| Mon 14 Nov 2011, 8:00 | | NTC - Netcare - Audited Group results for the year ended 30 September 2011 |
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NTC
NTC
NTC - Netcare - Audited Group results for the year ended 30 September 2011
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 2011
Overview
The Netcare Group is pleased to report solid financial results for the year
ended 30 September 2011, and a meaningful contribution to the delivery of
comprehensive healthcare services in South Africa (SA) and the United
Kingdom (UK).
The Group`s focus on operational efficiency was reflected in an improved
performance from the South African businesses and enhanced working capital
management in both SA and the UK. The weaker economic environment and a
stronger prevailing Rand on the translation of the UK results weighed on UK
performance, which impacted on the strong performance in SA. Group operating
profit for the year was R3 701 million (2010: R3 708 million).
Profit after taxation increased by 27.1% to R1 855 million, largely due to a
deferred tax release of R301 million in the UK (2010: R157 million)
following a further 2% reduction in the UK tax rate to 25%. Profit
attributable to shareholders increased by 25.7% to R1 617 million, while
headline earnings per share (HEPS) increased by 21.2% to 117.0 cents.
Cash generated from operations of R5 572 million (2010: R4 934 million) was
underpinned by a stringent focus on optimising working capital.
The Group continued to expand its facilities with the opening of the 126-bed
Netcare Waterfall City Hospital in Midrand in July 2011, and the addition of
52 beds across various facilities in SA. The 425-bed Queen `Mamohato
Memorial Hospital in Lesotho, part of the Lesotho Public Private Partnership
(PPP), commenced operations in October 2011.
Group financial review
Summarised financial information
Rm 2011 2010 % change
Revenue 23 221 22 474 3.3
EBITDA 4 914 4 865 1.0
Operating profit 3 701 3 708 (0.2)
Net financial expenses 1 755 1 978 11.3
Profit for the year 1 855 1 460 27.1
Headline earnings 1 504 1 226 22.7
Net debt 25 689 24 197 (6.2)
Cash generated from operations 5 572 4 934 12.9
Capital expenditure 1 327 1 284 3.3
Basic earnings per share (cents) 122.1 97.0 25.9
Headline earnings per share (cents) 117.0 96.5 21.2
Distributions per share (cents) 53.0 46.5 14.0
Currency conversion guide (Rand: Pound Sterling)
2011 2010 % change
Closing exchange rate 12.54 10.93 14.7
Average exchange rate for the year 11.09 11.63 (4.6)
Financial performance
In their respective local currencies, revenue grew in both SA and the UK. On
a constant currency basis, Group revenue rose 5.3% compared to the prior
year.
Group operating profit was impacted by lower profits in the UK and currency
conversion, with the operating margin declining from 16.5% to 15.9%.
Net financial expenses decreased by 11.3% to R1 755 million, driven by
strong cash generation in SA and the UK, reduced interest rates in SA and a
lower average exchange rate on UK borrowing costs. Net financial expenses
were also favourably impacted by a net R43 million non-cash credit (2010:
R103 million 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 R114 million, which represents an effective tax rate of
5.8%, was favourably impacted by the reduction in the UK tax rate. Excluding
the impact of the rate change, the Group`s effective tax rate was 21.1%.
Financial position
Property, plant and equipment, goodwill and intangible assets were
positively impacted by foreign currency translation adjustments of R4
525 million.
Net debt of R25 689 million increased from R24 197 million at 30
September 2010, with currency conversion contributing R2 876 million to this
movement. The SA operations reduced debt levels by R403 million driven by
strong cash generation and lower interest payments. UK net debt reduced by
GBP89.8 million, assisted by strong cash generation as well as the sale of
the freehold of two hospital properties and the settlement of the
corresponding debt. In September 2011, the Group redeemed its convertible
bond that was listed on the Singapore Stock Exchange in 2006 at a value of
R1.7 billion. This was partly funded by raising a further R1 billion under
the Domestic Medium Term Note programme in August 2011.
At 30 September 2011, the Group had R1 805 million in cash and cash
equivalents and unutilised facilities of R3 142 million.
Cash flow
Cash generated from operations grew by R638 million mainly due to increased
SA EBITDA, coupled with improved working capital in both geographies. Cash
conversion to EBITDA increased to 113.4% (2010:101.4%).
The Group invested R1 408 million in capital expenditure (including
intangible assets), while R639 million was returned to shareholders in
capital reductions and ordinary dividends paid. Net cash flows utilised by
financing activities increased by R1 018 million due to higher debt
repayments.
