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NTC - Netcare Limited - Audited Group results for the year ended 30 September

Release Date: 15/11/2010 08:00
Code(s): NTC
Wrap Text

NTC - Netcare Limited - Audited Group results for the year ended 30 September 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 Audited Group results for the year ended 30 September 2010 19.6% increase in profit before taxation 101.4% conversion of EBITDA into cash Final distribution of 27.5 cents per share Group financial review Notwithstanding challenging economic conditions, the Group is pleased to announce a 26.2% increase in basic headline earnings per share to 98.7 cents on a constant currency basis. Currency conversion had a major impact on both the year-end results and financial position of the Group, due to the prevailing strength of the Rand relative to the Pound Sterling (Pound) during the year. The average exchange rate used for converting income and expenditure was R11.63 to the Pound compared to R13.73 in the prior year, a change of 15.3%. The closing exchange rate used to convert assets and liabilities at 30 September 2010 was R10.93 to the Pound compared to R11.95 at 30 September 2009, a change of 8.5%. In their respective local currencies, revenue grew in both South Africa (SA) and the United Kingdom (UK). However, due to the Rand appreciation Group revenue decreased by 3.3% to R22 474 million (2009: R23 232 million). The operating margin improved from 15.9% to 16.5%, largely due to efficiency improvements and cost control. Operating profit was impacted by costs of R35 million relating to preparatory work undertaken for the Initial Public Offering (IPO) of General Healthcare Group (GHG) Operating Company (Opco) on the London Stock Exchange. Net financial expenses were 12.5% lower at R1 978 million (2009: R2 260 million). Reduced interest rates in SA, lower average levels of debt and the lower average exchange rate applicable to UK borrowing costs assisted the decrease. Financial expenses were negatively affected by a R103 million non- cash charge, representing the ineffective portion of the fair value adjustment of interest rate swaps for the year. The Group hedges its exposure to interest rate fluctuations through interest rate swaps, and fair value adjustments are recognised directly in equity to the extent that hedging proves to be effective. Group taxation of R294 million, representing an effective tax rate of 16.8%, was favourably impacted by a deferred tax release of R157 million (GBP13.7 million) following a 1% reduction in the UK company tax rate to 27% (effective from 1 April 2011), and non-taxable items in GHG that are expected to reverse in future. Excluding the impact of the rate change, the Group`s effective tax rate was 25.7%. A final distribution of 27.5 cents per share has been declared by way of a capital reduction out of share premium of 6.5 cents per share and a dividend of 21.0 cents per share. Net debt of R24 197 million reduced from R26 454 million at 30 September 2009. The strengthening of the closing exchange rate accounted for R1 912 million of the reduction. In the UK, GHG reduced net debt by GBP11.9 million, despite taking on GBP20.0 million of debt through acquisitions. The SA operations reduced debt levels to R3 706 million. The Group`s cash position remains strong, with net cash and cash equivalents of R1 285 million at year-end (2009: R714 million). Cash generated from operations of R4 934 million (2009: R4 640 million) was underpinned by a stringent focus on working capital optimisation. These efforts improved the conversion ratio of EBITDA into cash to 101.4% (2009: 94.2%). The Group invested R1 284 million in capital expenditure, while R521 million was returned to shareholders in capital reductions. Divisional review South Africa Revenue grew 6.0% to R12 541 million from R11 832 million, while operating profit rose 14.3% to R1 899 million (2009: R1 662 million). The operating profit margin improved from 14.0% to 15.1%. The SA operations contributed 88.1% (2009: 87.1%) to basic headline earnings per share. Cash generated by the SA operations increased by 7.0% to R2 428 million (2009: R2 270 million), benefitting from focused working capital management and centralised shared services. Total capital expenditure was R787 million (2009: R747 million) of which R502 million was spent on replacement and R285 million on expansionary expenditure. Netcare Education celebrated 21 years of providing education to the healthcare sector. The Group continued with its significant contribution during the year, helping address the shortage of skills in the country by training more than 3 700 nurses, paramedics and management students in 2010. For the 2010 FIFA World CupTrade Mark, 22 Netcare hospitals were designated as strategic