Wrap Text
NTC - Netcare Limited - Unaudited Group interim results for the six months ended
31 March 2010
Netcare Limited
("Netcare", "the Company" or "the Group")
Registration number: 1996/008242/06
(Incorporated in the Republic of South Africa)
JSE share code: NTC
ISIN code: ZAE000011953
Unaudited Group interim results for the six months ended 31 March 2010
14% increase in constant currency operating profit 2010: R2 072 million
2009: R1 822 million
28% increase in adjusted basic headline earnings per share 2010: 42.9 cents
2009: 33.4 cents
19% increase in capital reduction per share 2010: 19.0 cents
2009: 16.0 cents
Commentary
Group financial review
The Group is pleased to announce a 28.4% increase in adjusted basic headline
earnings per share (HEPS) to 42.9 cents for the six months under review. If the
currency impact is excluded, adjusted basic HEPS increased 32.3% to 44.2 cents.
Currency conversion had a major impact on both the half-year results and
financial position of the Group. This was due to the prevailing strength of the
Rand relative to the British Pound during the period. The average exchange rate
used for converting income and expenditure was R12.00 to the Pound, compared to
R14.73 in the comparative prior period, a change of 18.5%. The closing exchange
rate used to convert assets and liabilities at 31 March 2010 was R11.03 to the
Pound, compared to R13.64 at 31 March 2009, a change of 19.1%.
Despite revenue growth in both the South African and United Kingdom (UK)
operations, Group revenue was down 5.0% to R11 038 million (2009: R11 619
million) due to Rand appreciation. However, the Group`s operating margin
improved from 15.7% to 16.7% reflecting underlying efficiency improvements and
sound financial management.
Net financial expenses decreased by R247 million to R1 005 million, a 19.7%
reduction over last year. This was driven by reduced interest rates in South
Africa (SA), lower average levels of debt compared to the prior period and the
lower average exchange rate applicable to UK borrowing costs. The interest rate
swaps are hedge accounted and fair value adjustments are recognised directly in
equity to the extent that such hedging proves to be effective. Financial
expenses were negatively affected by a GBP3.0 million non-cash charge,
representing the ineffective portion of the fair value adjustment for the
period.
An interim capital reduction of 19.0 cents per share (2009: 16.0 cents) has been
declared, representing an 18.8% increase over the prior year.
Net debt at R24 862 million reduced from R26 454 million at 30 September 2009.
This reduction was impacted by fluctuations in the closing exchange rate, which
reduced debt by R1 723 million, and scheduled debt repayments in the UK, but
offset by higher borrowings in SA required to fund ongoing capital and seasonal
working capital requirements.
Equity decreased by R136 million from 30 September 2009. This was mainly due to
a decrease in the foreign currency translation reserve, and unfavourable non-
cash mark-to-market fair value adjustments on the UK interest rate swaps
recognised in the cash flow hedge accounting reserve.
Cash generated by operations rose 5.9% to R1 894 million from R1 788 million in
the prior comparative period primarily as a result of better cash conversion.
The Group converted 78.9% (2009: 72.3%) of its EBITDA into cash.
Capital expenditure of R423 million was incurred compared to R592 million in the
prior period, mainly due to the timing of capital expenditure in SA and the UK.
Divisional review
South Africa
Revenue grew 7.1% to R6 014 million from R5 616 million, while operating profit
rose 12.3% to R849 million (2009: R756 million). The operating profit margin
improved from 13.5% to 14.1%. The South African operations contributed 86.5%
(2009: 89.5%) to basic HEPS.
Cash generated by the SA operations of R738 million remained strong but was
slightly lower than a year earlier. This was mainly due to higher working
capital requirements, following an increase in The Commissioner for Occupational
Injury and Disease (COID) debtors and stock levels required for the Easter
holidays. Total capital expenditure was R270 million (2009: R293 million) of
which R161 million was spent on replacements and R109 million on expansionary
expenditure.
The construction of the 425-bed Lesotho Hospital PPP remains on track and is
scheduled for completion in 2011. The first of three off-site primary care
clinics was opened this month, while the other two will be opened before month-
end.
This year, Netcare Education celebrates 21 years of training nursing staff.
Currently over 3 500 students are being trained at its five campuses.
Netcare maintained its position as the most empowered company in the JSE`s
healthcare sector and was ranked thirteenth most empowered listed company
overall in the Financial Mail`s Top Empowerment Companies survey.
Netcare expresses its deepest regret at the passing away of Dr Molefi Sefularo,
honourable Deputy Minister of Health.
We congratulate Malebona Precious Matsoso on her appointment as Director General
for the Department of Health.
Hospitals and Emergency services
Revenue from Hospitals and Emergency services was up 9.5% to R5 336 million
(2009: R4 873 million), while EBITDA rose 9.1% to R1 029 million (2009: R943
million).
The Hospital division maintained patient days off a high base with a 10.2%
increase in revenue per patient day.
The number of registered beds increased from 8 766 to 8 843 during the six
months under review and Netcare continued to improve its infrastructure,
including the addition of a 17-bed neo-natal intensive care unit at Netcare
Garden City, commissioning of a new cardiac catherisation laboratory at Netcare
Linksfield, renovating a 30-bed paediatric unit at Netcare Park Lane and the
refurbishment of five theatres at Netcare Milpark. A fully integrated oncology
centre was opened at Netcare Clinton, specialising in intensity modulated and
image guided radiation therapy. In addition, the first neuro-interventional MRI
(magnetic resonance imaging) and CT (computed tomography) theatre in Africa was
opened at Netcare N1 City.
Emergency services division, Netcare 911, recorded 5.3% growth in total lives
under management to 7.9 million lives. The division continued to focus on
improving operational efficiencies, which supported the results. Netcare 911
became SA`s first aeromedical emergency evacuation specialist to become
accredited by the European Air Medical Institute (EURAMI) reflecting the high
level of service excellence provided to patients.
Primary care
The division achieved a significant turnaround, following a strategic review of
the managed care business and resultant termination of loss making contracts.
Revenue decreased 8.7% to R678 million (2009: R743 million) primarily due to a
contraction in managed care lives in Prime Cure, which reduced 28.4% to 172 000
lives. Medicross is rolling out a new practice management system which should
enhance its overall efficiencies.
Operating loss decreased significantly to R5 million compared to R25 million in
the prior period. The performance was bolstered by improved operational
efficiencies and internal controls.
United Kingdom
Netcare owns a 50.1% stake in General Healthcare Group (GHG), which operates a
national network of private hospitals across the UK under the BMI brand name.
GHG delivered a solid performance underpinned by continued demand for private
healthcare facilities despite the recessionary environment, record unemployment
rates and little to no inflation. The business continues to benefit from ongoing
investment in extending its breadth of services and its geographic presence.
Overall caseload in the UK grew 5.6% year-on-year, reflecting both organic
growth and the integration of the prior year acquisitions of Fitzroy Square,
Woodlands Hospital and City Medical consulting suites, as well as the addition
of the Kingston private patient unit in the period.
Private Medical Insurance (PMI) patient volumes remained stable on a same site
basis, excluding a decline resulting from the exceptionally severe weather
conditions experienced in January. The shift in business mix emanating from 2009
continued, with strong growth in NHS patients offsetting lower numbers of self-
pay patients. Pleasingly, the self-pay market is showing early signs of
recovery. The NHS Choose and Book (C&B) programme, which allows the public,
through their GPs, to select private facilities directly for their treatment has
been well received and uptake has been encouraging. Future demand under this
initiative should entrench the private healthcare sector as a key partner to the
NHS in ensuring the delivery of the UK`s national healthcare needs.
Revenue from UK operations for the six months rose 2.8% to GBP418.7 million
(2009: GBP407.4 million).
EBITDA was up 4.7% to GBP110.9 million (2009: GBP105.9 million) and operating
profit 9.4% higher at GBP79.2 million (2009: GBP72.4 million). The performance
reflected the benefits of ongoing efficiency improvements and standardisation,
coupled with stringent cost control, which underpinned margins.
