| Tue 21 May 2002, 0:00 | | Network Healthcare Holdings Limited - Interim Resu |
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NETWORK HEALTHCARE HOLDINGS LIMITED - INTERIM RESULTS FOR THE SIX MONTHS
ENDED 31 MARCH 2002
Network Healthcare Holdings Limited
(Registration number 1996/008242/06)
(Incorporated in the Republic of South Africa)
(JSE share code: NTC)
(ISIN code: ZAE000011953)
("Netcare" or "the Company")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2002
TOTAL REVENUE INCREASED BY 27,5% (ORGANIC BY 19,7%)
HEADLINE EARNINGS PER SHARE INCREASED BY 36,2%
CAPITAL DISTRIBUTION INCREASED BY 28,6%
GROUP BALANCE SHEET
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2002 2001 2001
(Rm) (Rm) (Rm)
Assets
Non-current assets
Property, plant and 2 292,9 1 992,8 2 202,8
equipment
Intangible assets 7,4 59,0 (82,1)
Investments and 184,2 108,3 139,7
loans
Deferred taxation 34,1 33,6 34,1
Total non-current 2 518,6 2 193,7 2 294,5
assets
Current assets
Inventories 215,2 161,3 164,2
Accounts receivable 1 013,0 642,8 838,1
Total current assets 1 228,2 804,1 1 002,3
Total assets 3 746,8 2 997,8 3 296,8
Equity and liabilities
Capital and reserves
Ordinary 1 939,1 1 444,4 1 592,0
shareholders` equity
Interest of outside 9,1 126,8 134,1
shareholders in
subsidiaries
Total shareholders` 1 948,2 1 571,2 1 726,1
equity
Net interest-bearing 825,3 701,0 494,1
debt
Non-current
liabilities
Deferred taxation 100,1 60,0 100,1
Current liabilities
Accounts payable 731,0 520,8 695,8
Vendors for - - 128,5
acquisition
Taxation 142,2 144,8 152,2
Total current 873,2 665,6 976,5
liabilities
Total equity and 3 746,8 2 997,8 3 296,8
liabilities
Net equity per share 134,2 104,2 119,0
(cents)
GROUP INCOME STATEMENT
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2002 2001 % 2001
(Rm) (Rm) change (Rm)
Revenue 2 074,3 1 626,9 27,5 3 586,0
Operating profit before 406,6 305,8 33,0 697,2
depreciation (EBITDA)
Depreciation (78,5) (55,9) (127,4)
Operating profit (EBIT) 328,1 249,9 31,3 569,8
Net finance charges (59,7) (52,2) (87,6)
Profit before 268,4 197,7 482,2
exceptional items
Exceptional items 1,0 (1,6) (31,4)
Profit before taxation 269,4 196,1 37,4 450,8
Taxation (75,2) (55,3) (127,2)
Profit after taxation 194,2 140,8 37,9 323,6
Attributable earnings 15,4 11,3 25,9
of associates
Profit after taxation 209,6 152,1 37,8 349,5
including associates
Outside shareholders` (2,7) (12,7) (22,8)
interests
Earnings attributable 206,9 139,4 48,4 326,7
to ordinary
shareholders
EARNINGS RECONCILIATION
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2002 2001 % 2001
(Rm) (Rm) change (Rm)
Attributable earnings 206,9 139,4 326,7
Goodwill (1,0) 1,6 (0,9)
(released)/amortised
Impairment loss on - - 26,0
properties
Medicross restructuring - - 6,3
(net of tax)
Minority share of - - (2,2)
adjustments
Headline earnings 205,9 141,0 46,0 355,9
Earnings per share
(cents)
Headline - basic 14,3 10,5 36,2 26,7
Headline - fully 13,7 10,3 25,8
diluted
Attributable - basic 14,4 10,4 24,5
Attributable - fully 13,8 10,2 23,7
diluted
Cash equivalent 19,4 14,2 36,6 37,9
earnings per share
Note: In terms of AC135 and AC123 Netcare now depreciates its owner occupied
properties. Prior year results have been restated accordingly.
