Wrap Text
Unaudited group interim results for the six months ended 31 March 2014
Netcare Limited
("Netcare", "the Company" or "the Group")
Registration number: 1996/008242/06
(Incorporated in the Republic of South Africa)
JSE share code: NTC
ISIN code: ZAE000011953
UNAUDITED GROUP INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2014
FINANCIAL HIGHLIGHTS
- Group revenue up 17.3% to R15 411 million
- Group adjusted HEPS up 19.5% to 75.9 cents
- Interim dividend per share up 18.5% to 32.0 cents
OVERVIEW
The unaudited Group interim results reflect a strong trading performance from the South African (SA) operations. While the United Kingdom (UK)
operations delivered a credible trading performance, profitability was negatively affected by, inter alia, the professional costs related to the successfully
completed Competition Commission (CC) private healthcare market investigation (hereinafter referred to as "the Investigation"). Adjusted headline earnings
per share (HEPS) rose by 19.5% to 75.9 cents from 63.5 cents 1 in the comparative period.
The accounting policies applied in the preparation of the unaudited Group interim financial statements are consistent in all material respects with those
applied in the audited financial statements for the year ended 30 September 2013, with the exception of the application of certain new and revised
International Financial Reporting Standards (IFRS). These new and revised standards have had a limited impact on the Group financial results, and are
fully described in notes 1, 2, 10 and 15 to the unaudited Group interim financial statements. However, as IFRS 11 (Joint Arrangements) and IAS 19
(Employee Benefits) require retrospective application, comparative period results have been restated accordingly.
The prior period's results include a non-recurring, non-cash profit of R3 270 million arising from the deconsolidation of the General Healthcare Group
(GHG) Property Businesses ("the Deconsolidation"), which took effect on 16 November 2012. To enable meaningful comparison, this commentary refers to
normalised results which exclude this non-recurring profit.
GROUP FINANCIAL REVIEW
Financial performance
With significant weakening of the Rand relative to the Pound Sterling (Pound) during the period under review, currency conversion impacted the Group's
results and financial position. The average exchange rate used for converting income and expenditure was R17.15 to the Pound, compared to R13.88 in
the prior period, a change of 23.6%. The closing exchange rate used to convert assets and liabilities at 31 March 2014 was R17.53, a change of 25.9%
from the R13.92 rate applicable at 31 March 2013 (30 September 2013: R16.22).
Revenue grew in both the SA and UK operations in their respective local currencies, with Group revenue up 17.3% to R15 411 million. Currency conversion
accounted for 11.2% or R1 468 million of this increase.
Normalised earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 17.2% to R3 248 million (2013: R2 771 million), before
recognising R1 202 million (2013: R703 million) in rent paid to the GHG Property Businesses. The 2013 rent expense of R703 million represents only 4½
months post the Deconsolidation and would have been R949 million on a pro forma like-for-like basis. After recognising the rental expense, reported
EBITDA declined by 1.1%, as did operating profit of R1 490 million (2013: R1 507 million). During the period under review the Group incurred non-
recurring costs of R139 million (2013: R24 million) related to CC matters and the rationalisation of certain marginal UK sites.
Net financial expenses were significantly lower at R183 million compared to R390 million in the prior period, with the decline largely attributed to the
reduction in interest charges following the Deconsolidation. The 2013 results included 1½ months of financial expenses relating to the GHG Property
Businesses, inclusive of non-cash fair value movements and amortisation of the cash flow hedge accounting reserve of R91 million (£6.6 million). In SA,
net interest paid increased marginally to R71 million (2013: R67 million), with the 50 basis points increase in the central bank interest rate being neutralised
by lower average net debt levels. Interest cover at 20.1 times continues to improve (2013: 18.1 times).
Normalised profit before tax of R1 342 million was 17.0% higher (2013: R1 147 million) than the prior period. Group tax of R393 million equates to an
effective tax rate of 29.3%, compared to the normalised effective tax rate of 20.4% in the prior period, which favourably benefited from a non-recurring UK
tax credit of R103 million. Normalised profit after tax grew by 3.9% to R949 million (2013: R913 million).
Financial position and cash flow
Currency conversion had a significant impact on the Group's statement of financial position, adding R453 million to total shareholders' equity which
increased from R10 415 million at 30 September 2013 to R11 237 million at 31 March 2014.
Group net debt at 31 March 2014 amounted to R5 562 million. The Group ratio of net debt to normalised EBITDA (before rent paid to the GHG Property
Businesses) strengthened to 0.9 times (March 2013: 1.0 times), while interest cover showed significant improvement to 8.4 times (March 2013: 4.3 times).
In SA, net debt increased in line with normal seasonality from R3 175 million at 30 September 2013 to R3 653 million at 31 March 2014 (March 2013: R4
184 million) due to the funding of capital expenditure, tax and dividend payments that amounted to R1 595 million during the period (March 2013: R1 225
million). In addition to the roll-over of short-dated notes, Netcare raised a R550 million 5-year note and a R250 million 3-year note in February 2014 under
its Domestic Medium Term Note (DMTN) programme. The funds were raised for normal working capital requirements including the funding of capital
expenditure and the settlement of existing DMTN notes maturing in March and April 2014. This improved the tenor of the SA debt profile and further
secures the Company's funding needs over the medium term.
Net debt in the UK amounted to £108.9 million at 31 March 2014, increasing marginally from £105.6 million at 30 September 2013. BMI OpCo's capital
structure was strengthened by completing an early refinancing of debt facilities in August 2013. Further details on the UK debt are provided in the UK
divisional review below.
The Group generated an increase in cash from operations (before rentals paid to the GHG Property Businesses) of 40.5% to R2 609 million (2013: R1 857
million). Operating cash flows generated after payment of these rentals increased by 12.1% to R1 428 million (2013: R1 274 million).
1. The 2013 adjusted headline earnings per share has been restated to take into account Competition Commission costs regarded as non-recurring
exceptional items.
The Group's investment in capital expenditure (including intangible assets) was R624 million (2013: R450 million) and distributions to shareholders by way
of ordinary dividends were R543 million (2013: R438 million).
DIVISIONAL REVIEW
South Africa
Revenue grew 7.5% to R7 740 million from R7 200 million. EBITDA rose 14.0% to R1 658 million (2013: R1 454 million) and the EBITDA margin widened to
21.4% (2013: 20.2%). Operating profit grew by 17.2% to R1 426 million (2013: R1 217 million) and adjusted HEPS increased 18.0% to 73.3 cents (2013:
62.1 cents).
