disclosures (amended)
- IFRS 8 Operating Segments
- Improvements to International Financial Reporting Standards
2008 and 2009 (certain improvements have been adopted earlier
than required)
The implementation of these standards had no impact on the
financial position or performance of the Group and has mainly
been of a presentation and disclosure nature.
2. Acquisition of businesses
The following business combinations took effect during the year:
Acquisitions in South Africa
2.1 Effective 1 October 2009, the Group acquired an additional
25% in Netcare Parklands Linac Joint Venture (Proprietary)
Limited (Parklands Linac) and 12.5% in Netcare St. Anne`s Linac
Joint Venture (Proprietary) Limited (St Annes`s Linac), changing
the Group`s effective holding to 75% and 62.5% respectively.
Both were previously accounted for as joint ventures.
Acquisitions in the United Kingdom
2.2 With effect from 1 January 2010, the Group acquired 100% of
the shares in Sterilplus Limited (Sterilplus) (subsequently
renamed BMI Hospital Decontamination Limited).
2.3 Effective 4 May 2010, the Group acquired 50% of the shares in
A.K. Medical Management Limited (BMI Southend) (renamed BMI
Southend Private Hospital Limited).
2.4 Effective 28 May 2010, the Group acquired a 42.5% interest
in the Transform Holdco Limited (Transform) (renamed Health and
Surgical Holdings Limited). Transform is consolidated in the
Group`s results as the Group has an option (up to 28 May 2013) to
purchase an additional 42.5% which is currently exercisable.
2.5 With effect from 28 May 2010, the Group acquired 100% of the
shares in Abbey Hospitals (Holdings) Limited (Abbey).
From the dates of acquisition to 30 September 2010, the new
acquisitions have contributed the following additional revenue
and operating profit to the Group:
Parklands
Rm Abbey Linac Sterilplus Transform Other* Total
Revenue 74 8 9 136 8 235
Operating
profit (3) 2 (5) 3 1 (2)
Had the acquisition taken place on the first day of the financial
year, the respective contributions to revenue and operating
profit would have been as follows:
Parklands
Rm Abbey Linac Sterilplus Transform Other* Total
Revenue 230 8 13 423 25 699
Operating
profit 7 2 (7) 6 8
* Other includes BMI Southend and St Anne`s Linac.
The following table reflects the fair values at acquisition:
Parklands
Rm Abbey Linac Sterilplus Transform Other* Total
Property,
plant and
equipment 25 16 58 177 3 279
Loans and
receivables 2 1 3
Inventories 10 7 17
Trade and
other
receivables 29 3 7 31 2 72
Cash and
cash
equivalents 7 1 34 1 43
Long-term
debt (7) (221) (228)
Short-term
debt (4) (4)
Trade and
other
payables (35) (9) (4) (125) (7) (180)
Taxation
payable (1) (1)
36 62 (97) 1
Non-
controlling
interest 56 56
Fair value
of net
assets
acquired 36 62 (41) 57
(Gain on
bargain
purchase)/
goodwill (36) 3 (45) 41 5 (32)
Purchase
consideration 3 17 5 25
Less fair
value of
previous
investment
in joint
venture (1) (1)
Less deferred
consideration
payable in
cash (2) (2)
Cash and
cash
equivalents
in acquiree (7) (1) (34) (1) (43)
Cash
(inflow)/
outflow on
acquisitions (7) 2 16 (34) 2 (21)
The fair values reflected above are equal to the carrying values at
acquisition.
*Other includes BMI Southend and St Anne`s Linac.
3. Reclassification of comparative information
Statement of comprehensive income
The effect of the cash flow hedge accounting which is included in
the statement of comprehensive income has been changed to reflect
the recycling of the cash flow hedge accounting reserve and the
effect of fair value changes separately.
The movement in the employee share trust reserve, previously
included in the statement of changes in equity, has been
reallocated to the statement of comprehensive income as this
represents non-owner movements in equity.
Rm 2010 2009 2008
4. Associated companies, investments and loans
Non-current
Associated companies* 151 122 89
Available-for-sale investments 22
Other loans 7 8 15
180 130 104
Current
Loans 45 54 75
225 184 179
* Directors` valuation of associated companies
369 395 282
5. Disposal group and assets held for sale
Assets held for sale
Assets in disposal group - Ampath Holdings
Trust 295
Land and buildings held for sale 13 4 9
13 4 304
Liabilities in disposal group held for sale
Liabilities in disposal group - Ampath
Holdings Trust (81)
5.1 Discontinued operation - Ampath Holdings
Trust
Sale of our interest in Ampath Holdings Trust
was completed in February 2009, following
Competition Commissioner 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
Other income 2
Administrative and other expenses (198) (426)
Operating profit 69 139
Financial expenses (5) (8)
Profit before taxation 64 131
Taxation (18) (26)
Profit for the year before profit on disposal 46 105
Profit on disposal of discontinued operation,
net of tax 588
Profit for the year from discontinued
operations 634 105
The profit on the sale of Ampath Holdings
Trust can be reconciled as follows:
Sale of units and claims 1 027
Less: Carrying value (349)
Claims settled (175)
Net asset value (174)
Profit on disposal 678
Less: Capital gains tax (90)
Profit on disposal of discontinued operation,
net of tax 588
The assets and liabilities of the disposal
group are as follows:
Property, plant and equipment 71
Goodwill 72
Investments and loans 11
Inventories 10
Trade and other receivables 116
Cash and cash equivalents 15
Long-term debt (8)
Post-retirement benefit obligation (9)
Trade and other payables (56)
Taxation payable (4)
Short-term debt (4)
The cash flows are as follows:
Net cash from operating activities (1) (11)
Net cash from investing activities (11) (28)
Net cash from financing activities (4)
5.2 Land and buildings held for sale
Certain land and buildings were classified as
held for sale.