healthcare providers and Netcare 911 was awarded a tender by National Treasury to provide emergency services during the event. During the Public Sector strike in 2010, Netcare made its facilities and personnel available to assist critically ill patients in need of hospitalisation or care, despite capacity constraints. Netcare 911 transported emergency public patients to Netcare facilities, and over 800 patients who needed urgent medical care were admitted, including more than 200 babies and children. National Renal Care assisted an additional 450 patients requiring urgent dialysis. No charges were levied by Netcare, the doctors or specialists, including radiologists and pathologists, for these services, and Netcare`s contribution was approximately R16 million. Netcare and Netcare 911`s ability to effectively manage the impact of the strike was mostly due to having a robust disaster management plan, which was refined for the 2010 FIFA World CupTrade Mark. Netcare achieved an AA rating from Empowerdex, equivalent to Level 3 compliance in terms of the Department of Trade and Industry (dti) Codes of Good Practice for Broad-based Black Economic Empowerment. This demonstrates our continued commitment to transformation. 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 maintained a top 10 position in the Large Companies category of the Deloitte Best Company to Work For Survey for the sixth consecutive year. Netcare supports the Government`s initiatives to broaden access to quality healthcare to all South Africans. The ANC tabled a discussion document on the National Health Insurance (NHI) scheme at its National General Council. However, details on implementation, funding and resourcing are yet to be finalised. Following Cabinet approval, a Green Paper will be tabled for public comment. We congratulate Dr Gwen Ramokgopa on her appointment as Deputy Minister of Health. In July 2010, the "Regulations Relating to the Obtainment of Information and the Process of Determination and Publication of Reference Price List (RPL)" were declared invalid and set aside in the High Court. As a result the Department of Health (DoH) will have to establish a revised process for determining reference prices for the private health sector. Subsequently the DoH and the Council for Medical Schemes have published a discussion document proposing two parallel processes - the creation of a public price determination authority and the initiation of voluntary interim tariff negotiations. These processes will only commence after an exemption from the Competition Act is obtained. As per the SENS announcement on 9 November 2010, Netcare is pleased to advise that the charges in the organ transplant case brought against Netcare and its Chief Executive Officer, Dr Richard Friedland, have been withdrawn. Netcare Kwa-Zulu (Proprietary) Limited (NKZ) pleaded guilty to certain offences as it became evident that some former employees of NKZ not only contravened the law but also disregarded Netcare`s own internal policies in the period between 2001 and 2003. NKZ agreed to pay a fine and confiscation order of R7.8 million. The employees who were involved in wrongdoing are no longer in the employ of Netcare or NKZ. Hospitals and Emergency services Revenue from Hospitals and Emergency services grew 8.2% to R11 167 million (2009: R10 319 million), and operating profit rose 11.2% to R1 893 million (2009: R1 703 million) due to solid operational leverage and improved cost control. Demand for hospital services was maintained and Hospitals increased patient days by 0.6%, off the high base of 4.9% growth achieved in 2009. Revenue per patient day increased by 8.3%. The number of registered beds increased from 8 766 to 8 874 during the year as Netcare continued to invest in its infrastructure. This included the addition of 28 surgical, five paediatric and four high care beds at Netcare Kuilsriver Hospital, commissioning a 30-bed bone marrow transplant unit at Netcare Pretoria East Hospital, renovating the trauma and intensive care unit (ICU) and adding five trauma ICU beds at Netcare Sunninghill Hospital, and refurbishing an epilepsy monitoring unit and 11 theatres at Netcare Milpark Hospital. The construction of the 132-bed private hospital in Waterfall, Midrand, with our empowerment partners is progressing well and we anticipate it will open during August 2011. The construction of the 425-bed Lesotho Hospital Public Private Partnership (PPP) remains on track and is scheduled to open in September 2011. Three primary care clinics that form part of the overall PPP delivery model commenced operations in May 2010. Our Emergency services division, Netcare 911, has 7.6 million lives under management. Netcare 911 achieved European Air Medical Institute (EURAMI) accreditation earlier in the year, recognising