The results were boosted by a non-recurring capital benefit of GBP3.7 million
relating to a gain on the bargain purchase of assets under a business
combination. Non-recurring expenses, comprising mostly restructuring and
retrenchment costs, of GBP2.1 million were incurred (2009: GBP3.5 million).
Profit after tax amounted to GBP15.3 million, an increase of 188.7% over the
prior period.
Capital expenditure including intangible assets amounted to GBP14.3 million
compared to GBP25.3 million in 2009. GHG continued to invest in its hospital
infrastructure to ensure that its patients and consultants have access to
leading-edge medical equipment and facilities.
Net debt reduced by GBP14 million to GBP1 873 million (September 2009: GBP1 887
million). Working capital increased by GBP13 million since the 2009 year-end due
to underlying business growth and the increased NHS caseload at longer payment
cycles. Cash collection remains a key focus to manage the impact on resources of
this industry-wide shift in business mix. GHG continued to meet its financial
covenants and has sufficient headroom for the remaining debt term. The debt
relating to the UK is without recourse to the SA operations.
As per the SENS announcement on 8 December 2009, Netcare`s partners in GHG, in
accordance with the terms of the Partnership Agreement, informed Netcare of
their desire to pursue an Initial Public Offering (IPO) of the GHG Operating
Company (OpCo) on the London Stock Exchange (LSE). Whilst preparation for the
IPO has progressed well, given prevailing market conditions, a final decision as
to the IPO and its timing has yet to be made. Shareholders will be updated as
and when the position changes.
Outlook
Barring any unforeseen circumstances, and particularly given the general
financial soundness of medical aid funds and the strong underlying demand for
private healthcare, the outlook for SA remains stable and positive. The
prospects of healthcare reform facilitating greater healthcare access and care
for all South Africans is seen as an imperative and viewed positively in terms
of the Group`s wide range of healthcare services on offer.
Over and above the capital expenditure planned for the year of R800 million in
SA, the Board has approved an additional R670 million to be invested over the
next three years on capital projects. These include the new Waterfall Hospital
in Midrand, Gauteng, 12 large projects that will add 295 new beds, a
refurbishment of 238 beds, three new theatres, 30 doctors consulting rooms and
21 smaller projects.
Recessionary pressures in the UK economy are expected to limit the growth of PMI
and self-pay spending on private healthcare in the short term. However, the
growth in NHS activity should provide sufficient offset. The demographics of an
ageing population and increasing incidence of lifestyle diseases are expected to
support growth in private caseload over the longer term. The underlying
fundamentals of the UK private healthcare sector remain sound, with NHS
budgetary pressures likely to increase demand for private facilities further.
The scale and quality of GHG`s facilities, infrastructure, consultant network
and management team position the company well to succeed in the current market
and to benefit from the compelling prospects for private healthcare in the UK.
Board changes
Andile Ngcaba resigned as a non-executive director effective 7 April 2010. The
Board expresses its gratitude and appreciation to Andile for his significant
contribution to Netcare over his term of office.
Declaration of capital reduction number 22
In accordance with the authority given to the directors by way of an ordinary
resolution passed on 29 January 2010, the Board of Directors declared on
Thursday, 13 May 2010 an interim capital reduction (number 22) out of share
premium of 19.0 cents per ordinary share, payable on Monday, 26 July 2010, to
shareholders recorded in the register of the Company as at Friday, 23 July 2010.
In terms of Article 54.12 of the Company`s Articles of Association, all capital
reductions with a value of R5,00 or less will be donated to a registered charity
approved by the directors of the Company.
In compliance with the requirements of Strate, the following dates are
applicable:
Last day to trade cum the capital reduction Friday, 16 July 2010
(LDT)
Trading ex capital reduction commences Monday, 19 July 2010
Record date Friday, 23 July 2010
Date of payment Monday, 26 July 2010
Share certificates may not be dematerialised nor rematerialised between Monday,
19 July 2010 and Friday, 23 July 2010, both days inclusive.
On behalf of the Board
Jerry Vilakazi Chairman
Richard Friedland Chief Executive Officer
Vaughan Firman Chief Financial Officer
Sandton
13 May 2010
Group statement of financial position
Unaudited Unaudited Audited
31 March 31 March 30 September
Rm Note 2010 2009 2009
Assets
Non-current assets
Property, plant and
equipment 23 538 27 818 25 097
Goodwill 13 235 16 271 14 303
Intangible assets 337 397 366
Associated companies,
investments and loans 4 182 90 130
Deferred taxation 1 040 638 1 147
Total non-current assets 38 332 45 214 41 043
Current assets
Loans and receivables 4 52 67 54
Inventories 677 643 621
Trade and other receivables 3 661 3 963 3 416
Cash and cash equivalents 1 094 618 803
5 484 5 291 4 894
Assets held for sale 5 6 4 4
Total current assets 5 490 5 295 4 898
Total assets 43 822 50 509 45 941
Equity and liabilities
Capital and reserves
Ordinary share capital and
premium 819 1 240 1 065
Treasury shares (767) (767) (767)
Option premium on
convertible bond 169 175 169
Other reserves (11) (98) 231
Retained earnings 3 966 2 982 3 446
Equity attributable to
owners of the parent 4 176 3 532 4 144
Preference share capital and
premium 644 644 644
Non-controlling interest 2 177 2 070 2 345
Total shareholders` equity 6 997 6 246 7 133
Non-current liabilities
Long-term debt 23 613 29 056 25 423
Financial liability -
Derivative financial
instruments 2 739 3 914 2 797
Post-retirement benefit
obligations 288 132 297
Deferred lease liability 119 98 114
Deferred taxation 4 617 5 866 5 041
Provisions 39 48 48
Total non-current
liabilities 31 415 39 114 33 720
Current liabilities
Trade and other payables 2 841 2 934 2 924
Short-term debt 1 920 1 871 1 745
Taxation payable 226 292 330
Bank overdrafts 423 52 89
Total current liabilities 5 410 5 149 5 088
Total equity and liabilities
43 822 50 509 45 941
Group income statement
Unaudited six Audited
Note months ended year ended
31 March 31 March % 30 September
Rm 2010 2009 change 2009
Continuing operations
Revenue 11 038 11 619 (5.0) 23 232
Cost of sales (6 404) (6 833) (13 701)
Gross profit 4 634 4 786 (3.2) 9 531
Other income 118 111 232
Administrative and
other expenses (2 909) (3 075) (6 063)
Operating profit 6 1 843 1 822 1.2 3 700
Financial income 7 24 66 171
Financial expenses 8 (1 029) (1 318) 21.9 (2 431)
Attributable earnings
of associates 16 10 27
Profit before
taxation 854 580 47.2 1 467
Taxation (185) (142) (350)
Profit for the period
from continuing
operations 669 438 52.7 1 117
Discontinued
operation
Profit for the period
from discontinued
operation 5 634 634
Profit for the period 669 1 072 (37.6) 1 751
Attributable to:
Owners of the parent 551 1 002 1 564
Preference
shareholders 28 37 73
Profit attributable
to shareholders 579 1 039 1 637
Non-controlling
interest 90 33 114
669 1 072 1 751
Earnings per share
(cents)
Basic 43.4 79.4 (45.3) 123.8
Continuing operations 43.4 29.2 48.6 73.6
Discontinued
operation 50.2 50.2
Diluted 41.8 79.3 (47.3) 122.6
Continuing operations 41.8 29.1 43.6 72.9
Discontinued
operation 50.2 49.7
Capital reduction per
share (cents) 19.0 16.0 18.8 38.0
Group statement of comprehensive income
Unaudited six Audited
months ended year ended
31 March 31 March 30 September
Rm 2010 2009 2009