A reversal of impairment amounting to
R1 million was recognised in the current
year (2009: Rnil million; 2008: R17 million). 13 4 9
6. Operating profit
After charging:
Depreciation and amortisation 1 157 1 227 1 244
Operating lease charges 420 410 345
7. Financial income
Dividends received 2 1 1
Fair value gain on cross-currency swap
contracts 136
Foreign exchange gains (net) 1
Recycling of cash flow hedge accounting
reserve (net) 10 20 23
Interest received 93 150 134
106 171 294
8. Financial expenses
Foreign exchange losses (net) 1 156
Ineffectiveness recognised in the income
statement arising from cash flow hedges (net) 103 5 15
Interest paid 1 981 2 425 2 550
2 084 2 431 2 721
9. Commitments
Capital commitments 1 392 869 753
South Africa 1 213 441 258
United Kingdom 179 428 495
Operating lease commitments 3 048 3 215 3 735
South Africa 1 212 1 369 1 460
United Kingdom 1 836 1 846 2 275
10. Contingent liabilities (guarantees and
suretyships)
South Africa 645 632 253
United Kingdom 118
645 632 371
Condensed segment report
for the year ended 30 September
%
Rm 2010 2009 change 2008
Income statement
Revenue 22 474 23 232 (3.3) 21 735
South Africa 12 541 11 832 6.0 10 385
Hospitals and Emergency services 11 167 10 319 9 020
Primary Care 1 374 1 513 1 365
United Kingdom 9 933 11 400 (12.9) 11 350
EBITDA 4 865 4 927 (1.3) 4 614
South Africa 2 249 2 018 11.4 1 739
Hospitals and Emergency services 2 220 2 042 1 735
Primary Care 29 (24) 4
United Kingdom 2 571 2 919 (11.9) 2 885
Capital items 45 (10) (10)
South Africa (34) (9) 20
United Kingdom 79 (1) (30)
Operating profit 3 708 3 700 0.2 3 370
South Africa 1 899 1 662 14.3 1 401
Hospitals and Emergency services 1 893 1 703 1 414
Primary Care 6 (41) (13)
United Kingdom 1 764 2 048 (13.9) 1 979
Capital items 45 (10) (10)
South Africa (34) (9) 20
United Kingdom 79 (1) (30)
Net interest expense 1 888 2 275 17.0 2 416
South Africa 367 463 20.7 518
United Kingdom 1 521 1 812 16.1 1 898
Statement of financial position
Total assets1 44 359 45 937 (3.4) 54 182
South Africa 9 271 8 611 7.7 8 073
United Kingdom 35 088 37 326 (6.0) 46 109
Debt net of cash 24 197 26 454 8.5 32 589
South Africa 3 706 3 903 5.0 4 837
United Kingdom 20 491 22 551 9.1 27 752
1 Excluding the disposal group and assets held for sale.
Constant currency segment report
for the year ended 30 September
Rm Reported Adjusted1 Reported % change
2010 2010 2009
Income statement
Revenue 22 474 24 263 23 232 4.4
South Africa 12 541 12 541 11 832 6.0
United Kingdom 9 933 11 722 11 400 2.8
EBITDA 4 865 5 343 4 927 8.4
South Africa 2 249 2 249 2 018 11.4
United Kingdom 2 571 3 035 2 919 4.0
Capital items 45 59 (10)
South Africa (34) (34) (9)
United Kingdom 79 93 (1)
Operating profit 3 708 4 040 3 700 9.2
South Africa 1 899 1 899 1 662 14.3
United Kingdom 1 764 2 082 2 048 1.7
Capital items 45 59 (10)
South Africa (34) (34) (9)
United Kingdom 79 93 (1)
Net interest expense 1 888 2 164 2 275 4.9
South Africa 367 367 463 20.7
United Kingdom 1 521 1 797 1 812 0.8
Basic headline earnings per
share (cents) 96.5 98.7 78.2 26.2
South Africa 85.0 85.0 68.1 24.8
United Kingdom 11.5 13.7 10.1 35.6
Statement of financial
position
Total assets2 44 359 47 633 45 937 3.7
South Africa 9 271 9 271 8 611 7.7
United Kingdom 35 088 38 362 37 326 2.8
Debt net of cash 24 197 26 109 26 454 1.3
South Africa 3 706 3 706 3 903 5.0
United Kingdom 20 491 22 403 22 551 0.7
1 The United Kingdom numbers have been recalculated at constant exchange
rates to remove the impact of foreign currency fluctuations.
2 Excluding assets held for sale.
Salient features
for the year ended 30 September
Rm 2010 2009 2008
Share statistics
Ordinary shares
Shares in issue net of treasury shares (million)
1 277 1 266 1 262
Weighted average number of shares (million) 1 271 1 263 1 261
Diluted weighted average number of shares
(million) 1 303 1 275 1 280
Market price per share (cents) 1 384 1 037 825
Currency conversion guide (R:GBP)
Closing exchange rate 10.93 11.95 14.76
Average exchange rate for the period 11.63 13.73 14.65
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), VLJ Litlhakanyane
Non-executive directors: SJ Vilakazi (Chairman), APH Jammine, JM Kahn, MJ
Kuscus, HR Levin, KD Moroka, MI Sacks, N Weltman
Company Secretary: L Kok
Sponsor: Nedbank Capital, a division of Nedbank Group Limited
Transfer secretaries: Link Market Services (Proprietary) Limited, 11 Diagonal
Street, Johannesburg, 2001
Investor relations: +27 11 301 0212; ir@netcare.co.za
Date: 15/11/2010 08:00:01 Produced by the JSE SENS Department.
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