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NETWORK HEALTHCARE HOLDINGS LIMITED
(REGISTRATION NUMBER 1996/008242/06)
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
("NETCARE")
AUDITED GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2000
* HEADLINE EARNINGS INCREASED BY 46,2%
* HEADLINE EARNINGS PER SHARE INCREASED BY 33,8%
* DEBT/EQUITY RATIO REDUCED TO 36,4%
GROUP BALANCE SHEET
2000 1999
(RM) (RM)
ASSETS
NON-CURRENT ASSETS
PROPERTY, PLANT AND EQUIPMENT 2 000,9 1 909,8
INVESTMENTS AND LOANS 94,5 78,8
DEFERRED TAXATION 33,6 32,0
TOTAL NON-CURRENT ASSETS 2 129,0 2 020,6
CURRENT ASSETS
INVENTORIES 151,3 133,0
ACCOUNTS RECEIVABLE 599,6 541,8
TOTAL CURRENT ASSETS 750,9 674,8
TOTAL ASSETS 2 879,9 2 695,4
EQUITY AND LIABILITIES
CAPITAL AND RESERVES
SHARE CAPITAL AND PREMIUM 817,2 923,0
RETAINED EARNINGS 550,0 290,5
ORDINARY SHAREHOLDERS' EQUITY 1 367,2 1 213,5
INTEREST OF OUTSIDE SHAREHOLDERS IN
SUBSIDIARIES 218,8 205,2
TOTAL SHAREHOLDERS' EQUITY 1 586,0 1 418,7
NET INTEREST-BEARING DEBT 577,7 642,0
NON-CURRENT LIABILITIES
DEFERRED TAXATION 60,0 45,3
CURRENT LIABILITIES
ACCOUNTS PAYABLE 500,5 467,2
CURRENT TAXATION 155,7 122,2
TOTAL CURRENT LIABILITIES 656,2 589,4
TOTAL EQUITY AND LIABILITIES 2 879,9 2 695,4
NET EQUITY PER SHARE (CENTS) 102,5 92,0
GROUP INCOME STATEMENT
2000 1999 %
(RM) (RM) CHANGE
REVENUE 2 848,8 2 566,1 11,0
OPERATING PROFIT BEFORE DEPRECIATION
(EBITDA) 547,1 484,3 13,0
DEPRECIATION (73,3) (73,9)
OPERATING PROFIT (EBIT) 473,8 410,4 15,5
NET FINANCE CHARGES (96,5) (162,5) 40,6
PROFIT BEFORE EXCEPTIONAL ITEMS 377,3 247,9
EXCEPTIONAL ITEMS (10,0) (7,0)
PROFIT BEFORE TAXATION 367,3 240,9
TAXATION (90,7) (52,1)
PROFIT AFTER TAXATION 276,6 188,8 46,5
ATTRIBUTABLE EARNINGS OF ASSOCIATES 22,3 19,9
PROFIT AFTER TAXATION INCLUDING ASSOCIATES 298,9 208,7
OUTSIDE SHAREHOLDERS' INTERESTS (39,4) (31,4)
EARNINGS ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 259,5 177,3 46,4
EARNINGS PER SHARE (CENTS)
- ATTRIBUTABLE 19,4 14,6 32,9
- HEADLINE 20,2 15,1 33,8
HEADLINE EARNINGS RECONCILIATION
EARNINGS ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 259,5 177,3
EXCEPTIONAL ITEMS (NET OF TAXATION)
PROVISION FOR LOSSES ON DISCONTINUANCE
OF INVOLVEMENT WITH RWANDA OPERATIONS - 7,0
RESTRUCTURING AND REORGANISATION COSTS 10,0 -
HEADLINE EARNINGS 269,5 184,3 46,2
ABRIDGED CASH FLOW STATEMENT
2000 1999
(RM) (RM)
CASH GENERATED BY OPERATIONS 534,0 477,9
MOVEMENT IN WORKING CAPITAL (42,8) (1,5)
NET FINANCE CHARGES (96,5) (162,5)
TAXATION PAID (44,2) (9,7)
CASH AVAILABLE FROM OPERATIONS 350,5 304,2
CASH UTILISED IN INVESTING ACTIVITIES
OTHER INVESTING AND FINANCING ACTIVITIES (187,1) (170,4)
DECREASE IN INTEREST-BEARING DEBT
(BEFORE DISTRIBUTIONS) 163,4 133,8
CAPITAL DISTRIBUTIONS PAID TO SHAREHOLDERS (99,1) -