Cash generated from operations was 44.3% higher at R1 186 million (2013: R822 million). Capital expenditure, including intangible assets, totalled R422
million (2013: R302 million).
Hospitals and Emergency Services
Patient days grew by 3.0% (excluding the Bronkhorstspruit Public Private Partnership (PPP) arrangement that ended in August 2013) and by 2.7% in
absolute terms. Revenue from Hospitals and Emergency Services grew 9.5% to R7 221 million (2013: R6 592 million) and EBITDA increased by 14.3% to
R1 621 million (2013: R1 418 million). The EBITDA margin improved to 22.4% (2013: 21.5%) reflecting the benefits of ongoing efficiency drives, improved
occupancies and a higher mix of complex cases.
Growth was largely organic with seven new beds coming on-stream during the period taking the total number of beds to 9 296. A further 124 under-
utilised beds are being converted to disciplines where there is greater demand. A further 96 beds are expected to be commissioned during the second
half of the financial year. Major expansion projects are underway, including the construction of a new 100-bed hospital in Pinehaven, west of
Johannesburg, and a 109-bed hospital in Polokwane, with commissioning expected late in the 2015 financial year. Construction is progressing well on the
Cape Town foreshore, the site for the relocation of the flagship Netcare Christiaan Barnard Memorial Hospital in 2016.
The Lesotho PPP is now in its third year of operation. It consists of four primary care clinics and the 425-bed referral facility, the Queen ‘Mamohato
Memorial Hospital. Demand for services remains high and is stabilising at patient volume levels that exceed contractual thresholds by approximately 30%.
The hospital and clinics are responsible for almost half of all hospital admissions in Lesotho.
Clinical outcomes have improved despite increased patient volumes. Independently verified research conducted by Boston University on behalf of the
World Bank showed a 65% reduction in the paediatric pneumonia death rate, a 41% reduction in the overall death rate, a 22% decline in the rate of
stillbirths and a 10% decrease in maternal deaths. The project is accredited by the Council for Health Service Accreditation of Southern Africa
(COHSASA) and is independently monitored on outcomes and key performance areas.
This venture has introduced a wide range of new and greatly improved services and facilities to the people of Lesotho, including 24-hour midwifery,
dentistry, ophthalmology, audiology, trauma facilities, adult and neonatal ICUs, digital radiography, MRI, neurosurgery and laparoscopic surgery. Given
increased patient volumes, the vastly expanded services on offer, extensive new facilities and the greatly improved outcomes, this project is making a
significant difference to the healthcare needs of the Basotho people.
Primary Care
The division's Medicross family medical and dental centres managed 1.1% more patient visits and increased dispensed pharmacy scripts by 2.9%. Prime
Cure continued its transition from a managed healthcare risk model to a managed healthcare administration model. Revenue declined by 14.6% to R519
million (2013: R608 million) as the comparative period included a residual of the terminated risk-based contracts. EBITDA of R37 million increased
marginally over the R36 million in the prior period, and the division's EBITDA margin improved from 5.9% to 7.1%.
Market inquiry into private healthcare
The SA CC's market inquiry into private healthcare commenced in January 2014 with the appointment of a panel to oversee the conduct of the inquiry. The
panel is chaired by retired Chief Justice Ngcobo and has already commenced its work. Netcare has indicated its intention to engage in the process and
understands that the panel will be publishing various draft documents for comment by the end of May 2014. Netcare intends making submissions in
response to the panel's invitation to comment on these documents.
United Kingdom
Revenue grew 4.4% to £446.8 million (2013: £428.1 million). Significant costs were incurred in relation to the CC Investigation into the private healthcare
market, amounting to £4.9 million for the period under review (2013: £1.7 million). A further £1.7 million of non-cash costs were recognised relating to the
closure of three marginal hospital sites as part of a strategic rationalisation plan, unrelated to the CC Investigation. Excluding these non-recurring costs,
EBITDA before rent of £70.1 million (2013: £50.7 million) paid to the GHG Property Businesses, amounted to £99.1 million (2013: £96.5 million), an
increase of 2.7%. The 2013 rent expense of £50.7 million represents only 4½ months post the Deconsolidation and would have been £68.4 million on a pro
forma like-for-like basis. After recognising these property rentals and non-recurring items, reported EBITDA was £22.4 million (2013: £44.1 million).
Depreciation of £18.8 million is lower than the prior year's £23.3 million which included 1½ month's depreciation from the GHG Property Businesses prior
to the Deconsolidation.
Net financial expenses reduced significantly to £6.5 million compared to the prior period's £23.9 million, which included £20.6 million related to the GHG
Property Businesses for the period prior to the Deconsolidation.
A loss before tax of £1.9 million for the half year reflected a moderate improvement on the prior period's loss of £2.4 million, notwithstanding the materially
increased non-recurring charges of £6.6 million (2013: £1.7 million). The current year tax charge amounted to £0.6 million compared to a credit of £7.5
million in the prior period, which benefited from a non-recurring credit of £7.9 million. The reported loss after tax was £2.5 million (2013: £5.1 million profit).
BMI OpCo
BMI OpCo delivered a robust result against the continued backdrop of a challenging trading environment and the significant distraction and cost of the
CC Investigation into the private healthcare market.
Inpatient and day case volumes remained broadly flat. This was driven by the continued decline in Private Medical Insurance (PMI) volumes, influenced by
the increasing practice of more stringent claims management initiatives by insurers and a shift in profile of PMI members to corporate policy holders, who
are typically younger and healthier. Self-pay caseload is stabilising with indications that this segment is beginning to return to growth as consumer
confidence gradually returns to this market.
State funded caseload through the National Health Service (NHS) continued to show strong growth of 9.3% against the prior period. This reflects the
success of BMI OpCo's targeted initiatives and the solid national and local partnerships being built with commissioning bodies. NHS work now comprises
35% of total caseload (March 2013: 32%), and BMI will continue to focus on attracting higher complexity work. The business has also grown the
contribution from outpatient activity during the reporting period.
The cost base remains tightly controlled and exit arrangements were concluded for three marginally performing hospitals during the period in review. While
this will not have a material impact on BMI's operational performance, it reduces the overall portfolio to allow UK management to focus operational
initiatives and capital expenditure on the long-term core of the estate.