Recognition
Netcare is humbled to have been recognised by the following awards, rankings
and accreditations in the year:
Ranked the most empowered company in the JSE`s healthcare sector for the
third year in a row in the Financial Mail`s Top Empowerment Companies Survey
for 2011.
Triple winner of the Metropolitan Oliver Empowerment Awards for Overall Top
Empowered Company of the Year, winner of the Big Business category and
winner in the Healthcare and Pharmaceuticals sector.
Ranked the most empowered company in the Science, Biotechnology and
Healthcare category of the Annual Top Women Awards, hosted by Topco Media in
conjunction with the Top Women in Business and Government publication.
Named a Level 1 Gold Community Contributor by the National Department of
Social Development.
Certified as the Best Employer in the Healthcare category, third in the
Large Company category and seventh in the overall Employer category by the
CRF Institutes` Best Employers South Africa 2011/2012 publication.
Reinstated to the SRI Index for 2011 by the JSE Limited and SRI Index
Advisory Committee on 24 March 2011.
First officially accredited South African Level 1 trauma centres at Netcare
Milpark and Netcare Union hospitals.
Excellence in Resuscitation award from the Resuscitation Council of Southern
Africa for the implementation of a best practice resuscitation system across
the group of Netcare hospitals.
Netcare 911 accredited by the European Air Ambulance Institute (EURAMI) for
the second year in a row.
Mid-cap category winner at the Annual Report Awards hosted by the Chartered
Secretaries Southern Africa and the JSE.
Runner-up in the Best Sustainability Report Award in the Non-resources
category of the Association of Certified Chartered Accountants (ACCA) South
Africa Awards for Sustainability Reporting 2010.
Divisional review
South Africa
The South African operations delivered a strong performance due to a
continued focus on operational efficiency, cost containment and business
improvement. Revenue grew 6.5% to R13 361 million and operating profit rose
16.9% to R2 220 million. The operating profit margin increased by 1.5
percentage points to 16.6%. The SA operations contributed 86.5% to HEPS.
Cash generated in SA increased by 24.0% to R3 010 million. During the year
the SA operations reduced its investment in working capital by R463
million despite higher levels of activity. This was due to the exceptional
management of trade receivables and accounts payable. Capital expenditure
including intangible assets totalled R921 million (2010: R826 million).
Netcare embraces the renewed focus on universal health access through the
National Health Insurance (NHI) reform policy published in August 2011
and stands ready to make a meaningful contribution. In preparation for NHI,
all Netcare`s 55 hospitals will be benchmarked against the National
Department of Health`s core standards by February 2012. As part of its
quality leadership, Netcare continues its Group-wide focus to drive quality
care. To this end, all Netcare hospitals are benchmarked against USA
hospitals.
Hospitals and Emergency services
Revenue from Hospitals and Emergency services grew 8.3% to R12
089 million and operating profit rose 15.3% to R2 182 million. The operating
profit margin improved by one percentage point to 18.0%. The division grew
patient days by 2.2% and net revenue per patient day increased by 6.4% for
the year.
The number of registered beds increased from 8 874 in the prior year to 9
052. Netcare Waterfall City Hospital, which was constructed in conjunction
with our empowerment partners, Phelang Bonolo, opened in July 2011 and
contributed 126 beds to this increase.
Netcare`s investment in infrastructure included:
Renovating operating theatres at Netcare Park Lane and Netcare Garden City
hospitals.
Ward renovations at Netcare Milpark Hospital.
Adding four new Intensive Care Unit (ICU) beds at Netcare Pretoria East
Hospital.
Refurbishing the paediatric wards at Netcare Unitas and Netcare St. Anne`s
hospitals.
The first phase of a 54-bed expansion project at Netcare Montana Hospital,
which included eight new ICU beds, theatre renovations and new consulting
rooms.
Construction has started at the following hospitals, with completion
expected during the 2012 financial year:
Second phase of the Netcare Montana Hospital expansion : 30 surgical, four
paediatric, four neo-natal intensive care unit (NICU) and eight day ward
beds.
64 beds at Netcare The Bay Hospital : 30 surgical, 20 medical and 14 ICU
beds.
57 beds at Netcare Mulbarton Hospital : 30 surgical beds, 20-bed maternity
and a seven-bed NICU.
35 beds at Netcare Kingsway Hospital : 23 medical and 12 surgical beds.
31 beds at Netcare Linmed Hospital : 26 surgical and 5 day ward beds.
The construction of the 425-bed hospital in Lesotho, part of the Lesotho
PPP, was successfully completed and commenced operations in October 2011.
