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NTC - Netcare - Audited Group results for the year ended 30 September 2011

Release Date: 14/11/2011 08:00
Code(s): NTC
Wrap Text

NTC - Netcare - Audited Group results for the year ended 30 September 2011 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 2011 Overview The Netcare Group is pleased to report solid financial results for the year ended 30 September 2011, and a meaningful contribution to the delivery of comprehensive healthcare services in South Africa (SA) and the United Kingdom (UK). The Group`s focus on operational efficiency was reflected in an improved performance from the South African businesses and enhanced working capital management in both SA and the UK. The weaker economic environment and a stronger prevailing Rand on the translation of the UK results weighed on UK performance, which impacted on the strong performance in SA. Group operating profit for the year was R3 701 million (2010: R3 708 million). Profit after taxation increased by 27.1% to R1 855 million, largely due to a deferred tax release of R301 million in the UK (2010: R157 million) following a further 2% reduction in the UK tax rate to 25%. Profit attributable to shareholders increased by 25.7% to R1 617 million, while headline earnings per share (HEPS) increased by 21.2% to 117.0 cents. Cash generated from operations of R5 572 million (2010: R4 934 million) was underpinned by a stringent focus on optimising working capital. The Group continued to expand its facilities with the opening of the 126-bed Netcare Waterfall City Hospital in Midrand in July 2011, and the addition of 52 beds across various facilities in SA. The 425-bed Queen `Mamohato Memorial Hospital in Lesotho, part of the Lesotho Public Private Partnership (PPP), commenced operations in October 2011. Group financial review Summarised financial information Rm 2011 2010 % change Revenue 23 221 22 474 3.3 EBITDA 4 914 4 865 1.0 Operating profit 3 701 3 708 (0.2) Net financial expenses 1 755 1 978 11.3 Profit for the year 1 855 1 460 27.1 Headline earnings 1 504 1 226 22.7 Net debt 25 689 24 197 (6.2) Cash generated from operations 5 572 4 934 12.9 Capital expenditure 1 327 1 284 3.3 Basic earnings per share (cents) 122.1 97.0 25.9 Headline earnings per share (cents) 117.0 96.5 21.2 Distributions per share (cents) 53.0 46.5 14.0 Currency conversion guide (Rand: Pound Sterling) 2011 2010 % change
Closing exchange rate 12.54 10.93 14.7 Average exchange rate for the year 11.09 11.63 (4.6) Financial performance In their respective local currencies, revenue grew in both SA and the UK. On a constant currency basis, Group revenue rose 5.3% compared to the prior year. Group operating profit was impacted by lower profits in the UK and currency conversion, with the operating margin declining from 16.5% to 15.9%. Net financial expenses decreased by 11.3% to R1 755 million, driven by strong cash generation in SA and the UK, reduced interest rates in SA and a lower average exchange rate on UK borrowing costs. Net financial expenses were also favourably impacted by a net R43 million non-cash credit (2010: R103 million 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 R114 million, which represents an effective tax rate of 5.8%, was favourably impacted by the reduction in the UK tax rate. Excluding the impact of the rate change, the Group`s effective tax rate was 21.1%. Financial position Property, plant and equipment, goodwill and intangible assets were positively impacted by foreign currency translation adjustments of R4 525 million. Net debt of R25 689 million increased from R24 197 million at 30 September 2010, with currency conversion contributing R2 876 million to this movement. The SA operations reduced debt levels by R403 million driven by strong cash generation and lower interest payments. UK net debt reduced by GBP89.8 million, assisted by strong cash generation as well as the sale of the freehold of two hospital properties and the settlement of the corresponding debt. In September 2011, the Group redeemed its convertible bond that was listed on the Singapore Stock Exchange in 2006 at a value of R1.7 billion. This was partly funded by raising a further R1 billion under the Domestic Medium Term Note programme in August 2011. At 30 September 2011, the Group had R1 805 million in cash and cash equivalents and unutilised facilities of R3 142 million. Cash flow Cash generated from operations grew by R638 million mainly due to increased SA EBITDA, coupled with improved working capital in both geographies. Cash conversion to EBITDA increased to 113.4% (2010:101.4%). The Group invested R1 408 million in capital expenditure (including intangible assets), while