Profit for the period 669 1 072 1 751
Other comprehensive loss, net of
tax (540) (3 499) (3 086)
Actuarial losses on defined
benefit plans (130)
Effect of cash flow hedge
accounting (134) (3 274) (2 086)
Effect of translation of foreign
entities (406) (225) (870)
Total comprehensive income/(loss)
for the period 129 (2 427) (1 335)
Attributable to:
Owners of the parent 268 (820) (48)
Preference shareholders 28 37 73
Non-controlling interest (167) (1 644) (1 360)
129 (2 427) (1 335)
Group statement of cash flows
Unaudited six Audited
months ended
year ended
31 March 31 March 30 September
Rm 2010 2009 2009
Cash flows from operating
activities
Cash received from customers 10 664 10 976 22 921
Cash paid to suppliers and
employees (8 770) (9 188) (18 281)
Cash generated from operations 1 894 1 788 4 640
Interest paid (993) (1 321) (2 430)
Continuing operations (993) (1 316) (2 425)
Discontinued operation (5) (5)
Taxation paid (302) (247) (526)
Continuing operations (302) (241) (520)
Discontinued operation (6) (6)
Ordinary dividends paid by
subsidiaries (1) (3) (3)
Preference dividends paid (28) (37) (73)
Capital reductions paid (279) (227) (430)
Net cash from operating activities 291 (47) 1 178
Continuing operations 291 (46) 1 179
Discontinued operation (1) (1)
Cash flows from investing
activities
Purchase of property, plant and
equipment (423) (592) (1 283)
Continuing operations (423) (581) (1 272)
Discontinued operation (11) (11)
Proceeds on disposal of property,
plant and equipment 46 5 60
Additions to intangible assets (26) (53) (144)
(Increase)/decrease in investments
and loans (34) 30 40
Proceeds from disposal of
businesses 852 852
Interest received 18 65 150
Dividends received 1 1 1
Acquisition of subsidiaries and
businesses, net of cash acquired (19) (9) (9)
Net cash from investing activities (437) 299 (333)
Continuing operations (437) 310 (322)
Discontinued operation (11) (11)
Cash flows from financing
activities
Proceeds from issue of ordinary
shares 33 3 31
Repurchase of shares (3) (11)
Settlement of derivatives (19)
Long-term liabilities
raised/(repaid) 2 (532) (840)
Short-term liabilities
raised/(repaid) 128 (95) (139)
Net cash from financing activities 163 (627) (978)
Continuing operations 163 (623) (974)
Discontinued operation (4) (4)
Net increase/(decrease) in cash
and cash equivalents 17 (375) (133)
Translation effects on cash and
cash equivalents of foreign
entities (60) (21) (115)
Cash and cash equivalents at
beginning of the period 714 962 962
Cash and cash equivalents at end
of the period 671 566 714
Group condensed statement of changes in equity
Unaudited six Audited
months ended year ended
31 March 31 March 30 September
Rm 2010 2009 2009
Balance at beginning of period 7 133 8 851 8 851
Ordinary shares issued 33 3 31
Capital reduction paid (279) (227) (430)
Repurchase of shares 68 68
Repurchase of convertible bond 4
Share-based payment reserve
movements 12 15 32
Capital gains tax on capital
reductions attributable to
treasury shares (7)
Preference dividends paid (28) (37) (73)
Other movements (3) (8)
Total comprehensive income/(loss)
for the period 129 (2 427) (1 335)
Balance at the end of the period 6 997 6 246 7 133
Comprising:
Ordinary share capital and
premium 819 1 240 1 065
Treasury shares (767) (767) (767)
Option premium on convertible
bond 169 175 169
Foreign currency translation
reserve 759 1 306 976
Cash flow hedge accounting
reserve (1 282) (1 827) (1 216)
Other reserves 512 423 471
Retained earnings 3 966 2 982 3 446
Equity attributable to owners of
the parent 4 176 3 532 4 144
Preference shareholders 644 644 644
Non-controlling interest 2 177 2 070 2 345
Total shareholders` equity 6 997 6 246 7 133
Headline earnings
Unaudited six Audited
months ended year ended
31 March 31 March % 30 September
Rm 2010 2009 change 2009
Reconciliation of headline
earnings
Profit for the period from
continuing operations 669 438 52.7 1 117
Less:
Preference shareholders (28) (37) (73)
Non-controlling interest (90) (33) (114)
Earnings used in the
calculation of basic
earnings per share from
continuing operations 551 368 49.7 930
Adjusted for:
Gain on bargain purchase (44)
Impairment of investments 2
Impairment of land and
buildings 10 13
Reversal of impairment of
land and buildings (1)
Profit on disposal of
property, plant and
equipment (1) (4) (5)
Tax effect of headline
adjusting items 1 2
Non-controlling share of
headline adjusting items 22
Headline earnings from
continuing operations 527 375 942
Earnings from discontinued
operation 634 634
Adjusted for:
Profit on disposal of
discontinued operation (678) (678)
Tax effect of headline
adjusting item 90 90
Headline earnings from
discontinued operation 46 46
Headline earnings 527 421 25.2 988
Adjusted for:
Ineffectiveness arising
from interest rate swaps 36 2 5
Non-controlling share of
headline adjusting item (18) (1) 1
Adjusted headline earnings 545 422 29.1 994
Headline earnings per
share (cents)
Basic 41.5 33.3 24.6 78.2
Continuing operations 41.5 29.7 39.7 74.6
Discontinued operation 3.6 3.6
Diluted 40.0 33.3 20.1 77.5
Continuing operations 40.0 29.7 34.7 73.9
Discontinued operation 3.6 3.6
Adjusted basic headline
earnings per share 42.9 33.4 28.4 78.7
Continuing operations 42.9 29.8 44.0 75.1
Discontinued operation 3.6 3.6
Notes
1. Basis of preparation and accounting policies
The interim financial information for the six months ended 31 March 2010 has
been prepared in accordance with the measurement and recognition criteria of
International Financial Reporting Standards (IFRS) and complies with IAS 34
Interim Financial Reporting.
The accounting policies applied in the preparation of the interim financial
statements are consistent with those applied for the year ended 30 September
2009, except for the following:
- IFRS 3 Business Combinations (revised) and IAS 27 Consolidated and Separate
Financial Statements (amended)
- IFRS 7 Financial Instruments: Disclosures (amended)
- IFRS 8 Operating Segments
- Improvements to International Financial reporting standards 2008 and 2009
(certain improvements have been adopted earlier than required)
The implementation of these standards had no impact on the financial position or
performance of the Group and has mainly been of a presentation and disclosure
nature.
2. Acquisition of businesses
The following business combinations took effect during the year:
2.1 Effective 1 October 2009, the Group acquired an additional 25% in Netcare
Parklands Linac Joint Venture (Proprietary) Limited (Parklands Linac) and 15% in
Netcare St Anne`s Linac Joint Venture (Proprietary) Limited (St Anne`s Linac),
changing the Group`s effective holding to 75% and 65% respectively. Both were
previously accounted for as joint ventures.
2.2 With effect from 1 January 2010, the Group acquired 100% of the shares in
Sterilplus Limited in the United Kingdom. Subsequent to acquisition, the company
was renamed to BMI Hospital Decontamination Limited.
From the dates of acquisition to 31 March 2010, the following amounts have been
included in the Group`s income statement:
Parklands St Anne`s Sterilplus
Rm Linac Linac Limited Total
Revenue 9 3 10 22
Operating profit 3 1 (1) 3
The following table reflects the fair values at acquisition:
Parklands Linac St Anne`s Sterilplus
Rm Linac Limited
Property, plant and
equipment 16 1 58
Loans and receivables 2 1
Trade and other
receivables 3 1 7
Cash and cash equivalents 1
Long-term debt (7)
Short-term debt (4)
Trade and other payables (9) (3) (5)
Taxation payable (1)
Fair value of net assets
acquired 61
Investment in joint
venture (1)
(1) 61
Goodwill/(gain on bargain
purchase) 3 1 (44)
Purchase consideration 2 1 17
Cash and cash equivalents
in acquiree (1)
Cash outflow on
acquisition 2 1 16
The fair values reflected above are equal to the carrying values at acquisition.
