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NETWORK HEALTHCARE HOLDINGS LIMITED
(REGISTRATION NUMBER 96/08242/06)
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
("NETCARE")
INTERIM REPORT FOR THE SIX MONTHS ENDED 31 MARCH 1999
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TURNOVER INCREASED BY 46,6%
OPERATING PROFIT INCREASED BY 40,0%
ATTRIBUTABLE EARNINGS INCREASED BY 45,1%
GROUP INCOME STATEMENT
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UNAUDITED UNAUDITED AUDITED
SIX MONTHS SIX MONTHS YEAR
ENDED ENDED ENDED
31 MARCH 31 MARCH 30 SEPT
1999 1998 PERCENTAGE 1998
(RM) (RM) CHANGE (RM)
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TURNOVER 1 209,6 825,1 46,6 2 097,3
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OPERATING PROFIT BEFORE
DEPRECIATION AND
EXCEPTIONAL ITEMS 218,6 150,6 45,2 394,2
DEPRECIATION (36,5) (21,8) (67,4) (58,8)
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OPERATING PROFIT BEFORE
EXCEPTIONAL ITEMS 182,1 128,8 41,4 335,4
EXCEPTIONAL ITEMS (1,8) - (13,7)
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OPERATING PROFIT 180,3 128,8 40,0 321,7
FINANCE CHARGES (93,1) (52,8) (76,3) (128,2)
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PROFIT BEFORE TAXATION 87,2 76,0 193,5
TAXATION (21,7) (19,0) (51,1)
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PROFIT AFTER TAXATION 65,5 57,0 14,9 142,4
ATTRIBUTABLE EARNINGS OF
ASSOCIATES 11,2 - 20,4
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PROFIT AFTER TAXATION
INCLUDING ASSOCIATES 76,7 57,0 162,8
OUTSIDE SHAREHOLDERS'
INTEREST IN EARNINGS
OF SUBSIDIARIES (11,1) (10,6) (20,2)
PREFERENCE DIVIDENDS
PAID BY SUBSIDIARY (0,6) (1,6) (3,4)
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EARNINGS ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 65,0 44,8 45,1 139,2
ORDINARY DIVIDEND - (8,8) (8,8)
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RETAINED PROFIT FOR THE
PERIOD 65,0 36,0 130,4
RETAINED PROFIT AT
BEGINNING OF PERIOD 113,2 5,7 5,7
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178,2 41,7 136,1
WRITE-OFF OF GOODWILL
AND INTANGIBLE ASSETS
ARISING FROM THE
ACQUISITION OF
SUBSIDIARIES - (38,9) (22,9)
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RETAINED PROFIT AT END
OF PERIOD 178,2 2,8 113,2
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HEADLINE EARNINGS RECONCILIATION
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EARNINGS ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS 65,0 44,8 45,1 139,2
EXCEPTIONAL ITEMS 1,8 - 13,7
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LOSS ON DISPOSAL AND
DISCONTINUATION OF
BUSINESSES - - 8,4
RESTRUCTURING AND
REORGANISATION COSTS 1,8 - 5,3
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TAX EFFECT OF EXCEPTIONAL
ITEMS (0,4) - (1,0)
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1,4 - 12,7
ATTRIBUTABLE TO OUTSIDE
SHAREHOLDERS (0,2) - (1,9)
EARNINGS OF ASSOCIATES
APPLICABLE TO PREVIOUS
YEAR - - (1,8)
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HEADLINE EARNINGS 66,2 44,8 47,8 148,2
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GROUP BALANCE SHEET
UNAUDITED UNAUDITED AUDITED
31 MARCH 31 MARCH 30 SEPT
1999 1998 1998
(RM) (RM) (RM)
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ORDINARY SHAREHOLDERS'
FUNDS 1 072,7 847,5 1 009,3
INTEREST OF OUTSIDE
SHAREHOLDERS IN
SUBSIDIARIES 178,8 187,3 167,7
REDEEMABLE PREFERENCE
SHARES ISSUED BY
SUBSIDIARY - 25,0 15,0
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TOTAL SHAREHOLDERS'
FUNDS 1 251,5 1 059,8 1 192,0
INTEREST-BEARING DEBT 990,8 647,4 760,8
- LONG-TERM 609,7 454,1 537,7
- NET SHORT-TERM 381,1 193,3 223,1
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CAPITAL EMPLOYED 2 242,3 1 707,2 1 952,8
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FIXED ASSETS 1 868,1 1 427,1 1 810,8
- LAND AND BUILDINGS 1 475,4 1 228,8 1 439,1
- OTHER 392,7 198,3 371,7
INVESTMENTS 177,8 1,7 148,7
CURRENT ASSETS 722,2 530,8 670,3
- INVENTORIES 97,8 75,8 90,8
- ACCOUNTS RECEIVABLE 624,4 455,0 579,5
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TOTAL ASSETS 2 768,1 1 959,6 2 629,8
NON-INTEREST-BEARING
LIABILITIES (525,8) (252,4) (677,0)
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- VENDORS FOR
ACQUISITIONS - - (98,7)
- ACCOUNTS PAYABLE (426,7) (186,7) (485,2)
- TAXATION (99,1) (54,8) (93,1)
- SHAREHOLDERS FOR
DIVIDEND - (10,9) -
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EMPLOYMENT OF CAPITAL 2 242,3 1 707,2 1 952,8
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KEY FINANCIAL INFORMATION
UNAUDITED UNAUDITED AUDITED
SIX MONTHS SIX MONTHS YEAR
ENDED ENDED ENDED
31 MARCH 31 MARCH PERCENTAGE 30 SEPT
1999 1998 CHANGE 1998
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ORDINARY SHARES (MILLIONS)
ISSUED 1 217,7 885,5 1 182,2
WEIGHTED AVERAGE* 1 217,7 912,1 1 136,8
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EARNINGS PER SHARE
(CENTS)* (1998 ANNUALISED)
- ATTRIBUTABLE 5,34 4,92 12,25
- HEADLINE 5,43 4,92 10,4 13,04
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* COMPARATIVES PRESENTED ON A FULLY DILUTED BASIS AND AFTER ADJUSTING FOR
CAPITALISATION ISSUE.