Revenue grew by 4.4% to £446.8 million (2013: £428.1 million). EBITDA before the GHG Property Businesses rentals, non-recurring costs related to the
CC Investigation and site closure costs increased by 2.4% to £99.1 million (2013: £96.8 million), and EBITDA margin (before the aforementioned costs)
declined slightly from 22.6% to 22.2%. The case mix shift towards NHS and its reduced year-on-year tariff levels was marginally offset by higher acuity
and cost-efficiency initiatives. A national shortage of qualified nursing staff continues to drive staffing costs. Reported EBITDA after CC costs of £4.9
million (2013: £1.7 million) and site closure costs of £1.7 million amounted to £22.4 million (2013: £26.7 million).
Capital expenditure (including intangible assets) amounted to £11.6 million (2013: £10.8 million), related mostly to projects initiated to enhance and
maintain the quality of the hospital portfolio.
Net debt of £108.9 million at 31 March 2014 increased marginally from £105.6 million at 30 September 2013. Gross debt increased to £181.6 million at 31
March 2014 from £156.0 million at 30 September 2013. The bulk of the increase was due to the draw-down of the revolving credit facility of £22.3 million
as a precautionary measure to enable the business to manage any potentially adverse outcomes ahead of the release of the final findings of the CC
Investigation on 2 April 2014. As these proceeds were retained in cash, this did not have an impact on net debt which closed at £108.9 million (September
2013: £105.6 million). The revolving credit facility is in the process of being repaid. Net interest paid for the period amounted to £6.2 million. The weighted
average cost of debt under the refinanced capital structure concluded in August 2013 was 6.5% (March 2013: 4.8%).
GHG Property Businesses
The Board of GHG PropCo 1 and the lender classes (junior, senior and swap counterparties) have been actively engaged in discussions since late 2012 to
agree on a solution to the GHG PropCo 1 debt facility of £1.5 billion. As a result of the substantial progress being made with regard to the restructuring of
the facilities, the loan maturity date was further extended on 10 April 2014 to 15 July 2014 by mutual agreement between the lenders. The terms of the
amendment provide that the Master Servicer and 50.1% of the senior creditors may shorten the maturity date to 2 June 2014 should they determine that
insufficient progress is being made with respect to the restructuring negotiations.
The debt of GHG PropCo 1 is ring-fenced from BMI OpCo and GHG PropCo 2 and there is no recourse to Netcare and its SA operations in this regard.
UK Competition Commission market investigation
In April 2012 the Office of Fair Trading referred the private healthcare market to the CC for investigation based on concerns that the private healthcare
market was not working effectively. On 4 April 2012, the CC began an arduous two year investigation and on 2 April 2014 delivered its Final Report. This
concluded, most notably, that insured patients did not suffer from an adverse effect on competition outside of central London and that BMI would not be
required to divest of any hospitals. The Final Report also included certain behavioural and information-sharing remedies that private providers generally
support and have embraced. The order prescribing the implementation of these remedies is expected in October 2014 and they are not expected to have
a material adverse impact on BMI.
While BMI is pleased with the ultimate result, the CC's Investigation was not without its challenges. The CC's provisional findings, issued on 28 August
2013, concluded that certain features in the industry had an adverse effect on competition in the UK private healthcare market and accordingly initiated a
consultation process on possible remedies to address this. The possible remedies included the prospect of multiple hospital divestments by BMI, HCA
and Spire. The CC's preliminary decision on remedies was published on 16 January 2014 and indicated that BMI would be required to divest of seven
facilities.
BMI engaged with the CC at all stages of the Investigation and supplied the CC with an enormous quantum of data, at considerable cost and
management time. Based on its own assessment of the market, analysis commissioned by independent experts, the data submitted to the CC and its daily
experience, BMI believed that the preliminary findings of adverse effects on competition outside of central London were erroneous and that the individual
conclusions on which the preliminary findings were based, were not supportable. BMI further believed that the CC's analysis was flawed and that the CC
had misunderstood or overlooked the data submitted. In September 2013, BMI appealed to the Competition Appeals Tribunal (CAT) to gain access to the
analysis and certain additional information on which the CC had based its provisional findings. BMI's appeal was successful with the CAT unanimously
concluding that the CC had breached its "statutory duty . . . and [acted] in breach of the rules of natural justice in comprehensively failing to give [BMI] a
fair opportunity to correct or contradict the Commission's Provisional Findings . . . or to make worthwhile representations".
As a result of the CAT's decision BMI was able to confirm its concern that the analytical framework and economic analysis was fundamentally flawed.
Among other concerns, BMI's main concerns were that the CC's approach:
- ignored large components of the healthcare value chain;
- discounted the commercial interplay between providers and funders;
- disregarded the competitive forces presented by the NHS;
- ignored market-based cost and input data in favour of unsupportable, unrealistic, hypothetical assumptions, such as the cost of land and buildings;
- interpreted similar financial data of similarly placed healthcare providers differently, such as rental expense and capital employed;
- dismissed the capital intensive nature of quality healthcare provision;
- minimised the quality differential among alternatives of care;
- extrapolated industry wide conclusions from a very limited cohort of episode data;
- embraced questionable statistical models shown to have inherent bias; and
- ignored many exogenous factors that may well be a cause for anecdotal competition concerns in specific markets, such as weakness in demand
caused by the economic downturn, poor business plans and execution.
The need for and benefits of a transparent process and open dialogue between the CC and the healthcare sector cannot be overstated. BMI was able to
use the information obtained as a result of the CAT ruling in subsequent hearings before the CC and in its formal submissions to help rectify the
misunderstandings.
While the outcome of the CC Investigation is welcomed, and the true realities of the market place are now better understood, the enormous cost and
material distraction of management resources and time have negatively impacted the business. With the Investigation now concluded, BMI management
will once again be able to focus on delivering quality healthcare and driving improvements within the business.
OUTLOOK
The demand for private healthcare within SA is expected to remain strong. The business will continue to drive clinical excellence and maintain its
operational efficiency programmes. It will continue work on improving occupancies, along with the focused expansion of Netcare's facilities and
geographic footprint and leverage the opportunity for environmental upgrades in the process. These initiatives all fall under the ambit of the Triple Aim
objectives of best patient outcome, best patient experience and cost effective care.