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2002 2001 2001
(Rm) (Rm) (Rm)
Ordinary shareholders` 1 592,0 1 394,0 1 394,0
equity at beginning
of period
Prior year adjustment - (52,3) (52,3)
Restated balance 1 592,0 1 341,7 1 341,7
Earnings attributable to 206,9 139,4 326,7
ordinary shareholders
As previously reported 206,9 148,0 343,9
Prior year adjustment - (8,6) (17,2)
Issue of shares 212,4 56,9 64,1
Treasury shares acquired - (59,1) (57,1)
Capital distributions paid (72,2) (34,5) (83,4)
Ordinary shareholders` 1 939,1 1 444,4 1 592,0
equity at end of period
ABRIDGED GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2002 2001 2001
(Rm) (Rm) (Rm)
Cash generated from 406,3 304,2 691,0
operations
Working capital movements (184,6) (54,1) 74,5
Cash generated from 221,7 250,1 765,5
operating activities
Net finance charges (59,7) (52,2) (87,6)
Taxation paid (85,2) (66,3) (87,4)
Cash inflow from operating 76,8 131,6 590,5
activities
Capital distributions paid (72,2) (37,6) (86,3)
Net cash retained 4,6 94,0 504,2
Other investing and (335,8) (217,3) (420,6)
financing activities
Capital expenditure (166,9) (93,2) (229,5)
Net investment in (137,9) (21,9) (93,5)
businesses
Other (31,0) (102,2) (97,6)
Movement in net interest- (331,2) (123,3) 83,6
bearing debt
Net interest-bearing debt
At beginning of period (494,1) (577,7) (577,7)
At end of period (825,3) (701,0) (494,1)
KEY FINANCIAL INFORMATION
Unaudited Unaudited Audited
31 March 31 March 30 Sept
2002 2001 2001
Ordinary shares (millions)
In issue 1 445,2 1 386,8 1 337,7
Weighted average number of 1 440,7 1 337,5 1 335,2
shares
Fully diluted weighted 1 502,0 1 372,3 1 379,0
average number of shares
Distributions
Capital distributions 4,5 3,5 8,5
(cents per share)
Other salient features
EBITDA margin (%) 19,6 18,8 19,4
EBIT margin (%) 15,8 15,4 15,9
Interest cover (times) 5,5 4,8 6,5
Effective taxation rate (%) 28,0 28,0 26,4
Operating profit return on 28,0 24,2 27,9
net assets (%)
Return on ordinary 23,3 20,2 24,3
shareholders` equity (%)
Debt:equity ratio (%) 42,4 44,6 28,6
Capital expenditure for the 166,9 93,2 229,5
period (Rm)
Capital commitments - 128,9 75,0 155,5
contracted (Rm)
Note: In terms of AC135 and AC123 Netcare now depreciates its owner occupied
properties. Prior year results have been restated accordingly.
INTRODUCTION
The Netcare Group`s focused strategy of investing in healthcare activities
which directly or indirectly support the Group`s core hospital business has
once again enhanced the growth and sustainability of the Group and yielded
strong results for the six-months ended 31 March 2002.
These results reflect the benefits of increasing market share through a
focused business model and a truly incentivised team, driven by a formalised
Balanced Scorecard system that sets meaningful targets throughout the Group.
Netcare was recently included in the JSE Securities Exchange South Africa
("JSE") Industrial 25 Index ("INDI 25") for the first time.
FINANCIAL OVERVIEW
A strong performance from the Group`s hospital division, the inclusion of
the results of Medicross for the six months to 31 March 2002, together with
pleasing contributions from the other divisions in the value chain resulted
in a 36,2% increase in headline EPS to 14,3 cents (2001: 10,5 cents).
Revenue increased by 27,5% to R2 074,3 million (2001: R1 626,9 million),
with organic growth of 19,7%, excluding the revenue from Medicross and the
newly acquired Margate Hospital in KwaZulu Natal. Cash equivalent EPS
increased 36,6% from 14,2 cents to 19,4 cents.
The 33,0% increase in EBITDA to R406,6 million (2001: R305,8 million), arose
largely due to improved efficiencies in the hospital division and meaningful
contributions from other divisions.
