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Network Healthcare Holdings Limited - Announcement
Network Healthcare Holdings Limited
(Registration number 1996/008242/06)
Code: NTC
ISIN number: ZAE000011953
("Netcare" or "the Group")
ANNOUNCEMENT
1. Introduction and Rationale
Following the listing of Netcare in December 1996, the Group embarked on an
aggressive acquisition trail to create a national network of hospital and
healthcare enterprises, all with the objective of ultimately being able to offer
a comprehensive range of healthcare services with broad geographic access.
In 1999, the resultant debt, coupled with high interest rates and the weakening
currency, required the composition and extent of the Group"s debt to be
reviewed. This review culminated in a proposal for the implementation of a
combined debt restructure and capital raising programme ("the capital
restructure"). Details of the capital restructure and issue of shares for cash
were, inter alia, set out in a circular to shareholders dated 4 August 1999 and
approved at a general meeting of Netcare held on 19 August 1999.
The capital restructure included the creation of the Netcare Trust ("the
Trust"), a special purpose entity, the beneficiaries of which are Netcare and
its wholly-owned subsidiaries, and the participants of which comprised business
associates of the Group. As part of the capital restructure, the Trust issued a
prospectus on 24 August 1999 relating to an offer for sale, by way of a private
placement of the newly issued Netcare shares on terms which included the payment
by participants over an extended period and based on a formula linked to the
Netcare share price at each of the future due dates of payment. This resulted
in 142 million Netcare shares being reserved for future sale through the Trust
and included the flexibility of being able to do so over an extended period of
time.
In terms of Accounting Standard AC133, which became applicable during the
company"s financial year ended 30 September 2003, the Netcare shares falling
under the aegis of the Netcare Trust gave rise to a R426,7m valuation of a
financial asset in Netcare"s balance sheet as at 30 September 2003. This value
essentially represented the mark-to-market value of the anticipated future
proceeds to be received in respect of the Netcare shares sold via the Trust. In
terms of AC133, the earnings impact of holding the financial asset was
effectively sterilised.
As a result of Netcare"s strong performance since the introduction of the
capital restructure and as the use of the Trust has been superseded by other
initiatives, the Group has determined that it would be advantageous for the
Trust to hold indefinitely, certain of the Netcare shares underlying the value
of the financial asset. Accordingly, the Group has entered into a transaction
("the Transaction") which will facilitate the fulfilment by the Trust of its
outstanding obligations in respect of Netcare shares already committed to
certain business associates ("the committed shares") and will eliminate the
dilutive impact on the Group"s earnings.
2. Transaction Summary
As a consequence of the Transaction, the abovementioned financial asset will no
longer be reflected in Netcare"s balance sheet. In addition, the Group will
receive a cash injection of approximately R54 million primarily in respect of
the upfront disposal by the Trust to a financial institution of the right to
future payments outstanding on the committed shares. The Trust will then retain
approximately 95,3 million Netcare shares which will be treated by the Group as
treasury shares in accordance with Accounting Standard AC412 (which deals with
the consolidation of special purpose entities for accounting purposes).
3. Financial effects
The table below represents the pro forma financial effects on Netcare for the
year ended 30 September 2003 had the Transaction been in place for that
financial year.
Audited Pro forma %
before after Change
30/9/03 30/9/03
Headline EPS (cents) 45,9 47,7 3,9
Attributable EPS 46,0 47,8 3,9
(cents)
Net Asset Value
Per Share (cents) 200,0 195,1 (2,4)
Net Tangible Asset
Value per Share 188,9 183,3 (3,0)
(cents)
Debt Equity Ratio (%) 28,7 30,0 (1,3)
The above calculations are based on the following assumptions:
- the audited financial statements for the year ended 30 September 2003 have
been used as a basis for the calculations;
- the accounting entries relating to the financial asset are eliminated;
- a cost of funding benefit of 14% (before tax) for the period being applied
to the approximately R54 million raised as a result of the Transaction; and
- the number of Netcare shares (adjusted for treasury shares) in issue are as
follows:
Before (million) After (million)
Weighted Average 1 428,8 1 333,5
In Issue 1 530,7 1 435,4
JSE Matters
Senior Counsel has furnished an opinion to Netcare confirming that the Trust
does not fall within the definition of a subsidiary in terms of the Companies
Act 1973, as amended ("the Act"), and, therefore, sections 85 to 90 of the Act
are not applicable to the Transaction. Accordingly, shareholder approval of the
Transaction is not required.
Sandton 29 April 2004
Netcare Sponsor Attorneys
Merrill Lynch South Africa (Pty) H R Levin
Limited Attorneys, Notaries & Conveyancers
Date: 30/04/2004 08:27:19 AM Supplied by www.sharenet.co.za
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