its focus on delivering service excellence to its clients. Netcare 911 was also awarded the prestigious "Air Ambulance Provider of the Year" adjudicated by the International Travel Insurance Journal. This is a first for an African based service provider and Netcare 911 competed against 130 international service providers, including CEGA (UK) and Sky Services (Canada) in the final round. Primary Care The division achieved a significant turnaround, following a strategic review of the Primary Care business. The division terminated loss making managed healthcare contracts and poorly performing Medicross clinic administration contracts. Revenue decreased by 9.2% to R1 374 million (2009: R1 513 million) mainly due to a 29.0% contraction in managed care lives in Prime Cure. Operating profit increased significantly to R6 million compared to a R41 million loss in the prior year. The division is coordinating Netcare`s participation in the National HIV Counselling and Testing (HCT) campaign launched by the Minister of Health in April 2010. United Kingdom GHG delivered positive results notwithstanding the recessionary environment and significant political change in the UK. During the year, the business was successful in extending its services and geographic presence. GHG acquired the Southend Day Care Centre (Essex), added the Kingston NHS Private Patient Unit (PPU) in London and opened the BMI Syon Clinic (London). In May 2010, GHG completed the acquisition of the Abbey Group, consisting of three hospitals with a total of 70 registered beds, as well as a 42.5% stake in the Transform cosmetic surgery business. Caseload grew by 5.8%, with 50% attributable to acquisitions. This was driven by strong growth in NHS cases through the Choose and Book (C&B) programme, which affords public patients the choice to be treated in a private facility. The C&B programme gained traction during the year and growing demand for C&B procedures is entrenching the private healthcare sector as a key partner to the NHS. GHG has established itself as a significant provider in this market and grew its monthly caseload six fold during the course of the year. Private Medical Insurance (PMI) patient volumes declined in the second half of the year. Demand for self-pay procedures remains below historical norms as consumers continue to be affected by the recession, particularly rising unemployment and diminishing disposable income. This in turn places a greater burden on the NHS, underpinning the important role of C&B service providers. Revenue grew by 2.8% to GBP855.0 million (2009: GBP831.5 million). EBITDA increased 3.9% to GBP221.5 million (2009: GBP213.1 million) and operating profit was 1.6% higher at GBP150.3 million (2009: GBP147.9 million). Operating expenses include IPO preparatory costs of GBP2.5 million. Financial expenses were adversely impacted by an GBP8.7 million non-cash charge, representing the ineffective portion of the movement in interest rate swaps. The net tax credit included a GBP13.7 million benefit following the substantive enactment of a 1% decrease in UK tax rates to 27%. Profit after tax grew 87.5% from GBP16.0 million to GBP30.0 million. Capital expenditure amounted to GBP43.2 million compared to GBP37.6 million in 2009 as GHG continued to invest in its hospital infrastructure to maintain its market-leading position. Major projects included equipping the new BMI Syon Clinic in London, commencing the refurbishment and regeneration of the BMI Park Hospital in Nottingham, and the phased upgrade of seven operating theatres at the BMI Alexandra Hospital in Manchester. Net debt reduced by GBP11.9 million to GBP1 875.2 million (September 2009: GBP1 887.1 million) despite the consolidation of a further GBP20.0 million of debt on the acquisition of Transform. This debt is without recourse to GHG. Working capital was tightly controlled and improved over the year. Cash collection remained a key operational focus, serving to mitigate the impact on resources as the business mix shifts towards increased NHS caseload at longer payment cycles. All financial covenants were achieved with sufficient headroom. All UK debt 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 IPO of the GHG OpCo on the London Stock Exchange. While preparations have progressed well, prevailing market conditions have delayed a final decision on the IPO and its timing. Shareholders will be updated as and when the position changes. Outlook Netcare remains confident that the demand for private healthcare at both primary and tertiary levels will be sustained in SA over the medium and long term. The benefits gained in the past year from lower interest rates are not expected to be repeated in 2011. Recessionary pressures in the UK economy are expected to constrain the growth of PMI and self-pay spending