R639 million was returned to shareholders in capital reductions and ordinary dividends paid. Net cash flows utilised by financing activities increased by R1 018 million due to higher debt repayments. Recognition Netcare is humbled to have been recognised by the following awards, rankings and accreditations in the year: Ranked the most empowered company in the JSE`s healthcare sector for the third year in a row in the Financial Mail`s Top Empowerment Companies Survey for 2011. Triple winner of the Metropolitan Oliver Empowerment Awards for Overall Top Empowered Company of the Year, winner of the Big Business category and winner in the Healthcare and Pharmaceuticals sector. Ranked the most empowered company in the Science, Biotechnology and Healthcare category of the Annual Top Women Awards, hosted by Topco Media in conjunction with the Top Women in Business and Government publication. Named a Level 1 Gold Community Contributor by the National Department of Social Development. Certified as the Best Employer in the Healthcare category, third in the Large Company category and seventh in the overall Employer category by the CRF Institutes` Best Employers South Africa 2011/2012 publication. Reinstated to the SRI Index for 2011 by the JSE Limited and SRI Index Advisory Committee on 24 March 2011. First officially accredited South African Level 1 trauma centres at Netcare Milpark and Netcare Union hospitals. Excellence in Resuscitation award from the Resuscitation Council of Southern Africa for the implementation of a best practice resuscitation system across the group of Netcare hospitals. Netcare 911 accredited by the European Air Ambulance Institute (EURAMI) for the second year in a row. Mid-cap category winner at the Annual Report Awards hosted by the Chartered Secretaries Southern Africa and the JSE. Runner-up in the Best Sustainability Report Award in the Non-resources category of the Association of Certified Chartered Accountants (ACCA) South Africa Awards for Sustainability Reporting 2010. Divisional review South Africa The South African operations delivered a strong performance due to a continued focus on operational efficiency, cost containment and business improvement. Revenue grew 6.5% to R13 361 million and operating profit rose 16.9% to R2 220 million. The operating profit margin increased by 1.5 percentage points to 16.6%. The SA operations contributed 86.5% to HEPS. Cash generated in SA increased by 24.0% to R3 010 million. During the year the SA operations reduced its investment in working capital by R463 million despite higher levels of activity. This was due to the exceptional management of trade receivables and accounts payable. Capital expenditure including intangible assets totalled R921 million (2010: R826 million). Netcare embraces the renewed focus on universal health access through the National Health Insurance (NHI) reform policy published in August 2011 and stands ready to make a meaningful contribution. In preparation for NHI, all Netcare`s 55 hospitals will be benchmarked against the National Department of Health`s core standards by February 2012. As part of its quality leadership, Netcare continues its Group-wide focus to drive quality care. To this end, all Netcare hospitals are benchmarked against USA hospitals. Hospitals and Emergency services Revenue from Hospitals and Emergency services grew 8.3% to R12 089 million and operating profit rose 15.3% to R2 182 million. The operating profit margin improved by one percentage point to 18.0%. The division grew patient days by 2.2% and net revenue per patient day increased by 6.4% for the year. The number of registered beds increased from 8 874 in the prior year to 9 052. Netcare Waterfall City Hospital, which was constructed in conjunction with our empowerment partners, Phelang Bonolo, opened in July 2011 and contributed 126 beds to this increase. Netcare`s investment in infrastructure included: Renovating operating theatres at Netcare Park Lane and Netcare Garden City hospitals. Ward renovations at Netcare Milpark Hospital. Adding four new Intensive Care Unit (ICU) beds at Netcare Pretoria East Hospital. Refurbishing the paediatric wards at Netcare Unitas and Netcare St. Anne`s hospitals. The first phase of a 54-bed expansion project at Netcare Montana Hospital, which included eight new ICU beds, theatre renovations and new consulting rooms. Construction has started at the following hospitals, with completion expected during the 2012 financial year: Second phase of the Netcare Montana Hospital expansion : 30 surgical, four paediatric, four neo-natal intensive care unit (NICU) and eight day ward beds. 64 beds at Netcare The Bay Hospital : 30 surgical, 20 medical and 14 ICU beds. 57 