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NETWORK HEALTHCARE HOLDINGS LIMITED
(REGISTRATION NUMBER 96/08242/06)
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
("NETCARE")
AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 1999
* TURNOVER INCREASED BY 22,4%
* OPERATING PROFIT INCREASED BY 25,4%
* HEADLINE EARNINGS INCREASED BY 24,4%
* HEADLINE EARNINGS PER SHARE INCREASED BY 16,1%
AUDITED AUDITED
GROUP INCOME YEAR ENDED YEAR ENDED
STATEMENT 30 SEPTEMBER 30 SEPTEMBER
1999 1998 %
(RM) (RM) CHANGE
TURNOVER 2 566,1 2 097,3 22,4
OPERATING PROFIT DEPRECIATION AND
EXCEPTIONAL ITEMS 484,3 394,2 22,9
DEPRECIATION (73,9) (58,8)
OPERATING PROFIT BEFORE EXCEPTIONAL
ITEMS 410,4 335,4 22,4
EXCEPTIONAL ITEMS (7,0) (13,7)
OPERATING PROFIT 403,4 321,7 25,4
FINANCE CHARGES (161,9) (128,2) 26,3
PROFIT BEFORE TAXATION 241,5 193,5 24,8
TAXATION (52,1) (51,1)
PROFIT AFTER TAXATION 189,4 142,4 33,0
ATTRIBUTABLE EARNINGS OF
ASSOCIATES 19,9 20,4
PROFIT AFTER TAXATION INCLUDING
ASSOCIATES 209,3 162,8 28,6
OUTSIDE SHAREHOLDERS' INTEREST
IN EARNINGS OF SUBSIDIARIES (31,4) (20,2)
PREFERENCE DIVIDENDS PAID BY
SUBSIDIARY (0,6) (3,4)
EARNINGS ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 177,3 139,2 27,4
HEADLINE EARNINGS RECONCILIATION
EARNINGS ATTRIBUTABLE
TO ORDINARY SHAREHOLDERS 177,3 139,2 27,4
EXCEPTIONAL ITEMS 7,0 12,7
LOSS ON DISPOSAL AND DIS-
CONTINUATION OF BUSINESSES 7,0 8,4
RESTRUCTURING AND RATIONALISATION
COSTS - 5,3
TAX EFFECT OF EXCEPTIONAL ITEMS - (1,0)
ATTRIBUTABLE TO OUTSIDE
SHAREHOLDERS - (1,9)
EARNINGS OF ASSOCIATES APPLICABLE
TO PREVIOUS YEAR - (1,8)
HEADLINE EARNINGS 184,3 148,2 24,4
AUDITED AUDITED
GROUP BALANCE 30 SEPTEMBER 30 SEPTEMBER
SHEET 1999 1998
(RM) (RM)
ORDINARY SHAREHOLDERS' FUNDS 1 213,6 1 009,3
INTEREST OF OUTSIDE SHAREHOLDERS
IN SUBSIDIARIES 205,1 173,8
TOTAL SHAREHOLDERS' FUNDS 1 418,7 1 183,1
DEFERRED TAXATION 13,4 2,4
NET INTEREST-BEARING DEBT 642,0 775,8
CAPITAL EMPLOYED 2 074,1 1 961,3
FIXED ASSETS 1 924,7 1 810,8
- LAND AND BUILDINGS 1 535,6 1 439,1
- OTHER 389,1 371,7
INVESTMENTS 78,9 148,7
CURRENT ASSETS 691,5 670,3
INVENTORIES 118,1 90,8
- ACCOUNTS RECEIVABLE 573,4 579,5
TOTAL ASSETS 2 695,1 2 629,8
NON INTEREST-BEARING LIABILITIES 621,0 668,5
- VENDORS FOR ACQUISITIONS - 98,7
- ACCOUNTS PAYABLE 498,8 479,1
- TAXATION 122,2 90,7
EMPLOYMENT OF CAPITAL 2 074,1 1 961,3
AUDITED AUDITED
KEY FINANCIAL YEAR ENDED YEAR ENDED
INFORMATION 30 SEPTEMBER 30 SEPTEMBER %
1999 1998 CHANGE
ORDINARY SHARES (000)
ISSUED 1 319,7 1 182,2
WEIGHTED AVERAGE 1 217,7 1 136,8*
EARNINGS PER SHARE (CENTS)
- ATTRIBUTABLE 14,56 12,24* 18,9
- HEADLINE 15,14 13,04* 16,1
DISTRIBUTIONS
INTERIM DIVIDEND (CENTS) - 1,0
