Wrap Text
NTC - Netcare Limited - Unaudited Results for the 6 months ended 31 March 2012
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
Commentary
Overview
A positive performance in South Africa (SA) was offset by weaker results in the
United Kingdom (UK) primarily due to the challenging economic environment.
Adjusted headline earnings per share (HEPS) increased 16.1% to 51.9 cents for
the period under review. Operational efficiency and implementing business
improvement plans were again key focus areas for the Group.
Group financial review
Financial performance
Revenue in both SA and the UK grew in their respective local currencies with
total revenue rising 11.1% to R12 654 million. Currency conversion favourably
impacted Group revenue by R630 million. Group operating profit increased 7.1% to
R1 818 million, while the operating profit margin declined from 14.9% to 14.4%
due to lower margins in the UK.
Net financial expenses increased R25 million to R973 million. This was driven by
the higher average exchange rate on UK borrowing costs, as well as a non-cash
charge of GBP8.1 million or R100 million (2011: GBP5.4 million or R60
million) on the ineffective portion of the fair value adjustment on UK interest
rate swaps. Cash-based net financial expenses in the UK declined by GBP2.1
million due to scheduled amortisation of debt balances, and the settlement of
debt related to two hospital properties sold in the prior year. In SA, net
financial expenses declined by R81 million and interest cover improved to a
healthy 11.8 times (2011: 6.4 times).
Group tax of R164 million represented an effective tax rate of 18.9% (2011:
7.2%) and included R47 million of secondary tax on companies (STC) arising from
dividends paid. No STC was paid in the comparative period as distributions took
the form of capital reductions out of share premium. The Group tax charge was
favourably impacted by a deferred tax release of R163 million (2011: R155
million) in the UK, after a 1% reduction in the UK tax rate to 24%.
Financial position and cash flow
During the period under review, Netcare acquired a contractual economic interest
in the debt of the UK operating company (OpCo). The transaction value of the
affected debt was at a 29.7% discount to its par value of GBP64.7 million. The
economic benefit of the transaction totalling GBP25.3 million, inclusive of
interest receivable, will be recognised in financial income over the
remaining debt term, with a benefit of GBP3.8 million (R48 million) accounted
for in this reporting period.
Net debt rose to R25 974 million from R25 689 million at 30 September 2011. In
SA, net debt increased to R4 218 million from R3 303 million at 30 September
2011 due to the funding of normal seasonal working capital requirements, capital
expenditure, tax and dividend payments, as well as R582 million (GBP45.5
million) used to acquire the economic interest in the UK OpCo debt. In the UK,
debt was lowered further through scheduled debt amortisation payments of GBP19.5
million. The UK`s half-year cash balances of GBP123.1 million (2011: GBP89.9
million) were a half-year record, despite declining from GBP130.6 million at 30
September 2011 due to normal seasonal cash requirements.
Cash generated from operations was R212 million less than in the previous
period. This was mainly due to the settlement of higher levels of payables on
the statement of financial position at 30 September 2011, related to capital
expenditure and the economic interest in UK OpCo debt. Debtor collections for
the current period were marginally affected by the close of the period falling
on a weekend. Working capital remained tightly controlled across both
geographies.
Capital expenditure was R570 million (including intangible assets), compared to
R461 million in the prior period.
Divisional review
South Africa
Revenue grew 7.9% to R6 983 million and operating profit rose 12.1% to R1 145
million. Earnings before interest, tax, depreciation and amortisation (EBITDA)
margin increased to 19.6% from 18.7% in 2011. The EDITDA margin has increased
310 basis points from 16.5% in 2009. SA HEPS increased 18.4% to 54.1 cents.
Cash generated from operations, affected by higher seasonal working capital
requirements and fell from R949 million in the comparative period to R657
million for the current period. Capital expenditure including intangible assets
totalled R378 million (2011: R242 million).
Our Public Private Partnership (PPP) with the Government of Lesotho is fully
operational. The PPP will operate the newly built 425-bed Queen `Mamohato
Hospital and four primary care clinics for 18 years. We are confident that this
innovative integrated approach to healthcare delivery will deliver improved
clinical outcomes and a sustainable operating performance.
Netcare was recognised at the Metropolitan Oliver Empowerment Awards for Supply
Chain, Community Development and New Black Business Development. In the
Financial Mail`s Top Empowerment Companies Survey for 2012, Netcare was ranked
the most empowered company in the JSE`s healthcare sector for the fourth
consecutive year. Accelerating transformation is one of our strategic pillars
and we are humbled that our efforts to assist in normalising our nation have
been so consistently recognised.