beds at Netcare Mulbarton Hospital : 30 surgical beds, 20-bed maternity and a seven-bed NICU. 35 beds at Netcare Kingsway Hospital : 23 medical and 12 surgical beds. 31 beds at Netcare Linmed Hospital : 26 surgical and 5 day ward beds. The construction of the 425-bed hospital in Lesotho, part of the Lesotho PPP, was successfully completed and commenced operations in October 2011. AVENG Grinaker-LTA was awarded the Excellence in Construction Awards 2011 in the Health Facilities category by the Master Builders Association for the construction of the Lesotho hospital. The Queen `Mamohato Memorial Hospital is fully operated by Netcare, including both clinical and non-clinical services, representing an innovative approach in providing integrated, outcome based quality healthcare in Africa. The four primary care clinics that form part of the overall PPP delivery model are performing as expected. The Group`s Emergency services division, Netcare 911, remains the leading provider of emergency medical services in Africa and provides a critical service to society in times of medical crisis. Netcare 911 provided free emergency services to more than 6 400 indigent patients during the year. Primary Care The division delivered pleasing results for the year. In line with the strategy to reduce full risk lives under management, revenue decreased by 7.4% to R1 272 million. Operating profit improved to R38 million (2010: R6 million), underpinned by stringent cost control measures and operational efficiencies as well as effective managed care risk management. The division`s Medicross family medical and dental centres (Medicentres) and Prime Cure clinics managed approximately 3.2 million patient visits and dispensed 1.7 million pharmacy scripts during the year. United Kingdom General Healthcare Group (GHG) experienced a difficult trading year due to continued economic uncertainty in the UK, constrained NHS spending and a further decline in the number of insured lives. Rising unemployment, reduced levels of policy cover and diminishing disposable incomes continued to drive a decline in the number and nature of insured lives. While these economic factors also negatively impacted the self-pay market, there are positive signs of a recovery in this segment with year-on-year growth recorded in response to specific GHG initiatives and lengthening NHS waiting times. GHG`s partnership with the NHS to deliver care through Choose & Book (C&B) has been through a year of uncertainty due to financial constraints and regulatory changes in the healthcare sector. The Health and Social Care Bill was delayed, contractual relationships according to the Any Qualified Provider framework were decentralised and Primary Care Trusts (PCTs) were disbanded in favour of GP-led commissioning bodies. The changes occur at a time when the NHS aims to save GBP16-20 billion by 2014 (equating to 6% of the national healthcare budget). Despite these challenges, GHG remains an important provider to the NHS under the C&B programme. GHG has grown its market share in this area faster than any of its competitors over the last two years. GHG`s overall caseload grew by 4.2% and revenue rose by 3.8% to GBP887.6 million. GHG`s EBITDA however, declined by 11.4% to GBP196.2 million. The decline was due to: Continued reduction in insured volumes. Increased external rent charges from the sale of the BMI The Duchy and BMI The Harbour hospitals (refer below). VAT increase to 20%, which added to GHG`s cost base as it cannot claim input VAT. The winding down of NHS Independent Sector Treatment Centres (ISTC). The EBITDA margin declined to 22.1% (2010: 25.9%), mainly as a result of the continued shift from private patient volumes to lower-margin NHS cases, and the impact of OpCo businesses acquired in prior years, which are EBITDA accretive but have lower margins. Net financial income and expenses were positively impacted by a credit of GBP2.8 million relating to the ineffective portion of the mark-to-market movement in interest rate swaps, compared to an GBP8.7 million charge in the prior year. A tax credit of GBP27.5 million (2010: GBP13.7 million) was recognised following a further 2% reduction in the UK company tax rate to 25% and as a result, profit after tax reflects GBP41.6 million (2010: GBP31.5 million). GHG continued to invest in its infrastructure and facilities, with capital expenditure (including intangible assets) amounting to GBP43.9 million (2010: GBP47.4 million). This included the following: Refurbishing BMI The Park Hospital, with a major extension to the existing building including a new intensive treatment units (ITU) department, new endoscopy suite and new theatre, and the refurbishment of three existing