3. Reclassification of comparative information
Statement of financial position
Long-term provisions in the March 2009 statement of financial position have been
reclassified from trade and other payables, included in current liabilities, to
provisions which are classified as non-current liabilities. This adjustment is
in line with the disclosure at 30 September 2009.
Unaudited six Audited
months ended year ended
31 March 31 March 30 September
Rm 2010 2009 2009
4. Associated companies,
investments and loans
Non-current
Associated companies* 149 70 122
Available-for-sale investments 22
Other loans 11 20 8
182 90 130
Current
Loans 52 67 54
234 157 184
* Directors` valuation of
associated companies 304 292 395
5 Assets held for sale
5.1 Land and buildings held for
sale
Certain land and buildings
were classified as held for
sale.
A reversal of impairment
amounting to R1 million was
recognised in the current
year. 6 4 4
5.2 Discontinued operation -
Ampath Holdings Trust
Sale of our interest in Ampath
Holdings Trust was completed
in February 2009, following
Competition Commission
approval. The sale of our
units and claims amounted to
R1 027 million.
Our 50% share of the
discontinued operation was as
follows:
Revenue 267 267
Administrative and other
expenses (198) (198)
Operating profit 69 69
Financial expenses (5) (5)
Profit before taxation 64 64
Taxation (18) (18)
Profit for the period before
profit on disposal 46 46
Profit on disposal of
discontinued operation, net of
tax 588 588
Profit for the period from
discontinued operations 634 634
The cash flows are as follows:
Net cash from operating
activities (1) (1)
Net cash from investing
activities (11) (11)
Net cash from financing
activities (4) (4)
The profit on the sale of Ampath Holdings Trust can be reconciled as follows:
Rm
Sale of units and claims 1 027
Less: Carrying value (349)
Claims settled (174)
Net asset value (175)
Profit on disposal 678
Less: Capital gains tax (90)
Profit on disposal of discontinued operation, net of tax 588
Unaudited six Audited
months ended
year ended
31 March 31 March 30 September
Rm 2010 2009 2009
6. Operating profit
After charging:
Depreciation and amortisation 557 652 1 227
Operating lease charges 199 197 410
7. Financial income
Dividends received 1 1 1
Recycling of cash flow hedge
reserve 5 20
Interest received 18 65 150
24 66 171
8. Financial expenses
Foreign exchange losses (net) 1
Ineffectiveness recognised in
the income statement arising
from cash flow hedges (net) 36 2 5
Interest paid 993 1 316 2 425
1 029 1 318 2 431
9. Commitments
Capital commitments 745 951 869
South Africa 461 401 441
United Kingdom 284 550 428
Operating lease commitments 3 090 3 345 3 215
South Africa 1 312 1 115 1 369
United Kingdom 1 778 2 230 1 846
10. Contingent liabilities
(guarantees and suretyships)
South Africa 656 601 632
United Kingdom 109
656 710 632
Condensed segment report
Unaudited six Audited
months ended year ended
31 March 31 March % 30 September
Rm 2010 2009 change 2009
Income statement
Revenue 11 038 11 619 (5.0) 23 232
South Africa 6 014 5 616 7.1 11 832
Hospitals and Emergency
services 5 336 4 873 10 319
Primary care 678 743 1 513
United Kingdom 5 024 6 003 (16.3) 11 400
EBITDA 2 400 2 474 (3.0) 4 927
South Africa 1 035 927 11.7 2 018
Hospitals and Emergency
services 1 029 943 2 042
Primary care 6 (16) (24)
United Kingdom 1 319 1 549 (14.8) 2 919
Capital items 46 (2) (10)
South Africa 1 (1) (9)
United Kingdom 45 (1) (1)
Operating profit 1 843 1 822 1.2 3 700
South Africa 849 756 12.3 1 662
Hospitals and Emergency
services 854 781 1 703
Primary care (5) (25) (41)
United Kingdom 948 1 068 (11.2) 2 048
Capital items 46 (2) (10)
South Africa 1 (1) (9)
United Kingdom 45 (1) (1)
Net interest paid 975 1 251 22.1 2 275
South Africa 200 272 26.5 463
United Kingdom 775 979 20.8 1 812
Statement of financial
position
Total assets 43 816 50 505 (13.2) 45 937
South Africa 9 096 8 447 7.7 8 611
United Kingdom 34 720 42 058 (17.4) 37 326
Debt net of cash 24 862 30 361 18.1 26 454
South Africa 4 212 4 255 1.0 3 903
United Kingdom 20 650 26 106 20.9 22 551
The segment report excludes the disposal group and assets held for sale.
Foreign exchange impact
Reported Adjusted* Reported
31 March 31 March 31 March %
Rm 2010 2010 2009 change
Income statement
Revenue 11 038 12 184 11 619 4.9
South Africa 6 014 6 014 5 616 7.1
United Kingdom 5 024 6 170 6 003 2.8
EBITDA 2 400 2 713 2 474 9.7
South Africa 1 035 1 035 927 11.7
United Kingdom 1 319 1 632 1 549 5.4
Capital items 46 46 (2)
South Africa 1 1 (1)
United Kingdom 45 45 (1)
Operating profit 1 843 2 072 1 822 13.7
South Africa 849 849 756 12.3
United Kingdom 948 1 177 1 068 10.2
Capital items 46 46 (2)
South Africa 1 1 (1)
United Kingdom 45 45 (1)
Net interest paid 975 1 152 1 251 7.9
South Africa 200 200 272 26.5
United Kingdom 775 952 979 2.8
Basic headline earnings per
share (cents) 41.5 42.8 33.3 28.5
South Africa 35.9 35.9 29.8 20.5
United Kingdom 5.6 6.9 3.5 97.1
Adjusted basic headline
earnings per share (cents) 42.9 44.2 33.4 32.3
South Africa 35.9 35.9 29.8 20.5
United Kingdom 7.0 8.3 3.6 130.6
Statement of financial
position
Total assets 43 816 52 037 50 505 3.0
South Africa 9 096 9 096 8 447 7.7
United Kingdom 34 720 42 941 42 058 2.1
Debt net of cash 24 862 29 751 30 361 2.0
South Africa 4 212 4 212 4 255 1.0
United Kingdom 20 650 25 539 26 106 2.2
* The United Kingdom numbers have been recalculated at constant exchange rates
to remove the impact of foreign currency fluctuations.
Adjusted to exclude the ineffectiveness on the interest rate swaps.
Salient features
Unaudited Unaudited Audited
31 March 31 March 30 September
2010 2009 2009
Share statistics
Ordinary shares
Total shares in issue (million) 1 271 1 263 1 266
Weighted average number of shares
(million) 1 269 1 262 1 263
Diluted weighted average number
of shares (million) 1 318 1 264 1 275
Market price per share (cents) 1 320 799 1 037
Currency conversion guide (R:GBP)
Closing exchange rate 11.03 13.64 11.95
Average exchange rate for the
period 12.00 14.73 13.73
Registered office: 76 Maude Street (corner West Street), Sandton 2196,Private
Bag X34, Benmore 2010
Executive directors: RH Friedland (Chief Executive Officer), VE Firman (Chief
Financial Officer), VLJ Litlhakanyane
Non-executive directors: SJ Vilakazi (Chairman), APH Jammine, JM Kahn, MJ
Kuscus, HR Levin, KD Moroka, MI Sacks, N Weltman
Company Secretary: L Kok
Sponsor: Nedbank Capital, a division of Nedbank Group Limited
Transfer secretaries: Link Market Services (Proprietary) Limited, 11 Diagonal
Street, Johannesburg, 2001
Investor relations: +27 11 301 0212; ir@netcare.co.za
Date: 17/05/2010 08:00:04 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
NTC
NTC - Netcare Limited - Unaudited Group interim results for the six months ended
31 March 2010
Netcare Limited
("Netcare", "the Company" or "the Group")
Registration number: 1996/008242/06
(Incorporated in the Republic of South Africa)
JSE share code: NTC
ISIN code: ZAE000011953
Unaudited Group interim results for the six months ended 31 March 2010
14% increase in constant currency operating profit 2010: R2 072 million
2009: R1 822 million
28% increase in adjusted basic headline earnings per share 2010: 42.9 cents
2009: 33.4 cents
19% increase in capital reduction per share 2010: 19.0 cents
2009: 16.0 cents
Commentary
Group financial review
The Group is pleased to announce a 28.4% increase in adjusted basic headline
earnings per share (HEPS) to 42.9 cents for the six months under review. If the
currency impact is excluded, adjusted basic HEPS increased 32.3% to 44.2 cents.