An analysis of the various components of the supply and value chain is set
out below:
Revenue
31 March 31 March %
2002 2001 increase
Hospital Division 1 860,3 1 571,8 18,4
Medicross 123,9 n/a n/a
Traumanet ("Netcare 911") 53,9 31,5 71,1
Other 36,2 23,6 53,4
Total 2 074,3 1 626,9 27,5
EBITDA
31 March 31 March %
2002 2001 increase
Hospital Division 375,7 299,5 25,4
Medicross 21,0 n/a n/a
Traumanet ("Netcare 911") 4,5 2,2 104,5
Other 5,4 4,1 31,7
Total 406,6 305,8 33,0
The Group`s debt:equity ratio of 42,4% (2001: 44,6%) improved
notwithstanding the payment of R128,5 million to settle the vendors of
Medicross and R166,9 million (2001: R93,2 million) spent on an accelerated
capital expenditure programme over 30 sites, which will increase the number
of beds and theatres in use to meet increasing demand. While capex spend
should be similar for the second half of the financial year, expenditure for
financial 2003 is expected to slow down.
Increases in working capital reflect the usual working capital cycle
experienced in the hospital industry. In comparison to 31 March 2001, after
adjusting for the impact of the inclusion of acquisitions and a temporary
increase in non-trade debtors relating primarily to VAT timing issues,
accounts receivable increased by 18,9% as compared to organic turnover
growth of 19,7%.
ACCOUNTING POLICIES
The interim financial statements comply with South African Statements of
Generally Accepted Accounting Practice and reflect the change to the Group`s
accounting policy on depreciation with effect from 1 October 2001. In
accordance with accounting standards AC135 and AC123, the Group now provides
for depreciation on owner occupied properties. Comparative figures have been
restated and the necessary prior year adjustments have been effected.
Depreciation on buildings for the period amounted to R10,0 million (2001
Restated: R9,6 million).
ACQUISITIONS
During the period Netcare concluded the following transactions:
Acquired all the shares held by minorities in Clinic Holdings Limited
("Clinics") in consideration for the issue of 98,5 million Netcare shares.
Clinics was delisted in October 2001.
Acquired the 58-bed Margate Hospital with effect from 1 March 2002 to
complement the Group`s KwaZulu Natal hospital network. The cost of the
transaction, which included the provision for profit and other warranties,
amounted to approximately R19 million, payable partly in cash and partly in
Netcare shares. The impact of the acquisition on the results for the period
under review is immaterial.
The Group will continue to consider selected investments which support the
core hospital business, add to the value chain and ensure sustainable
growth.
OPERATIONAL REVIEW
Hospital Division
Total admissions increased by 3,2% with organic revenue growth of 18,2%.
This has been achieved despite the low activity over the Easter period which
fell in March 2002 as against April 2001 and the closure of the Libertas
Hospital in the Cape.
Approximately 15% of hospital revenue is currently generated from sources
outside of the standard medical aid insurance model. Discussions are
currently underway with funders to significantly increase the utilisation of
alternative reimbursive payment methods, which currently account for nearly
10% of revenue.
Medicross
The Medicross multi-disciplinary primary healthcare provider network has
been successfully integrated into the Netcare Group and achieved a profit
for the first time since its inception in 1994. This was due to greater
efficiencies being obtained in business processes and economies of scale.
Medicross has outperformed expectations with an EBITDA turnaround of
approximately R15 million against the comparative prior year period. The
full potential of the Medicross franchise model has yet to be explored, but
the business continues to develop its alternative reimbursement methods and
growth strategies.
Traumanet "Netcare 911"
The Traumanet ("Netcare 911") Division, which provides pre-hospital
emergency services and related insurance products, continued to deliver
exceptional growth and performance. Insured members grew by over 70% to 4,0
million (2001: 2,3 million).
Ampath
The increase in attributable earnings of associates compared to the prior
period, reflects Netcare`s increased effective stake in the Ampath
administration services group. Ampath`s results were negatively impacted by
significant imported cost increases due to the decline in the Rand.
Netcare International
Netcare International has completed certain consultancy contracts in the
Middle East and is active in bidding for long-term management contracts in
the region.
Community Hospital Group ("CHG")
Netcare`s empowerment associate has made pleasing progress with its current
portfolio of three hospitals, while the 100-bed Kuilsrivier Hospital in the
Cape, presently under construction, is scheduled to open in July 2002.