Hospitals and Emergency services
Revenue from Hospitals and Emergency services grew 8.3% to R6 327 million, and
EBITDA rose 11.2% to R1 324 million. The division grew patient days by 1.8%,
while revenue per patient day increased 5.9%.
The total number of beds increased from 9 052 to 9 143 during the six months
under review. Major expansion projects completed include building projects at
Netcare Mulbarton (30 surgical and six neo-natal intensive care unit (ICU)
beds), Netcare Kingsway (23 medical and 12 surgical beds) and Netcare The Bay
(18 medical and 14 ICU beds). Current projects include Netcare Montana (46 beds)
and Netcare Linmed (31 beds). In addition to expanding our ability to service
the escalating demand for healthcare, a portion of our capital investment is
focused on upgrading and replacing existing equipment, in line with our
commitment to quality patient care.
According to Stats SA, hospital inflation in 2010 and 2011 was 7.0% and 5.5%
respectively which compares favourably with medical insurance inflation of 13.0%
and 10.3% respectively. This is evidence of cost containment efforts by private
hospital operators such as Netcare.
Primary Care
The division delivered pleasing results for the period, with revenue up 4.5% to
R656 million. The EBITDA margin has increased to 6.9% from 3.3% in 2011
underpinned by stringent cost control measures and operational efficiencies, as
well as sound risk management in the managed care division. Operating profit
rose to R31 million (2011: R8 million).
Medicross and Prime Cure is the largest private national network of group GP and
dental practices. Primary care delivery is becoming increasingly more important
in the delivery of sustainable and affordable healthcare.
United Kingdom
Despite a very difficult trading environment characterised by continuing
recessionary pressures and ongoing NHS reforms, our UK operations delivered a
robust performance for the period under review. Revenue rose by 2.5% to
GBP456.8, although EBITDA declined 1.3% to GBP88.9 mainly due to the reduction
in insured lives.
General Healthcare Group`s (GHG) overall caseload increased by 3.2% compared to
the prior period, driven by NHS Choose & Book (C&B) growth, offset by a
continued decline in Private Medical Insurance (PMI) volumes. High levels of
unemployment and low levels of disposable income continued to cause the number
of insured lives across the wider PMI market to contract. Self-pay volumes have
recovered after two years of decline. This has been driven by NHS waiting times
increasing further due to financial constraints and regulatory changes in the
healthcare sector. Pleasingly, NHS activity has continued to increase and GHG
has grown its market share in this segment to become the largest private
hospital service provider to the NHS under C&B.
The EBITDA margin declined to 19.5% from 20.2% in the comparative period mainly
as a result of the continued shift from private patient volumes to lower-margin
NHS volumes and a shift to more day cases. GHG`s operational efficiency and cost
rationalisation programmes have however continued to offset this effect.
Net financial expenses were adversely affected by an GBP8.1 million (2011:
GBP5.4 million) non-cash charge, representing the ineffective portion of the
movement in the fair value of GHG`s interest rate swaps.
A tax benefit of GBP13.6 million (2011: GBP14.0 million) was recognised for the
period, following a further 1% reduction in the UK statutory company tax rate to
24%. GHG recorded a loss after tax of GBP2.3 million (2011: profit after tax
of GBP7.1 million).
Capital expenditure (including intangible assets) amounted to GBP15.1
million (2011: GBP19.9 million), relating mainly to projects initiated in the
2011 financial year and spending on the existing asset base. Net debt
declined GBP9.0 million from 30 September 2011 to GBP1 776.4 million. Working
capital was tightly controlled and the improvements of the prior year were
sustained during the period. Closing cash balances remain high at GBP123.1
million compared to GBP89.9 million in the comparative period.
GHG continues to meet all financial covenants on both the OpCo and property-
owning companies (PropCo) debt facilities. PropCo remains focused on achieving a
solution to the PropCo debt facility, which matures in October 2013. Advisors
have been appointed and various options are being evaluated. The PropCo debt is
ring-fenced from the OpCo and is also without recourse to Netcare`s SA
operations. Furthermore, in terms of the long-term lease arrangements in place
(19 years remaining plus additional extensions of 10 years), OpCo has the right
to ongoing use and occupation of the hospital premises as long as it complies
with its contractual rental obligations to PropCo.