Currency conversion had a major impact on both the half-year results and
financial position of the Group. This was due to the prevailing strength of the
Rand relative to the British Pound during the period. The average exchange rate
used for converting income and expenditure was R12.00 to the Pound, compared to
R14.73 in the comparative prior period, a change of 18.5%. The closing exchange
rate used to convert assets and liabilities at 31 March 2010 was R11.03 to the
Pound, compared to R13.64 at 31 March 2009, a change of 19.1%.
Despite revenue growth in both the South African and United Kingdom (UK)
operations, Group revenue was down 5.0% to R11 038 million (2009: R11 619
million) due to Rand appreciation. However, the Group`s operating margin
improved from 15.7% to 16.7% reflecting underlying efficiency improvements and
sound financial management.
Net financial expenses decreased by R247 million to R1 005 million, a 19.7%
reduction over last year. This was driven by reduced interest rates in South
Africa (SA), lower average levels of debt compared to the prior period and the
lower average exchange rate applicable to UK borrowing costs. The interest rate
swaps are hedge accounted and fair value adjustments are recognised directly in
equity to the extent that such hedging proves to be effective. Financial
expenses were negatively affected by a GBP3.0 million non-cash charge,
representing the ineffective portion of the fair value adjustment for the
period.
An interim capital reduction of 19.0 cents per share (2009: 16.0 cents) has been
declared, representing an 18.8% increase over the prior year.
Net debt at R24 862 million reduced from R26 454 million at 30 September 2009.
This reduction was impacted by fluctuations in the closing exchange rate, which
reduced debt by R1 723 million, and scheduled debt repayments in the UK, but
offset by higher borrowings in SA required to fund ongoing capital and seasonal
working capital requirements.
Equity decreased by R136 million from 30 September 2009. This was mainly due to
a decrease in the foreign currency translation reserve, and unfavourable non-
cash mark-to-market fair value adjustments on the UK interest rate swaps
recognised in the cash flow hedge accounting reserve.
Cash generated by operations rose 5.9% to R1 894 million from R1 788 million in
the prior comparative period primarily as a result of better cash conversion.
The Group converted 78.9% (2009: 72.3%) of its EBITDA into cash.
Capital expenditure of R423 million was incurred compared to R592 million in the
prior period, mainly due to the timing of capital expenditure in SA and the UK.
Divisional review
South Africa
Revenue grew 7.1% to R6 014 million from R5 616 million, while operating profit
rose 12.3% to R849 million (2009: R756 million). The operating profit margin
improved from 13.5% to 14.1%. The South African operations contributed 86.5%
(2009: 89.5%) to basic HEPS.
Cash generated by the SA operations of R738 million remained strong but was
slightly lower than a year earlier. This was mainly due to higher working
capital requirements, following an increase in The Commissioner for Occupational
Injury and Disease (COID) debtors and stock levels required for the Easter
holidays. Total capital expenditure was R270 million (2009: R293 million) of
which R161 million was spent on replacements and R109 million on expansionary
expenditure.
The construction of the 425-bed Lesotho Hospital PPP remains on track and is
scheduled for completion in 2011. The first of three off-site primary care
clinics was opened this month, while the other two will be opened before month-
end.
This year, Netcare Education celebrates 21 years of training nursing staff.
Currently over 3 500 students are being trained at its five campuses.
Netcare maintained its position as the most empowered company in the JSE`s
healthcare sector and was ranked thirteenth most empowered listed company
overall in the Financial Mail`s Top Empowerment Companies survey.
Netcare expresses its deepest regret at the passing away of Dr Molefi Sefularo,
honourable Deputy Minister of Health.
We congratulate Malebona Precious Matsoso on her appointment as Director General
for the Department of Health.
Hospitals and Emergency services
Revenue from Hospitals and Emergency services was up 9.5% to R5 336 million
(2009: R4 873 million), while EBITDA rose 9.1% to R1 029 million (2009: R943
million).
The Hospital division maintained patient days off a high base with a 10.2%
increase in revenue per patient day.
The number of registered beds increased from 8 766 to 8 843 during the six
months under review and Netcare continued to improve its infrastructure,
including the addition of a 17-bed neo-natal intensive care unit at Netcare
Garden City, commissioning of a new cardiac catherisation laboratory at Netcare
Linksfield, renovating a 30-bed paediatric unit at Netcare Park Lane and the
refurbishment of five theatres at Netcare Milpark. A fully integrated oncology
centre was opened at Netcare Clinton, specialising in intensity modulated and
image guided radiation therapy. In addition, the first neuro-interventional MRI
(magnetic resonance imaging) and CT (computed tomography) theatre in Africa was
opened at Netcare N1 City.
Emergency services division, Netcare 911, recorded 5.3% growth in total lives
under management to 7.9 million lives. The division continued to focus on
improving operational efficiencies, which supported the results. Netcare 911
became SA`s first aeromedical emergency evacuation specialist to become
accredited by the European Air Medical Institute (EURAMI) reflecting the high
level of service excellence provided to patients.
Primary care
The division achieved a significant turnaround, following a strategic review of
the managed care business and resultant termination of loss making contracts.
Revenue decreased 8.7% to R678 million (2009: R743 million) primarily due to a
contraction in managed care lives in Prime Cure, which reduced 28.4% to 172 000
lives. Medicross is rolling out a new practice management system which should
enhance its overall efficiencies.
Operating loss decreased significantly to R5 million compared to R25 million in
the prior period. The performance was bolstered by improved operational
efficiencies and internal controls.
United Kingdom
Netcare owns a 50.1% stake in General Healthcare Group (GHG), which operates a
national network of private hospitals across the UK under the BMI brand name.
GHG delivered a solid performance underpinned by continued demand for private
healthcare facilities despite the recessionary environment, record unemployment
rates and little to no inflation. The business continues to benefit from ongoing
investment in extending its breadth of services and its geographic presence.
Overall caseload in the UK grew 5.6% year-on-year, reflecting both organic
growth and the integration of the prior year acquisitions of Fitzroy Square,
Woodlands Hospital and City Medical consulting suites, as well as the addition
of the Kingston private patient unit in the period.
Private Medical Insurance (PMI) patient volumes remained stable on a same site
basis, excluding a decline resulting from the exceptionally severe weather
conditions experienced in January. The shift in business mix emanating from 2009
continued, with strong growth in NHS patients offsetting lower numbers of self-
pay patients. Pleasingly, the self-pay market is showing early signs of
recovery. The NHS Choose and Book (C&B) programme, which allows the public,
through their GPs, to select private facilities directly for their treatment has
been well received and uptake has been encouraging. Future demand under this
initiative should entrench the private healthcare sector as a key partner to the
NHS in ensuring the delivery of the UK`s national healthcare needs.
Revenue from UK operations for the six months rose 2.8% to GBP418.7 million
(2009: GBP407.4 million).
EBITDA was up 4.7% to GBP110.9 million (2009: GBP105.9 million) and operating
profit 9.4% higher at GBP79.2 million (2009: GBP72.4 million). The performance
reflected the benefits of ongoing efficiency improvements and standardisation,
coupled with stringent cost control, which underpinned margins.