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DISTRIBUTIONS
INTERIM DIVIDEND (CENTS) - 1,0 1,0
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OTHER SALIENT FEATURES
EFFECTIVE TAXATION
RATE (%) 24,9 25,0 26,4
CAPITAL COMMITMENTS
AUTHORISED (RM) 92,4 32,7 42,1
CAPITAL EXPENDITURE FOR
THE PERIOD (RM) 93,9 44,3 134,6
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186,3* 77,0 176,7
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* INCLUDES Y2K TOTAL COST OF R47,0 MILLION.
NET ASSET VALUE PER
SHARE (CENTS) 88,1 95,7 85,4
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ABRIDGED CASH FLOW STATEMENT
UNAUDITED UNAUDITED AUDITED
SIX MONTHS SIX MONTHS YEAR
ENDED ENDED ENDED
31 MARCH 31 MARCH 30 SEPT
1999 1998 1998
(RM) (RM) (RM)
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CASH GENERATED BY
OPERATIONS 216,8 150,6 381,8
FINANCE CHARGES (93,1) (52,8) (128,2)
TAXATION PAID (13,5) (3,0) (2,5)
(INCREASE)/DECREASE IN
NET WORKING CAPITAL (112,5) (174,3) (12,2)
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CASH (UTILISED IN)/
AVAILABLE FROM OPERATIONS(2,3) (79,5) 238,9
DIVIDENDS PAID (0,6) - (10,9)
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CASH EFFECTS OF OPERATING
ACTIVITIES (2,9) (79,5) 228,0
VENDORS FOR ACQUISITIONS
PAID (98,7) - (98,7)
OTHER INVESTING AND
FINANCING ACTIVITIES (128,4) (46,2) (368,4)
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NET INCREASE IN
INTEREST-BEARING DEBT (230,0) (125,7) (239,1)
INTEREST-BEARING DEBT AT
BEGINNING OF PERIOD (760,8) (521,7) (521,7)
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INTEREST-BEARING DEBT AT
END OF PERIOD (990,8) (647,4) (760,8)
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REVIEW AND COMMENT
THE BOARD IS PROUD TO REPORT THAT FOR THE HALF YEAR TO 31 MARCH 1999, NETCARE
RECORDED ANOTHER PERIOD OF SOLID FINANCIAL RESULTS, AN ACCOMPLISHMENT WHICH
RESPECTFULLY BEARS TESTIMONY TO THE STRENGTH OF ITS HEALTHCARE SYSTEMS,
DELIVERY NETWORKS AND THE EFFECTIVENESS OF ITS BUSINESS STRATEGY.
NETCARE'S SPIRITED MOMENTUM AND GROWTH CONTINUED INTO 1999, NOT JUST IN THE
AREA OF HOSPITAL ACQUISITIONS, BUT ALSO IN THE DEVELOPMENT OF ITS OTHER RELATED
HEALTHCARE DIVISIONS, MORE PARTICULARLY NETCARE HEALTH SYSTEMS ("NHS"),
TRAUMALINK, CLINICAL PARTNERS AND NETCARE INTERNATIONAL.
IN THE PERIOD UNDER REVIEW, TURNOVER INCREASED BY 46,6% TO R1 209,6 MILLION.
OPERATING PROFITS INCREASED BY 40,0% TO R180,3 MILLION, A PROFIT PERFORMANCE
SUBSTANTIALLY ENHANCED BY THE GROWTH OF THE HOSPITAL NETWORK AND THE
EFFICIENCIES ARISING THROUGH ITS CONTINUING RATIONALISATION PROCESSES. IN
ADDITION, HEALTHY EARNINGS FROM THE INTEREST OF NHS IN THE AMPATH HOLDINGS
TRUST CONTRIBUTED TO THE IMPROVEMENT IN THE EARNINGS ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS OF 45,1% TO AN AMOUNT OF R65,0 MILLION.
IT IS GRATIFYING TO RECORD THAT, WHILST HEADLINE EARNINGS PER SHARE ("EPS") FOR
THE PERIOD INCREASED BY 10,4%, HAD INTEREST RATES DURING THE PERIOD BEEN AT
PRESENT LEVELS, WHICH BY COINCIDENCE ARE THE SAME LEVELS APPLICABLE DURING THE
COMPARABLE PERIOD, HEADLINE EPS WOULD HAVE INCREASED BY 30,9%. THIS IS SET OUT
IN THE FOLLOWING TABLE:
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1999 1998
(RM) (RM)
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STATED HEADLINE EARNINGS 66,2 44,8
TAXED IMPACT OF INCREASED INTEREST 12,2 -
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PRO-FORMA HEADLINE EARNINGS 78,4 44,8
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PRO-FORMA HEADLINE EPS (CENTS) 6,44 4,92
PRO-FORMA INCREASE IN HEADLINE EPS (%) 30,9 -
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IN ORDER TO GAIN AN APPRECIATION OF NETCARE'S HOSPITAL OPERATIONS AND ITS
PERFORMANCE, SHAREHOLDERS ARE REFERRED TO THE INTERIM RESULTS OF CLINIC
HOLDINGS LIMITED ("CLINICS"), THE LISTED SUBSIDIARY OF NETCARE, PUBLISHED
ALONGSIDE THIS ANNOUNCEMENT.