DECREASE IN NET INTEREST-BEARING DEBT 64,3 133,8
NET INTEREST-BEARING DEBT AT BEGINNING
OF YEAR (642,0) 775,8)
NET INTEREST-BEARING DEBT AT END OF YEAR (577,7) (642,0)
OPERATING CASH FLOW PER SHARE (CENTS) 40,0 36,2
KEY FINANCIAL INFORMATION
ORDINARY SHARES (MILLIONS)
IN ISSUE 1 333,6 1 319,7
WEIGHTED AVERAGE NUMBER OF SHARES 1 336,2 1 217,7
DISTRIBUTIONS
CAPITAL DISTRIBUTIONS (CENTS PER SHARE) 5,0 4,0
OTHER SALIENT FEATURES
EBITDA MARGIN (%) 19,2 18,9
EBIT MARGIN (%) 16,6 16,0
INTEREST COVER (TIMES) 4,9 2,5
EFFECTIVE TAXATION RATE (%) 24,7 21,6
OPERATING PROFIT RETURN ON ASSETS (%) 23,7 21,7
RETURN ON ORDINARY SHAREHOLDERS' EQUITY (%) 20,9 16,6
DEBT/EQUITY (%) 36,4 45,3
CAPITAL COMMITMENTS AUTHORISED (RM) 76,4 48,4
CAPITAL EXPENDITURE FOR THE YEAR (RM) 165,8 195,8
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
2000 1999
(RM) (RM)
ORDINARY SHAREHOLDERS' EQUITY AT
BEGINNING OF YEAR 1 213,5 1 652,5
SHARE CAPITAL ISSUED 10,0 112,2
ISSUE OF SHARES 0,1 1,4
SHARE PREMIUM 9,9 110,8
OTHER MOVEMENTS 143,7 (551,2)
TREASURY SHARES HELD (2,9) -
EARNINGS ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS 259,5 177,3
GOODWILL WRITTEN OFF AND SET OFF (26,9) (725,9)
PRELIMINARY, SHARE ISSUE AND LISTING
EXPENSES - (2,6)
CAPITAL DISTRIBUTIONS (86,0) -
ORDINARY SHAREHOLDERS' EQUITY AT END
OF YEAR 1 367,2 1 213,5
COMPARATIVE FIGURES HAVE BEEN REGROUPED OR RECLASSIFIED WHERE NECESSARY TO GIVE
A MORE APPROPRIATE COMPARISON.
OVERVIEW
NETWORK HEALTHCARE HOLDINGS LIMITED ("NETCARE") HAS AGAIN POSTED A SOUND PROFIT
PERFORMANCE. NETCARE IS AN INVESTMENT HOLDING COMPANY WITH INTERESTS IN PRIVATE
HOSPITALS AND SELECTED COMPLEMENTARY HEALTHCARE ENTERPRISES. THE GROUP'S
LARGEST INVESTMENT IS CLINIC HOLDINGS LIMITED ("CLINICS") WHICH OWNS AND
OPERATES A NATIONAL NETWORK OF 43 PRIVATE HOSPITALS AND 61 SPECIALISED MEDICAL
FACILITIES. CLINICS' ANNUAL RESULTS ARE MORE FULLY SET OUT IN THE CLINICS
PROFIT ANNOUNCEMENT PUBLISHED ALONGSIDE THIS ANNOUNCEMENT.
A PLEASING ASPECT OF NETCARE'S RESULTS IS THE ACCELERATING PROGRESS
ACCOMPLISHED BY SEVERAL OF THE COMPLEMENTARY NETCARE OPERATIONS WHICH WERE
ACQUIRED OR COMMENCED OVER THE PAST THREE YEARS, IN CERTAIN INSTANCES AT
MINIMAL COST. THESE OPERATIONS INCLUDE TRAUMA LINK, NETCARE HEALTH SYSTEMS,
MEDISWITCH AND CLINICAL PARTNERS.
THE RESULTS GENERALLY REFLECT STRONG OPERATIONAL PERFORMANCE AND CASH
GENERATION FROM PURELY ORGANIC GROWTH.
FINANCIAL COMMENTARY
OPERATING PROFITS INCREASED BY 15,5% ON AN 11,0% INCREASE IN TURNOVER WHILE
HEADLINE EARNINGS INCREASED BY 46,2% TO R269,5 MILLION (1999: R184,3 MILLION).
THIS RESULTED IN AN INCREASE OF 33,8% IN HEADLINE EARNINGS PER SHARE TO 20,2
CENTS (1999: 15,1 CENTS), AFTER TAKING INTO ACCOUNT THE INCREASED NUMBER OF
SHARES IN ISSUE.
