| Wed 9 May 2001, 0:00 | | Afrox Healthcare Ltd - Results For The Six Months |
|
AFROX HEALTHCARE LIMITED
www.afrox/healthcare.com
Results for the six months ended 31 March 2001
* Revenue up 26,6%
* Operating profit up 31,5%
* Headline earnings per share at 40,3c, up 36,1%
Message to our shareholders
Dear Shareholders
Performance
Continued organic growth, improved operating efficiencies, coupled with a
strategic acquisition, means that your company has achieved excellent results,
with revenue growing by 26,6 percent, operating profit up 31,5 percent, net
profit 38,1 percent higher, and a 36,1 percent increase in headline earnings
per share.
The healthy balance sheet will enable your company to continue to grow the
business organically, and by seeking selected acquisitions in both the
hospitals and healthcare services businesses.
Gearing was reduced to 27,7 percent from 31,1 percent over the period, and
return on capital employed increased to 24,9 percent from 22,9 percent. Net
asset value improved to 438,3 cents a share, against 398,1 cents for the
September 2000 year end and 390,2 cents for the first six months last year.
Cash generated from operations was R171,0 million compared to R58,2 million
this time last year. This strong improvement was due to better working capital
management.
Although the balance sheet shows a R31 million increase in debt over last year,
interest paid for the period was R2 million lower at R14 million, despite your
company having acquired the 55 percent holding in Lifecare Group Holdings
Limited (Lifecare) from our parent company, African Oxygen Limited (Afrox) on 1
October 2000.
Since the merger with President Medical Investments Limited, Afrox Healthcare
has managed Lifecare. Acquiring Afrox's interest was deemed important for the
future of the group, as it enables your company to offer a broader base of
healthcare to a wider group of South Africans.
Lifecare, specialising in long-term care to the chronically ill, frail and
elderly patients, has 24 hospitals with 10 000 beds. Bringing Lifecare into the
fold now firmly positions your company as the leading healthcare provider group
in southern Africa, with 95 acute and long-stay hospitals and access to nearly
17 500 beds.
The results are for the first full comparable period since the merger. Taking
out the effect of Lifecare on a strictly like-for-like basis shows very strong
organic growth with major efficiencies and benefits achieved, partly as a
result of the merger. Excluding Lifecare, revenue was up 12 percent with
profits increasing
29 percent.
This clearly demonstrates improved operating efficiencies and the sustained
organic growth that the company is able to achieve, through its ongoing
strategy of investing in existing infrastructure to improve facilities and, to
commission the latest medical equipment. This strategy, once again, contributed
to the strong growth.
It is pleasing to report for the first time in some years that a realistic
tariff increase was agreed with the Board of Healthcare Funders (BHF) following
tough, but sensible negotiations. The new increase, effective January this
year, should now form a base for a sustainable future relationship between
private hospital groups and healthcare funders.
Business review
Strategic investments in facilities and the latest medical equipment have
helped your company grow in all the geographic regions in which it operates.
Although the trend for shorter stays remains because of managed care, more
surgical cases and high-technology procedures are being realised as a result of
our investments to ensure world-class facilities and equipment.
Many of our associate hospitals are integral parts of the business and
management matrix structure. This period has been an outstanding one, with
share of profits from associates increasing from R6,6 million this time last
year, to R12,7 million. First, our associate hospitals have successful
management practices in place. Second, they have access to our best operating
practice measurements and, the benefits of scale Afrox Healthcare provides.
Healthcare services companies performed well and, at the same time, continued
to grow their markets and increase revenues. Organic growth targets were
achieved, and plans to broaden these businesses' services and products are at
an advanced stage.
Your company's management has during the past few months begun a process of
benchmarking various aspects of its performance and progress against similar
private hospital groups in other countries. During this process, it has become
clear that the private hospitals in South Africa, and your company in
particular, are comparable to the best elsewhere in the world. Further, despite
the fact that some 40 percent of our costs are determined by world market
prices, the fees charged to patients are as low as one quarter of the fees
charged in other comparable countries. This confirms the effectiveness of our
policy to do everything we can to contain increases in the cost of hospital
care for the benefit of our patients, while at the same time, optimising the
rewards to our employees and the return to our shareholders.
It is our view that the private healthcare industry is a national asset to
South Africa and provides access to a world-class hospital system.
STRATE
Afrox Healthcare Limited is to commence trading within the Share Transaction
Totally Electronic (STRATE) electronic environment from Monday, 30 July 2001. A
notice to this effect will be posted to shareholders on or around Tuesday, 15
May 2001.
Dividend
The directors have declared an increased interim dividend of 11,0 cents (2000:
9,6 cents). The dividend is covered 3,7 times by earnings.
Prospects
We will continue to streamline the highly cost-effective support and enabling
functions, and we will continue to implement best operating practices into all
profit centres.
At the same time as focusing on organic growth, we shall pursue growth projects
that will further boost performance. We therefore expect that the results for
the full year will reflect continued good growth over the past year.