AVENG Grinaker-LTA was awarded the Excellence in Construction Awards 2011 in
the Health Facilities category by the Master Builders Association for the
construction of the Lesotho hospital. The Queen `Mamohato Memorial Hospital
is fully operated by Netcare, including both clinical and non-clinical
services, representing an innovative approach in providing integrated,
outcome based quality healthcare in Africa. The four primary care clinics
that form part of the overall PPP delivery model are performing as expected.
The Group`s Emergency services division, Netcare 911, remains the leading
provider of emergency medical services in Africa and provides a critical
service to society in times of medical crisis. Netcare 911 provided free
emergency services to more than 6 400 indigent patients during the year.
Primary Care
The division delivered pleasing results for the year. In line with the
strategy to reduce full risk lives under management, revenue decreased by
7.4% to R1 272 million. Operating profit improved to R38 million (2010: R6
million), underpinned by stringent cost control measures and operational
efficiencies as well as effective managed care risk management.
The division`s Medicross family medical and dental centres (Medicentres) and
Prime Cure clinics managed approximately 3.2 million patient visits and
dispensed 1.7 million pharmacy scripts during the year.
United Kingdom
General Healthcare Group (GHG) experienced a difficult trading year due to
continued economic uncertainty in the UK, constrained NHS spending and a
further decline in the number of insured lives.
Rising unemployment, reduced levels of policy cover and diminishing
disposable incomes continued to drive a decline in the number and nature of
insured lives. While these economic factors also negatively impacted the
self-pay market, there are positive signs of a recovery in this segment with
year-on-year growth recorded in response to specific GHG initiatives and
lengthening NHS waiting times.
GHG`s partnership with the NHS to deliver care through Choose & Book (C&B)
has been through a year of uncertainty due to financial constraints and
regulatory changes in the healthcare sector. The Health and Social Care Bill
was delayed, contractual relationships according to the Any Qualified
Provider framework were decentralised and Primary Care Trusts (PCTs) were
disbanded in favour of GP-led commissioning bodies. The changes occur at a
time when the NHS aims to save GBP16-20 billion by 2014 (equating to 6% of
the national healthcare budget).
Despite these challenges, GHG remains an important provider to the NHS under
the C&B programme. GHG has grown its market share in this area faster than
any of its competitors over the last two years.
GHG`s overall caseload grew by 4.2% and revenue rose by 3.8% to GBP887.6
million. GHG`s EBITDA however, declined by 11.4% to GBP196.2 million. The
decline was due to:
Continued reduction in insured volumes.
Increased external rent charges from the sale of the BMI The Duchy and BMI
The Harbour hospitals (refer below).
VAT increase to 20%, which added to GHG`s cost base as it cannot claim input
VAT.
The winding down of NHS Independent Sector Treatment Centres (ISTC).
The EBITDA margin declined to 22.1% (2010: 25.9%), mainly as a result of the
continued shift from private patient volumes to lower-margin NHS cases, and
the impact of OpCo businesses acquired in prior years, which are EBITDA
accretive but have lower margins.
Net financial income and expenses were positively impacted by a credit of
GBP2.8 million relating to the ineffective portion of the mark-to-market
movement in interest rate swaps, compared to an GBP8.7 million charge in the
prior year. A tax credit of GBP27.5 million (2010: GBP13.7
million) was recognised following a further 2% reduction in the UK company
tax rate to 25% and as a result, profit after tax reflects GBP41.6 million
(2010: GBP31.5 million).
GHG continued to invest in its infrastructure and facilities, with capital
expenditure (including intangible assets) amounting to GBP43.9 million
(2010: GBP47.4 million). This included the following:
Refurbishing BMI The Park Hospital, with a major extension to the existing
building including a new intensive treatment units (ITU) department, new
endoscopy suite and new theatre, and the refurbishment of three existing
theatres.
Refurbishing seven theatre suites and three existing wards, and building new
oncology and paediatric wards at the BMI The Alexandra Hospital.
New operating theatres and refurbishments at the BMI The Ridgeway Hospital.
Working capital was tightly controlled and improved during the year despite
the shift to more NHS caseload and the longer payment cycles associated with
it. As a result, GHG increased its year-end cash balances to GBP130.6
million (2010: GBP79.8 million) and reduced net debt by GBP89.8 million to
GBP1 785.4 million. The reduction in net debt was aided by GBP35.4 million
of funds generated from the sale and leaseback of the BMI The Duchy Hospital
in January 2011 and the BMI The Harbour Hospital in July 2011, with the
accompanying repayment of debt and associated swap obligations. GHG
continues to meet all financial covenants on both the OpCo and PropCo debt
facilities, which are ring-fenced from each other and without recourse to
the SA operations.