Terms of Reference for the SA CC inquiry into the private healthcare sector were published on 29 November 2013 and the Healthcare Inquiry Panel was
appointed on 30 January 2014. A draft Statement of Issues and Administrative Guidelines are expected by the end of May 2014. The provisional findings
of the SA CC inquiry are expected to be published by the end of October 2015. Netcare views this as an opportunity for an independent and impartial
process that comprehensively reflects the functioning of the national health market. We are committed to contributing positively towards this process and
the development of health policy that aims to improve access to quality healthcare in SA.
In the UK, economic data indicates that the economy is starting to recover. However, central London remains distinct from the rest of the country, with the
recovery currently less evident in other areas. Healthcare tends to be a late cycle beneficiary and the broader macro-economic improvements will take
some time before they translate into a tangible increase in demand for private medical insurance.
The NHS market is expected to continue its strong growth path leading up to the May 2015 elections. The self-pay market is demonstrating signs of
stabilising and there are preliminary indications that increasing demand could return this segment to growth, notably as consumer confidence improves
and NHS waiting times come under further strain. We are confident that the PMI market will strengthen in the medium term. With the distractions of the CC
Investigation out of the way and certain marginal sites exited, management will direct their focus on building caseload and complexity, while maintaining
tight control of costs. We remain optimistic about the medium and longer term prospects of the UK business.
BOARD AND EXECUTIVE CHANGES
Mr HR Levin retired as a non-executive director with effect from 28 February 2014. He served as a member of the Netcare Board since 6 November 1996
and chaired the Remuneration Committee, as well as being a member and former chair of the Audit Committee. The Board expresses its gratitude and
appreciation to Mr Levin for his valued contribution to the Group.
Following the successful completion of the BMI OpCo refinancing and the UK CC Investigation, Mr Stephen Collier, Group CEO of GHG, has informed the
Company of his intention to step down on 31 December 2014 after 32 years with the Company. We wish to express the appreciation of the Board to Mr
Collier for his stewardship of GHG over the last 3 years. Mr Collier will be remaining with the Company in a non-executive capacity.
DECLARATION OF INTERIM DIVIDEND NUMBER 10
Notice is hereby given that an interim gross dividend of 32.0 cents per ordinary share is declared in respect of the six months ended 31 March 2014. The
dividend has been declared from income reserves and is payable on Monday, 21 July 2014 to shareholders recorded in the register at the close of
business on Friday, 18 July 2014. There are no STC credits available for utilisation. The number of ordinary shares (inclusive of treasury shares) in issue at
date of this declaration is 1 476 361 326. The dividend will be subject to a local dividend withholding tax rate of 15%, which will result in a net interim
dividend of 27.2 cents per ordinary share to those shareholders not exempt from paying dividend withholding tax, and 32.0 cents per ordinary share for
those shareholders who are exempt from dividend withholding tax.
The Board has 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 salient dates applicable to the interim dividend are as follows:
Last day to trade cum dividend Friday, 11 July 2014
Trading ex dividend commences Monday, 14 July 2014
Record date Friday, 18 July 2014
Payment date Monday, 21 July 2014
Share certificates may not be dematerialised nor rematerialised between Monday, 14 July 2014 and Friday, 18 July 2014, both days inclusive.
On Monday, 21 July 2014, the dividend will be electronically transferred to the bank accounts of all certificated shareholders. Holders of dematerialised
shares will have their accounts credited at their participant or broker on Monday, 21 July 2014.
Netcare Limited's tax reference number is 9999/581/71/4.
On behalf of the Board
Jerry Vilakazi Chairman
Richard Friedland Chief Executive Officer
Keith Gibson Chief Financial Officer
Sandton
15 May 2014
GROUP INCOME STATEMENT
Unaudited
six months ended Year ended
Restated Restated
31 March 31 March % 30 September
Rm Notes 2014 2013 change 2013
Revenue 15 411 13 143 17.3 27 382
Cost of sales (8 777) (7 515) (15 568)
Gross profit 6 634 5 628 17.9 11 814
Other income 157 145 306
Administrative and other expenses (5 301) (4 266) (9 117)
Operating profit before profit on deconsolidation 1 490 1 507 (1.1) 3 003
Profit on deconsolidation 3 3 270 3 257
Operating profit 4 1 490 4 777 (68.8) 6 260
Investment income 5 96 102 290
Financial expenses 6 (274) (448) (754)
Other financial losses - net 7 (5) (44) (193)
Attributable earnings of associates and joint ventures 35 30 89
Profit before taxation 1 342 4 417 (69.6) 5 692
Taxation 8 (393) (234) (642)
Profit for the period 949 4 183 (77.3) 5 050
Attributable to:
Owners of the parent 943 4 136 5 044
Preference shareholders 23 24 47
Profit attributable to shareholders 966 4 160 (76.8) 5 091
Non-controlling interest (17) 23 (41)
949 4 183 (77.3) 5 050
Cents
Earnings per share
Basic 70.6 313.3 (77.5) 381.2
Diluted 68.9 306.1 (77.5) 372.2
Dividend per share 32.0 27.0 18.5 67.5
GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited
six months ended Year ended
Restated Restated
31 March 31 March 30 September
Rm 2014 2013 2013
Profit for the period 949 4 183 5 050
Items that will not subsequently be reclassified to profit or loss 270 240
Actuarial losses on defined benefit schemes (4) (42)
Effect of translation of foreign entities 274 274
Deconsolidation of GHG Property Businesses 274 274
Taxation on items that will not subsequently be reclassified to profit or loss 8