theatres. Refurbishing seven theatre suites and three existing wards, and building new oncology and paediatric wards at the BMI The Alexandra Hospital. New operating theatres and refurbishments at the BMI The Ridgeway Hospital. Working capital was tightly controlled and improved during the year despite the shift to more NHS caseload and the longer payment cycles associated with it. As a result, GHG increased its year-end cash balances to GBP130.6 million (2010: GBP79.8 million) and reduced net debt by GBP89.8 million to GBP1 785.4 million. The reduction in net debt was aided by GBP35.4 million of funds generated from the sale and leaseback of the BMI The Duchy Hospital in January 2011 and the BMI The Harbour Hospital in July 2011, with the accompanying repayment of debt and associated swap obligations. GHG continues to meet all financial covenants on both the OpCo and PropCo debt facilities, which are ring-fenced from each other and without recourse to the SA operations. Outlook Netcare remains confident that the demand for private healthcare services at primary and tertiary levels will be sustained in SA over the medium and long term. Netcare`s capital investment in expansionary projects is expected to sustain growth in SA. With global economic uncertainty persisting, budgetary and structural uncertainties in the NHS and the impact of austerity measures on the UK economy, the next 12 months are anticipated to remain very challenging for GHG. Private caseload is likely to continue to be constrained, while NHS volumes will depend on which areas are targeted for budget savings. Nevertheless, the strategies and improvements implemented during the year should position GHG to address these challenges. Board changes Thevendrie Brewer was appointed as an independent non-executive director with effect from 24 January 2011. Lynelle Bagwandeen was appointed Company Secretary with effect from 1 March 2011, following the resignation of Bert Kok on 28 February 2011. Michael (Motty) Sacks retired as a non-executive director with effect from 30 September 2011. Motty served as both executive and non-executive Chairman of Netcare for 12 years until 2008, and remained a non-executive director thereafter. The Board expresses its wholehearted appreciation for his extraordinary contribution to the Group. Vaughan Firman resigned as an executive director and Group Chief Financial Officer of Netcare effective 31 July 2011. Victor Litlhakanyane resigned as Group Stakeholder Relations Director with effect from 31 December 2011. The Board expresses its gratitude and appreciation to Vaughan and Victor for their valuable contribution to Netcare. Keith Gibson was appointed Acting Chief Financial Officer of the Group effective 1 August 2011. The Board approved Keith`s appointment as executive director and Group Chief Financial Officer of Netcare effective 10 November 2011. Declaration of dividend number 5 Notice is hereby given that a final dividend of 31.0 cents per ordinary share (2010: capital reduction out of share premium of 6.5 cents per ordinary share and a dividend of 21.0 cents per ordinary share) has been declared for the year ended 30 September 2011. The directors have confirmed by resolution that the solvency and liquidity test as contemplated by the Companies Act 71 of 2008 has been duly considered, applied and satisfied. In accordance with the provisions of STRATE, the electronic settlement and custody system used by the JSE Limited, the relevant dates for the dividend are as follows: Last day to trade cum dividend Friday, 13 January 2012 Trading ex dividend commences Monday, 16 January 2012 Record date Friday, 20 January 2012 Payment date Monday, 23 January 2012 Share certificates may not be dematerialised nor rematerialised between Monday, 16 January 2012 and Friday, 20 January 2012, both days inclusive. On Monday, 23 January 2012, the dividend will be electronically transferred to the bank accounts of all certificated shareholders where this facility is available. Where electronic funds transfer is either not available or not elected by the shareholder, cheques dated Monday, 23 January 2012 will be posted on that date. Holders of dematerialised shares will have their accounts credited at their participant or broker on Monday, 23 January 2012. On behalf of the Board Jerry Vilakazi Chairman Richard Friedland Chief Executive Officer Keith Gibson Chief Financial Officer Sandton 10 November 2011 Group income statement for the year ended 30 September Rm Note 2011 2010 % change Revenue 23 221 22 474 3.3 Cost of sales (13 513) (12 893) Gross profit 9 708 9 581 1.3 Other income 408 255 Administrative and other (6 415) (6 128) expenses Operating profit 4 3 701 3 708 (0.2) Investment