FINAL CAPITAL CAPITALISATION
DISTRIBUTION SHARE ISSUE
* COMPARATIVES PRESENTED ON A FULLY DILUTED BASIS AND AFTER ADJUSTING FOR
CAPITALISATION ISSUE
OTHER SALIENT FEATURES
EFFECTIVE TAXATION RATE (%) 21,6 26,3
COST OF INVENTORIES SOLD (RM) 785,1 601,8
CAPITAL COMMITMENTS
AUTHORISED (RM) 47,5 42,1
CAPITAL EXPENDITURE FOR THE YEAR
(RM) 188,4 134,6
NET ASSET VALUE PER SHARE (CENTS) 92,0 82,9*
DEBT/EQUITY RATIO (%) 45 66
AUDITED AUDITED
ABRIDGED CASH FLOW YEAR ENDED YEAR ENDED
STATEMENT 30 SEPTEMBER 30 SEPTEMBER
1999 1998
(RM) (RM)
CASH GENERATED BY OPERATIONS
BEFORE THE FOLLOWING 477,9 381,8
FINANCE CHARGES (161,9) (128,2)
TAXATION PAID (9,6) (2,5)
INCREASE IN NET WORKING CAPITAL (1,2) (12,2)
CASH AVAILABLE FROM OPERATIONS 305,2 238,9
DIVIDENDS PAID (1,0) (10,9)
CASH EFFECTS OF OPERATING
ACTIVITIES 304,2 228,0
OTHER INVESTING AND FINANCING ACTIVITIES
ISSUE OF SHARES 112,2 12,5
CAPITAL EXPENDITURE (188,4) (131,5)
OTHER (94,2) (338,1)
NET DECREASE/(INCREASE) IN
INTEREST-BEARING DEBT 133,8 (229,1)
INTEREST-BEARING DEBT AT BEGINNING
OF YEAR (775,8) (546,7)
INTEREST-BEARING DEBT AT END
OF YEAR (642,0) (775,8)
OVERVIEW
NETWORK HEALTHCARE HOLDINGS LIMITED ("NETCARE") DELIVERED STRONG RESULTS FOR
THE YEAR ENDED SEPTEMBER 1999 NOTWITHSTANDING A PERIOD OF CONSOLIDATION WITHIN
THE GROUP AND VOLATILE MARKET CONDITIONS.
NETCARE HAS NOW ENTRENCHED THE GROUP AS A LEADING HEALTHCARE PROVIDER IN SOUTH
AFRICA AFTER SUCCESSFULLY BEDDING DOWN THE ACQUISITIONS OF, INTER ALIA, CLINIC
HOLDINGS LIMITED ("CLINICS"), CLINFED INVESTMENTS (PTY) LIMITED ("CLINFED") AND
EXCEL MEDICAL HOLDINGS LIMITED. NETCARE HOLDS 85% OF THE SHARES IN CLINICS. THE
GROUP HAS MANAGED TO SIGNIFICANTLY IMPROVE THE SERVICE AND PROFITABILITY OF THE
ORIGINAL CLINICS AND CLINFED HOSPITALS. THE RESULTS OF CLINICS ARE MORE FULLY
PRESENTED IN THE RESULTS ANNOUNCEMENT PUBLISHED ALONGSIDE THIS ANNOUNCEMENT.
BESIDES STRENGTHENING ITS CORE HOSPITAL DIVISION, THE GROUP HAS ALSO ASSEMBLED
A PORTFOLIO OF ALIGNED BUSINESSES TO ASSIST ITS STRATEGY OF DEVELOPING AN
EFFICIENT AND AFFORDABLE HEALTHCARE SOLUTION. VARIOUS FACETS OF THE HEALTHCARE
DELIVERY CHAIN ARE CONSTANTLY EXPLORED TO SUPPORT THE GROUP'S CORE HOSPITAL
DIVISION. THESE OTHER HOSPITAL RELATED ACTIVITIES TEND TO BE HIGHER MARGIN
ENTERPRISES, ARE LESS CAPITAL INTENSIVE AND ARE EXPECTED TO PROVIDE SUPERIOR
RETURNS TO SHAREHOLDERS IN THE MEDIUM TERM.
SALIENT AND RELEVANT PERFORMANCE BAR CHARTS ARE SET OUT ALONGSIDE.
FINANCIAL COMMENTARY
OPERATING PROFITS INCREASED BY 25,4% ON A 22,4% INCREASE IN TURNOVER WHILE
ATTRIBUTABLE EARNINGS INCREASED BY 24,4% TO R177,3 MILLION (1998: R139,2
MILLION). THIS RESULTED IN AN INCREASE OF 16,1% IN HEADLINE EARNINGS PER SHARE.