Items that will subsequently be reclassified to profit or loss 450 2 625 3 559
Effect of cash flow hedge accounting (18) 2 624 3 108
Deconsolidation of GHG Property Businesses 2 473 2 473
Amortisation of the cash flow hedge accounting reserve (18) 151 177
Reclassification of the cash flow hedge accounting reserve 458
Effect of translation of foreign entities 463 34 520
Deconsolidation of GHG Property Businesses 310 310
Other 463 (276) 210
Taxation on items that will subsequently be reclassified to profit or loss 5 (33) (69)
Other comprehensive income for the period 450 2 895 3 799
Total comprehensive income for the period 1 399 7 078 8 849
Attributable to:
Owners of the parent 1 191 5 704 7 139
Preference shareholders 23 24 47
Non-controlling interest 185 1 350 1 663
1 399 7 078 8 849
GROUP STATEMENT OF FINANCIAL POSITION
Unaudited Year ended
Restated Restated
31 March 31 March 30 September
Rm Notes 2014 2013 2013
ASSETS
Non-current assets
Property, plant and equipment 10 702 9 556 10 401
Goodwill 3 727 3 027 3 466
Intangible assets 454 294 389
Equity-accounted companies, loans and receivables 9 1 843 1 285 1 679
Financial asset - Derivative financial instruments 10 34 51 49
Deferred taxation 1 355 1 208 1 218
Total non-current assets 18 115 15 421 17 202
Current assets
Loans and receivables 9 41 257 34
Inventories 1 042 954 912
Trade and other receivables 4 759 3 883 4 033
Taxation receivable 18 17
Cash and cash equivalents 2 107 2 205 1 659
Total current assets 7 967 7 299 6 655
Total assets 26 082 22 720 23 857
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital and premium 947 861 934
Treasury shares (748) (767) (766)
Other reserves 2 411 2 039 2 146
Retained earnings 5 185 3 608 4 846
Equity attributable to owners of the parent 7 795 5 741 7 160
Preference share capital and premium 644 644 644
Non-controlling interest 2 798 2 579 2 611
Total shareholders' equity 11 237 8 964 10 415
Non-current liabilities
Long-term debt 11 5 721 5 578 5 290
Financial liability - Derivative financial instruments 10 16 122 8
Post-retirement benefit obligations 237 221 229
Deferred lease liability 79 67 70
Deferred taxation 1 347 1 135 1 129
Provisions 121 451 97
Total non-current liabilities 7 521 7 574 6 823
Current liabilities
Trade and other payables 5 317 3 967 5 114
Short-term debt 11 1 660 1 813 1 140
Financial liability - Derivative financial instruments 10 3
Taxation payable 56 89 248
Bank overdrafts 288 313 117
Total current liabilities 7 324 6 182 6 619
Total equity and liabilities 26 082 22 720 23 857
GROUP STATEMENT OF CASH FLOWS
Unaudited
six months ended Year ended
Restated Restated
31 March 31 March 30 September
Rm 2014 2013 2013
Cash flows from operating activities
Cash received from customers 15 068 12 819 27 197
Cash paid to suppliers and employees (13 640) (11 545) (23 403)
Cash generated from operations 1 428 1 274 3 794
Interest paid (274) (410) (811)
Taxation paid (518) (362) (726)
Ordinary dividends paid by subsidiaries (1) (1) (3)
Ordinary dividends paid (543) (438) (788)
Preference dividends paid (23) (24) (47)
Distributions to beneficiaries of the HPFL trusts (85) (44) (66)
Net cash from operating activities (16) (5) 1 353
Cash flows from investing activities
Purchase of property, plant and equipment (613) (438) (1 350)
Proceeds on disposal of property, plant and equipment 8 13 15
Additions to intangible assets (11) (12) (37)
Proceeds from financial assets 5 5
Other investments and loans (27) (66) 311
Interest received 41 66 246
Dividends received 15 18 24
Increase in equity interest in subsidiaries (12) (163) (172)
Net cash from investing activities (599) (577) (958)
Cash flows from financing activities
Proceeds from issue of ordinary shares 13 21 94
Proceeds on disposal of treasury shares 71 31 36
Long-term liabilities raised/(repaid) 259 337 (297)
Short-term liabilities raised/(repaid) 453 (334) (1 065)
Settlement of derivatives (120)
Net cash from financing activities 796 55 (1 352)
Net increase/(decrease) in cash and cash equivalents 181 (527) (957)
Translation effects on cash and cash equivalents of foreign entities 96 68 148
Cash and cash equivalents at the beginning of the period 1 542 2 411 2 411
Cash and cash equivalents of businesses deconsolidated (60) (60)
Cash and cash equivalents at the end of the period 1 819 1 892 1 542
Consisting of:
Cash on hand and balances with banks 2 107 2 205 1 659
Short-term money market borrowings and bank overdrafts (288) (313) (117)
1 819 1 892 1 542
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Equity
Ordinary Cash flow Foreign attributable Preference
share hedge currency to owners share Non- Total
capital and Treasury accounting translation Other Retained of the capital and controlling shareholders'
Rm premium shares reserve reserve reserves earnings parent premium interest equity
Restated balance at 30 September 2012 720 (654) (1 635) 1 290 854 427 1 002 644 (2 678) (1 032)
Shares issued during the period 141 (120) 21 21
Sale of treasury shares 7 19 26 26
Share-based payments reserve movements 14 14 14
Deferred tax recognised in equity 7 7 7
Preference dividends paid (24) (24)
Dividends paid (452) (452) (1) (453)
Distributions to beneficiaries of the HPFL trusts (44) (44) (44)
Other reserve movements (86) 86
Increase in equity interest in subsidiaries (6) 37 1 (295) (263) 100 (163)
Deconsolidation of GHG Property Businesses (274) (274) 3 808 3 534
Total comprehensive income for the period 1 378 192 4 134 5 704 24 1 350 7 078
Deconsolidation of GHG Property Businesses 1 311 310 3 270 4 891 1 436 6 327
Other movements 67 (118) 864 813 24 (86) 751
Restated balance at 31 March 2013 861 (767) (263) 1 519 783 3 608 5 741 644 2 579 8 964
Shares issued during the period 73 73 73
Sale of treasury shares 1 3 4 4
Share-based payments reserve movements 22 22 22
Income tax recognised in equity 38 38 38
Deferred tax recognised in equity (16) (16) (16)
Dividend withholding tax recognised in equity (8) (8) (8)
Preference dividends paid (23) (23)