Royden Vice Rick Hogben
Chairman Managing director
Johannesburg
9 May 2001
Dividend declaration
Notice is hereby given that an interim dividend of 11,0 cents per ordinary
share has been declared, payable on 27 July 2001 to shareholders registered in
the books of the company at the close of business on 6 July 2001.
The directors report that the interim consolidated results for the six months
ended 31 March 2001 are as follows:
Condensed Balance Sheet
Unaudited Unaudited Audited
31-Mar 31-Mar 30-Sep
R'000 2001 2000 2000
ASSETS
Non-current assets 1 176 274 1 014 048 1 043 405
Property, plant and equipment 984 186 845 781 870 247
Deferred tax 27 139 11 129 17 369
Investments 158 733 154 451 155 465
Intangible assets 6 216 2 687 324
Current assets 806 779 683 664 654 288
Inventories 119 791 95 294 103 994
Receivables and prepayments 566 893 562 102 474 665
Cash and cash equivalents 120 095 26 268 75 629
Total assets 1 983 053 1 697 712 1 697 693
EQUITY AND LIABILITIES
Capital and reserves 973 139 866 309 883 853
Capital 620 373 620 704 620 705
Retained earnings and reserves 352 766 245 605 263 148
Minority interest 190 835 116 703 123 852
Non-current liabilities 296 455 283 408 211 594
Current liabilities 522 624 431 292 478 394
Current portion of borrowings 21 615 3 787 9 079
Provisions for liabilities and
charges 39 807 33 823 53 000
Other current liabilities 461 202 393 682 416 315
Total equity and liabilities 1 983 053 1 697 712 1 697 693
Condensed Income Statement
Six months Six months Year
ended ended ended
31 March % Change 31 March 30 Sep
2001 2000 2000
R'000
Revenue 1 465 736 26,6 1 157 406 2 446 162
Operating profit 160 797 31,5 122 271 279 728
Exceptional item - - (1 440)
Finance costs (14 066) (16 151) (33 344)
Outside partners' interest (5 029) (3 361) (8 238)
Share of profits of associates 12 651 6 633 15 409
Profit before tax 154 353 41,1 109 392 252 115
Tax (45 061) (34 011) (80 403)
Profit from ordinary activities 109 292 45,0 75 381 171 712
Minority interest (18 959) (9 824) (19 464)
Preference dividend paid by
subsidiary (889) (807) (1 579)
Net profit 89 444 38,1 64 750 150 669
Adjustments for headline
earnings:
Goodwill written off - 289 534
Loss on sale of property - - 1 440
Headline earnings 89 444 65 039 152 643
Headline earnings per share 40,3 36,1 29,6 69,5
Earnings per share 40,3 36,6 29,5 68,6
Condensed Cash Flow Statement
31-Mar 31-Mar 30-Sep
R'000 2001 2000 2000
Cash generated from operations 170 980 58 254 358 034
Net finance costs (14 066) (16 151) (33 344)
Taxation paid (88 423) (9 259) (49 494)
Dividends received - - 655
Net cash provided by
operating activities 68 491 32 844 275 851
Net cash used in investing
activities (122 649) (98 273) (170 304)
Net acquisition (52 225) - (5 549)
Purchase of property, plant
and equipment (54 467) (90 971) (158 440)
Other investing cash flows, net (15 957) (7 302) (6 315)
Net cash provided/(used) in
financing activities 98 624 47 429 (74 186)
Dividends paid (26 118) (18 366) (40 208)
Issue of share capital 3 281 4 (872)
Proceeds less payments on
long-term borrowings 105 798 71 370 (27 653)
Other financing cash flows, net 15 663 (5 579) (5 453)
Increase/(decrease) in cash and
cash equivalents 44 466 (18 000) 31 361
Movement in cash and cash
equivalents
At start of period 75 629 44 268 44 268
Increase/(decrease) 44 466 (18 000) 31 361
At end of period 120 095 26 268 75 629
Condensed Statement of Changes In Equity
Revaluation and Accumulated
R'000 Capital other reserves profits Total
Balance at 1 October 2000 620 705 3 100 260 048 883 853
Shares issued less expenses (332) - - (332)
Currency translation differences - 174 - 174
Net profit - - 89 444 89 444
Balance at 31 March 2001 620 373 3 274 349 492 973 139
Balance at 1 October 1999 621 577 62 046 138 965 822 588
Shares issued less expenses (873) - - (873)
Currency translation differences - 168 - 168
Dividends - - (21 070) (21 070)
Net profit - - 64 750 64 750
Other - 746 - 746
Balance at 31 March 2000 620 704 62 960 182 645 866 309
Segmental Information
Healthcare
R'000 Hospitals services Group
Six months ended 31 March 2001
Revenue 1 014 382 451 354 1 465 736
Operating profit 120 703 40 094 160 797
Six months ended 31 March 2000
Revenue 890 983 266 423 1 157 406
Operating profit 101 963 20 308 122 271
Year ended 30 September 2000
Revenue 1 905 337 540 825 2 446 162
Operating profit 236 879 42 849 279 728
A new subsidiary operating in the Healthcare services segment was acquired in
October 2000.