CAPITAL EXPENDITURE INCURRED DURING THE YEAR REFLECTED A R30,0 MILLION
REDUCTION FROM THE PRIOR YEAR. WHEREAS DURING 1998 AND 1999 A SIGNIFICANT
AMOUNT OF CAPITAL EXPENDITURE WAS INCURRED IN REFURBISHING ASSETS IN THE
HOSPITAL GROUP, CAPITAL EXPENDITURE IN THIS PERIOD HAS BEEN INVESTED
SUBSTANTIALLY IN INCOME GENERATING PROJECTS.
THE INTEREST-BEARING DEBT REDUCED BY R163,4 MILLION, BEFORE CAPITAL
DISTRIBUTIONS OF R99,1 MILLION, WHICH RESULTED IN THE DEBT/EQUITY RATIO
DECLINING TO 36,4% (1999: 45,3%). THE REDUCED DEBT LEVELS RESULTED FROM STRONG
OPERATIONAL CASHFLOWS. NET FINANCE CHARGES REDUCED BY 40,6% TO R96,5 MILLION
REFLECTING REDUCED INTEREST RATES AND DEBT LEVELS. INTEREST COVER HAS IMPROVED
TO A SATISFACTORY 4,9 TIMES (1999: 2,5 TIMES).
THE GROUP HAS SUCCESSFULLY RESTRUCTURED ITS BORROWINGS BY CONCLUDING FAVOURABLE
LONG-TERM FUNDING ARRANGEMENTS WITH A CONSORTIUM OF BANKS ("THE DEBT
RESTRUCTURE"). THIS HAS SECURED NETCARE'S FORSEEABLE FUNDING REQUIREMENTS.
IN ADDITION TO THE DEBT RESTRUCTURE, THE COMPLEX ARRANGEMENT OF HOSPITAL
SUBSIDIARIES HAS NOW BEEN RECONSTITUTED INTO A STREAMLINED AND PRACTICAL
CORPORATE STRUCTURE. THE COSTS OF THE DEBT AND CORPORATE RESTRUCTURE AMOUNTED
TO R10,0 MILLION AND HAVE BEEN ACCOUNTED FOR AS A HEADLINE ADJUSTMENT.
OPERATIONAL REVIEW
* HOSPITAL DIVISION
SINCE ITS ACQUISITION BY NETCARE IN 1997, CLINICS HAS RECORDED SIGNIFICANT
IMPROVEMENT IN ALL ASPECTS OF ITS HOSPITAL BUSINESS FOR THE THIRD CONSECUTIVE
YEAR. HEADLINE EARNINGS INCREASED BY 35,3% TO R278,2 MILLION, MAINLY DUE TO
FURTHER IMPROVEMENTS IN OPERATING EFFICIENCIES, REDUCED FINANCE CHARGES, AND
FROM CONTRIBUTIONS MADE BY NETCARE'S REFERRAL AND SUPPORT SERVICES. THE RESULTS
OF CLINICS ARE MORE FULLY PRESENTED IN THE CLINICS REPORT.
* TRAUMA LINK
TRAUMA LINK OFFERS PRE-HOSPITAL EMERGENCY SERVICES AND PRODUCTS AND PERFORMED
ABOVE EXPECTATIONS. INSURED LIVES COVERED BY THE SERVICE GREW IN NUMBER FROM
UNDER 0,3 MILLION IN 1999 TO 1,3 MILLION BY SEPTEMBER 2000 AND SEVERAL OF THE
LARGEST MEDICAL SCHEMES ARE NOW REGISTERED WITH NETCARE 911. FURTHER GROWTH IN
MEMBERSHIP HAS ALSO BEEN SECURED SINCE THE
YEAR-END.
* NETCARE HEALTH SYSTEMS "NHS"
NETCARE'S 37% INTEREST IN THE FACILITIES AND MANAGEMENT OPERATIONS SERVING THE
AMPATH PATHOLOGY GROUP CONTRIBUTED PROFITS IN LINE WITH EXPECTATIONS.
* MEDISWITCH
NETCARE PLAYED AN IMPORTANT ROLE IN ASSEMBLING A USER COMMUNITY TO INVEST IN
MEDISWITCH. THIS E-COMMERCE PLATFORM ENABLES ELECTRONIC INTERACTION BETWEEN
HEALTHCARE TRADING PARTNERS, AND IS LIKELY TO SIGNIFICANTLY TRANSFORM THE
HEALTH INDUSTRY'S OPERATING EFFICIENCIES THROUGH SIZEABLE ADMINISTRATION COST
REDUCTIONS AND ENHANCED SERVICE LEVELS.