income 5 115 95 Financial expenses 6 (1 847) (1 981) 6.8 Other losses - net 7 (23) (92) Attributable earnings of 23 24 associates Profit before taxation 1 969 1 754 12.3 Taxation (114) (294) Profit for the year 1 855 1 460 27.1 Attributable to: Owners of the parent 1 570 1 233 Preference shareholders 47 53 Profit attributable to 1 617 1 286 shareholders Non-controlling interest 238 174 1 855 1 460 Earnings per share (cents) Basic 122.1 97.0 25.9 Diluted 119.2 94.6 26.0 Distributions per share (cents) Capital reduction per share 25.5 Dividend per share 53.0 21.0 Total distributions per 53.0 46.5 14.0 share Group statement of comprehensive income for the year ended 30 September Rm Note 2011 2010* Profit for the year 1 1 460 855 Other comprehensive income/(loss), net of 22 (1 tax 503) Actuarial (losses)/gains on defined benefit (1) 29 plans Effect of cash flow hedge accounting Change in the fair value of cash flow (1 hedges (608) 118) Reclassification of the cash flow hedge 7 43 (10) reserve Effect of translation of foreign entities 588 (404) Total comprehensive income/(loss) for the 1 (43) year 877 Attributable to: Owners of the parent 1 605 449 Preference shareholders 47 53 Non-controlling interest 225 (545) 1 877 (43) Condensed Group statement of financial position As At 30 September Rm 2011 2010* 2009* ASSETS Non-current assets Property, plant and equipment 26 416 23 852 25 097 Goodwill 15 034 13 153 14 303 Intangible assets 366 331 366 Associated companies, investments 494 180 130 and loans Financial asset - Derivative financial 3 26 instruments Deferred taxation 2 165 1 753 1 385 Total non-current assets 44 39 41 478 295 281 Current assets Investments and loans 43 45 54 Financial asset - Derivative financial 2 6 instruments Inventories 721 652 621 Trade and other receivables 3 057 3 290 3 416 Cash and cash equivalents 2 355 1 378 803 6 178 5 371 4 894 Assets held for sale 8 13 4 Total current assets 6 186 5 384 4 898 Total assets 50 44 46 664 679 179 EQUITY AND LIABILITIES Equity attributable to owners of the 5 155 4 069 4 048 parent Preference share capital and premium 644 644 644 Non-controlling interest 1 886 1 645 2 254 Total shareholders` equity 7 685 6 358 6 946 Non-current liabilities Long-term debt 25 106 21 630 25 423 Financial liability - Derivative financial 5 319 4 113 2 797 instruments Post-retirement benefit obligations 188 179 297 Deferred lease liability 54 122 114 Deferred taxation 5 178 4 908 5 466 Cash-settled compensation liability 1 Provisions 89 30 48 Total non-current liabilities 35 30 34 935 982 145 Current liabilities Trade and other payables 3 901 3 118 2 924 Short-term debt 2 388 3 852 1 745 Taxation payable 205 276 330 Bank overdrafts 550 93 89 Total current liabilities 7 044 7 339 5 088 Total equity and liabilities 50 664 44 679 46 179 * Restated comparatives refer to note 3. Condensed Group statement of changes in equity as at 30 September Rm Ordinary Treasury Option share shares premium on capital convertible and bond
premium Balance at 30 September 2009 as 1 065 (767) 169 previously reported Prior year restatement (refer to note 3) Restated balance at 30 September 1 065 (767) 169 2009 Shares issued during the year 80 Capital reduction (521) Repurchase of convertible bonds (5) Share-based payments reserve movements Capital gains tax on capital reductions attributable to treasury shares Preference dividends paid Other reserve movements Decrease in equity interest in subsidiaries Dividends paid by subsidiaries Restated total comprehensive loss for the year Total comprehensive loss for the year as previously reported Prior year restatement (refer to note 3) Restated balance at 30 September 624 (767) 164 2010 Shares issued during the year 74 Capital reduction (83) Sale of treasury shares 53 Repurchase of convertible bonds 6 Share-based payments reserve movements Capital gains tax on capital reductions attributable to treasury shares Preference dividends paid Dividends paid Distributions to beneficiaries of the HPFL trusts Other reserve movements (170) Increase in equity interest in subsidiaries Total comprehensive income for the year Balance at 30 September 2011 615 (714) Rm Cash flow Foreign Other Retained hedge currency reserves earnings accounting translation reserve reserve Balance at (1 216) 976 471 3 446 30 September 2009 as previously reported Prior year restatement 18 (114) (refer to note 3) Restated balance at (1 216) 994 471 3 332 30 September 2009 Shares issued during the year Capital reduction Repurchase of 2 convertible bonds Share-based payments 26 reserve movements Capital gains tax on capital reductions attributable to treasury shares (7) Preference dividends (53) paid Other reserve movements 54 (57) Decrease