Outlook
Netcare remains confident that the demand for private healthcare services at
primary and tertiary levels will be sustained in SA over the medium and long
term. Netcare`s capital investment in expansionary projects is expected to
sustain growth in SA.
With global economic uncertainty persisting, budgetary and structural
uncertainties in the NHS and the impact of austerity measures on the UK
economy, the next 12 months are anticipated to remain very challenging for
GHG. Private caseload is likely to continue to be constrained, while NHS
volumes will depend on which areas are targeted for budget savings.
Nevertheless, the strategies and improvements implemented during the year
should position GHG to address these challenges.
Board changes
Thevendrie Brewer was appointed as an independent non-executive director
with effect from 24 January 2011.
Lynelle Bagwandeen was appointed Company Secretary with effect from 1
March 2011, following the resignation of Bert Kok on 28 February 2011.
Michael (Motty) Sacks retired as a non-executive director with effect from
30 September 2011. Motty served as both executive and non-executive Chairman
of Netcare for 12 years until 2008, and remained a non-executive director
thereafter. The Board expresses its wholehearted appreciation for his
extraordinary contribution to the Group.
Vaughan Firman resigned as an executive director and Group Chief Financial
Officer of Netcare effective 31 July 2011. Victor Litlhakanyane resigned as
Group Stakeholder Relations Director with effect from 31 December 2011. The
Board expresses its gratitude and appreciation to Vaughan and Victor for
their valuable contribution to Netcare.
Keith Gibson was appointed Acting Chief Financial Officer of the Group
effective 1 August 2011. The Board approved Keith`s appointment as executive
director and Group Chief Financial Officer of Netcare effective 10 November
2011.
Declaration of dividend number 5
Notice is hereby given that a final dividend of 31.0 cents per ordinary
share (2010: capital reduction out of share premium of 6.5 cents per
ordinary share and a dividend of 21.0 cents per ordinary share) has been
declared for the year ended 30 September 2011. The directors have confirmed
by resolution that the solvency and liquidity test as contemplated by the
Companies Act 71 of 2008 has been duly considered, applied and satisfied.
In accordance with the provisions of STRATE, the electronic settlement and
custody system used by the JSE Limited, the relevant dates for the dividend
are as follows:
Last day to trade cum dividend Friday, 13 January 2012
Trading ex dividend commences Monday, 16 January 2012
Record date Friday, 20 January 2012
Payment date Monday, 23 January 2012
Share certificates may not be dematerialised nor rematerialised between
Monday, 16 January 2012 and Friday, 20 January 2012, both days inclusive.
On Monday, 23 January 2012, the dividend will be electronically transferred
to the bank accounts of all certificated shareholders where this facility is
available. Where electronic funds transfer is either not available or not
elected by the shareholder, cheques dated Monday, 23 January 2012 will be
posted on that date. Holders of dematerialised shares will have their
accounts credited at their participant or broker on Monday, 23 January 2012.
On behalf of the Board
Jerry Vilakazi
Chairman
Richard Friedland
Chief Executive Officer
Keith Gibson
Chief Financial Officer
Sandton
10 November 2011
Group income statement
for the year ended 30 September
Rm Note 2011 2010 % change
Revenue 23 221 22 474 3.3
Cost of sales (13 513) (12 893)
Gross profit 9 708 9 581 1.3
Other income 408 255
Administrative and other (6 415) (6 128)
expenses
Operating profit 4 3 701 3 708 (0.2)
Investment income 5 115 95
Financial expenses 6 (1 847) (1 981) 6.8
Other losses - net 7 (23) (92)
Attributable earnings of 23 24
associates
Profit before taxation 1 969 1 754 12.3
Taxation (114) (294)
Profit for the year 1 855 1 460 27.1
Attributable to:
Owners of the parent 1 570 1 233
Preference shareholders 47 53
Profit attributable to 1 617 1 286
shareholders
Non-controlling interest 238 174
1 855 1 460
Earnings per share (cents)
Basic 122.1 97.0 25.9
Diluted 119.2 94.6 26.0
Distributions per share
(cents)
Capital reduction per share 25.5
Dividend per share 53.0 21.0
Total distributions per 53.0 46.5 14.0
share
Group statement of comprehensive income
for the year ended 30 September
Rm Note 2011 2010*
Profit for the year 1 1 460
855
Other comprehensive income/(loss), net of 22 (1
tax 503)
Actuarial (losses)/gains on defined benefit (1) 29
plans
Effect of cash flow hedge accounting