Outlook
Netcare, in consultation with key stakeholders, has completed an extensive
scenario analysis of the South African healthcare environment. In every possible
future scenario, healthcare demand continues to expand. While this is the basis
for growth in health services, it also poses a risk insofar as these demands may
not be met nationally by current healthcare delivery systems or resources. The
launch of 10 NHI pilot sites is a significant step forward in assessing the
supply and demand parameters of healthcare delivery. Netcare is firmly committed
to increasing access to quality health care. We believe we can play a meaningful
role in assisting future NHI delivery, in partnership with government given our
broad portfolio of healthcare services and experience over the last decade in
the UK of working with the NHS in public health delivery.
In the UK, a firm foundation has been set for the remainder of the financial
year, although the challenges remain significant. These include the economic
headwinds and their impact on personal incomes and the PMI market, as well as
government austerity measures and changing dynamics within the NHS. However, GHG
continues to be focused on its core businesses, ensuring efficiency and quality,
and being ready to capitalise on the inevitable return to growth of the private
healthcare market.
Declaration of interim dividend number 6
Notice is hereby given that on Thursday, 10 May 2012, the board of directors of
Netcare Limited declared an interim gross dividend of 22.0 cents per ordinary
share (18.7846 cents per ordinary share net of dividend withholding tax and STC
credits) (2011: 22.0 cents), for the six months ended 31 March 2012. The board
has determined that, taking all relevant factors into account, this dividend is
appropriate in working towards a sustainable dividend policy of between 2.5 to
3.0 times cover over time. The board 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.
The dividend has been declared from income reserves.
In terms of the new Dividends Tax effective 1 April 2012, the following
additional information is disclosed:
* The dividend is subject to dividend withholding tax at 15%. In determining
dividend withholding tax, STC credits must be taken into account and the STC
credits utilised as part of this dividend declaration amount to R8 178 401.
* The STC credits utilised per share amounts to 0.564 cents per share.
* Tax payable is 3.2154 cents per share, which results in a net dividend of
18.7846 cents per share to shareholders who are not exempt from dividends
withholding tax.
* The amount of shares in issue at the date of this declaration is 1 451 328 433
(inclusive of treasury shares) and the Company`s tax reference number is
9999/581/71/4.
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 July 2012
Trading ex dividend commences Monday, 16 July 2012
Record date Friday, 20 July 2012
Payment date Monday, 23 July 2012
Share certificates may not be dematerialised nor rematerialised between Monday,
16 July 2012 and Friday, 20 July 2012, both days inclusive.
On Monday, 23 July 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 July 2012 will be posted on that date.
Holders of dematerialised shares will have their accounts credited at their
participant or broker on Monday, 23 July 2012.
On behalf of the Board
Jerry Vilakazi
Chairman
Richard Friedland
Chief Executive Officer
Keith Gibson
Chief Financial Officer
Sandton
10 May 2012
Group income statement
Rm Notes Unaudited % Audited
six months ended change year ended
31 March 31 March 30 September
2012 2011 2011
Revenue 12 654 11 392 11.1 23 221
Cost of sales (7 359) (6 681) (13 513)
Gross profit 5 295 4 711 12.4 9 708
Other income 143 177 408
Administrative and (3 620) (3 190) (6 415)
other expenses
Operating profit 3 1 818 1 698 7.1 3 701
Investment income 4 90 26 115
Financial expenses 5 (970) (904) (1 847)
Other losses - net 6 (93) (70) (23)
Attributable 25 3 23
earnings of
associates
Profit before 870 753 15.5 1 969
taxation
Taxation (164) (54) (114)
Profit for the 706 699 1.0 1 855
period
Attributable to:
Owners of the 699 642 1 570
parent
Preference 22 24 47
shareholders
Profit attributable 721 666 1 617
to shareholders
Non-controlling (15) 33 238
interest
706 699 1 855
Earnings per share
(cents)
Basic 53.6 50.2 6.8 122.1
Diluted 52.9 48.7 8.6 119.2
Dividend per share 22.0 22.0 53.0
(cents)
Group statement of comprehensive income
Rm Note Unaudited Audited
six months ended year ended
31 March 31 March* 30 September
2012 2011 2011
Profit for the period 706 699 1 855
Other comprehensive (172) 1 091 22
(loss)/income, net of tax
Actuarial losses on (1)
defined benefit
plans
Effect of cash flow
hedge accounting
Change in the fair (78) 1 130 (608)
value of cash flow
hedges
Reclassification of 6 (9) 1 43
the cash flow hedge
reserve
Effect of (85) (40) 588
translation of
foreign entities
Total comprehensive 534 1 790 1 877
income for the
period
Attributable to:
Owners of the parent 594 1 210 1 605
Preference 22 24 47
shareholders
Non-controlling (82) 556 225
interest
534 1 790 1 877
* Restated refer to note 2.