NETCARE HOSPITAL DIVISION
THE NETCARE HOSPITAL DIVISION NOW COMPRISES 44 HOSPITALS, WITH MORE THAN
7 200 BEDS, 317 OPERATING THEATRES AND 56 SPECIALISED MEDICAL UNITS. THESE
SPECIALISED MEDICAL UNITS INCLUDE FIVE RADIOTHERAPY ONCOLOGY CENTRES, NINE
CARDIAC CATHETERISATION UNITS, 15 RENAL DIALYSIS CENTRES, 21 LITHOTRIPTER
FACILITIES, AS WELL AS SIX ORGAN TRANSPLANT UNITS. IN ADDITION, THE HOSPITAL
DIVISION OPERATES EIGHT LEVEL ONE AND 16 LEVEL TWO TRAUMA AND EMERGENCY
CENTRES, AS WELL AS 15 OUTPATIENT CASUALTY DEPARTMENTS. THE DIVISION HAS A
STAFF COMPLEMENT IN EXCESS OF 12 000 AND OWNS AND MANAGES HOSPITALS AND
SPECIALISED MEDICAL UNITS IN MOST OF THE MAJOR SOUTH AFRICAN CENTRES. IT IS
ESTIMATED THAT MORE THAN 70% OF THE MEDICALLY INSURED POPULATION IN SOUTH
AFRICA NOW HAVE DIRECT ACCESS TO NETCARE HOSPITAL AND HEALTHCARE FACILITIES.
NETCARE HEALTH SYSTEMS
ON 18 DECEMBER 1998 NETCARE ANNOUNCED THE ACQUISITION, BY ITS WHOLLY OWNED
SUBSIDIARY, NHS, OF A 50% INTEREST IN THE AMPATH HOLDINGS TRUST ("HOLDINGS").
HOLDINGS IS THE OWNER OF 74% OF THE UNITS IN THE AMPATH TRUST ("AMPATH"), THE
REMAINING 26% BEING INDIRECTLY OWNED BY FEDSURE HEALTH.
AMPATH OWNS A NETWORK OF 30 HIGH TECHNOLOGY LABORATORIES IN AND AROUND SOUTH
AFRICA, AS WELL AS OPERATIONS MANAGEMENT CENTRES IN JOHANNESBURG, KEMPTON PARK,
PRETORIA, DURBAN, EAST LONDON AND MAPUTO. IN ADDITION TO PROVIDING SPECIALISED
TECHNICAL FACILITIES AND COMPREHENSIVE MANAGEMENT SERVICES TO THE PATHOLOGY
PROFESSION, AMPATH HAS A DEVELOPED EXPERTISE, INTER ALIA, IN NUTRITIONAL
HEALTH, FORENSIC AND FERTILITY SCIENCES, MOLECULAR BIOLOGY, CYTOGENIC SERVICES,
VETERINARY PATHOLOGY, OCCUPATIONAL HEALTH CONSULTING AND CLINICAL DRUG TRIAL
EVALUATION, ALL OF WHICH SERVICES ARE PROVIDED TO A WIDE RANGE OF CLIENTS IN
SOUTH AFRICA AND ABROAD. THE RESULTS OF HOLDINGS SINCE THE DATE OF ACQUISITION
HAVE BEEN EXTREMELY GOOD AND THE RETURNS FROM THIS INVESTMENT ARE EXPECTED TO
GROW SIGNIFICANTLY AS A RESULT OF ITS EXPANDING NETWORK OF SERVICE OPERATIONS.
OTHER DIVISIONS
TRAUMALINK, CLINICAL PARTNERS AND NETCARE INTERNATIONAL CONTINUED TO MAKE GOOD
PROGRESS IN EACH OF THEIR RESPECTIVE OPERATIONS NOTWITHSTANDING THAT THESE NEW
DEVELOPING DIVISIONS INCURRED NOMINAL LOSSES DURING THE PERIOD UNDER REVIEW.
- TRAUMALINK
THE LAUNCH OF TRAUMALINK'S NETCARE 911 EMERGENCY MEDICAL RESPONSE SERVICE HAS
MADE AN EXTRAORDINARY IMPACT IN THE EMERGENCY MEDICAL SERVICES MARKET SINCE ITS
LAUNCH IN JUNE 1998. NETCARE 911 CATERS FOR BOTH INSURED AND INDIGENT PATIENTS.
APPROXIMATELY 68% OF RESPONSE CALLS ARE MADE TO INDIGENT PATIENTS, THIS SERVICE
HAVING BEEN MADE POSSIBLE SUBSTANTIALLY THROUGH THE GENEROUS SUPPORT OF
VODACOM. NETCARE 911, PRESENTLY PROVIDING AN EMERGENCY MEDICAL RESPONSE SERVICE
IN GAUTENG, KWAZULU-NATAL AND PORT ELIZABETH WILL BECOME NATIONAL DURING THE
LATTER PART OF 1999. IN ADDITION TO NETCARE 911, TRAUMALINK MARKETS A RANGE OF
PRE-HOSPITALISATION INSURANCE PRODUCTS.