Change in the fair value of cash flow (1
hedges (608) 118)
Reclassification of the cash flow hedge 7 43 (10)
reserve
Effect of translation of foreign entities 588 (404)
Total comprehensive income/(loss) for the 1 (43)
year 877
Attributable to:
Owners of the parent 1 605 449
Preference shareholders 47 53
Non-controlling interest 225 (545)
1 877 (43)
Condensed Group statement of financial position
As At 30 September
Rm 2011 2010* 2009*
ASSETS
Non-current assets
Property, plant and equipment 26 416 23 852 25 097
Goodwill 15 034 13 153 14 303
Intangible assets 366 331 366
Associated companies, investments 494 180 130
and loans
Financial asset - Derivative financial 3 26
instruments
Deferred taxation 2 165 1 753 1 385
Total non-current assets 44 39 41
478 295 281
Current assets
Investments and loans 43 45 54
Financial asset - Derivative financial 2 6
instruments
Inventories 721 652 621
Trade and other receivables 3 057 3 290 3 416
Cash and cash equivalents 2 355 1 378 803
6 178 5 371 4 894
Assets held for sale 8 13 4
Total current assets 6 186 5 384 4 898
Total assets 50 44 46
664 679 179
EQUITY AND LIABILITIES
Equity attributable to owners of the 5 155 4 069 4 048
parent
Preference share capital and premium 644 644 644
Non-controlling interest 1 886 1 645 2 254
Total shareholders` equity 7 685 6 358 6 946
Non-current liabilities
Long-term debt 25 106 21 630 25 423
Financial liability - Derivative financial 5 319 4 113 2 797
instruments
Post-retirement benefit obligations 188 179 297
Deferred lease liability 54 122 114
Deferred taxation 5 178 4 908 5 466
Cash-settled compensation liability 1
Provisions 89 30 48
Total non-current liabilities 35 30 34
935 982 145
Current liabilities
Trade and other payables 3 901 3 118 2 924
Short-term debt 2 388 3 852 1 745
Taxation payable 205 276 330
Bank overdrafts 550 93 89
Total current liabilities 7 044 7 339 5 088
Total equity and liabilities 50 664 44 679 46 179
* Restated comparatives refer to note 3.
Condensed Group statement of changes in equity
as at 30 September
Rm Ordinary Treasury Option
share shares premium on
capital convertible
and bond
premium
Balance at 30 September 2009 as 1 065 (767) 169
previously reported
Prior year restatement (refer to
note 3)
Restated balance at 30 September 1 065 (767) 169
2009
Shares issued during the year 80
Capital reduction (521)
Repurchase of convertible bonds (5)
Share-based payments reserve
movements
Capital gains tax on capital
reductions attributable
to treasury shares
Preference dividends paid
Other reserve movements
Decrease in equity interest in
subsidiaries
Dividends paid by subsidiaries
Restated total comprehensive loss
for the year
Total comprehensive loss for the
year as previously reported
Prior year restatement (refer to
note 3)
Restated balance at 30 September 624 (767) 164
2010
Shares issued during the year 74
Capital reduction (83)
Sale of treasury shares 53
Repurchase of convertible bonds 6
Share-based payments reserve
movements
Capital gains tax on capital
reductions
attributable to treasury shares
Preference dividends paid
Dividends paid
Distributions to beneficiaries of
the HPFL trusts
Other reserve movements (170)
Increase in equity interest in
subsidiaries
Total comprehensive income for
the year
Balance at 30 September 2011 615 (714)
Rm Cash flow Foreign Other Retained
hedge currency reserves earnings
accounting translation
reserve reserve
Balance at (1 216) 976 471 3 446
30 September 2009 as
previously reported
Prior year restatement 18 (114)
(refer to note 3)
Restated balance at (1 216) 994 471 3 332
30 September 2009
Shares issued during the
year
Capital reduction
Repurchase of 2
convertible bonds
Share-based payments 26
reserve movements
Capital gains tax on
capital reductions
attributable
to treasury shares (7)
Preference dividends (53)
paid
Other reserve movements 54 (57)
Decrease in equity
interest in subsidiaries
Dividends paid by
subsidiaries
Restated total (574) (225) 1 301
comprehensive loss for
the year
Total comprehensive loss (574) (233) 1 301
for the year as
previously reported
Prior year restatement 8
(refer to note 3)
Restated balance at (1 790) 769 551 4 518
30 September 2010
Shares issued during the
year
Capital reduction
Sale of treasury shares 55
Repurchase of (21)
convertible bonds
Share-based payments 23
reserve movements
Capital gains tax on
capital reductions
attributable to treasury (1)
shares
Preference dividends (47)
paid
Dividends paid (553)
Distributions to (47)
beneficiaries of the
HPFL trusts
Other reserve movements 123 52
Increase in equity (30)
interest in subsidiaries
Total comprehensive (301) 342 1 611
income for the year