on private healthcare in the short term. Growth in NHS activity through C&B is expected to continue, provided NHS funding does not come under further financial pressure. The proposed UK DoH`s White Paper reforms are positive for the private sector in the longer term, but they may take a few years to implement and could be disruptive over the short term. Audit opinion of the independent auditors These condensed financial statements have been extracted from the Group audited annual financial statements on which Grant Thornton has issued an unqualified audit report. This report is available for inspection at the Company`s registered office. Declaration of capital reduction number 23 and dividend number 3 The Board of Directors declared a final capital reduction (number 23) out of share premium of 6.5 cents per ordinary share and a dividend (number 3) of 21.0 cents per ordinary share, on Thursday, 11 November 2010. The final capital reduction is in accordance with the authority given to the directors by way of an ordinary resolution passed on 29 January 2010, and the dividend is in terms of the Company`s Articles of Association. In compliance with the requirements of Strate, the following dates are applicable: Friday, 14 January 2011 Last day to trade cum the capital reduction/dividend (LDT) Trading ex capital reduction/dividend Monday, 17 January 2011 commences Record date Friday, 21 January 2011 Date of payment Monday, 24 January 2011 Share certificates may not be dematerialised nor rematerialised between Monday, 17 January 2011 and Friday, 21 January 2011, both days inclusive. On behalf of the Board Jerry Vilakazi Richard Friedland Vaughan Firman Chairman Chief Executive Chief Financial Officer Officer Sandton 11 November 2010 Group statement of financial position as at 30 September Rm Notes 2010 2009 2008 Assets Non-current assets Property, plant and equipment 23 852 25 097 29 732 Goodwill 13 153 14 303 17 555 Intangible assets 331 366 355 Associated companies, investments 4 180 130 104 and loans Financial asset - Derivative 26 558 financial instruments Deferred taxation 1 446 1 147 689 Total non-current assets 38 988 41 043 48 993 Current assets Investments and loans 4 45 54 75 Financial asset - Derivative 6 financial instruments Inventories 652 621 638 Trade and other receivables 3 290 3 416 3 274 Cash and cash equivalents 1 378 803 1 202 5 371 4 894 5 189 Assets held for sale 5 13 4 304 Total current assets 5 384 4 898 5 493 Total assets 44 372 45 941 54 486 Equity and liabilities Capital and reserves Ordinary share capital and premium 624 1 065 1 601 Treasury shares (767) (767) (5 555) Option premium on convertible bond 164 169 172 Other reserves (496) 231 1 685 Retained earnings 4 632 3 446 6 590 Equity attributable to owners of the parent 4 157 4 144 4 493 Preference share capital and premium 644 644 644 Non-controlling interest 1 728 2 345 3 714 Total shareholders` equity 6 529 7 133 8 851 Non-current liabilities Long-term debt 21 630 25 423 31 530 Financial liability - Derivative 4 113 2 797 1 654 financial instruments Post-retirement benefit obligations 179 297 126 Deferred lease liability 122 114 91 Deferred taxation 4 430 5 041 6 463 Provisions 30 48 56 Total non-current liabilities 30 504 33 720 39 920 Current liabilities Trade and other payables 3 118 2 924 3 105 Short-term debt 3 852 1 745 2 021 Taxation payable 276 330 268 Bank overdrafts 93 89 240 7 339 5 088 5 634
Liabilities in disposal group held 5 81 for sale Total current liabilities 7 339 5 088 5 715 Total equity and liabilities 44 372 45 941 54 486 Group income statement for the year ended 30 September % Rm Notes 2010 2009 change 2008 Continuing operations Revenue 22 474 23 232 (3.3) 21 735 Cost of sales (12 893) (13 701) (12 842) Gross profit 9 581 9 531 0.5 8 893 Other income 255 232 256 Administrative and other (6 128) (6 063) (5 779) expenses Operating profit 6 3 708 3 700 0.2 3 370 Financial income 7 106 171 294 Financial expenses 8 (2 084) (2 431) 14.3 (2 721) Attributable earnings of 24 27 2 associates Profit before taxation 1 754 1 467 19.6 945 Taxation (294) (350) (68) Profit for the year from continuing operations 1 460 1 117 30.7 877 Discontinued operation Profit for the period from 634 105 discontinued operation 5 Profit for the year 1 460 1 751 (16.6) 982 Attributable to: Owners of the parent 1 233 1 564 801 Preference shareholders 53 73 67 Profit attributable to 1 286 1 637 868 shareholders Non-controlling interest 174 114 114 1 460 1 751 982 Earnings per share (cents) Basic 97.0 123.8 (21.6) 63.5 Continuing operations 97.0 73.6 31.8 55.2 Discontinued operation 50.2 8.3 Diluted 94.6 122.6 (22.8) 62.6 Continuing operations 94.6 72.9 29.8 54.4 Discontinued operation 49.7 8.2 Capital reduction per share 25.5 38.0 32.0 (cents) Dividend per share (cents) 21.0 