- CLINICAL PARTNERS
CLINICAL PARTNERS HAS BEEN WORKING WITH THE GROUP'S VARIOUS HOSPITALS, THEIR
DOCTORS, MEDICAL AIDS AND EMPLOYERS TO DEVELOP ALTERNATIVE FUNDING MECHANISMS
THAT WILL PROVIDE, TO THE NEW EMERGING SOUTH AFRICAN MARKET, ACCESS TO PRIVATE
HEALTHCARE. THIS DIVISION IS FOCUSED ON THE MOST FERTILE GROWTH AREA IN
HEALTHCARE IN SOUTH AFRICA AND IS EXPECTED TO CONTRIBUTE SIGNIFICANTLY TO
NETCARE'S FUTURE REVENUES AND PROFITS.
- NETCARE INTERNATIONAL
NETCARE INTERNATIONAL, THE DIVISION OF NETCARE WHICH CARRIES ON A RANGE OF
HEALTHCARE OPERATIONS IN AFRICA, CONTINUED TO MAKE GOOD PROGRESS DURING THE
PERIOD. THE FOCUS OF SERVICES PROVIDED AND SECURED BY NETCARE INTERNATIONAL
INCLUDES PATIENT REFERRALS, GOVERNMENT CONTRACTS, HEALTHCARE INSURANCE
PRODUCTS, TRAINING AND EDUCATION, HOSPITAL MANAGEMENT AND PHARMACEUTICAL AND
EQUIPMENT PROCUREMENT. THE AFRICA DIVISION, WHILST STILL IN ITS INFANCY, IS
SIMILARLY EXPECTED TO CONTRIBUTE SIGNIFICANTLY TO NETCARE'S FUTURE REVENUES AND
PROFITS.
THE RAPID EVOLUTION AND DEVELOPMENT OF NETCARE'S VARIOUS DIVISIONS, POSITIONS
NETCARE AS THE ONLY INTEGRATED HEALTHCARE DELIVERY ENTERPRISE IN SOUTH AFRICA.
IT IS EXPECTED THAT, AS THESE AND OTHER STRATEGIC DIVISIONS ARE DEVELOPED AND
CONTINUE TO GROW, THEIR CONTRIBUTIONS TO GROUP PROFITS WILL REDUCE THE GROUP'S
RELIANCE ON EARNINGS FROM ITS PRIVATE HOSPITAL DIVISION.
CAPITAL RESTRUCTURING AND CAUTIONARY ANNOUNCEMENT
THE ASSEMBLY OF NETCARE'S HOSPITALS AND RELATED OPERATIONS HAVE YIELDED
EXCELLENT RESULTS IN THEIR RESPECTIVE PERIODS OF OWNERSHIP, AND, AS THE DESIRED
ASSET BASE AND INFRASTRUCTURE IS NOW SUBSTANTIALLY IN PLACE, THERE IS A VIEW
THAT THE COMPOSITION AND EXTENT OF THE GROUP'S DEBT BE REVIEWED, THE OBJECTIVE
BEING TO REPLACE A PORTION OF THE DEBT WITH PERMANENT CAPITAL.
PURSUANT TO THAT REVIEW PROCESS, NETCARE HAS IDENTIFIED, FROM A RANGE OF
CAPITAL RAISING PROPOSALS, ONE IN WHICH NETCARE WILL RAISE, AN AMOUNT OF UP TO
R300 MILLION OF PERMANENT CAPITAL, SUBJECT TO THE APPROPRIATE APPROVALS BEING
OBTAINED.
THE EFFECT OF THE APPROVAL AND IMPLEMENTATION OF THE PROPOSAL, WILL BE THE
REDUCTION OF THE NETCARE DEBT/EQUITY RATIO FROM ITS PRESENT LEVEL OF 79% TO
45%. IN ADDITION TO THE REDUCTION IN THE DEBT/EQUITY RATIO, THE PROPOSAL IS
DESIGNED TO SIGNIFICANTLY REDUCE THE EFFECTIVE COST OF SERVICING THE GROUP'S
REMAINING DEBT. THE REQUIRED DOCUMENTATION IS PRESENTLY BEING PREPARED AND IT
IS EXPECTED THAT A CIRCULAR CONTAINING THE RELEVANT DETAILS WILL BE POSTED TO
SHAREHOLDERS DURING JULY 1999.
PENDING THE RELEASE OF FURTHER INFORMATION RELATING TO THE PROPOSED CAPITAL
RAISING AND DEBT RESTRUCTURE, NETCARE SHAREHOLDERS ARE ADVISED TO EXERCISE
CAUTION IN THEIR DEALING OF NETCARE SHARES.
YEAR 2000 COMPLIANCE (Y2K)
THE YEAR 2000 TEAM HAS BEEN WORKING SINCE THE BEGINNING OF 1998 TO ADDRESS THE
ISSUES POSED BY THE MILLENNIUM CHANGE. SPECIFICALLY, THE TEAM HAS CONCENTRATED
ON ADDRESSING POTENTIAL PROBLEMS IN FIVE DIFFERENT AREAS: MEDICAL EQUIPMENT,
HOSPITAL INFORMATION SYSTEMS, PLANT AND EQUIPMENT, SUPPLIERS AND FUNDERS. FULL
COMPLIANCE AND THE ESTABLISHMENT OF CONTINGENCY PROCEDURES ARE EXPECTED TO BE
COMPLETED BY 31 AUGUST 1999. THE BOARD IS SATISFIED WITH THE PROGRESS ALREADY
MADE ON THIS MATTER AND IS CONFIDENT THAT Y2K IS UNLIKELY TO HAVE A MATERIAL
IMPACT ON THE BUSINESS OF THE GROUP.