Balance at (2 091) 1 111 697 5 537
30 September 2011
Rm Equity Preference Non- Total
attributable share Control- share-
to owners capital ling holders`
of the and interest equity
parent premium
Balance at 4 144 644 2 345 7 133
30 September 2009 as
previously reported
Prior year restatement (96) (91) (187)
(refer to note 3)
Restated balance at 4 048 644 2 254 6 946
30 September 2009
Shares issued during 80 80
the year
Capital reduction (521) (521)
Repurchase of (3) (3)
convertible bonds
Share-based payments 26 26
reserve movements
Capital gains tax on
capital reductions
attributable
to treasury shares (7) (7)
Preference dividends (53) (53)
paid
Other reserve movements (3) (3)
Decrease in equity (63) (63)
interest in
subsidiaries
Dividends paid by (1) (1)
subsidiaries
Restated total 502 (545) (43)
comprehensive loss for
the year
?Total comprehensive 494 (553) (59)
loss for the year as
previously reported
?Prior year restatement 8 8 16
(refer to note 3)
Restated balance at 4 069 644 1 645 6 358
30 September 2010
Shares issued during 74 74
the year
Capital reduction (83) (83)
Sale of treasury shares 108 108
Repurchase of (15) (15)
convertible bonds
Share-based payments 23 23
reserve movements
Capital gains tax on
capital reductions
attributable to (1) (1)
treasury shares
Preference dividends (47) (47)
paid
Dividends paid (553) (3) (556)
Distributions to (47) (47)
beneficiaries of the
HPFL trusts
Other reserve movements 5 5
Increase in equity (30) 19 (11)
interest in
subsidiaries
Total comprehensive 1 652 225 1 877
income for the year
Balance at 5 155 644 1 886 7 685
30 September 2011
Group statement of cash flows
for the year ended 30 September
Rm 2011 2010
Cash flows from operating activities
Cash received from customers 23 645 22 518
Cash paid to suppliers and employees (18 073) (17 584)
Cash generated from operations 5 572 4 934
Interest paid (1 836) (1 981)
Taxation paid (674) (565)
Ordinary dividends paid by subsidiaries (3) (1)
Ordinary dividends paid (553)
Preference dividends paid (47) (53)
Capital reductions paid (83) (521)
Distributions to beneficiaries of the HPFL (47)
trusts
Net cash from operating activities 2 329 1 813
Cash flows from investing activities
Purchase of property, plant and equipment (1 327) (1 284)
Proceeds on disposal of property, plant and 415 19
equipment
Additions to intangible assets (81) (86)
Increase in investments and loans (250) (29)
Additions to derivatives (32)
Interest received 115 93
Dividends received 2
Increase in equity interest in subsidiaries (11) (2)
Acquisition of subsidiaries and businesses, 21
net of cash acquired
Net cash from investing activities (1 139) (1 298)
Cash flows from financing activities
Proceeds from issue of ordinary shares 74 80
Proceeds on disposal of treasury shares 123
Equity premium on repurchase of convertible (10)
bond
Long-term liabilities raised 477 883
Short-term liabilities repaid (1 544) (825)
Net cash from financing activities (880) 138
Net increase in cash and cash equivalents 310 653
Translation effects on cash and cash 210 (82)
equivalents of foreign entities
Cash and cash equivalents at beginning of the 1 285 714
year
Cash and cash equivalents at end of the year 1 805 1 285
Consisting of:
Cash on hand and balances with banks 2 355 1 378
Short-term money market borrowings and bank (550) (93)
overdrafts
1 805 1 285
Headline earnings
for the year ended 30 September
Rm 2011 2010 %
change
Reconciliation of headline earnings
Profit for the year 1 855 1 460 27.1
Less:
Preference shareholders (47) (53)
Non-controlling interest (238) (174)
Earnings used in the calculation of basic 1 570 1 27.3
earnings per share 233
Adjusted for:
Gain on bargain purchase (81)
Impairment of goodwill 9
Impairment of investments 24 8
Impairment of property, plant and equipment 19
Reversal of impairment of property, plant (7) (1)
and equipment
(Profit)/loss on disposal of property, plant 1
and equipment (162)
Tax effect of headline adjusting items 23
Non-controlling share of headline adjusting 56 38
items
Headline earnings 1 504 1 226 22.7
Headline earnings per share (cents) 117.0 96.5 21.2
Diluted headline earnings per share (cents) 114.2 94.1 21.4
Condensed notes to the Group financial statements
for the year ended 30 September
1. Basis of preparation and accounting policies
The annual financial statements from which these condensed financial
statements have been derived, have been prepared in accordance with
International Financial Reporting Standards (IFRS), the AC500 standards as
previously issued by the Accounting Practices Board, the Listings
Requirements of the JSE Limited and the South African Companies Act No 71 of
2008.