Condensed Group statement of financial position
Unaudited Audited
Rm Note 31 March 31 March* 30 September
2012 2011 2011
ASSETS
Non-current assets
Property, plant and 25 875 23 534 26 416
equipment
Goodwill 14 704 13 057 15 034
Intangible assets 335 324 366
Associated companies, 7 890 249 494
investments and loans
Financial asset - Derivative 10 3 13 3
financial instruments
Deferred taxation 2 098 1 376 2 165
Total non-current assets 43 905 38 553 44 478
Current assets
Investments and loans 7 47 45 43
Financial asset - Derivative 10 3 8 2
financial instruments
Inventories 772 689 721
Trade and other receivables 3 536 3 322 3 057
Cash and cash equivalents 2 038 1 384 2 355
6 396 5 448 6 178
Assets held for sale 8 5 8 8
Total current assets 6 401 5 456 6 186
Total assets 50 306 44 009 50 664
EQUITY AND LIABILITIES
Equity attributable to 5 447 4 985 5 155
owners of the parent
Preference share capital and 644 644 644
premium
Non-controlling interest 1 803 2 215 1 886
Total shareholders` equity 7 894 7 844 7 685
Non-current liabilities
Long-term debt 9 25 286 21 199 25 106
Financial liability - 10 5 309 2 579 5 319
Derivative financial
instruments
Post-retirement benefit 195 182 188
obligations
Deferred lease liability 58 49 54
Deferred taxation 4 871 4 709 5 178
Cash-settled compensation 1
liability
Provisions 85 32 89
Total non-current 35 804 28 750 35 935
liabilities
Current liabilities
Trade and other payables 3 727 3 173 3 901
Short-term debt 9 2 290 3 807 2 388
Taxation payable 155 219 205
Bank overdrafts 436 216 550
Total current liabilities 6 608 7 415 7 044
Total equity and liabilities 50 306 44 009 50 664
* Restated refer to note 2.
Group statement of cash flows
Rm Unaudited Audited
six months ended year ended
31 March 31 March 30 September
2012 2011 2011
Cash flows from operating
activities
Cash received from customers 12 135 11 349 23 645
Cash paid to suppliers and (10 363) (9 365) (18 073)
employees
Cash generated from operations 1 772 1 984 5 572
Interest paid (936) (902) (1 836)
Taxation paid (427) (346) (674)
Ordinary dividends paid by (1) (1) (3)
subsidiaries
Ordinary dividends paid (405) (269) (553)
Preference dividends paid (22) (24) (47)
Capital reductions paid (83) (83)
Distributions to beneficiaries of (31) (38) (47)
the HPFL trusts
Net cash from operating activities (50) 321 2 329
Cash flows from investing
activities
Purchase of property, plant and (561) (436) (1 327)
equipment
Proceeds on disposal of property, 27 144 415
plant and equipment
Additions to intangible assets (9) (25) (81)
(Increase)/decrease in investments (364) 85 (250)
and loans
Interest received 54 26 115
Increase in equity interest in (11)
subsidiaries
Net cash from investing activities (853) (206) (1 139)
Cash flows from financing
activities
Proceeds from issue of ordinary 16 36 74
shares
Proceeds on disposal of treasury 119 62 123
shares
Equity premium on repurchase of (10)
convertible bond
Long-term liabilities 680 (286) 477
raised/(repaid)
Short-term liabilities repaid (79) (37) (1 544)
Net cash from financing activities 736 (225) (880)
Net (decrease)/increase in cash (167) (110) 310
and cash equivalents
Translation effects on cash and (36) (7) 210
cash equivalents of foreign
entities
Cash and cash equivalents at 1 805 1 285 1 285
beginning of the period
Cash and cash equivalents at end 1 602 1 168 1 805
of the period
Consisting of:
Cash on hand and balances with 2 038 1 384 2 355
banks
Short-term money market borrowings (436) (216) (550)
and bank overdrafts
1 602 1 168 1 805
Condensed Group statement of changes in equity
Rm Ordinary Treasury Option Cash flow
share shares premium on hedge
capital convertible accounting
and bond reserve
premium
Balance at 624 (767) 164 (1 790)
30 September 2010
Shares issued during the 36
period
Capital reduction (83)
Sale of treasury shares 26
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
Restated total 588
comprehensive loss for
the period
Total comprehensive 588
income for the period as
previously reported
Prior year restatement
(Refer to note 2)
Restated balance at 577 (741) 164 (1 202)
31 March 2011
Balance at 31 March 2011 577 (741) 164 (1 202)
as previously reported
Prior year restatement
(Refer to note 2)
Shares issued during the 38
period
Sale of treasury shares 27