in equity interest in subsidiaries Dividends paid by subsidiaries Restated total (574) (225) 1 301 comprehensive loss for the year Total comprehensive loss (574) (233) 1 301 for the year as previously reported Prior year restatement 8 (refer to note 3) Restated balance at (1 790) 769 551 4 518 30 September 2010 Shares issued during the year Capital reduction Sale of treasury shares 55 Repurchase of (21) convertible bonds Share-based payments 23 reserve movements Capital gains tax on capital reductions attributable to treasury (1) shares Preference dividends (47) paid Dividends paid (553) Distributions to (47) beneficiaries of the HPFL trusts Other reserve movements 123 52 Increase in equity (30) interest in subsidiaries Total comprehensive (301) 342 1 611 income for the year Balance at (2 091) 1 111 697 5 537 30 September 2011 Rm Equity Preference Non- Total attributable share Control- share- to owners capital ling holders` of the and interest equity parent premium
Balance at 4 144 644 2 345 7 133 30 September 2009 as previously reported Prior year restatement (96) (91) (187) (refer to note 3) Restated balance at 4 048 644 2 254 6 946 30 September 2009 Shares issued during 80 80 the year Capital reduction (521) (521) Repurchase of (3) (3) convertible bonds Share-based payments 26 26 reserve movements Capital gains tax on capital reductions attributable to treasury shares (7) (7) Preference dividends (53) (53) paid Other reserve movements (3) (3) Decrease in equity (63) (63) interest in subsidiaries Dividends paid by (1) (1) subsidiaries Restated total 502 (545) (43) comprehensive loss for the year 'Total comprehensive 494 (553) (59) loss for the year as previously reported 'Prior year restatement 8 8 16 (refer to note 3) Restated balance at 4 069 644 1 645 6 358 30 September 2010 Shares issued during 74 74 the year Capital reduction (83) (83) Sale of treasury shares 108 108 Repurchase of (15) (15) convertible bonds Share-based payments 23 23 reserve movements Capital gains tax on capital reductions attributable to (1) (1) treasury shares Preference dividends (47) (47) paid Dividends paid (553) (3) (556) Distributions to (47) (47) beneficiaries of the HPFL trusts Other reserve movements 5 5 Increase in equity (30) 19 (11) interest in subsidiaries Total comprehensive 1 652 225 1 877 income for the year Balance at 5 155 644 1 886 7 685 30 September 2011 Group statement of cash flows for the year ended 30 September Rm 2011 2010 Cash flows from operating activities Cash received from customers 23 645 22 518 Cash paid to suppliers and employees (18 073) (17 584) Cash generated from operations 5 572 4 934 Interest paid (1 836) (1 981) Taxation paid (674) (565) Ordinary dividends paid by subsidiaries (3) (1) Ordinary dividends paid (553) Preference dividends paid (47) (53) Capital reductions paid (83) (521) Distributions to beneficiaries of the HPFL (47) trusts Net cash from operating activities 2 329 1 813 Cash flows from investing activities Purchase of property, plant and equipment (1 327) (1 284) Proceeds on disposal of property, plant and 415 19 equipment Additions to intangible assets (81) (86) Increase in investments and loans (250) (29) Additions to derivatives (32) Interest received 115 93 Dividends received 2 Increase in equity interest in subsidiaries (11) (2) Acquisition of subsidiaries and businesses, 21 net of cash acquired Net cash from investing activities (1 139) (1 298) Cash flows from financing activities Proceeds from issue of ordinary shares 74 80 Proceeds on disposal of treasury shares 123 Equity premium on repurchase of convertible (10) bond Long-term liabilities raised 477 883 Short-term liabilities repaid (1 544) (825) Net cash from financing activities (880) 138 Net increase in cash and cash equivalents 310 653 Translation effects on cash and cash 210 (82) equivalents of foreign entities Cash and cash equivalents at beginning of the 1 285 714 year Cash and cash equivalents at end of the year 1 805 1 285 Consisting of: Cash on hand and balances with banks 2 355 1 378 Short-term money market borrowings and bank (550) (93) overdrafts 1 805 1 285 Headline earnings for the year ended 30 September Rm 2011 2010 % change Reconciliation of headline earnings Profit for the year 1 855 1 460 27.1 Less: Preference shareholders (47) (53) Non-controlling interest (238) (174) Earnings used in the calculation of basic 1 570 1 27.3 earnings per share 233 Adjusted for: Gain on bargain purchase (81) Impairment of goodwill 9 Impairment of investments 24 8 Impairment of property, plant and equipment 19 Reversal of impairment of property, plant (7) (1) and equipment (Profit)/loss on disposal of property, plant 1 and equipment (162) Tax effect of headline