The accounting policies applied in the preparation of these statements are
consistent with those applied for the year ended 30 September 2010, except
for the adoption of improvements to International Financial Reporting
Standards 2010 (certain improvements have been adopted earlier than
required), and the change in accounting policy detailed in note 3 below.
The directors have reviewed the Group`s budget and cash flow forecasts and
have satisfied themselves that the Group is in a sound financial position
and that it has access to sufficient borrowing facilities to meet its
foreseeable cash requirements. Certain General Healthcare Group (GHG)
contracts with major medical insurers expire in 2012 and, based on past
experience and current discussions, it is likely that negotiations will be
lengthy and challenging. The directors are confident of a successful outcome
in this regard, however, until these negotiations have been satisfactorily
resolved, the GHG forecasts remain uncertain.
The borrowings of GHG, which are ring-fenced from the South African
operations, include senior bank facilities and other long-term facilities,
which are due for repayment between 2013 and 2017. A significant proportion
of this debt is due for repayment in October 2013 and will need to be
refinanced. The directors have considered a number of refinancing options
that may exist at that point, but no final or likely solution has been
determined. As such, no assessment can be reasonably made of the effect this
may have on the financial statements. However, given the number and nature
of refinancing options, the directors are comfortable with the going concern
assessment.
The directors consider it appropriate to adopt the going concern basis in
preparing the Group`s annual financial statements.
The preparation of the annual financial statements was supervised by KN
Gibson CA (SA), Chief Financial Officer of Netcare Limited.
2. Independent report of the auditors
The annual financial statements have been audited by Grant Thornton and
their accompanying unqualified audit report is available for inspection at
the company`s registered office.
3. Restatement of comparative information
During the current year, General Healthcare Group (GHG) in the United
Kingdom revisited its interpretation of IAS 12 Income Taxes in relation to
the differences that arise on the straight-lining of lease rentals on
operating leases between its wholly owned subsidiaries, BMI Healthcare
Limited and other property holding companies.
In prior years, the differences were accounted for as permanent differences
with no deferred tax being raised. While this is considered to be an
appropriate interpretation of IAS12, management have concluded that fairer
presentation will be achieved if these are treated as timing differences and
the appropriate deferred tax liability raised.
To the extent available, a deferred tax asset has been recognised on the
losses created by the straight-line adjustment.
The change in the accounting policy has been accounted for retrospectively,
and the comparative information in the statement of financial position,
statement of comprehensive income, statement of changes in equity and the
relevant notes have been restated.
The restatement did not result in any changes to earnings or headline
earnings per share in the prior year.
The effect of this change is summarised below:
Group statement of financial position for the year ended 30 September 2009
Rm Previously Adjustment Restated
reported
Non-current assets
Deferred taxation 1 147 238 1 385
Non-current liabilities
Deferred taxation (5 041) (425) (5 466)
Equity
Foreign currency (976) (18) (994)
translation reserve
Retained earnings (3 446) 114 (3 332)
Non-controlling interest (2 345) 91 (2 254)
Group statement of financial position for the year ended 30 September 2010
Rm Previously Adjustment Restated
reported
Non-current assets
Deferred taxation 1 446 307 1 753
Non-current liabilities
Deferred taxation (4 430) (478) (4 908)
Equity
Foreign currency (743) (26) (769)
translation reserve
Retained earnings (4 632) 114 (4 518)
Non-controlling interest (1 728) 83 (1 645)
2011 2010
4. Operating profit
After charging:
Depreciation and amortisation 1 1
213 157
Operating lease charges 469 420
5. Investment income
Dividends received 2
Return on retirement benefit plan assets 49 48
Interest on bank accounts and other 66 45
115 95
6. Financial expenses
Amortisation of arrangement fee 90 85
Retirement benefit plan interest cost 63 55
Interest on convertible bonds (liability 140 154
portion)
Interest on promissory notes 166 180
Interest on preference shares classified as debt 4 24
Interest on bank loans and other 1 384 1 483
1 847 1 981
7. Other losses - net
Foreign exchange gains 5 1
Ineffectiveness gains/(losses) on cash flow 43
hedges (103)
Fair value loss on inflation rate swaps (not (2)
hedge accounted)
Fair value loss on derivative financial assets (26)
(not hedge accounted)
Amount reclassified from cash flow hedge reserve (43) 10
(23) (92)
8. Commitments
Capital commitments 1 268 1 392
South Africa 845 1 213
United Kingdom 423 179
Operating lease commitments 4 510 3 048
South Africa 1 410 1 212
United Kingdom 3 100 1 836
9. Contingent liabilities (guarantees and
suretyships)
South Africa 636 645
Condensed segment report
for the year ended 30 September
The Group operates in two geographical regions, South Africa (SA) and the
United Kingdom (UK). SA has two further segments, Hospital and Emergency
services and Primary Care, which are separately monitored for decision-
making purposes. The UK segment results are impacted by fluctuations in the
Rand relative to the Pound Sterling on translation. The impact of foreign
currency fluctuations have been removed from the UK segment for decision-
making purposes.