Repurchase of 6
convertible bonds
Share-based payments
reserve movements
Preference dividends
paid
Dividends paid
Distributions to
beneficiaries of the
HPFL trusts
Other reserve movements (170)
Increase in equity
interest in subsidiaries
Total comprehensive (889)
income for the period
Balance at 615 (714) (2 091)
30 September 2011
Shares issued during the 16
period
Sale of treasury shares 56
Share-based payments
reserve movements
Preference dividends
paid
Dividends paid
Distributions to
beneficiaries of the
HPFL trusts
Other reserve movements
Total comprehensive (45)
income for the period
Balance at 31 March 2012 631 (658) (2 136)
Rm Foreign Other Retained Equity
currency reserves earnings attributable
translation to owners
reserve of the
parent
Balance at 769 551 4 518 4 069
30 September 2010
Shares issued during 36
the period
Capital reduction (83)
Sale of treasury 30 56
shares
Share-based payments 14 14
reserve movements
Capital gains tax on (1) (1)
capital reductions
attributable to
treasury shares
Preference dividends (24) (24)
paid
Dividends paid (269) (269)
Distributions to (38) (38)
beneficiaries of the
HPFL trusts
Other reserve 19 (28) (9)
movements
Restated total (20) 666 1 234
comprehensive loss for
the period
Total comprehensive (21) 666 1 233
income for the period
as previously reported
Prior year restatement 1 1
(Refer to note 2)
Restated balance at 749 584 4 854 4 985
31 March 2011
Balance at 722 584 4 968 5 072
31 March 2011 as
previously reported
Prior year restatement 27 (114) (87)
(Refer to note 2)
Shares issued during 38
the period
Sale of treasury 25 52
shares
Repurchase of (21) (15)
convertible bonds
Share-based payments 9 9
reserve movements
Preference dividends (23) (23)
paid
Dividends paid (284) (284)
Distributions to (9) (9)
beneficiaries of the
HPFL trusts
Other reserve 104 80 14
movements
Increase in equity (30) (30)
interest in
subsidiaries
Total comprehensive 362 945 418
income for the period
Balance at 1 111 697 5 537 5 155
30 September 2011
Shares issued during 16
the period
Sale of treasury 53 109
shares
Share-based payments 9 9
reserve movements
Preference dividends (22) (22)
paid
Dividends paid (405) (405)
Distributions to (31) (31)
beneficiaries of the
HPFL trusts
Other reserve 5 (5)
movements
Total comprehensive (60) 721 616
income for the period
Balance at 1 051 711 5 848 5 447
31 March 2012
Rm Preference Non- Total
share controlling share-
capital and interest holders`
premium equity
Balance at 644 1 645 6 358
30 September 2010
Shares issued during the 36
period
Capital reduction (83)
Sale of treasury shares 56
Share-based payments reserve 14
movements
Capital gains tax on capital (1)
reductions attributable to
treasury shares
Preference dividends paid (24)
Dividends paid (1) (270)
Distributions to (38)
beneficiaries of the HPFL
trusts
Other reserve movements 15 6
Restated total comprehensive 556 1 790
loss for the period
Total comprehensive income 555 1 788
for the period as previously
reported
Prior year restatement 1 2
(Refer to note 2)
Restated balance at 644 2 215 7 844
31 March 2011
Balance at 31 March 2011 644 2 297 8 013
as previously reported
Prior year restatement (82) (169)
(Refer to note 2)
Shares issued during the 38
period
Sale of treasury shares 52
Repurchase of convertible (15)
bonds
Share-based payments reserve 9
movements
Preference dividends paid (23)
Dividends paid (2) (286)
Distributions to (9)
beneficiaries of the HPFL
trusts
Other reserve movements (15) (1)
Increase in equity interest 19 (11)
in subsidiaries
Total comprehensive income (331) 87
for the period
Balance at 644 1 886 7 685
30 September 2011
Shares issued during the 16
period
Sale of treasury shares 109
Share-based payments reserve 9
movements
Preference dividends paid (22)
Dividends paid (1) (406)
Distributions to (31)
beneficiaries of the HPFL
trusts
Other reserve movements
Total comprehensive income (82) 534
for the period
Balance at 31 March 2012 644 1 803 7 894
Headline earnings
Rm Unaudited % Audited
six months ended change year ended
30 September
2011
31 March 31 March
2012 2011
Reconciliation of
headline earnings
Profit for the period 706 699 1.0 1 855
Less:
Preference (22) (24) (47)
shareholders
Non-controlling 15 (33) (238)
interest
Earnings used in the 699 642 8.9 1 570