The results were boosted by a non-recurring capital benefit of GBP3.7 million
relating to a gain on the bargain purchase of assets under a business
combination. Non-recurring expenses, comprising mostly restructuring and
retrenchment costs, of GBP2.1 million were incurred (2009: GBP3.5 million).
Profit after tax amounted to GBP15.3 million, an increase of 188.7% over the
prior period.
Capital expenditure including intangible assets amounted to GBP14.3 million
compared to GBP25.3 million in 2009. GHG continued to invest in its hospital
infrastructure to ensure that its patients and consultants have access to
leading-edge medical equipment and facilities.
Net debt reduced by GBP14 million to GBP1 873 million (September 2009: GBP1 887
million). Working capital increased by GBP13 million since the 2009 year-end due
to underlying business growth and the increased NHS caseload at longer payment
cycles. Cash collection remains a key focus to manage the impact on resources of
this industry-wide shift in business mix. GHG continued to meet its financial
covenants and has sufficient headroom for the remaining debt term. The debt
relating to the UK is without recourse to the SA operations.
As per the SENS announcement on 8 December 2009, Netcare`s partners in GHG, in
accordance with the terms of the Partnership Agreement, informed Netcare of
their desire to pursue an Initial Public Offering (IPO) of the GHG Operating
Company (OpCo) on the London Stock Exchange (LSE). Whilst preparation for the
IPO has progressed well, given prevailing market conditions, a final decision as
to the IPO and its timing has yet to be made. Shareholders will be updated as
and when the position changes.
Outlook
Barring any unforeseen circumstances, and particularly given the general
financial soundness of medical aid funds and the strong underlying demand for
private healthcare, the outlook for SA remains stable and positive. The
prospects of healthcare reform facilitating greater healthcare access and care
for all South Africans is seen as an imperative and viewed positively in terms
of the Group`s wide range of healthcare services on offer.
Over and above the capital expenditure planned for the year of R800 million in
SA, the Board has approved an additional R670 million to be invested over the
next three years on capital projects. These include the new Waterfall Hospital
in Midrand, Gauteng, 12 large projects that will add 295 new beds, a
refurbishment of 238 beds, three new theatres, 30 doctors consulting rooms and
21 smaller projects.
Recessionary pressures in the UK economy are expected to limit the growth of PMI
and self-pay spending on private healthcare in the short term. However, the
growth in NHS activity should provide sufficient offset. The demographics of an
ageing population and increasing incidence of lifestyle diseases are expected to
support growth in private caseload over the longer term. The underlying
fundamentals of the UK private healthcare sector remain sound, with NHS
budgetary pressures likely to increase demand for private facilities further.
The scale and quality of GHG`s facilities, infrastructure, consultant network
and management team position the company well to succeed in the current market
and to benefit from the compelling prospects for private healthcare in the UK.
Board changes
Andile Ngcaba resigned as a non-executive director effective 7 April 2010. The
Board expresses its gratitude and appreciation to Andile for his significant
contribution to Netcare over his term of office.
Declaration of capital reduction number 22
In accordance with the authority given to the directors by way of an ordinary
resolution passed on 29 January 2010, the Board of Directors declared on
Thursday, 13 May 2010 an interim capital reduction (number 22) out of share
premium of 19.0 cents per ordinary share, payable on Monday, 26 July 2010, to
shareholders recorded in the register of the Company as at Friday, 23 July 2010.
In terms of Article 54.12 of the Company`s Articles of Association, all capital
reductions with a value of R5,00 or less will be donated to a registered charity
approved by the directors of the Company.
In compliance with the requirements of Strate, the following dates are
applicable:
Last day to trade cum the capital reduction Friday, 16 July 2010
(LDT)
Trading ex capital reduction commences Monday, 19 July 2010
Record date Friday, 23 July 2010
Date of payment Monday, 26 July 2010
Share certificates may not be dematerialised nor rematerialised between Monday,
19 July 2010 and Friday, 23 July 2010, both days inclusive.
On behalf of the Board
Jerry Vilakazi Chairman
Richard Friedland Chief Executive Officer
Vaughan Firman Chief Financial Officer
Sandton
13 May 2010
Group statement of financial position
Unaudited Unaudited Audited
31 March 31 March 30 September
Rm Note 2010 2009 2009
Assets
Non-current assets
Property, plant and
equipment 23 538 27 818 25 097
Goodwill 13 235 16 271 14 303
Intangible assets 337 397 366
Associated companies,
investments and loans 4 182 90 130
Deferred taxation 1 040 638 1 147
Total non-current assets 38 332 45 214 41 043
Current assets
Loans and receivables 4 52 67 54
Inventories 677 643 621
Trade and other receivables 3 661 3 963 3 416
Cash and cash equivalents 1 094 618 803
5 484 5 291 4 894
Assets held for sale 5 6 4 4
Total current assets 5 490 5 295 4 898
Total assets 43 822 50 509 45 941
Equity and liabilities
Capital and reserves
Ordinary share capital and
premium 819 1 240 1 065
Treasury shares (767) (767) (767)
Option premium on
convertible bond 169 175 169
Other reserves (11) (98) 231
Retained earnings 3 966 2 982 3 446
Equity attributable to
owners of the parent 4 176 3 532 4 144
Preference share capital and
premium 644 644 644
Non-controlling interest 2 177 2 070 2 345
Total shareholders` equity 6 997 6 246 7 133
Non-current liabilities
Long-term debt 23 613 29 056 25 423
Financial liability -
Derivative financial
instruments 2 739 3 914 2 797
Post-retirement benefit
obligations 288 132 297
Deferred lease liability 119 98 114
Deferred taxation 4 617 5 866 5 041
Provisions 39 48 48
Total non-current
liabilities 31 415 39 114 33 720
Current liabilities
Trade and other payables 2 841 2 934 2 924
Short-term debt 1 920 1 871 1 745
Taxation payable 226 292 330
Bank overdrafts 423 52 89
Total current liabilities 5 410 5 149 5 088
Total equity and liabilities
43 822 50 509 45 941
Group income statement
Unaudited six Audited
Note months ended year ended
31 March 31 March % 30 September
Rm 2010 2009 change 2009
Continuing operations
Revenue 11 038 11 619 (5.0) 23 232
Cost of sales (6 404) (6 833) (13 701)
Gross profit 4 634 4 786 (3.2) 9 531
Other income 118 111 232
Administrative and
other expenses (2 909) (3 075) (6 063)
Operating profit 6 1 843 1 822 1.2 3 700
Financial income 7 24 66 171
Financial expenses 8 (1 029) (1 318) 21.9 (2 431)
Attributable earnings
of associates 16 10 27
Profit before
taxation 854 580 47.2 1 467
Taxation (185) (142) (350)
Profit for the period
from continuing
operations 669 438 52.7 1 117
Discontinued
operation
Profit for the period
from discontinued
operation 5 634 634
Profit for the period 669 1 072 (37.6) 1 751
Attributable to:
Owners of the parent 551 1 002 1 564
Preference
shareholders 28 37 73
Profit attributable
to shareholders 579 1 039 1 637
Non-controlling
interest 90 33 114
669 1 072 1 751
Earnings per share
(cents)
Basic 43.4 79.4 (45.3) 123.8
Continuing operations 43.4 29.2 48.6 73.6
Discontinued
operation 50.2 50.2
Diluted 41.8 79.3 (47.3) 122.6
Continuing operations 41.8 29.1 43.6 72.9
Discontinued
operation 50.2 49.7
Capital reduction per
share (cents) 19.0 16.0 18.8 38.0
Group statement of comprehensive income
Unaudited six Audited
months ended year ended
31 March 31 March 30 September
Rm 2010 2009 2009