adjusting items 23 Non-controlling share of headline adjusting 56 38 items Headline earnings 1 504 1 226 22.7 Headline earnings per share (cents) 117.0 96.5 21.2 Diluted headline earnings per share (cents) 114.2 94.1 21.4 Condensed notes to the Group financial statements for the year ended 30 September 1. Basis of preparation and accounting policies The annual financial statements from which these condensed financial statements have been derived, have been prepared in accordance with International Financial Reporting Standards (IFRS), the AC500 standards as previously issued by the Accounting Practices Board, the Listings Requirements of the JSE Limited and the South African Companies Act No 71 of 2008. The accounting policies applied in the preparation of these statements are consistent with those applied for the year ended 30 September 2010, except for the adoption of improvements to International Financial Reporting Standards 2010 (certain improvements have been adopted earlier than required), and the change in accounting policy detailed in note 3 below. The directors have reviewed the Group`s budget and cash flow forecasts and have satisfied themselves that the Group is in a sound financial position and that it has access to sufficient borrowing facilities to meet its foreseeable cash requirements. Certain General Healthcare Group (GHG) contracts with major medical insurers expire in 2012 and, based on past experience and current discussions, it is likely that negotiations will be lengthy and challenging. The directors are confident of a successful outcome in this regard, however, until these negotiations have been satisfactorily resolved, the GHG forecasts remain uncertain. The borrowings of GHG, which are ring-fenced from the South African operations, include senior bank facilities and other long-term facilities, which are due for repayment between 2013 and 2017. A significant proportion of this debt is due for repayment in October 2013 and will need to be refinanced. The directors have considered a number of refinancing options that may exist at that point, but no final or likely solution has been determined. As such, no assessment can be reasonably made of the effect this may have on the financial statements. However, given the number and nature of refinancing options, the directors are comfortable with the going concern assessment. The directors consider it appropriate to adopt the going concern basis in preparing the Group`s annual financial statements. The preparation of the annual financial statements was supervised by KN Gibson CA (SA), Chief Financial Officer of Netcare Limited. 2. Independent report of the auditors The annual financial statements have been audited by Grant Thornton and their accompanying unqualified audit report is available for inspection at the company`s registered office. 3. Restatement of comparative information During the current year, General Healthcare Group (GHG) in the United Kingdom revisited its interpretation of IAS 12 Income Taxes in relation to the differences that arise on the straight-lining of lease rentals on operating leases between its wholly owned subsidiaries, BMI Healthcare Limited and other property holding companies. In prior years, the differences were accounted for as permanent differences with no deferred tax being raised. While this is considered to be an appropriate interpretation of IAS12, management have concluded that fairer presentation will be achieved if these are treated as timing differences and the appropriate deferred tax liability raised. To the extent available, a deferred tax asset has been recognised on the losses created by the straight-line adjustment. The change in the accounting policy has been accounted for retrospectively, and the comparative information in the statement of financial position, statement of comprehensive income, statement of changes in equity and the relevant notes have been restated. The restatement did not result in any changes to earnings or headline earnings per share in the prior year. The effect of this change is summarised below: Group statement of financial position for the year ended 30 September 2009 Rm Previously Adjustment Restated reported
Non-current assets Deferred taxation 1 147 238 1 385 Non-current liabilities Deferred taxation (5 041) (425) (5 466) Equity Foreign currency (976) (18) (994) translation reserve Retained earnings (3 446) 114 (3 332) Non-controlling interest (2 345) 91 (2 254) Group statement of financial position for the year ended 30 September 2010 Rm Previously Adjustment Restated reported