Dividends paid (361) (361) (2) (363)
Distributions to beneficiaries of the HPFL trusts (22) (22) (22)
Other reserve movements (437) 437
Increase in equity interest in subsidiaries 254 254 (268) (14)
Deconsolidation of GHG Property Businesses (11) (11)
Total comprehensive income for the period 263 259 913 1 435 23 313 1 771
Deconsolidation of GHG Property Businesses (13) (13) (13)
Other movements 263 259 926 1 448 23 313 1 784
Restated balance at 30 September 2013 934 (766) 1 778 368 4 846 7 160 644 2 611 10 415
Shares issued during the period 13 13 13
Sale of treasury shares 18 32 50 50
Share-based payments reserve movements 17 17 17
Increase in equity interest in subsidiaries (6) (6) 3 (3)
Capital gains tax relating to Forfeitable Share Plan recognised
in equity (2) (2) (2)
Preference dividends paid (23) (23)
Dividends paid (543) (543) (1) (544)
Distributions to beneficiaries of the HPFL trusts (85) (85) (85)
Total comprehensive income for the period (7) 255 943 1 191 23 185 1 399
Balance at 31 March 2014 947 (748) (7) 2 033 385 5 185 7 795 644 2 798 11 237
HEADLINE EARNINGS
Unaudited
six months ended Year ended
Restated Restated
31 March 31 March % 30 September
Rm 2014 2013 change 2013
Reconciliation of headline earnings
Profit for the period 949 4 183 (77.3) 5 050
Less:
Dividends paid on shares attributable to the Forfeitable Share Plan (3) (4)
Preference shareholders (23) (24) (47)
Non-controlling interest 17 (23) 41
Earnings used in the calculation of basic earnings per share 940 4 136 (77.3) 5 040
Adjusted for:
Profit on deconsolidation (3 270) (3 257)
Loss on disposal of property, plant and equipment 3 10
Reversal of impairment of property, plant and equipment (9)
Tax effect of headline adjusting items (1) (2)
Non-controlling share of headline adjusting items (2)
Headline earnings 940 868 8.3 1 780
Headline earnings adjusted for:
Amortisation of the cash flow hedge accounting reserve 117 224
Fair value losses/(gains) on derivative financial instruments 5 (65) (46)
Ineffectiveness (gains)/losses on cash flow hedges (12) 15
Fair value loss on financial asset 4
Reduction in UK statutory tax rate (20)
Deferred tax adjustment relating to prior years (103) (103)
Fees related to UK debt refinancing 41
Competition Commission costs 1 108 24 55
Site closure costs 31
Tax effect of adjusting items (30) (15) (31)
Non-controlling share of adjusting items (43) 20 (59)
Adjusted headline earnings 1 011 838 20.6 1 856
Headline earnings per share (cents) 70.6 65.8 7.3 134.6
Diluted headline earnings per share (cents) 68.9 64.2 7.3 131.5
Adjusted headline earnings per share (cents) 75.9 63.5 19.5 140.4
1. Adjusted headline earnings per share have been restated to exclude Competition Commission costs as these are regarded as non-recurring
and exceptional.
CONDENSED SEGMENT REPORT
South Africa United Kingdom
Hospital and Adjustments
Emergency and
Rm services Primary Care Total BMI OpCo GHG PropCo eliminations Total Group
31 March 2014
Income Statement
Revenue 7 221 519 7 740 7 671 7 671 15 411
Attributable earnings of associates and joint ventures 17 17 18 18 35
EBITDA 1 621 37 1 658 388 388 2 046
EBITDA before capital items 1 621 37 1 658 388 388 2 046
Capital items
Operating profit 1 405 21 1 426 64 64 1 490
Operating profit before capital items 1 405 21 1 426 64 64 1 490
Capital items
Segment assets and liabilities
Total assets 13 285 12 797 26 082
Total liabilities (7 065) (7 780) (14 845)
Restated 31 March 2013 1
Income Statement
External revenue 6 592 608 7 200 5 943 5 943 13 143
Inter-segment revenue 245 (245)
PropCo 1 rent 234 (234)
PropCo 2 rent 11 (11)
Revenue 6 592 608 7 200 5 943 245 (245) 5 943 13 143
Attributable earnings of associates and joint ventures 20 20 10 10 30
EBITDA 1 416 36 1 452 371 245 3 270 3 886 5 338
EBITDA before capital items and profit on deconsolidation 1 418 36 1 454 372 245 617 2 071
Capital items (2) (2) (1) (1) (3)
EBITDA before profit on deconsolidation 1 416 36 1 452 371 245 616 2 068
Profit on deconsolidation 2 3 270 3 270 3 270
Operating profit 1 195 20 1 215 40 181 3 341 3 562 4 777
Operating profit before capital items and profit on deconsolidation 1 197 20 1 217 41 181 71 293 1 510
Capital items (2) (2) (1) (1) (3)
Operating profit before profit on deconsolidation 1 195 20 1 215 40 181 71 292 1 507
Profit on deconsolidation 2 3 270 3 270 3 270
Segment assets and liabilities
Total assets 11 869 10 851 22 720
Total liabilities (7 045) (6 711) (13 756)
Notes:
1. The results of the GHG Property Businesses are included until the date of deconsolidation. Refer to note 3 for more detail.
2. Profit on deconsolidation of the GHG Property Businesses.
CONDENSED SEGMENT REPORT continued
South Africa United Kingdom
Hospital and Adjustments
Emergency and
Rm services Primary Care Total BMI OpCo GHG PropCo eliminations Total Group
Restated 30 September 2013 1
Income Statement
External revenue 13 984 1 163 15 147 12 235 12 235 27 382
Inter-segment revenue 275 (275)
PropCo 1 rent 264 (264)
PropCo 2 rent 11 (11)
Revenue 13 984 1 163 15 147 12 235 275 (275) 12 235 27 382
Attributable earnings of associates and joint ventures 53 53 36 36 89
EBITDA 3 099 82 3 181 637 274 3 257 4 168 7 349
EBITDA before capital items and profit on deconsolidation 3 093 83 3 176 643 274 917 4 093
Capital items 6 (1) 5 (6) (6) (1)
EBITDA before profit on deconsolidation 3 099 82 3 181 637 274 911 4 092
Profit on deconsolidation 2 3 257 3 257 3 257
Operating profit/(loss) 2 655 48 2 703 (27) 227 3 357 3 557 6 260
Operating profit/(loss) before capital items and profit on deconsolidation 2 649 49 2 698 (21) 227 100 306 3 004
Capital items 6 (1) 5 (6) (6) (1)
Operating profit/(loss) before profit on deconsolidation 2 655 48 2 703 (27) 227 100 300 3 003
Profit on deconsolidation 2 3 257 3 257 3 257
Segment assets and liabilities
Total assets 12 504 11 353 23 857
Total liabilities (6 777) (6 665) (13 442)
Notes:
1. The results of the GHG Property Businesses are included until the date of deconsolidation. Refer to note 3 for more detail.