Total distribution per 46.5 38.0 22.4 32.0 share (cents) Group statement of comprehensive income for the year ended 30 September Rm Notes 2010 2009 2008 Profit for the year 1 460 1 751 982 Other comprehensive loss, net of tax (1 519) (3 085) (505) Actuarial gains/(losses) on defined 29 (130) (49) benefit plans Effect of cash flow hedge accounting Change in the fair value of cash (1 118) (2 066) (767) flow hedges Recycling of cash flow hedge (10) (20) (23) accounting reserve 7 Effect of translation of foreign (420) (870) 304 entities Movement in employee share trust 1 30 reserve Total comprehensive (loss)/income (59) (1 334) 477 for the year Attributable to: Owners of the parent 441 (47) 510 Preference shareholders 53 73 67 Non-controlling interest (553) (1 360) (100) (59) (1 334) 477 Group statement of cash flows for the year ended 30 September Rm Notes 2010 2009 2008 Cash flows from operating activities Cash received from customers 22 518 22 921 21 099 Cash paid to suppliers and employees (17 584) (18 281) (16 436) Cash generated from operations 4 934 4 640 4 663 Interest paid (1 981) (2 430) (2 558) Continuing operations (1 981) (2 425) (2 550) Discontinued operation (5) (8) Taxation paid (565) (526) (290) Continuing operations (565) (520) (268) Discontinued operation (6) (22) Ordinary dividends paid by (1) (3) (1) subsidiaries Preference dividends paid (53) (73) (67) Capital reductions paid (521) (430) (406) Net cash from operating activities 1 813 1 178 1 341 Continuing operations 1 813 1 179 1 352 Discontinued operations (1) (11) Cash flows from investing activities Purchase of property, plant and (1 284) (1 283) (1 268) equipment Continuing operations (1 284) (1 272) (1 240) Discontinued operations (11) (28) Proceeds on disposal of property, 19 60 708 plant and equipment Additions to intangible assets (86) (144) (148) (Increase)/decrease in (29) 40 128 investments and loans Additions to derivatives (32) Interest received 93 150 134 Realised gain on cross-currency 324 swap Dividends received 2 1 44 Proceeds from disposal of subsidiaries, net of cash 852 15 Increase in equity interest in subsidiaries (2) Acquisition of subsidiaries and 2 21 (9) (2 112) businesses, net of cash acquired Net cash from investing (1 298) (333) (2 175) activities Continuing operations (1 298) (322) (2 147) Discontinued operations (11) (28) Cash flows from financing activities Proceeds from issue of ordinary 80 31 48 shares Repurchase of shares (11) Settlement of derivatives (19) Long-term liabilities 883 raised/(repaid) (840) 974 Short-term liabilities (repaid)/raised (825) (139) (133) Net cash from financing activities 138 (978) 889 Continuing operations 138 (974) 889 Discontinued operations (4) Net increase/(decrease) in cash 653 (133) 55 and cash equivalents Translation effects on cash and (82) (115) (32) cash equivalents of foreign entities Cash and cash equivalents at 714 962 900 beginning of the year Cash flows in disposal group held for sale 39 Cash and cash equivalents at end 1 285 714 962 of the year Consisting of: Cash on hand and balances with 1 378 803 1 202 banks Short-term money market (93) (89) (240) borrowings and bank overdrafts 1 285 714 962 Group statement of changes in equity as at 30 September Ordinary share Option Foreign capital premium on currency
and Treasury convertible translation Rm premium shares bond reserve Balance at 30 September 2007 1 819 (5 555) 172 1 292 Shares issued during the year 188 Capital reduction (406) Revaluation of land and buildings following a business combination Share-based payments reserve movements Capital gains tax on capital reductions attributable to treasury shares Preference dividends paid Other reserve movements Disposal of shares in subsidiary Dividends paid by subsidiaries Total comprehensive 130 income for the year Balance at 30 September 1 601 (5 555) 172 1 422 2008 Shares issued during the year 31 Capital reduction (430) Repurchase of shares (137) 4 788 Repurchase of convertible (3) bond Share-based payments reserve movements Capital gains tax on capital reductions attributable to treasury shares Preference dividends paid Other reserve movements Acquisition of shares in subsidiary Dividends paid by subsidiaries Total comprehensive (446) income for the year Balance at 30 September 1 065 (767) 169 976 2009 Shares issued during the year 80 Capital reduction (521) Repurchase of convertible (5) bond Share-based payments reserve movements Capital gains tax on capital reductions attributable to treasury shares Preference dividends paid Other reserve movements Acquisition of shares in subsidiary Dividends paid by subsidiaries Total comprehensive (233) income for the year Balance at 30 September 624 (767) 164 743 2010 Equity Cash flow attributable hedge to owners