AN AMOUNT OF R7 MILLION HAS BEEN PROVIDED IN CONNECTION WITH THE DISCONTINUANCE
OF THE GROUP'S INVOLVEMENT WITH THE KING FAYCAL HOSPITAL IN RWANDA.
THE GROUP SUCCESSFULLY COMPLETED THE FIRST PHASE OF ITS DEBT AND CAPITAL
RESTRUCTURING, RESULTING IN AN INCREASE IN PERMANENT CAPITAL OF R112,2 MILLION.
THE RESTRUCTURING WAS ONLY CONCLUDED AT THE END OF THE FINANCIAL YEAR AND THE
BENEFITS OF REDUCED FUNDING COSTS ON THE DECLINING GROUP DEBT LEVELS WILL BE
REALISED IN THE NEXT FINANCIAL YEAR.
NET BORROWINGS REDUCED FROM R776 MILLION TO R642 MILLION DUE TO THE
ABOVE-MENTIONED CAPITAL INCREASE AS WELL AS STRONG OPERATING CASH FLOWS AND
MORE EFFICIENT WORKING CAPITAL MANAGEMENT. THIS WAS ACHIEVED DESPITE
SIGNIFICANT CASH OUTFLOWS FOR GROUP CAPITAL EXPENDITURE AND AMOUNTS OWING FOR
CERTAIN ACQUISITIONS EFFECTIVE IN THE PRIOR PERIOD. THE DEBT/EQUITY RATIO HAS
CONSEQUENTLY DECLINED DURING THE YEAR FROM 66% TO 45%.
OPERATIONAL REVIEW
THE NETCARE HOSPITAL DIVISION REMAINS THE CORE DIVISION OF THE GROUP.
NOTWITHSTANDING AN INCREASED INTEREST COST, THIS DIVISION POSTED STRONG
HEADLINE EARNINGS PER SHARE GROWTH OF 26,7% SUBSTANTIALLY DUE TO THE INCREASED
NUMBER OF ADMISSIONS AND IMPROVED OPERATIONAL EFFICIENCIES.
GIVEN THE DEVELOPMENT STAGE OF NETCARE'S COMPLEMENTARY OPERATING DIVISIONS, THE
RESULTS OF EACH DIVISION HAVE BEEN IN LINE WITH EXPECTATIONS. EACH OF THE
DIVISIONS ARE MAKING GOOD PROGRESS AND THE AGGREGATE CONTRIBUTION TO HEADLINE
EARNINGS OF
R10,1 MILLION FOR THE YEAR ENDED 30 SEPTEMBER 1999 IS CONSIDERED SATISFACTORY.
THE DIVISIONS ARE: NETCARE HEALTH SYSTEMS WHICH HOUSES THE GROUP'S EFFECTIVE
37% INTEREST IN THE AMPATH TRUST WHICH PROVIDES SERVICES TO THE LARGEST PRIVATE
PATHOLOGY GROUP IN SOUTH AFRICA; TRAUMALINK, WHICH IS PART OF A JOINT VENTURE
WITH EUROP ASSISTANCE AND PROVIDES COMPREHENSIVE PRE-HOSPITAL EMERGENCY
SERVICES AND PRODUCTS; NETCARE INTERNATIONAL, WHICH IS PRIMARILY INVOLVED IN
THE PROMOTION OF PATIENT REFERRALS FROM AFRICA TO THE GROUP'S FACILITIES IN
SOUTH AFRICA; AND CLINICAL PARTNERS, WHICH IS A MANAGED CARE COMPANY
ESTABLISHED TO PARTNER DOCTORS AND OTHER HEALTHCARE PROVIDERS IN THE
DEVELOPMENT OF QUALITY, COST-EFFECTIVE HEALTHCARE DELIVERY MECHANISMS.
YEAR 2000 COMPLIANCE (Y2K)
A MORE COMPREHENSIVE STATUS REPORT IS SET OUT IN THE REVIEW OF CLINICS
ALONGSIDE THIS ANNOUNCEMENT, WHICH COMMENTS APPLY TO THE NETCARE GROUP AS A
WHOLE.