SUBSEQUENT EVENTS
THE REDUCTION OF R615 MILLION IN THE SHARE PREMIUM ACCOUNT TO EFFECT THE
WRITE-OFF OF CONSOLIDATED GOODWILL, WAS APPROVED AT THE GENERAL MEETING OF
SHAREHOLDERS HELD ON 4 JUNE 1999. WHILST SHAREHOLDERS' APPROVAL WAS REQUIRED TO
BE OBTAINED, THE ACCOUNTING POLICY HAS BEEN, IN ANY EVENT, TO SET-OFF GOODWILL
AGAINST THE SHARE PREMIUM ACCOUNT.
WARRANTY CLAIMS
SHAREHOLDERS ARE REMINDED THAT CERTAIN PRICE ADJUSTMENT CLAIMS WHICH ARISE IN
TERMS OF THE WARRANTY PROVISIONS OF THE SALE AGREEMENT BETWEEN NETCARE, CLINICS
AND THE VENDORS OF CLINICS REMAIN TO BE RESOLVED. THESE CLAIMS WILL BE FINALLY
ASCERTAINED BY 31 AUGUST 1999. IN ADDITION, IN TERMS OF THE AFOREMENTIONED SALE
AGREEMENT, CERTAIN CLINICS' VENDORS MAY EXERCISE A RIGHT TO "PUT" ANY RETAINED
CLINICS SHARES TO NETCARE ON 30 SEPTEMBER 1999.
INDUSTRY MATTERS AND PROSPECTS
NETCARE IS UNABLE TO PREDICT THE EXACT NATURE AND FINAL COMPOSITION OF
HEALTHCARE LEGISLATION PRESENTLY BEING CONSIDERED BY THE STATE, BUT IT
CONTINUES TO MONITOR ALL PROPOSED LEGISLATION AND ANALYSE ITS POTENTIAL IMPACT
IN ORDER TO FORMULATE THE GROUP'S FUTURE BUSINESS STRATEGIES.
MINDFUL OF THE CHANGING DYNAMICS IN HEALTHCARE IN SOUTH AFRICA, THE BOARD
NEVERTHELESS REMAINS CONFIDENT THAT NETCARE IS WELL POSITIONED TO RESPOND TO
THE CHALLENGES FACING THE INDUSTRY. FURTHERMORE, NETCARE REMAINS COMMITTED TO
PROVIDE SUPPORT AND GUIDANCE TO THE PUBLIC SECTOR PRESENTLY GRAPPLING WITH THE
HISTORICAL INEQUITIES OF HEALTHCARE DELIVERY.
THE BOARD IS EQUALLY CONFIDENT THAT, BARRING ANY MATERIAL DECLINE IN ECONOMIC
CONDITIONS, NETCARE WILL MAINTAIN A POSITIVE GROWTH IN EARNINGS FOR THE
FINANCIAL YEAR ENDING 30 SEPTEMBER 1999.
TRIBUTE
PURSUANT TO HER APPOINTMENT AS THE GAUTENG PROVINCIAL MEC FOR HEALTH, DR GM
RAMOKGOPA RESIGNED AS A DIRECTOR OF NETCARE GROUP COMPANIES WITH EFFECT FROM 18
JUNE 1999. THE BOARD TAKES THIS OPPORTUNITY TO THANK DR RAMOKGOPA FOR HER WISE
COUNSEL DURING HER TERM AS A DIRECTOR AND WISHES HER EVERY SUCCESS IN HER NEW
OFFICE.
DIVIDENDS
THE BOARD HAS RESOLVED THAT, HAVING REGARD TO THE PENDING CAPITAL RESTRUCTURE
PLANS PRESENTLY BEING FINALISED FOR IMPLEMENTATION, NO INTERIM DIVIDEND WILL BE
PROPOSED. HAVING REGARD THERETO, THE BOARD INTENDS, HOWEVER, TO REVIEW THE
NATURE AND EXTENT OF THE FINAL DIVIDEND NORMALLY DECLARED IN DECEMBER OF EACH
YEAR.
ON BEHALF OF THE BOARD
MI SACKS (CHAIRMAN)
DR J SHEVEL (CHIEF EXECUTIVE OFFICER)
SANDTON
24 JUNE 1999
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DIRECTORATE AND ADMINISTRATION
EXECUTIVE DIRECTORS
MI SACKS
CA(SA), AICPA (ISR) (CHAIRMAN)
DR J SHEVEL
MBBCH (WITS) (CHIEF EXECUTIVE OFFICER)
DR RH FRIEDLAND
BVSC (PRET), MBBCH (WITS), DIP FIN MAN (CHIEF OPERATING OFFICER)
SR FAVISH
BCOM CA(SA), MBA (UCT) (CHIEF FINANCIAL OFFICER)
DR RH BUSH
MBBCH, DCH(SA)
PJ LINDEQUE
CA(SA)
DR C ROSSOLIMOS
MBBCH (RAND), (DMS) DIP. BUS. M., PRAC. ACC.