accounting Other Retained of the Rm reserve reserves earnings parent Balance at 30 September 2007 306 265 5 833 4 132 Shares issued during the 188 year Capital reduction (406) Revaluation of land and buildings following a business combination 93 93 Share-based payments reserve movements 5 5 Capital gains tax on capital reductions attributable to treasury shares (10) (10) Preference dividends paid (67) (67) Other reserve movements (9) (10) (19) Disposal of shares in subsidiary Dividends paid by subsidiaries Total comprehensive income for the year (427) 30 844 577 Balance at 30 September 2008 (121) 384 6 590 4 493 Shares issued during the year 31 Capital reduction (430) Repurchase of shares (4 583) 68 Repurchase of convertible bond 7 4 Share-based payments reserve movements 32 32 Capital gains tax on capital reductions attributable to treasury shares (7) (7) Preference dividends paid (73) (73) Other reserve movements 54 (54) Acquisition of shares in subsidiary Dividends paid by subsidiaries Total comprehensive income for the year (1 095) 1 1 566 26 Balance at 30 September 2009 (1 216) 471 3 446 4 144 Shares issued during the year 80 Capital reduction (521) Repurchase of convertible bond 2 (3) Share-based payments reserve movements 26 26 Capital gains tax on capital reductions attributable to treasury shares (7) (7) Preference dividends paid (53) (53) Other reserve movements 54 (57) (3) Acquisition of shares in subsidiary Dividends paid by subsidiaries Total comprehensive income for the year (574) 1 301 494 Balance at 30 September 2010 (1 790) 551 4 632 4 157 Preference share Total
capital Non- share- and controlling holders` Rm premium interest equity Balance at 30 September 2007 644 3 806 8 582 Shares issued during the year 188 Capital reduction (406) Revaluation of land and buildings following a business combination 93 Share-based payments reserve movements 5 Capital gains tax on capital reductions attributable to treasury shares (10) Preference dividends paid (67) Other reserve movements (19) Disposal of shares in subsidiary 9 9 Dividends paid by subsidiaries (1) (1) Total comprehensive income for the year (100) 477 Balance at 30 September 2008 644 3 714 8 851 Shares issued during the year 31 Capital reduction (430) Repurchase of shares 68 Repurchase of convertible bond 4 Share-based payments reserve movements 32 Capital gains tax on capital reductions attributable to treasury shares (7) Preference dividends paid (73) Other reserve movements Acquisition of shares in subsidiary (6) (6) Dividends paid by subsidiaries (3) (3) Total comprehensive income for the year (1 360) (1 334) Balance at 30 September 2009 644 2 345 7 133 Shares issued during the year 80 Capital reduction (521) Repurchase of convertible bond (3) Share-based payments reserve movements 26 Capital gains tax on capital reductions attributable to treasury shares (7) Preference dividends paid (53) Other reserve movements (3) Acquisition of shares in subsidiary (63) (63) Dividends paid by subsidiaries (1) (1) Total comprehensive income for the year (553) (59) Balance at 30 September 2010 644 1 728 6 529 Headline earnings for the year ended 30 September % Rm 2010 2009 change 2008 Reconciliation of headline earnings Profit for the year from continuing operations 1 460 1 117 30.7 877 Less: Preference shareholders (53) (73) (67) Non-controlling interest (174) (114) (114) Earnings used in the calculation of basic earnings per share from continuing operations 1 233 930 32.6 696 Adjusted for: Gain on bargain purchase (81) Impairment of goodwill 9 1 Impairment of investments 8 2 1 Impairment of property, plant and equipment 19 13 1 Reversal of impairment of land and buildings (1) (17) Loss/(profit) on disposal of property, plant and equipment 1 (5) (28) Loss on disposal of subsidiaries/investments 2 Tax effect of headline adjusting items 2 6 Non-controlling share of headline adjusting items 38 10 Headline earnings from continuing operations 1 226 942 672 Earnings from discontinued operation 634 105 Adjusted for: Profit on disposal of property, plant and equipment (2) Profit on disposal of discontinued operation (678) Tax effect of headline adjusting items 90 Headline earnings from discontinued operations 46 103 Headline earnings 1 226 988 24.1 775 Headline earnings per share (cents) Basic 96.5 78.2 23.4 61.5 Continuing operations 96.5 74.6 29.4 53.3 Discontinued operation 3.6 8.2 Diluted 94.1 77.5 21.4 60.5 Continuing operations 94.1 73.9 27.3 52.5 Discontinued operation 3.6 8.0 Notes for the year ended 30 September 1. Basis of preparation and accounting policies The condensed financial statements have been extracted from the Group financial statements which have been prepared in accordance with International Financial Reporting Standards (IFRS), the Listings Requirements of the JSE Limited and the Companies Act of South Africa. The