calculation of basic
earnings per share
Adjusted for:
Impairment of 24
investments
Reversal of impairment (1) (7)
of property, plant and
equipment
Profit on disposal of (12) (55) (162)
property, plant and
equipment
Tax effect of headline 2 8 23
adjusting items
Non-controlling share (1) 19 56
of headline adjusting
items
Headline earnings 688 613 12.2 1 504
Adjusted for:
Ineffectiveness 100 61
arising from interest
rate swaps
Reduction in UK (163) (155)
statutory tax rate
Impairments and other 31 7
Non-controlling share 20 46
of adjusted items
Adjusted headline 676 572 18.2
earnings
Headline earnings per 52.8 48.0 10.0 117.0
share (cents)
Diluted headline 52.1 46.5 12.0 114.2
earnings per share
(cents)
Adjusted headline 51.9 44.7 16.1
earnings per share
(cents)
Condensed notes to the Group financial statements
1. Basis of preparation and accounting policies
The condensed financial statements for the six months ended
31 March 2012 have been prepared in accordance with International
Financial Reporting Standards (IFRS) and comply with IAS 34
Interim Financial Reporting, the AC500 standards as issued by the
Accounting Practices Board or its successor, 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
condensed financial statements are consistent in all material
respects with those applied in the audited financial statements
for the year ended 30 September 2011.
A significant portion of the UK PropCo debt matures in October
2013, and the business is actively involved with its advisors in
order to seek a solution. Whilst no formally committed plan
currently exists, it is premature at this stage, with 17 months
remaining before the maturity date, to conclude that a solution
cannot be achieved. Furthermore, given the ring-fencing of the
PropCo debt from the UK OpCo, and the non-recourse nature of this
debt to Netcare`s SA operations, the directors are comfortable
with the going concern assessment.
The interim results have not been audited by the Group`s
independent external auditors, Grant Thornton.
The condensed financial statements have been prepared under the
supervision of KN Gibson CA (SA), Chief Financial Officer of
Netcare Limited.
2. Restatement of comparative information
The annual financial statements for the year ended 30 September
2011 included a prior year restatement resulting from a change in
GHG`s interpretation of IAS 12 Income taxes. This change related
to the differences that arise on the straight-lining of lease
rentals on operating leases between GHG`s wholly owned
subsidiaries, BMI Healthcare Limited and other group property
holding companies. In prior years, the differences were accounted
for as permanent differences with no deferred tax being raised.
Management concluded that fairer presentation would be achieved
if these were treated as timing differences and the appropriate
deferred tax liability raised. More details are provided in note
33 of the annual financial statements for the year ended
30 September 2011.
The March 2011 statement of financial position, statement of
changes in equity and statement of comprehensive income have been
restated to reflect the changes. The restatement did not result
in any changes to earnings or headline earnings per share.
The effect of this change is summarised below:
Group statement of financial position for the six months ended
31 March 2011
Rm Previously Adjustment Restated
reported
Non-current assets
Deferred taxation 1 071 305 1 376
Non-current liabilities
Deferred taxation (4 235) (474) (4 709)
Equity
Foreign currency translation (722) (27) (749)
reserve
Retained earnings (4 968) 114 (4 854)
Non-controlling interest (2 297) 82 (2 215)
Rm Unaudited Audited
six months ended year ended
31 March 31 March 30 September
2012 2011 2011
3 Operating profit
.
After charging:
Depreciation and amortisation 659 568 1 213
Operating lease charges 272 176 469
4 Investment income
.
Return on retirement benefit 49
plan assets
Interest on bank accounts and 90 26 66
other
90 26 115
5 Financial expenses
.
Amortisation of arrangement fee 52 43 90
Interest on convertible bonds 73 140
(liability portion)
Interest on promissory notes 121 84 166
Interest on preference shares 1 3 4
classified as debt
Interest on bank loans and 796 701 1 447
other
970 904 1 847
6 Other losses - net
.