Profit for the period 669 1 072 1 751
Other comprehensive loss, net of
tax (540) (3 499) (3 086)
Actuarial losses on defined
benefit plans (130)
Effect of cash flow hedge
accounting (134) (3 274) (2 086)
Effect of translation of foreign
entities (406) (225) (870)
Total comprehensive income/(loss)
for the period 129 (2 427) (1 335)
Attributable to:
Owners of the parent 268 (820) (48)
Preference shareholders 28 37 73
Non-controlling interest (167) (1 644) (1 360)
129 (2 427) (1 335)
Group statement of cash flows
Unaudited six Audited
months ended
year ended
31 March 31 March 30 September
Rm 2010 2009 2009
Cash flows from operating
activities
Cash received from customers 10 664 10 976 22 921
Cash paid to suppliers and
employees (8 770) (9 188) (18 281)
Cash generated from operations 1 894 1 788 4 640
Interest paid (993) (1 321) (2 430)
Continuing operations (993) (1 316) (2 425)
Discontinued operation (5) (5)
Taxation paid (302) (247) (526)
Continuing operations (302) (241) (520)
Discontinued operation (6) (6)
Ordinary dividends paid by
subsidiaries (1) (3) (3)
Preference dividends paid (28) (37) (73)
Capital reductions paid (279) (227) (430)
Net cash from operating activities 291 (47) 1 178
Continuing operations 291 (46) 1 179
Discontinued operation (1) (1)
Cash flows from investing
activities
Purchase of property, plant and
equipment (423) (592) (1 283)
Continuing operations (423) (581) (1 272)
Discontinued operation (11) (11)
Proceeds on disposal of property,
plant and equipment 46 5 60
Additions to intangible assets (26) (53) (144)
(Increase)/decrease in investments
and loans (34) 30 40
Proceeds from disposal of
businesses 852 852
Interest received 18 65 150
Dividends received 1 1 1
Acquisition of subsidiaries and
businesses, net of cash acquired (19) (9) (9)
Net cash from investing activities (437) 299 (333)
Continuing operations (437) 310 (322)
Discontinued operation (11) (11)
Cash flows from financing
activities
Proceeds from issue of ordinary
shares 33 3 31
Repurchase of shares (3) (11)
Settlement of derivatives (19)
Long-term liabilities
raised/(repaid) 2 (532) (840)
Short-term liabilities
raised/(repaid) 128 (95) (139)
Net cash from financing activities 163 (627) (978)
Continuing operations 163 (623) (974)
Discontinued operation (4) (4)
Net increase/(decrease) in cash
and cash equivalents 17 (375) (133)
Translation effects on cash and
cash equivalents of foreign
entities (60) (21) (115)
Cash and cash equivalents at
beginning of the period 714 962 962
Cash and cash equivalents at end
of the period 671 566 714
Group condensed statement of changes in equity
Unaudited six Audited
months ended year ended
31 March 31 March 30 September
Rm 2010 2009 2009
Balance at beginning of period 7 133 8 851 8 851
Ordinary shares issued 33 3 31
Capital reduction paid (279) (227) (430)
Repurchase of shares 68 68
Repurchase of convertible bond 4
Share-based payment reserve
movements 12 15 32
Capital gains tax on capital
reductions attributable to
treasury shares (7)
Preference dividends paid (28) (37) (73)
Other movements (3) (8)
Total comprehensive income/(loss)
for the period 129 (2 427) (1 335)
Balance at the end of the period 6 997 6 246 7 133
Comprising:
Ordinary share capital and
premium 819 1 240 1 065
Treasury shares (767) (767) (767)
Option premium on convertible
bond 169 175 169
Foreign currency translation
reserve 759 1 306 976
Cash flow hedge accounting
reserve (1 282) (1 827) (1 216)
Other reserves 512 423 471
Retained earnings 3 966 2 982 3 446
Equity attributable to owners of
the parent 4 176 3 532 4 144
Preference shareholders 644 644 644
Non-controlling interest 2 177 2 070 2 345
Total shareholders` equity 6 997 6 246 7 133
Headline earnings
Unaudited six Audited
months ended year ended
31 March 31 March % 30 September
Rm 2010 2009 change 2009
Reconciliation of headline
earnings
Profit for the period from
continuing operations 669 438 52.7 1 117
Less:
Preference shareholders (28) (37) (73)
Non-controlling interest (90) (33) (114)
Earnings used in the
calculation of basic
earnings per share from
continuing operations 551 368 49.7 930
Adjusted for:
Gain on bargain purchase (44)
Impairment of investments 2
Impairment of land and
buildings 10 13
Reversal of impairment of
land and buildings (1)
Profit on disposal of
property, plant and
equipment (1) (4) (5)
Tax effect of headline
adjusting items 1 2
Non-controlling share of
headline adjusting items 22
Headline earnings from
continuing operations 527 375 942
Earnings from discontinued
operation 634 634
Adjusted for:
Profit on disposal of
discontinued operation (678) (678)
Tax effect of headline
adjusting item 90 90
Headline earnings from
discontinued operation 46 46
Headline earnings 527 421 25.2 988
Adjusted for:
Ineffectiveness arising
from interest rate swaps 36 2 5
Non-controlling share of
headline adjusting item (18) (1) 1
Adjusted headline earnings 545 422 29.1 994
Headline earnings per
share (cents)
Basic 41.5 33.3 24.6 78.2
Continuing operations 41.5 29.7 39.7 74.6
Discontinued operation 3.6 3.6
Diluted 40.0 33.3 20.1 77.5
Continuing operations 40.0 29.7 34.7 73.9
Discontinued operation 3.6 3.6
Adjusted basic headline
earnings per share 42.9 33.4 28.4 78.7
Continuing operations 42.9 29.8 44.0 75.1
Discontinued operation 3.6 3.6
Notes
1. Basis of preparation and accounting policies
The interim financial information for the six months ended 31 March 2010 has
been prepared in accordance with the measurement and recognition criteria of
International Financial Reporting Standards (IFRS) and complies with IAS 34
Interim Financial Reporting.
The accounting policies applied in the preparation of the interim financial
statements are consistent with those applied for the year ended 30 September
2009, except for the following:
- IFRS 3 Business Combinations (revised) and IAS 27 Consolidated and Separate
Financial Statements (amended)
- IFRS 7 Financial Instruments: Disclosures (amended)
- IFRS 8 Operating Segments
- Improvements to International Financial reporting standards 2008 and 2009
(certain improvements have been adopted earlier than required)
The implementation of these standards had no impact on the financial position or
performance of the Group and has mainly been of a presentation and disclosure
nature.
2. Acquisition of businesses
The following business combinations took effect during the year:
2.1 Effective 1 October 2009, the Group acquired an additional 25% in Netcare
Parklands Linac Joint Venture (Proprietary) Limited (Parklands Linac) and 15% in
Netcare St Anne`s Linac Joint Venture (Proprietary) Limited (St Anne`s Linac),
changing the Group`s effective holding to 75% and 65% respectively. Both were
previously accounted for as joint ventures.
2.2 With effect from 1 January 2010, the Group acquired 100% of the shares in
Sterilplus Limited in the United Kingdom. Subsequent to acquisition, the company
was renamed to BMI Hospital Decontamination Limited.
From the dates of acquisition to 31 March 2010, the following amounts have been
included in the Group`s income statement:
Parklands St Anne`s Sterilplus
Rm Linac Linac Limited Total
Revenue 9 3 10 22
Operating profit 3 1 (1) 3
The following table reflects the fair values at acquisition:
Parklands Linac St Anne`s Sterilplus
Rm Linac Limited
Property, plant and
equipment 16 1 58
Loans and receivables 2 1
Trade and other
receivables 3 1 7
Cash and cash equivalents 1
Long-term debt (7)
Short-term debt (4)
Trade and other payables (9) (3) (5)
Taxation payable (1)
Fair value of net assets
acquired 61
Investment in joint
venture (1)
(1) 61
Goodwill/(gain on bargain
purchase) 3 1 (44)
Purchase consideration 2 1 17
Cash and cash equivalents
in acquiree (1)
Cash outflow on
acquisition 2 1 16
The fair values reflected above are equal to the carrying values at acquisition.