accounting policies applied in the preparation of these 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 (revised) - 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: Acquisitions in South Africa 2.1 Effective 1 October 2009, the Group acquired an additional 25% in Netcare Parklands Linac Joint Venture (Proprietary) Limited (Parklands Linac) and 12.5% in Netcare St. Anne`s Linac Joint Venture (Proprietary) Limited (St Annes`s Linac), changing the Group`s effective holding to 75% and 62.5% respectively. Both were previously accounted for as joint ventures. Acquisitions in the United Kingdom 2.2 With effect from 1 January 2010, the Group acquired 100% of the shares in Sterilplus Limited (Sterilplus) (subsequently renamed BMI Hospital Decontamination Limited). 2.3 Effective 4 May 2010, the Group acquired 50% of the shares in A.K. Medical Management Limited (BMI Southend) (renamed BMI Southend Private Hospital Limited). 2.4 Effective 28 May 2010, the Group acquired a 42.5% interest in the Transform Holdco Limited (Transform) (renamed Health and Surgical Holdings Limited). Transform is consolidated in the Group`s results as the Group has an option (up to 28 May 2013) to purchase an additional 42.5% which is currently exercisable. 2.5 With effect from 28 May 2010, the Group acquired 100% of the shares in Abbey Hospitals (Holdings) Limited (Abbey). From the dates of acquisition to 30 September 2010, the new acquisitions have contributed the following additional revenue and operating profit to the Group: Parklands Rm Abbey Linac Sterilplus Transform Other* Total Revenue 74 8 9 136 8 235 Operating profit (3) 2 (5) 3 1 (2) Had the acquisition taken place on the first day of the financial year, the respective contributions to revenue and operating profit would have been as follows: Parklands Rm Abbey Linac Sterilplus Transform Other* Total Revenue 230 8 13 423 25 699 Operating profit 7 2 (7) 6 8 * Other includes BMI Southend and St Anne`s Linac. The following table reflects the fair values at acquisition: Parklands Rm Abbey Linac Sterilplus Transform Other* Total Property, plant and equipment 25 16 58 177 3 279 Loans and receivables 2 1 3 Inventories 10 7 17 Trade and other receivables 29 3 7 31 2 72 Cash and cash equivalents 7 1 34 1 43 Long-term debt (7) (221) (228) Short-term debt (4) (4) Trade and other payables (35) (9) (4) (125) (7) (180) Taxation payable (1) (1) 36 62 (97) 1
Non- controlling interest 56 56 Fair value of net assets acquired 36 62 (41) 57 (Gain on bargain purchase)/ goodwill (36) 3 (45) 41 5 (32) Purchase consideration 3 17 5 25 Less fair value of previous investment in joint venture (1) (1) Less deferred consideration payable in cash (2) (2) Cash and cash equivalents in acquiree (7) (1) (34) (1) (43) Cash (inflow)/ outflow on acquisitions (7) 2 16 (34) 2 (21) The fair values reflected above are equal to the carrying values at acquisition. *Other includes BMI Southend and St Anne`s Linac. 3. Reclassification of comparative information Statement of comprehensive income The effect of the cash flow hedge accounting which is included in the statement of comprehensive income has been changed to reflect the recycling of the cash flow hedge accounting reserve and the effect of fair value changes separately. The movement in the employee share trust reserve, previously included in the statement of changes in equity, has been reallocated to the statement of comprehensive income as this represents non-owner movements in equity. Rm 2010 2009 2008 4. Associated companies, investments and loans Non-current Associated companies* 151 122 89 Available-for-sale investments 22 Other loans 7 8 15 180 130 104 Current Loans 45 54 75 225 184 179 * Directors` valuation of associated companies 369 395 282
5. Disposal group and assets held for sale Assets held for sale Assets in disposal group - Ampath Holdings Trust 295 Land and buildings held for sale 13 4 9 13 4 304 Liabilities in disposal group held for sale Liabilities in disposal group - Ampath Holdings Trust (81) 5.1 Discontinued operation - Ampath Holdings Trust Sale of our interest in Ampath Holdings Trust was completed in February 2009, following Competition Commissioner approval. The sale of our units and claims amounted to R1 027 million. Our 50% share of the discontinued operation was as follows: Revenue 267 563 Other income 2 Administrative and other expenses (198) (426) Operating profit 69 139 Financial expenses (5) (8) Profit before taxation 64 131 Taxation (18) (26) Profit for the year before profit on disposal 46 105 Profit on disposal of discontinued operation, net of tax 588 Profit for the year from discontinued operations 634 105 The profit on the sale of Ampath Holdings Trust can be reconciled as follows: Sale of units and claims 1 027 Less: Carrying value (349) Claims settled (175) Net asset value (174) Profit on disposal 678 Less: Capital gains tax (90) Profit on disposal of discontinued operation, net of tax 588 The assets and liabilities of the disposal group are as follows: Property, plant and equipment 71 Goodwill 72 Investments and loans 11 Inventories 10 Trade and other receivables 116 Cash and cash equivalents 15 Long-term debt (8) Post-retirement benefit obligation (9) Trade and other payables (56) Taxation payable (4) Short-term debt (4) The cash flows are as follows: Net cash from operating activities (1) (11) Net cash from investing activities (11) (28) Net cash from financing activities (4) 5.2 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 (2009: Rnil million; 2008: R17 million). 13 4 9 6. Operating profit After charging: Depreciation and amortisation 1 157 1 227 1 244 Operating lease charges 420 410 345 7. Financial income Dividends received 2 1 1 Fair value gain on cross-currency swap contracts 136 Foreign exchange gains (net) 1 Recycling of cash flow hedge accounting reserve (net) 10 20 23 Interest received 93 150 134 106 171 294
8. Financial expenses Foreign exchange losses (net) 1 156 Ineffectiveness recognised in the income statement arising from cash flow hedges (net) 103 5 15 Interest paid 1 981 2 425 2 550 2 084 2 431 2 721 9. Commitments Capital commitments 1 392 869 753 South Africa 1 213 441 258 United Kingdom 179 428 495 Operating lease commitments 3 048 3 215 3 735 South Africa 1 212 1 369 1 460 United Kingdom 1 836 1 846 2 275 10. Contingent liabilities (guarantees and suretyships) South Africa 645 632 253 United Kingdom 118 645 632 371 Condensed segment report for the year ended 30 September % Rm 2010 2009 change 2008 Income statement Revenue 22 474 23 232 (3.3) 21 735 South Africa 12 541 11 832 6.0 10 385 Hospitals and Emergency services 11 167 10 319 9 020 Primary Care 1 374 1 513 1 365 United Kingdom 9 933 11 400 (12.9) 11 350 EBITDA 4 865 4 927 (1.3) 4 614 South Africa 2 249 2 018 11.4 1 739 Hospitals and Emergency services 2 220 2 042 1 735 Primary Care 29 (24) 4 United Kingdom 2 571 2 919 (11.9) 2 885 Capital items 45 (10) (10) South Africa (34) (9) 20 United Kingdom 79 (1) (30) Operating profit 3 708 3 700 0.2 3 370 South Africa 1 899 1 662 14.3 1 401 Hospitals and Emergency services 1 893 1 703 1 414 Primary Care 6 (41) (13) United Kingdom 1 764 2 048 (13.9) 1 979 Capital items 45 (10) (10) South Africa (34) (9) 20 United Kingdom 79 (1) (30) Net interest expense 1 888 2 275 17.0 2 416 South Africa 367 463 20.7 518 United Kingdom 1 521 1 812 16.1 1 898 Statement of financial position Total assets1 44 359 45 937 (3.4) 54 182 South Africa 9 271 8 611 7.7 8 073 United Kingdom 35 088 37 326 (6.0) 46 109 Debt net of cash 24 197 26 454 8.5 32 589 South Africa 3 706 3 903 5.0 4 837 United Kingdom 20 491 22 551 9.1 27 752 1 Excluding the disposal group and assets held for sale. Constant currency segment report for the year ended 30 September Rm Reported Adjusted1 Reported % change 2010 2010 2009
Income statement Revenue 22 474 24 263 23 232 4.4 South Africa 12 541 12 541 11 832 6.0 United Kingdom 9 933 11 722 11 400 2.8 EBITDA 4 865 5 343 4 927 8.4 South Africa 2 249 2 249 2 018 11.4 United Kingdom 2 571 3 035 2 919 4.0 Capital items 45 59 (10) South Africa (34) (34) (9) United Kingdom 79 93 (1) Operating profit 3 708 4 040 3 700 9.2 South Africa 1 899 1 899 1 662 14.3 United Kingdom 1 764 2 082 2 048 1.7 Capital items 45 59 (10) South Africa (34) (34) (9) United Kingdom 79 93 (1) Net interest expense 1 888 2 164 2 275 4.9 South Africa 367 367 463 20.7 United Kingdom 1 521 1 797 1 812 0.8 Basic headline earnings per share (cents) 96.5 98.7 78.2 26.2 South Africa 85.0 85.0 68.1 24.8 United Kingdom 11.5 13.7 10.1 35.6 Statement of financial position Total assets2 44 359 47 633 45 937 3.7 South Africa 9 271 9 271 8 611 7.7 United Kingdom 35 088 38 362 37 326 2.8 Debt net of cash 24 197 26 109 26 454 1.3 South Africa 3 706 3 706 3 903 5.0 United Kingdom 20 491 22 403 22 551 0.7 1 The United Kingdom numbers have been recalculated at constant exchange rates to remove the impact of foreign currency fluctuations. 2 Excluding assets held for sale. Salient features for the year ended 30 September Rm 2010 2009 2008 Share statistics Ordinary shares Shares in issue net of treasury shares (million) 1 277 1 266 1 262 Weighted average number of shares (million) 1 271 1 263 1 261 Diluted weighted average number of shares (million) 1 303 1 275 1 280 Market price per share (cents) 1 384 1 037 825 Currency conversion guide (R:GBP) Closing exchange rate 10.93 11.95 14.76 Average exchange rate for the period 11.63 13.73 14.65 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: 15/11/2010 08:00:01 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.

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