Foreign exchange (losses)/gains (1) 5
Ineffectiveness (losses)/gains (100) (61) 43
on cash flow hedges
Fair value loss on inflation (2)
rate swaps (not hedge
accounted)
Fair value loss on derivative (2) (7) (26)
financial assets (not hedge
accounted)
Amount reclassified from cash 9 (1) (43)
flow hedge reserve
(93) (70) (23)
Rm Unaudited Audited
six months ended year ended
31 March 31 March 30 September
2012 2011 2011
7 Associated companies,
. investments
and loans
Non-current
Associated companies 287 224 289
Available-for-sale investments 22
Loans and receivables 603 3 205
890 249 494
Current
Loans and receivables 47 45 43
937 294 537
The available-for-sale
investment represents an 8%
investment in Phoenix Hospital
Limited, an unlisted group
which comprises The Weymouth
Clinic Limited and 9 Harley
Street Limited in the United
Kingdom. An impairment loss of
R22 million was recognised
during the prior year.
Included in loans and
receivables is a net
investment of R584 million
relating to the acquisition of
a contractual economic
interest in the debt of the UK
OpCo.
8. Assets held for sale
Certain land and buildings 5 8 8
were classified as held for
sale
Rm Unaudited Audited
six months ended year ended
31 March 31 March 30 September
2012 2011 2011
9. Debt
Long-term debt 25 286 21 199 25 106
Short-term debt 2 290 3 807 2 388
Total debt 27 576 25 006 27 494
Comprising:
Debt in South African Rand
Finance leases 51 57 57
Redeemable cumulative 22 42 34
preference shares
Convertible bonds (debt 1 445
portion)
Promissory notes 4 039 1 910 3 180
Unsecured liabilities 200 452 200
4 312 3 906 3 471
Debt in foreign currency
Secured liabilities 22 927 20 903 23 563
Finance leases 153 111 154
Other 184 86 306
23 264 21 100 24 023
27 576 25 006 27 494
Maturity
profile
Rm Total < 1 1 - 2 2 - 3 3 - 4 > 4
year years years years years
31 March 2012
Debt in South 4 312 1 500 420 1 374 7 1 011
African Rand
Debt in 23 264 790 19 1 086 1 518 170
foreign 700
currency
27 576 2 290 20 2 460 1 525 1 181
120
31 March 2011
Debt in South 3 906 3 192 683 7 6 18
African Rand
Debt in 21 100 615 440 17 421 86 2 538
foreign
currency
25 006 3 807 1 123 17 428 92 2 556
31 September
2011
Debt in South 3 471 1 622 483 344 7 1 015
African Rand
Debt in 24 023 766 575 19 908 1 592 1 182
foreign
currency
27 494 2 388 1 058 20 252 1 599 2 197
Rm Unaudited Audited
six months ended year ended
31 March 31 March 30 September
2012 2011 2011
10 Derivative financial
. instruments
Derivative financial assets
European style call options
South African Rand 3 21 5
Interest rate swaps
South African Rand 3
6 21 5
Included in:
Non-current assets 3 13 3
Current assets 3 8 2
6 21 5
Derivative financial
liabilities
Interest rate swaps
South African Rand 9 10 16
Foreign currency 5 297 2 569 5 300
5 306 2 579 5 316
Inflation rate swaps
South African Rand 3 3
5 309 2 579 5 319
Included in:
Non-current liabilities 5 309 2 579 5 319
The inter-bank rate used in the fair value calculations of the
foreign currency interest rate swaps has been adjusted to take
into account the credit risk to which the Group is exposed. The
value of the foreign currency interest rate swaps excluding the
counterparty valuation adjustment (CVA) at 31 March 2012 was R6
202 million.
Rm Unaudited Audited
six months ended year ended
31 March 31 March 30 September
2012 2011 2011
11 Commitments
.