Non-current assets Deferred taxation 1 446 307 1 753 Non-current liabilities Deferred taxation (4 430) (478) (4 908) Equity Foreign currency (743) (26) (769) translation reserve Retained earnings (4 632) 114 (4 518) Non-controlling interest (1 728) 83 (1 645) 2011 2010 4. Operating profit After charging: Depreciation and amortisation 1 1 213 157 Operating lease charges 469 420 5. Investment income Dividends received 2 Return on retirement benefit plan assets 49 48 Interest on bank accounts and other 66 45 115 95
6. Financial expenses Amortisation of arrangement fee 90 85 Retirement benefit plan interest cost 63 55 Interest on convertible bonds (liability 140 154 portion) Interest on promissory notes 166 180 Interest on preference shares classified as debt 4 24 Interest on bank loans and other 1 384 1 483 1 847 1 981 7. Other losses - net Foreign exchange gains 5 1 Ineffectiveness gains/(losses) on cash flow 43 hedges (103) Fair value loss on inflation rate swaps (not (2) hedge accounted) Fair value loss on derivative financial assets (26) (not hedge accounted) Amount reclassified from cash flow hedge reserve (43) 10 (23) (92) 8. Commitments Capital commitments 1 268 1 392 South Africa 845 1 213 United Kingdom 423 179 Operating lease commitments 4 510 3 048 South Africa 1 410 1 212 United Kingdom 3 100 1 836 9. Contingent liabilities (guarantees and suretyships) South Africa 636 645 Condensed segment report for the year ended 30 September The Group operates in two geographical regions, South Africa (SA) and the United Kingdom (UK). SA has two further segments, Hospital and Emergency services and Primary Care, which are separately monitored for decision- making purposes. The UK segment results are impacted by fluctuations in the Rand relative to the Pound Sterling on translation. The impact of foreign currency fluctuations have been removed from the UK segment for decision- making purposes. Rm 2011 2010 % change
INCOME STATEMENT Revenue South Africa 13 361 12 541 6.5 Hospitals and Emergency services 12 089 11 167 8.3 Primary Care 1 272 1 374 (7.4) United Kingdom 9 860 9 933 (0.7) UK adjusted1 10 312 9 933 3.8 Exchange rate impact (452) Group reported 23 221 22 474 3.3 Exchange rate impact 452 Group adjusted1 23 673 22 474 5.3 Operating profit South Africa 2 220 1 899 16.9 Hospitals and Emergency services 2 182 1 893 15.3 Primary Care 38 6 533.3 United Kingdom 1 384 1 764 (21.5) UK adjusted1 1 420 1 764 (19.5) Exchange rate impact (36) Capital items 97 45 115.6 South Africa (14) (34) 58.8 UK adjusted1 119 79 50.6 Exchange rate impact (8) Group reported 3 701 3 708 (0.2) Exchange rate impact 44 Group adjusted1 3 745 3 708 1.0 Net interest expense South Africa 327 367 10.9 United Kingdom 1 405 1 521 7.6 UK adjusted1 1 477 1 521 2.9 Exchange rate impact (72) Group reported 1 732 1 888 8.3 Exchange rate impact 72 Group adjusted1 1 804 1 888 4.5 Rm 2011 2010 % 2009 change STATEMENT OF FINANCIAL POSITION Total assets2 South Africa 10 262 9 284 10.5 8 615 United Kingdom 40 402 35 395 14.1 37 564 UK adjusted1 35 212 35 395 (0.5) 37 564 Exchange rate impact 5 190 Group reported 50 664 44 679 13.4 46 179 Exchange rate impact (5 190) Group adjusted1 45 474 44 679 1.8 46 179 Debt net of cash South Africa 3 303 3 706 10.9 3 903 United Kingdom 22 386 20 491 (9.2) 22 551 UK adjusted1 19 510 20 491 4.8 22 551 Exchange rate impact 2 876 Group reported 25 689 24 197 (6.2) 26 454 Exchange rate impact (2 876) Group adjusted1 22 813 24 197 5.7 26 454 1 The September 2011 UK numbers have been recalculated to remove the impact of foreign currency fluctuations since the September 2010 results. 2 Restated comparatives refer to note 3. Salient features for the year ended 30 September 2011 2010 2009 Share statistics Ordinary shares Shares in issue net of treasury shares 1 295 1 277 1 266 (million) Weighted average number of shares (million) 1 286 1 271 1 263 Diluted weighted average number of shares 1 317 1 303 1 275 (million) Market price per share (cents) 1 305 1 384 1 037 Currency conversion guide (R:GBP) Closing exchange rate 12.54 10.93 11.95 Average exchange rate for the period 11.09 11.63 13.73 Registered office: 76 Maude Street (corner West Street), Sandton 2196, Private Bag X34,Benmore, 2010 Executive RH Friedland (Chief Executive Officer), KN directors: Gibson (Chief Financial Officer),VLJ Litlhakanyane Non-executive SJ Vilakazi (Chairman), T Brewer, APH Jammine, directors: JM Kahn, MJ Kuscus, HR Levin, KD Moroka, N Weltman Company Secretary: L Bagwandeen Sponsor: Nedbank Capital, a division of Nedbank Group Limited
Transfer Link Market Services (Proprietary) Limited, 11 secretaries: Diagonal Street, Johannesburg, 2001 Investor relations: ir@netcare.co.za; www.netcareinvestor.co.za Date: 14/11/2011 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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