2. Profit on deconsolidation of the GHG Property Businesses.
CONDENSED NOTES TO THE UNAUDITED GROUP INTERIM FINANCIAL STATEMENTS
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The condensed unaudited Group interim financial statements for the six months ended 31 March 2014 have been prepared in accordance with
International Financial Reporting Standards (IFRS) and comply with IAS 34 Interim Financial Reporting, SAICA Financial Reporting Guides, 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 unaudited Group interim financial statements are consistent in all material
respects with those applied in the audited financial statements for the year ended 30 September 2013, with the exception of the adoption of
Amendment to IFRS 7 - Disclosures - Offsetting Financial Assets and Financial Liabilities, IFRS 10 - Consolidated Financial Statements, IFRS 11 - Joint
Arrangements, IFRS 12 - Disclosure of Interests in Other Entities, IFRS 13 - Fair Value Measurement, Amendment to IAS 19 - Employee Benefits,
Amendment to IAS 27 - Separate Financial Statements, Amendment to IAS 28 - Investments in Associates and Joint Ventures, Amendment to IAS 36 -
Impairment of assets and Amendment to IAS 39 - Financial Instruments: Recognition and Measurement.
The interim results have not been reviewed or audited by the Group's independent external auditors, Grant Thornton.
The condensed unaudited Group interim financial statements have been prepared under the supervision of KN Gibson CA(SA), Chief Financial Officer
of Netcare Limited.
2. IMPACT OF THE APPLICATION OF NEW AND REVISED STANDARDS
The following standards and amendments to standards which are relevant to the Group have had no material effect on the presentation and disclosure
for these condensed unaudited Group interim financial statements, unless expressed otherwise.
IFRS 7 - Disclosures - Offsetting Financial Assets and Financial Liabilities
The amendment applies to financial assets and financial liabilities that are offset in the statement of financial position, or are subject to enforceable
master netting arrangements or similar agreements. An entity is required to disclose amounts which are set-off in the financial statements and the
effects of these rights of set-off on the entity's rights and obligations.
IFRS 10 - Consolidated Financial Statements
IFRS 10 establishes a single control model that applies to all entities, including special purpose entities, by revising the definition of control. The new
standard replaces SIC 12 - Consolidation - Special Purpose Entities and the portion of IAS 27 - Consolidated and Separate Financial Statements that
addresses consolidated financial statements.
IFRS 11 - Joint Arrangements
IFRS 11 requires the application of the equity method of accounting for joint ventures. The Group previously proportionately consolidated its share of
the assets, liabilities, income and expenses of joint ventures on a line-by-line basis in its financial statements.
In order to transition to the equity method, the investments in joint ventures were recognised and measured using the carrying amounts of the assets
and liabilities, including any attributable goodwill, that had previously been proportionately consolidated at 1 October 2012. The investment was
thereafter adjusted for the Group's subsequent share of profit or loss and movements in other comprehensive income, less dividends, as well as
changes in loans. The Group's share of the profit or loss of joint ventures is recognised as a single line item in profit or loss under the equity method.
The change from proportionate consolidation to equity accounting resulted in a change in individual asset, liability, income, expense and cash flow line
items with no impact on equity and profit attributable to owners of the parent.
- The Group income statement attributable earnings of joint ventures is now included in attributable earnings of associates and joint ventures. The
Group's proportionate share of the income and expenses of joint ventures has been removed from the individual line items. There has been no
impact on other comprehensive income.
- The Group statement of financial position now includes the investment in joint ventures in equity-accounted companies, loans and receivables,
in accordance with the equity method. The Group's proportionate share of the assets and liabilities of joint ventures has been removed from the
individual line items.
- The Group statement of cash flows includes dividends received from joint ventures together with dividends received from associates (investing
activities). The loans advanced or repaid are included in investing activities. The Group's proportionate share of the cash flows of joint ventures
has been removed from the individual line items.
- The Group segment report now includes attributable earnings of joint ventures together with earnings from associates. The Group's proportionate
share of the income and expenses of joint ventures has been removed from the individual line items.
The impact of the application of IFRS 11 on the Group's financial results is disclosed in note 15. The comparative periods restated are 31 March 2013
and 30 September 2013.
IFRS 12 - Disclosure of Interests in Other Entities
IFRS 12 requires extensive disclosures relating to an entity's interests in subsidiaries, joint arrangements, associates and unconsolidated structured
entities. The new standard requires disclosure of information to assist users of the financial statements to evaluate the nature of, and risks associated
with, its interests in other entities and the effect of those interests on its financial statements. The adoption of this standard will result in additional
disclosure for the Group.
IFRS 13 - Fair Value Measurement
IFRS 13 defines fair value, establishes a single source framework for fair value measurement and sets out disclosure requirements for fair value
measurements. IFRS 13 does not introduce new requirements to measure assets or liabilities at fair value, but rather provides guidance on how to
measure fair value under IFRS when fair value is required or permitted by IFRS. The adoption of this standard will result in additional disclosure for the
Group. The impact of the application of IFRS 13 on the Group's financial results is disclosed in note 10.
Amendment to IAS 19 - Employee Benefits
IAS 19 (Revised) impacted the measurement of the defined benefit pension plan in the United Kingdom and related disclosures. The most significant
change is the requirement that all actuarial gains and losses are recognised immediately in other comprehensive income, thereby eliminating the
corridor method. The Group is not affected by this change as actuarial gains and losses have previously been recognised in other comprehensive
income.
The Group is, however, impacted by the new requirement to calculate interest on the net defined benefit liability/asset. The Group has a defined benefit
pension scheme with plan assets. Under the previous version of IAS 19, the financing cost recognised in profit or loss consisted of the interest cost on
the defined benefit obligation and the expected return on plan assets. Following application of the amendments to IAS 19, the Group has calculated
the interest based on the liability and asset, and interest is now recognised in other comprehensive income.
The impact of the application of IAS 19 (revised) on the Group's financial results is disclosed in note 15. The comparative period restated is
30 September 2013.
Amendment to IAS 27 - Separate Financial Statements
The amended standard remains largely unchanged from the previous standard, but now only contains the accounting and disclosure requirements for
investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements.
Amendment to IAS 28 - Investments in Associates and Joint Ventures
The amended standard prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method
when accounting for investments in associates and joint ventures.