3. Reclassification of comparative information
Statement of financial position
Long-term provisions in the March 2009 statement of financial position have been
reclassified from trade and other payables, included in current liabilities, to
provisions which are classified as non-current liabilities. This adjustment is
in line with the disclosure at 30 September 2009.
Unaudited six Audited
months ended year ended
31 March 31 March 30 September
Rm 2010 2009 2009
4. Associated companies,
investments and loans
Non-current
Associated companies* 149 70 122
Available-for-sale investments 22
Other loans 11 20 8
182 90 130
Current
Loans 52 67 54
234 157 184
* Directors` valuation of
associated companies 304 292 395
5 Assets held for sale
5.1 Land and buildings held for
sale
Certain land and buildings
were classified as held for
sale.
A reversal of impairment
amounting to R1 million was
recognised in the current
year. 6 4 4
5.2 Discontinued operation -
Ampath Holdings Trust
Sale of our interest in Ampath
Holdings Trust was completed
in February 2009, following
Competition Commission
approval. The sale of our
units and claims amounted to
R1 027 million.
Our 50% share of the
discontinued operation was as
follows:
Revenue 267 267
Administrative and other
expenses (198) (198)
Operating profit 69 69
Financial expenses (5) (5)
Profit before taxation 64 64
Taxation (18) (18)
Profit for the period before
profit on disposal 46 46
Profit on disposal of
discontinued operation, net of
tax 588 588
Profit for the period from
discontinued operations 634 634
The cash flows are as follows:
Net cash from operating
activities (1) (1)
Net cash from investing
activities (11) (11)
Net cash from financing
activities (4) (4)
The profit on the sale of Ampath Holdings Trust can be reconciled as follows:
Rm
Sale of units and claims 1 027
Less: Carrying value (349)
Claims settled (174)
Net asset value (175)
Profit on disposal 678
Less: Capital gains tax (90)
Profit on disposal of discontinued operation, net of tax 588
Unaudited six Audited
months ended
year ended
31 March 31 March 30 September
Rm 2010 2009 2009
6. Operating profit
After charging:
Depreciation and amortisation 557 652 1 227
Operating lease charges 199 197 410
7. Financial income
Dividends received 1 1 1
Recycling of cash flow hedge
reserve 5 20
Interest received 18 65 150
24 66 171
8. Financial expenses
Foreign exchange losses (net) 1
Ineffectiveness recognised in
the income statement arising
from cash flow hedges (net) 36 2 5
Interest paid 993 1 316 2 425
1 029 1 318 2 431
9. Commitments
Capital commitments 745 951 869
South Africa 461 401 441
United Kingdom 284 550 428
Operating lease commitments 3 090 3 345 3 215
South Africa 1 312 1 115 1 369
United Kingdom 1 778 2 230 1 846
10. Contingent liabilities
(guarantees and suretyships)
South Africa 656 601 632
United Kingdom 109
656 710 632
Condensed segment report
Unaudited six Audited
months ended year ended
31 March 31 March % 30 September
Rm 2010 2009 change 2009
Income statement
Revenue 11 038 11 619 (5.0) 23 232
South Africa 6 014 5 616 7.1 11 832
Hospitals and Emergency
services 5 336 4 873 10 319
Primary care 678 743 1 513
United Kingdom 5 024 6 003 (16.3) 11 400
EBITDA 2 400 2 474 (3.0) 4 927
South Africa 1 035 927 11.7 2 018
Hospitals and Emergency
services 1 029 943 2 042
Primary care 6 (16) (24)
United Kingdom 1 319 1 549 (14.8) 2 919
Capital items 46 (2) (10)
South Africa 1 (1) (9)
United Kingdom 45 (1) (1)
Operating profit 1 843 1 822 1.2 3 700
South Africa 849 756 12.3 1 662
Hospitals and Emergency
services 854 781 1 703
Primary care (5) (25) (41)
United Kingdom 948 1 068 (11.2) 2 048
Capital items 46 (2) (10)
South Africa 1 (1) (9)
United Kingdom 45 (1) (1)
Net interest paid 975 1 251 22.1 2 275
South Africa 200 272 26.5 463
United Kingdom 775 979 20.8 1 812
Statement of financial
position
Total assets 43 816 50 505 (13.2) 45 937
South Africa 9 096 8 447 7.7 8 611
United Kingdom 34 720 42 058 (17.4) 37 326
Debt net of cash 24 862 30 361 18.1 26 454
South Africa 4 212 4 255 1.0 3 903
United Kingdom 20 650 26 106 20.9 22 551
The segment report excludes the disposal group and assets held for sale.
Foreign exchange impact
Reported Adjusted* Reported
31 March 31 March 31 March %
Rm 2010 2010 2009 change
Income statement
Revenue 11 038 12 184 11 619 4.9
South Africa 6 014 6 014 5 616 7.1
United Kingdom 5 024 6 170 6 003 2.8
EBITDA 2 400 2 713 2 474 9.7
South Africa 1 035 1 035 927 11.7
United Kingdom 1 319 1 632 1 549 5.4
Capital items 46 46 (2)
South Africa 1 1 (1)
United Kingdom 45 45 (1)
Operating profit 1 843 2 072 1 822 13.7
South Africa 849 849 756 12.3
United Kingdom 948 1 177 1 068 10.2
Capital items 46 46 (2)
South Africa 1 1 (1)
United Kingdom 45 45 (1)
Net interest paid 975 1 152 1 251 7.9
South Africa 200 200 272 26.5
United Kingdom 775 952 979 2.8
Basic headline earnings per
share (cents) 41.5 42.8 33.3 28.5
South Africa 35.9 35.9 29.8 20.5
United Kingdom 5.6 6.9 3.5 97.1
Adjusted basic headline
earnings per share (cents) 42.9 44.2 33.4 32.3
South Africa 35.9 35.9 29.8 20.5
United Kingdom 7.0 8.3 3.6 130.6
Statement of financial
position
Total assets 43 816 52 037 50 505 3.0
South Africa 9 096 9 096 8 447 7.7
United Kingdom 34 720 42 941 42 058 2.1
Debt net of cash 24 862 29 751 30 361 2.0
South Africa 4 212 4 212 4 255 1.0
United Kingdom 20 650 25 539 26 106 2.2
* The United Kingdom numbers have been recalculated at constant exchange rates
to remove the impact of foreign currency fluctuations.
Adjusted to exclude the ineffectiveness on the interest rate swaps.
Salient features
Unaudited Unaudited Audited
31 March 31 March 30 September
2010 2009 2009
Share statistics
Ordinary shares
Total shares in issue (million) 1 271 1 263 1 266
Weighted average number of shares
(million) 1 269 1 262 1 263
Diluted weighted average number
of shares (million) 1 318 1 264 1 275
Market price per share (cents) 1 320 799 1 037
Currency conversion guide (R:GBP)
Closing exchange rate 11.03 13.64 11.95
Average exchange rate for the
period 12.00 14.73 13.73
Registered office: 76 Maude Street (corner West Street), Sandton 2196,Private
Bag X34, Benmore 2010
Executive directors: RH Friedland (Chief Executive Officer), VE Firman (Chief
Financial Officer), VLJ Litlhakanyane
Non-executive directors: SJ Vilakazi (Chairman), APH Jammine, JM Kahn, MJ
Kuscus, HR Levin, KD Moroka, MI Sacks, N Weltman
Company Secretary: L Kok
Sponsor: Nedbank Capital, a division of Nedbank Group Limited
Transfer secretaries: Link Market Services (Proprietary) Limited, 11 Diagonal
Street, Johannesburg, 2001
Investor relations: +27 11 301 0212; ir@netcare.co.za
Date: 17/05/2010 08:00:04 Supplied by www.sharenet.co.za
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