CHG is engaged in discussions with certain Provinces relating to the
establishment of Private Public Partnerships with Government.
Staff Training and Quality Care
To meet the challenges facing the Nursing profession, the Netcare Training
Academy now has over 2000 graduates for the year, all of whom are on Netcare
sponsored bursaries.
As part of the Group`s aim to remain at the forefront of quality healthcare
delivery and to be an employer of choice, a comprehensive staff reward and
recognition programme, branded as "Goldcare Winners Programme", has been
successfully introduced. The objective of the programme is to improve
patient care and enhance staff retention. In addition, the Group has been
striving to improve nursing care and has been described by independent
research house Twig SA as "..leaders in consistently delivering exceptional
patient care" ahead of its competitors.
PROSPECTS
Netcare`s portfolio of operations is well positioned in the markets it
serves and the Group remains committed to maintain its position as a low
cost producer of quality healthcare services.
Focus areas over the next period will be to embrace the core value
disciplines of best and safest product, customer intimacy and operational
efficiencies.
The Board of Netcare is confident that, in the absence of unforeseen
circumstances, the Group will continue to grow earnings in the second six
months of the financial year. Historically the Group reports a higher level
of revenue, profits and cash generation in the second half of the financial
year due to the seasonal nature of hospital usage.
CAPITAL DISTRIBUTION
In accordance with the authority given to the Board of directors by way of
an ordinary resolution passed on 25 January 2002, the Board of directors has
declared an interim capital distribution out of share premium of 4,5 cents
per ordinary share (2001: 3,5 cents per share), payable to shareholders
recorded in the register of the company on Friday, 5 July 2002. This
represents an increase of 28,6% over the prior period.
In compliance with the requirements of STRATE the following dates are
applicable:
2002
Last date to trade ("CUM") the
cash distribution ("LDT") Friday, 28 June
Date trading commences ("EX")
the cash distribution Monday, 1 July
Record date Friday, 5 July
Date of payment Monday, 8 July
Certificated shareholders may not dematerialise or rematerialise their share
certificates between Monday, 24 June 2002 and Friday, 5 July 2002, both
dates inclusive.
By order of the Board
Michael I Sacks Dr Jack Shevel
Chairman Chief Executive Officer
Sandton
20 May 2002
REGISTERED OFFICE
3rd Floor, Sanlam Park South, 9 Fredman Drive
Cnr Bute Lane, Sandown, Sandton 2196
(Private Bag X34, Benmore 2010)
TRANSFER SECRETARIES
Ultra Registrars (Pty) Limited, 11 Diagonal Street Johannesburg 2001
(PO Box 4844, Johannesburg 2000)
EXECUTIVE DIRECTORS
MI Sacks (Chairman) CTA CA(SA) AICPA (ISR) ,
Dr J Shevel (Chief Executive Officer) MBBCh,
Dr RH Friedland (Chief Operating Officer) BVSc
MBBCh Dip Fin Man MBA,
SR Favish (Chief Financial Officer) BCom CA(SA) MBA,
Dr RH Bush MBBCh DCH (SA)
IM Davis Dip Pharm (MPS),
Dr I Kadish (Managed Care Operations and Information Technology) MBBCh MBA,
PJ Lindeque CA(SA),
Dr C Rossolimos (Chief Executive Officer - International)
MBBCh (DMS) Dip Bus M Prac Acc,
P Warrener (Human Resources) BSocSci DPLR Dip Fin Man,
N Weltman CA(SA)
NON-EXECUTIVE DIRECTORS
Dr APH Jammine BSc (Hons) BA (Hons) MSC (LSE) PhD (LBS),
JM Kahn BA(Law) MBA DCom(hc) SOE,
HR Levin BCom LLB LLM H Dip Tax Law H Dip Co Law,
Dr JA van Rooyen MBBCh M Med (Clin Path),
Mrs SV Zilwa CA(SA) Adv Tax Cert (SA) CFP (SA)
COMPANY SECRETARY
J Wolpert CA(SA) FCMA
For more information please visit our website at: www.netcare.co.za
Date: 21/05/2002 07:22:00 AM Produced by the SENS Department