Rm 2011 2010 %
change
INCOME STATEMENT
Revenue
South Africa 13 361 12 541 6.5
Hospitals and Emergency services 12 089 11 167 8.3
Primary Care 1 272 1 374 (7.4)
United Kingdom 9 860 9 933 (0.7)
UK adjusted1 10 312 9 933 3.8
Exchange rate impact (452)
Group reported 23 221 22 474 3.3
Exchange rate impact 452
Group adjusted1 23 673 22 474 5.3
Operating profit
South Africa 2 220 1 899 16.9
Hospitals and Emergency services 2 182 1 893 15.3
Primary Care 38 6 533.3
United Kingdom 1 384 1 764 (21.5)
UK adjusted1 1 420 1 764 (19.5)
Exchange rate impact (36)
Capital items 97 45 115.6
South Africa (14) (34) 58.8
UK adjusted1 119 79 50.6
Exchange rate impact (8)
Group reported 3 701 3 708 (0.2)
Exchange rate impact 44
Group adjusted1 3 745 3 708 1.0
Net interest expense
South Africa 327 367 10.9
United Kingdom 1 405 1 521 7.6
UK adjusted1 1 477 1 521 2.9
Exchange rate impact (72)
Group reported 1 732 1 888 8.3
Exchange rate impact 72
Group adjusted1 1 804 1 888 4.5
Rm 2011 2010 % 2009
change
STATEMENT OF FINANCIAL POSITION
Total assets2
South Africa 10 262 9 284 10.5 8 615
United Kingdom 40 402 35 395 14.1 37 564
UK adjusted1 35 212 35 395 (0.5) 37 564
Exchange rate impact 5 190
Group reported 50 664 44 679 13.4 46 179
Exchange rate impact (5 190)
Group adjusted1 45 474 44 679 1.8 46 179
Debt net of cash
South Africa 3 303 3 706 10.9 3 903
United Kingdom 22 386 20 491 (9.2) 22 551
UK adjusted1 19 510 20 491 4.8 22 551
Exchange rate impact 2 876
Group reported 25 689 24 197 (6.2) 26 454
Exchange rate impact (2 876)
Group adjusted1 22 813 24 197 5.7 26 454
1 The September 2011 UK numbers have been recalculated to remove the impact
of foreign currency fluctuations since the September 2010 results.
2 Restated comparatives refer to note 3.
Salient features
for the year ended 30 September
2011 2010 2009
Share statistics
Ordinary shares
Shares in issue net of treasury shares 1 295 1 277 1 266
(million)
Weighted average number of shares (million) 1 286 1 271 1 263
Diluted weighted average number of shares 1 317 1 303 1 275
(million)
Market price per share (cents) 1 305 1 384 1 037
Currency conversion guide (R:GBP)
Closing exchange rate 12.54 10.93 11.95
Average exchange rate for the period 11.09 11.63 13.73
Registered office: 76 Maude Street (corner West Street), Sandton
2196, Private Bag X34,Benmore, 2010
Executive RH Friedland (Chief Executive Officer), KN
directors: Gibson (Chief Financial Officer),VLJ
Litlhakanyane
Non-executive SJ Vilakazi (Chairman), T Brewer, APH Jammine,
directors: JM Kahn, MJ Kuscus, HR Levin, KD Moroka,
N Weltman
Company Secretary: L Bagwandeen
Sponsor: Nedbank Capital, a division of Nedbank Group
Limited
Transfer Link Market Services (Proprietary) Limited, 11
secretaries: Diagonal Street, Johannesburg, 2001
Investor relations: ir@netcare.co.za; www.netcareinvestor.co.za
Date: 14/11/2011 08:00:01 Produced by the JSE SENS Department.
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