NON-EXECUTIVE DIRECTORS
DS AVNIT
BACC, CA(SA), MBA (WITS)
DAJ DONALD
BCOM, CA(SA), H DIP TAX LAW
DR APH JAMMINE
BSC (HONS), BA (HONS), MSC LONDON (LSE), PHD LONDON (LBS)
HR LEVIN
BCOM, LLB, LLM, H DIP TAX LAW, H DIP CO LAW (WITS)
TM MOTSISI
BA LAW (LESOTHO), LLM (SYDNEY), MBA (CANBERRA)
RRS ROBERTS
BA JD (GEORGETOWN)
DR JA VAN ROOYEN
MBBCH (PRETORIA) MMED (CLIN PATH) (STELLENBOSCH)
REGISTERED OFFICE
3RD FLOOR, SANLAM PARK SOUTH,
9 FREDMAN DRIVE, CNR BUTE LANE, SANDOWN, SANDTON 2196.
(PRIVATE BAG X34, BENMORE 2010)
TRANSFER SECRETARIES
COMPUTERSHARE SERVICES LIMITED
EDURA
41 FOX STREET, JOHANNESBURG 2001.
(PO BOX 61051,
MARSHALLTOWN 2107)
PRESS RELEASE
STRONG STRATEGY BOLSTERS NETCARE'S PERFORMANCE
THE IMPLEMENTATION OF AN EFFECTIVE BUSINESS STRATEGY, COUPLED WITH
WELL-DEVELOPED HEALTHCARE SYSTEMS AND DELIVERY NETWORKS, HAS ENABLED NETWORK
HEALTHCARE HOLDINGS LIMITED ("NETCARE") TO RECORD ANOTHER PERIOD OF SOLID
GROWTH FOR THE SIX-MONTH PERIOD ENDED 31 MARCH 1999. OVERALL TURNOVER AT R1
209.6 BILLION IS 46% UP ON THE SAME PERIOD LAST YEAR, WITH OPERATING PROFITS
40% HIGHER AT R180,3 MILLION AND ATTRIBUTABLE EARNINGS TO SHAREHOLDERS UP 45 %
TO R65 MILLION.
DESPITE THE INCREASE IN INTEREST RATES, EARNINGS PER SHARE INCREASED 10,4% TO
5.43 CENTS. WITH EQUIVALENT INTEREST RATES FOR THE PERIOD, EARNINGS PER SHARE
WOULD HAVE GROWN 30,8%.
EXPRESSING HIS PLEASURE AT THE RESULTS, CHIEF EXECUTIVE OFFICER DR JACK SHEVEL
ATTRIBUTES THE GROUP'S CONTINUED SUCCESS TO THE MOMENTUM MAINTAINED IN THE
ACQUISITION OF HOSPITALS AND IN THE DEVELOPMENT OF OTHER RELATED HEALTHCARE
DIVISIONS. "WE HAVE TRANSFORMED THE GROUP FROM AN OWNER AND OPERATOR OF
HOSPITAL FACILITIES INTO A FULLY INTEGRATED HEALTHCARE COMPANY AND ARE RIGHT ON
TRACK IN TERMS OF OUR FIVE YEAR STRATEGIC PLAN," HE SAYS. "OUR GOALS IN 1998
INCLUDED FORMING STRATEGIC PARTNERSHIPS, RE-ENGINEERING THE BUSINESS WITH
SUPERB MANAGEMENT TEAMS AND ACQUIRING CRITICAL MASS IN SOUTH AFRICA WITH
NATION-WIDE GEOGRAPHIC SPREAD, WHILE RATIONALISING AND OPTIMISING THE HOSPITAL
DIVISION. WE MORE THAN ACHIEVED THOSE OBJECTIVES - THE DIVISION CURRENTLY OWNS
AND MANAGES 44 HOSPITALS IN MOST OF THE MAJOR SOUTH AFRICAN CENTRES, COMPRISING
MORE THAN 7 200 BEDS, 317 OPERATING THEATRES AND 56 SPECIALISED MEDICAL
FACILITIES."
THIS YEAR, THE GROUP HAS BEEN STRATEGICALLY INTENT ON REDUCING ITS RELIANCE ON
THE SOUTH AFRICAN PRIVATE HOSPITAL INDUSTRY FOR GROWTH. "WE HAVE DEVELOPED A
NUMBER OF RELATED HEALTHCARE DIVISIONS WHICH BOTH AUGMENT AND BOLSTER THE
HOSPITAL DIVISION," SAYS SHEVEL. "NETCARE HEALTH SYSTEMS (A HEALTHCARE
MANAGEMENT COMPANY), CLINICAL PARTNERS (A MANAGED HEALTHCARE COMPANY), TRAUMA
LINK (WHICH OFFERS PRE-HOSPITAL AND EMERGENCY SERVICES AND PRODUCTS); AND
NETCARE INTERNATIONAL HAVE BEEN ADDED TO THE PORTFOLIO, EFFECTIVELY BROADENING
THE SCOPE OF OUR HEALTHCARE PORTFOLIO." HE ADDS THAT THE DEVELOPMENT OF A
REPOSITORY OF INTEGRATED HEALTHCARE SOLUTIONS AND PRODUCTS FOR EMERGING MARKETS
IS INTEGRAL TO THE COMPANY'S STRATEGIC PLANS FOR THE FUTURE.