PRICE ADJUSTMENT CLAIMS
SHAREHOLDERS HAVE REGULARLY BEEN INFORMED OF THE OUTSTANDING PRICE ADJUSTMENT
AND BREACH OF WARRANTY CLAIMS AGAINST THE VENDORS OF THE CONTROLLING INTERESTS
OF CLINICS AND CLINFED. VALID PRICE ADJUSTMENT AND BREACH OF WARRANTY CLAIMS IN
EXCESS OF R240 MILLION WERE ESTABLISHED BY NETCARE WITHIN THE SPECIFIED PERIOD,
BUT AS THE SALE AGREEMENT IMPOSED CERTAIN CLAIMS LIMITATIONS, SHAREHOLDERS ARE
ADVISED THAT A CLAIM OF R139 MILLION WAS LODGED AGAINST THE VENDORS WHICH
INCLUDES INTEREST TO 31 AUGUST 1999.
WHILST THE CLAIM IS BEING DEFENDED BY THE VENDORS, THE LEGAL ADVISORS FOR
NETCARE ARE CONFIDENT OF THE GROUP'S ULTIMATE SUCCESS IN ENFORCING ITS CLAIMS.
ON 30 SEPTEMBER 1999 THE VENDORS SOUGHT TO EXERCISE CERTAIN "PUT OPTION"
PROVISIONS IN RELATION TO THEIR CLINICS SHARES, BUT THIS ACTION HAS BEEN
REJECTED ON A NUMBER OF GROUNDS. ALL OF THE DISPUTES HEREIN ARE LIKELY TO
PROCEED TO LITIGATION, BUT HAVING REGARD TO THE FACTS OF THIS MATTER THE BOARD
IS SATISFIED THAT NETCARE WILL NOT SUFFER ANY MATERIAL PREJUDICE OR DAMAGE.
PROSPECTS
NETCARE'S CORE HOSPITAL BUSINESS IS OPERATING WELL AND TOGETHER WITH THE
ANCILLARY BUSINESS UNITS WHICH SUPPORT THIS DIVISION, THE DIRECTORS BELIEVE
THAT NETCARE IS WELL POSITIONED TO MEET THE CHALLENGES FACING THE HEALTHCARE
INDUSTRY IN GENERAL AND THE PRIVATE HOSPITAL INDUSTRY IN PARTICULAR.
THE BOARD IS CONFIDENT THAT, IN THE ABSENCE OF UNFORESEEN CIRCUMSTANCES,
NETCARE WILL MAINTAIN REAL GROWTH IN EARNINGS FOR THE NEXT FINANCIAL YEAR.
CAPITAL DISTRIBUTION TO SHAREHOLDERS
THE BOARD OF DIRECTORS HAS PROPOSED A CAPITAL DISTRIBUTION OF 4 CENTS PER
ORDINARY SHARE, SUBJECT TO THE APPROVAL OF A GENERAL MEETING OF SHAREHOLDERS.
THE CAPITAL DISTRIBUTION WILL BE PAID OUT OF THE SHARE PREMIUM ACCOUNT. A
CIRCULAR CONTAINING DETAILS OF THE PROPOSED GENERAL MEETING IS IN THE PROCESS
OF PREPARATION AND WILL BE POSTED TO SHAREHOLDERS IN JANUARY 2000. SUBJECT TO
SHAREHOLDERS' APPROVAL, THE CAPITAL DISTRIBUTION SHOULD BE EFFECTED IN FEBRUARY
2000.
MI SACKS (CHAIRMAN)
DR J SHEVEL (CHIEF EXECUTIVE OFFICER)
SANDTON
1 DECEMBER 1999
REGISTERED OFFICE
3RD FLOOR, SANLAM PARK SOUTH, 9 FREDMAN DRIVE, CNR BUTE LANE, SANDOWN, SANDTON
2196.
(PRIVATE BAG X34, BENMORE 2010)
TRANSFER SECRETARIES
COMPUTERSHARE REGISTRARS (PTY) LIMITED. 4TH FLOOR, EDURA HOUSE, 41 FOX STREET,
JOHANNESBURG 2001. (PO BOX 62391, MARSHALLTOWN 2107)
EXECUTIVE DIRECTORS
MI SACKS (CHAIRMAN); DR J SHEVEL (CHIEF EXECUTIVE OFFICER); DR RH FRIEDLAND
(CHIEF OPERATING OFFICER); SR FAVISH (CHIEF FINANCIAL OFFICER); DR C ROSSOLIMOS
(CHIEF EXECUTIVE OFFICER P INTERNATIONAL); DR RH BUSH; IM DAVIS; DR I KADISH;
PJ LINDEQUE;
R MAGENNIS; B SHEPPY; DR NT TSINONIS; P WARRENER; N WELTMAN.
NON-EXECUTIVE DIRECTORS
DS AVNIT; DAJ DONALD; DR APH JAMMINE; HR LEVIN; TM MOTSISI;
J VAN ROOYEN.
A MEMBER OF THE NETCARE GROUP
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