Statistics And Ratios
31-Mar 31-Mar 30-Sep
2001 2000 2000
Statistics
Total number of shares in
issue ('000) 222 024 219 480 219 480
Number of ordinary shares on which
earnings per share are
based ('000) 222 024 219 480 219 480
Dividends per share (cents) 11,0 9,6 21,5
Ratios
Interest cover (times) 11,4 7,6 8,4
Effective tax rate (%)
(excluding STC effect) 29,2 29,1 29,0
Gearing (%) 27,7 31,1 21,9
Net asset value (cents) 438,3 390,2 398,1
Return on capital employed (%) 24,9 22,7 22,9
Dividend cover (times) 3,7 3,1 3,2
EXCELLENT NUMBERS FOR AHEALTH -
HEADLINE EARNINGS PER SHARE INCREASE 36,1%
MEDIA RELEASE
Private healthcare group, Afrox Healthcare Limited (AHealth), has produced
excellent numbers for the six months ended 31 March 2001. AHealth's chairman,
Royden Vice, attributes the 26,6 percent revenue growth and the 31,5 percent
increase in operating profit to efficiency programmes, organic growth, coupled
with a long-stay hospital group acquisition.
Headline earnings per share rose 36,1 percent to 40,3 cents (29,6 cents).
Vice says, "The excellent numbers are mirrored by a healthy balance sheet which
will allow AHealth to continue to expand its existing businesses and acquire
new ones. With continued merger benefits and, the efficiency enhancing
programmes which are in place, I am confident of continued growth for the
second half."
Vice confirms AHealth will focus on growth projects that will boost
performance. He says, "AHealth's first priority is, however, to focus on
organic growth, internal efficiencies and, further streamline the highly cost
effective support and enabling functions which form the cornerstones of the
company's management matrix."
During the period, AHealth acquired the 55 percent stake in Lifecare Group
Holdings (Lifecare) from parent Afrox. Real Africa Holdings Limited holds the
balance. Lifecare specialises in long-stay chronic care and has 24 hospitals
with 10,000 beds. Lifecare will be incorporated into AHealth's management
matrix which will help remove unnecessary duplication of costs.
"This acquisition," says managing director, Rick Hogben, "firmly positions
AHealth as the leading healthcare provider group in southern Africa, with 95
acute and long-stay hospitals with some 17,500 beds."
Revenue increased 26,6 percent to R1,47 billion (R1,16 billion) and operating
profit exceeded the percentage increase in revenue and was 31,5 percent up at
R160,8 million (R122,3 million). Profit before tax was 41 percent higher at
R154,4 million (R109,4 million) with net profit up 38,1 percent at R89,4
million (R64,7 million).
An increased interim dividend of 11,0 cents( 9,6 cents) was declared. The
interim is covered 3,7 times by earnings.
The healthy balance sheet shows good working capital management and detailed
attention to capital expenditure. Cash generated from operations was higher at
R171,0 million compared to R58,3 million this time last year. Return on capital
employed improved to 25 percent from 23 percent.
Despite acquiring 55 percent in Lifecare, gearing reduced to 27,7 percent from
31,1 percent over the period. At the same time, interest paid during the six
months was R2 million lower at R14 million although a R31 million increase in
borrowings is reflected.
Rick Hogben says, "New efficiency programmes, best operating practice
implementation in all profit centres, and continued merger benefits are
realising savings.
Hogben compares AHealth's performance on a strictly like for like basis by
taking out Lifecare's contribution. On this basis, revenue increased 12 percent
with profits increasing 29 percent. "This clearly demonstrates both improved
operating efficiencies and the sustained organic growth the company is able to
achieve."
"Our strategy of ongoing investment in the latest medical equipment and by
improving facilities has also contributed to growth in all geographical areas
where AHealth has a presence. Although the trend for shorter stays remains
because of managed care, more surgical cases using high technology procedures
are being realised as a result of our investment in ensuring world-class
equipment and facilities."
AHealth has recently started benchmarking its procedures, performance and
progress against similar global hospital groups. The findings show South
African private hospital groups, and AHealth in particular, are comparable to
the best globally.
Hogben says, "This finding is despite the fact that some 40 percent of our
costs are determined by world market prices and that the fees charged to South
African patients are as low as one quarter of those charged in other countries
like America, the UK and Australia."
"Our ability to contain cost increases in hospital care confirms our
effectiveness as a leading world-class healthcare provider which obviously
benefits our patients," concludes Hogben.
Ends
Issued by: Afrox Healthcare Limited
For further information contact Chris Fieldgate
Tel: 490-0554 Cel: 082-495-1481