WITH REGARD TO THE DIVISIONAL CONTRIBUTIONS TO NETCARE'S OVERALL PERFORMANCE,
SHEVEL ADVISES THAT THE INTERIM RESULTS OF CLINIC HOLDINGS LIMITED ("CLINICS"),
ANNOUNCED SIMULTANEOUSLY, ARE EXCEPTIONALLY STRONG. "CLINICS - WHICH COMPRISES
OUR HOSPITAL DIVISION - ACHIEVED A 43% INCREASE IN OPERATING PROFITS TO
R184,5 MILLION," SAYS SHEVEL. "THIS IS ATTRIBUTABLE TO BOTH THE EXPANSION OF
NETCARE HOSPITAL GROUP THROUGH THE ACQUISITION OF HOSPITALS AND THE REWARDS OF
THE CONTINUED RATIONALISATION OF THE BROADER HOSPITAL NETWORK. ENHANCED
OPERATIONAL EFFICIENCIES HAVE ALSO BEEN REALISED."
THE ACQUISITION BY NETCARE HEALTH SYSTEMS OF A 50% INTEREST IN THE AMPATH
HOLDINGS TRUST IN DECEMBER LAST YEAR ENABLED THIS DIVISION TO CONTRIBUTE
TOWARDS A NOTEWORTHY PERCENTAGE OF ATTRIBUTABLE EARNINGS TO ORDINARY
SHAREHOLDERS. CLINICAL PARTNERS AND NETCARE INTERNATIONAL, ON THE OTHER HAND,
INCURRED START-UP LOSSES DURING THE PERIOD UNDER REVIEW.
LOOKING TO THE FUTURE, SHEVEL IS CONFIDENT OF NETCARE'S ABILITY TO MAINTAIN ITS
GROWTH MOMENTUM. "THE ISSUE FOR PRIVATE HEALTHCARE IS NOT SURVIVAL, BUT
SELECTING THE BEST POSITION FOR THE ENORMOUS GROWTH POTENTIAL. IT IS A FACT OF
LIFE THAT PEOPLE WHO GET SICK WANT TO GET BETTER. IT IS ALSO A FACT THAT THE
PUBLIC SECTOR HAS INADEQUATE RESOURCES TO DELIVER THE HEALTHCARE REQUIRED.
MARKET FORCES WILL DICTATE THAT THE PRIVATE SECTOR WILL PLAY AN INCREASINGLY
IMPORTANT ROLE IN SATISFYING THE HEALTHCARE NEEDS OF A DISCERNING PUBLIC," HE
EXPLAINS. "I BELIEVE THAT THE PRIVATE HEALTHCARE SECTOR HAS A RESPONSIBILITY TO
INCREASE THE NUMBER OF INSURED LIVES, AS WELL AS TO CHANGE THE REIMBURSIVE
METHOD. PUBLIC PRIVATE PARTNERSHIPS IN THE DELIVERY OF HEALTHCARE ARE ALSO
INEVITABLE."
HE ADDS THAT NETCARE IS WELL-POSITIONED TO FULFIL THIS ROLE. "NETCARE IS
PRO-ACTIVELY RESPONDING TO THE DICTATES OF THE MARKET IN TERMS OF MEDICAL
INSURANCE PRODUCTS, AIMING TO IMPROVE BOTH THE ACCESSIBILITY AND AFFORDABILITY
OF HEALTHCARE SERVICES. WE ARE ALSO COMMITTED TO THE PRINCIPLES OF MANAGED
CARE: SOME 42% OF CURRENT PATIENT TREATMENTS ARE VIA MANAGED CARE CONTRACTS."
A FURTHER BOOSTER FOR NETCARE'S FUTURE PERFORMANCE LIES IN THE NHG'S MEMBERSHIP
OF THE NATIONAL HOSPITAL NETWORK WHICH PROVIDES AFFILIATION TO A FURTHER 35
HOSPITALS AND CLINICS WITH 3 000 BEDS AND 100 OPERATING THEATRES LOCATED ACROSS
SOUTH AFRICA. THE NETWORK ALLIANCE HAS ADDED ADVANTAGES OF RECIPROCAL PRODUCT
AND SERVICES PROCUREMENT, AS WELL AS SIGNIFICANT TERTIARY REFERRAL
OPPORTUNITIES.
"HAVING INVESTED MUCH TO ACHIEVE OUR DESIRED CRITICAL MASS AND INFRASTRUCTURE,
WE BELIEVE THAT NETCARE IS NOW POSITIONED TO BEGIN ADDING ENORMOUS VALUE FOR
OUR SHAREHOLDERS," CONCLUDES SHEVEL. "THE BOARD WILL THEREFORE SOON PROPOSE A
DEBT RESTRUCTURING INITIATIVE WHICH WILL SERVE TO REDUCE THE COMPANY'S DEBT
EQUITY RATIO AND REDUCE THE EFFECTIVE COST OF FUNDING, WITH POSITIVE SPIN-OFF
BENEFITS IN TERMS OF EARNINGS PER SHARE. IT IS ALSO AN INITIATIVE WHICH, BY THE
PRIVATE PLACING OF SHARES, WILL ALLOW OUR ASSOCIATES AND PARTNERS TO
PARTICIPATE MORE FULLY IN OUR SUCCESS."