Capital commitments 1 270 1 433 1 268
South Africa 996 1 310 845
United Kingdom 274 123 423
Operating lease commitments 5 665 3 089 4 510
South Africa 1 357 1 151 1 410
United Kingdom 4 308 1 938 3 100
12 Contingent liabilities
. (guarantees and suretyships)
South Africa 616 669 636
United Kingdom 13
616 682 636
Condensed segment report
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 Unaudited % Audited
six months ended change year ended
31 March 31 March 30 September
2012 2011 2011
INCOME STATEMENT
Revenue
South Africa 6 983 6 472 7.9 13 361
Hospitals and Emergency 6 327 5 844 8.3 12 089
services
Primary Care 656 628 4.5 1 272
United Kingdom 5 671 4 920 15.3 9 860
UK adjusted1 5 041 4 920 2.5 9 860
Exchange rate impact 630
Group reported 12 654 11 392 11.1 23 221
Exchange rate impact (630)
Group adjusted1 12 024 11 392 5.5 23 221
EBITDA
South Africa 1 369 1 212 13.0 2 608
Hospitals and Emergency 1 324 1 191 11.2 2 543
services
Primary Care 45 21 114.3 65
United Kingdom 1 103 998 10.5 2 209
UK adjusted1 984 998 (1.4) 2 209
Exchange rate impact 119
Capital items 5 56 (91.1) 97
South Africa 8 9 (14)
United Kingdm (3) 47 111
Group reported 2 477 2 266 9.3 4 914
Exchange rate impact (119)
Group adjusted1 2 358 2 266 4.1 4 914
1 The March 2012 UK numbers have been recalculated to remove the
impact of foreign currency fluctuations since the March 2011
results.
Rm Unaudited % Audited
six months ended year ended
change
31 March 31 March 30 September
2012 2011 2011
Operating profit
South Africa 1 145 1 021 12.1 2 220
Hospitals and Emergency 1 114 1 013 10.0 2 182
services
Primary Care 31 8 287.5 38
United Kingdom 668 621 7.6 1 384
UK adjusted1 598 621 (3.7) 1 384
Exchange rate impact 70
Capital items 5 56 (91.1) 97
South Africa 8 9 (14)
United Kingdom (3) 47 111
Group reported 1 818 1 698 7.1 3 701
Exchange rate impact (70)
Group adjusted1 1 748 1 698 2.9 3 701
Net interest expense
South Africa 98 162 39.5 327
United Kingdom 782 716 (9.2) 1 405
UK adjusted1 693 716 3.2 1 405
Exchange rate impact 89
Group reported 880 878 (0.2) 1 732
Exchange rate impact (89)
Group adjusted1 791 878 9.9 1 732
1 The March 2012 UK numbers have been recalculated to remove the
impact of foreign currency fluctuations since the March 2011
results.
Rm Unaudited % Audited
change
31 March 31 March 30 September
2012 2011 2011
STATEMENT OF FINANCIAL
POSITION
Total assets2
South Africa 10 969 9 395 16.8 10 262
United Kingdom 39 337 34 614 13.6 40 402
UK adjusted1 34 832 34 614 0.6 40 402
Exchange rate impact (4 505)
Group reported 50 306 44 009 14.3 50 664
Exchange rate impact 4 505
Group adjusted1 45 801 44 009 4.1 50 664
Debt net of cash
South Africa 4 218 3 713 (13.6) 3 303
United Kingdom 21 756 20 125 (8.1) 22 386
UK adjusted1 19 264 20 125 4.3 22 386
Exchange rate impact 2 492
Group reported 25 974 23 838 (9.0) 25 689
Exchange rate impact (2 492)
Group adjusted1 23 482 23 838 1.5 25 689
1 The March 2012 UK numbers have been recalculated to remove the
impact of foreign currency fluctuations since the March 2011
results.
2 Restated refer to note 2.
Salient features
Unaudited Audited
31 March 31 March 30 September
2012 2011 2011
Share statistics
Ordinary shares
Shares in issue (million) 1 448 1 441 1 446
Shares in issue net of treasury 1 306 1 277 1 295
shares (million)
Weighted average number of shares 1 303 1 279 1 286
(million)
Diluted weighted average number 1 321 1 318 1 317
of shares (million)
Market price per share (cents) 1 423 1 450 1 305
Currency conversion guide (R:GBP)
Closing exchange rate 12.25 10.85 12.54
Average exchange rate for the 12.42 11.02 11.09
period
Registered office:
76 Maude Street (corner West Street), Sandton 2196, Private Bag X34, Benmore
2010
Executive directors:
RH Friedland (Chief Executive Officer)
KN Gibson (Chief Financial Officer)
Non-executive directors:
SJ Vilakazi (Chairman)
T Brewer
APH Jammine
JM Kahn
MJ Kuscus
HR Levin
KD Moroka
N Weltman
Company Secretary:
L Bagwandeen
Sponsor:
Nedbank Capital, a division of Nedbank Group Limited
Transfer secretaries:
Link Market Services South Africa (Proprietary) Limited,
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein 2001
Investor relations: ir@netcare.co.za
Date: 14/05/2012 08:00:01 Supplied by www.sharenet.co.za
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