* CLINICAL PARTNERS
CLINICAL PARTNERS ACHIEVED SUBSTANTIAL SAVINGS FOR THE NETCARE MEDICAL SCHEME
BY IMPLEMENTING A NEW MEDICAL SPECIALIST REIMBURSEMENT AND PERFORMANCE
MEASUREMENT SYSTEM. THE DIVISION CONCLUDED A MANAGEMENT CONTRACT WITH A
MEDICAL SCHEME FOR A NEW NETCARE BENEFIT OPTION TARGETED FOR LOW INCOME
SECTORS. THIS BENEFIT OPTION IS THE FIRST AND MOST AFFORDABLE OF ITS KIND IN
THE MARKET.
VENDOR MATTERS
THE LITIGATION BETWEEN NETCARE AND THE VENDORS OF THE CONTROLLING INTERESTS OF
CLINICS IS PROCEEDING. AS PREVIOUSLY INDICATED, THE BOARD IS SATISFIED THAT
NETCARE WILL NOT SUFFER ANY MATERIAL PREJUDICE
NOR DAMAGE.
PROSPECTS
SIGNIFICANT OPERATIONAL EFFICIENCIES HAVE BEEN ACHIEVED OVER THE PAST THREE
YEARS AND IT IS ANTICIPATED THAT THIS TREND WILL CONTINUE.
THE GROUP'S PERFORMANCE IS EXPECTED TO BE DRIVEN BY ITS RANGE OF VALUE-ADDING
SUPPORT AND REFERRAL SERVICES. THE GROUP IS WELL POSITIONED TO BENEFIT FROM
FURTHER VOLUME GROWTH.
NETCARE IS CONFIDENT THAT THE YEAR AHEAD WILL SEE AN ESCALATION IN PRIVATE
HEALTHCARE SECTOR ACTIVITIES AIMED AT SERVING THE LOW INCOME EMERGING MARKETS.
IN LINE WITH THIS TREND, NETCARE WILL CONTINUE TO ENGAGE WITH THE STATE TO
ADDRESS THE UNDER-SERVICED DEMAND FOR MEDICAL SERVICES.
IN THE ABSENCE OF MATERIAL ADVERSE CHANGES IN THE ECONOMY, IT IS ANTICIPATED
THAT NETCARE WILL ACHIEVE GROWTH IN EARNINGS FOR THE NEXT FINANCIAL YEAR.
CAPITAL DISTRIBUTION
THE BOARD OF DIRECTORS HAS PROPOSED A FINAL CAPITAL DISTRIBUTION OF 2,5 CENTS
PER ORDINARY SHARE PAYABLE TO SHAREHOLDERS REGISTERED ON 12 JANUARY 2001.
PAYMENT WILL BE MADE ON OR ABOUT 26 JANUARY 2001. TAKEN WITH THE INTERIM
DISTRIBUTION OF 2,5 CENTS PER SHARE, THE TOTAL DISTRIBUTION FOR THE YEAR
AMOUNTS TO 5,0 CENTS PER SHARE WHICH IS AN INCREASE OF 25,0% OVER THE PREVIOUS
YEAR.
BY ORDER OF THE BOARD
MICHAEL I SACKS (CHAIRMAN) DR JACK SHEVEL (CHIEF EXECUTIVE OFFICER)
SANDTON 15 NOVEMBER 2000
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 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 (CHIEF FINANCIAL
OFFICER), DR RH BUSH MBBCH (WITS), DCH(SA), IM DAVIS DIP PHARM (MPS), DR I
KADISH MBBCH (WITS), MBA (WHARTON), PJ LINDEQUE CA(SA),
RH MAGENNIS BCOM, BACC, CA(SA) MBL, PAHM (USA), DR C ROSSOLIMOS MBBCH (WITS),
(DMS) DIP. BUS. M. PRAC. ACC., P WARRENER BSOCSCI, DPLR, DIP FIN MAN, N WELTMAN
CA(SA).
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) (WITS), MSC LONDON (LSE), PHD LONDON (LBS),
JM KAHN BA(LAW), MBA DCOM(HC), SOE, HR LEVIN BCOM, LLB, LLM, H DIP TAX LAW, H
DIP CO LAW (WITS), DR JA VAN ROOYEN MBBCH (PRETORIA), M MED (CLIN PATH)
(STELLENBOSCH).
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