-ENDS-
ISSUED BY: SASANI COMMUNICATIONS
LISA VAN HOOGSTRATEN / MEGANN MURDOCH
083 448 6008 / 083 320 7577
TEL: (011) 784 2598
ON BEHALF OF: NETCARE
DR JACK SHEVEL
TEL: (011) 301 0202
DATE: THURSDAY, 24 JUNE 1999
PRESS RELEASE
NETCARE RESTRUCTURES TO REDUCE DEBT BURDEN
LEADING SOUTH AFRICAN PRIVATE HEALTHCARE GROUP NETWORK HEALTHCARE HOLDINGS
LIMITED ("NETCARE") HAS ANNOUNCED ITS INTENTION TO RESTRUCTURE BOTH THE
COMPOSITION AND EXTENT OF THE GROUP'S DEBT BURDEN. A PROPOSAL TO REPLACE A
PORTION OF THE DEBT WITH PERMANENT CAPITAL IS SOON TO BE PRESENTED TO
SHAREHOLDERS FOR APPROVAL.
NETCARE FOUNDER AND CHIEF EXECUTIVE OFFICER DR JACK SHEVEL ADVISES THAT THE
PROPOSED DEBT RESTRUCTURING INITIATIVE WILL ENTAIL THE RAISING OF UP TO R300
MILLION OF PERMANENT CAPITAL AND WILL EFFECTIVELY REDUCE DEBT EQUITY RATIO FROM
79 % TO 45 %.
EXPLAINING THE RATIONALE BEHIND THE PROPOSED DEBT RESTRUCTURING, SHEVEL SAYS
THAT THE MEDIUM-TERM VISION FOR NETCARE AFTER LISTING IN DECEMBER 1996 WAS TO
OBTAIN THE CRITICAL MASS AND GEOGRAPHIC DISTRIBUTION REQUIRED TO MAXIMISE THE
DELIVERY OF PRIVATE HEALTHCARE IN SOUTH AFRICA AND TO ACHIEVE OPTIMAL ECONOMIES
OF SCALE. "WE HAVE ACHIEVED THAT OBJECTIVE - OUR HOSPITAL DIVISION CURRENTLY
COMPRISES 44 HOSPITALS WITH MORE THAN 7 200 BEDS, 317 OPERATING THEATRES AND 56
SPECIALISED MEDICAL SUITES. BUT, AS WITH ANY GROWTH STRATEGY, WE HAVE BEEN
COMPELLED TO INVEST SUBSTANTIAL SUMS OF MONEY - THE BULK OF WHICH HAS BEEN
FINANCED BY BORROWINGS."
HE REFERS IN PARTICULAR TO THE ACQUISITION OF ST ANNE'S HOSPITAL, PRETORIA EAST
HOSPITAL, EXCEL MEDICAL HOLDINGS LIMITED AND A SHARE IN THE AMPATH HOLDINGS
TRUST - TOTALLING R335 MILLION; AND TO A CAPITAL EXPENDITURE IN EXCESS OF R332
MILLION IN RESTORING AND EXPANDING THE GROUP'S MEDICAL FACILITIES TO NETCARE'S
HIGH STANDARDS. THE UNEXPECTED INCREASE IN INTEREST RATES DURING 1998 RAISED
THE INTEREST PAYABLE ON NETCARE'S BORROWINGS, IMPACTING SIGNIFICANTLY ON THE
GROUP'S FREE CASH FLOW.
WITH THE GROUP'S INFRASTRUCTURE NOW FIRMLY IN PLACE, NETCARE IS POSITIONED TO
TRANSFORM THE NEUTRAL CASH FLOW OF THE CURRENT YEAR INTO A SURPLUS IN THE YEARS
AHEAD, ENABLING THE GROUP TO BECOME DEBT-FREE WITHIN FOUR YEARS. WHILE THE
DEBT BURDEN COULD THEREFORE HAVE BEEN EASED WITHOUT THE NEED FOR A DEBT
RESTRUCTURING EXERCISE, SHEVEL AND HIS BOARD HAVE NEVERTHELESS OPTED FOR THE
LATTER COURSE OF ACTION.
"A REDUCTION IN NETCARE'S DEBT BURDEN IN THE SHORT-TERM HAS A NUMBER OF
ADVANTAGES," SAYS SHEVEL. "FOR STARTERS, THE GROUP WILL BE BETTER PLACED IN
TERMS OF FUTURE INTEREST RATE FLUCTUATIONS. ON THE BALANCE SHEET, A REDUCED
GEARING WILL IMPROVE THE EFFECTIVE COST OF SERVICING THE GROUP'S REMAINING DEBT
AND WILL HAVE A MATERIAL IMPACT ON THE POTENTIAL EARNINGS PER SHARE. PERHAPS
MOST IMPORTANTLY, THE PROPOSED RESTRUCTURING GIVES CREDENCE TO NETCARE'S STATED
OBJECTIVE OF FORGING STRONG PARTNERSHIPS WITH OUR ASSOCIATES AND FUTURE GROWTH
STRATEGY."
SHEVEL ADVISES THAT A CAUTIONARY HAS BEEN ISSUED AND A CIRCULAR DETAILING THE
PROPOSED DEBT RESTRUCTURING INITIATIVE WILL BE DISTRIBUTED FOR SHAREHOLDERS'
APPROVAL IN JULY THIS YEAR. THE APPROVED INITIATIVE SHOULD BE IN PLACE BY THE
FINANCIAL YEAR-END, WITH THE BENEFITS TO BE REAPED EARLY IN THE YEAR 2000.
-ENDS-
ISSUED BY: SASANI COMMUNICATIONS
LISA VAN HOOGSTRATEN / MEGANN MURDOCH
083 448 6008 / 083 320 7577
TEL: (011) 784 2598
ON BEHALF OF: NETCARE
DR JACK SHEVEL
TEL: (011) 301 0202
DATE: THURSDAY, 24 JUNE 1999
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