Amendment to IAS 36 - Impairment of assets
The amended standard requires the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value
less costs of disposal. In addition, if the recoverable amount was measured based on the present value technique, disclosure is required of the dis-
count rates used in the current and previous measurements. The amended standard should be applied in conjunction with IFRS 13.
Amendment to IAS 39 - Financial Instruments: Recognition and Measurement
The standard was amended in June 2013 to include guidance on novation of derivative financial instruments. Under the amendments hedge accounting
will not be discontinued if a hedging derivative is novated, provided certain criteria are met.
3. PROFIT ON DECONSOLIDATION
The 2013 non-cash profit on deconsolidation arose from the deconsolidation of GHG PropCo 1 and GHG PropCo 2 (collectively the "GHG Property
Businesses"). After evaluation of the overall factors of control, including a decision to sell down Netcare's interests in GHG PropCo 1 to 50.0%, the
GHG Property Businesses have been deconsolidated with effect from 16 November 2012. The GHG Property Businesses were consolidated for the
first one-and-a-half months of the 2013 financial year, and thereafter they are equity accounted as Netcare continues to exercise significant influence.
Unaudited
six months ended Year ended
Restated Restated
31 March 31 March 30 September
Rm 2014 2013 2013
4. OPERATING PROFIT
After including:
Profit on deconsolidation 3 270 3 257
Depreciation and amortisation (556) (561) (1 089)
GHG Property Businesses (47) (47)
Other (556) (514) (1 042)
Operating lease charges (1 533) (978) (2 270)
GHG Property Businesses (1 202) (703) (1 719)
Other (331) (275) (551)
5. INVESTMENT INCOME
Dividends received 2
Expected return on retirement benefit plan assets 58
Interest on bank accounts and other 96 100 232
96 102 290
6. FINANCIAL EXPENSES
Amortisation of arrangement fees (5) (20) (23)
GHG Property Businesses (11) (11)
Other (5) (9) (12)
Interest on bank loans and other (133) (292) (399)
GHG Property Businesses (185) (185)
Other (133) (107) (214)
Interest on promissory notes (126) (127) (255)
Retirement benefit plan interest cost (10) (9) (77)
(274) (448) (754)
Unaudited
six months ended Year ended
Restated Restated
31 March 31 March 30 September
Rm 2014 2013 2013
7. OTHER FINANCIAL LOSSES - NET
Amount reclassified from the cash flow hedge accounting reserve (117) (224)
Fair value losses on derivative financial instruments (4) (4)
Fair value (losses)/gains on inflation rate swaps (not hedge accounted) (5) 54 44
Fair value gains on interest rate swaps (not hedge accounted) 26 3
Ineffectiveness losses on cash flow hedges (3) (12)
(5) (44) (193)
8. TAXATION
South African normal and deferred taxation
Current year (382) (330) (750)
Prior years (3)
(382) (330) (753)
Foreign normal and deferred taxation
Current year (11) (7) (21)
Prior years 103 112
Rate change 20
(11) 96 111
Total taxation per the income statement (393) (234) (642)
The 2013 prior year foreign taxation adjustment included an amount of R103 million relating to a
change in the deferred taxation treatment of subsequent additions to non-qualifying property, plant
and equipment that was initially acquired through business acquisitions.
9. EQUITY-ACCOUNTED COMPANIES, LOANS AND RECEIVABLES
Non-current
Associated companies 662 638 627
Joint ventures 1 150 129 141
Loans and receivables 1 031 518 911
1 843 1 285 1 679
Current
Loans and receivables 41 257 34
1 884 1 542 1 713
1. Refer to note 15 for the restatement due to the adoption of IFRS 11 - Joint Arrangements.
Included in loans and receivables is an investment of R981 million (March 2013: R693 million;
September 2013: R855 million) relating to a contractual economic interest in the debt of BMI OpCo.
10. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial assets
Interest rate swaps
South African Rand 30 21
Inflation rate swaps
South African Rand 3
Foreign currency 1 51 28
34 51 49
Included in:
Non-current assets 34 51 49
Derivative financial liabilities
Interest rate swaps
South African Rand (6) (15) (5)
Foreign currency (103)
(6) (118) (5)
Inflation rate swaps
South African Rand (9) (4)
Foreign currency (4) (3)
(19) (122) (8)
Included in:
Non-current liabilities (16) (122) (8)
Current liabilities (3)
(19) (122) (8)
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.
10. DERIVATIVE FINANCIAL INSTRUMENTS continued
Fair value hierarchy
Financial instruments measured at fair value are grouped into the following levels based on the significance of the inputs used in determining fair
value:
Level 1: Fair value is derived from quoted prices (unadjusted) in active markets for identical instruments.
Level 2: Fair value is derived through the use of valuation techniques based on observable inputs, either directly or indirectly.
Level 3: Fair value is derived through the use of valuation techniques using inputs not based on observable market data.
The table below analyses the level applicable to financial instruments measured at fair value:
Rm Level 1 Level 2 Level 3 Total
31 March 2014
Derivative financial assets
Interest rate swaps 30 30
Inflation rate swaps 4 4
30 4 34
Derivative financial liabilities
Interest rate swaps (6) (6)
Inflation rate swaps (13) (13)
(6) (13) (19)
31 March 2013
Derivative financial assets
Inflation rate swaps 51 51
Derivative financial liabilities
Interest rate swaps (118) (118)
Inflation rate swaps (4) (4)
(118) (4) (122)
30 September 2013
Derivative financial assets
Interest rate swaps 21 21
Inflation rate swaps 28 28
21 28 49
Derivative financial liabilities
Interest rate swaps (5) (5)
Inflation rate swaps (3) (3)
(5) (3) (8)
Unaudited
six months ended Year ended
Restated Restated
31 March 31 March 30 September
Rm 2014 2013 2013
11. DEBT
Long-term debt 5 721 5 578 5 290
Short-term debt 1 660 1 813 1 140
Total debt 7 381 7 391 6 430
Comprising:
Debt in South African Rand
Finance leases 42 51 47
Promissory notes and commercial paper in issue 4 154 4 194 3 851
Unsecured liabilities 1 1 1
4 197 4 246 3 899
Debt in foreign currency
Secured liabilities 2 943 2 972 2 361
Finance leases 172 150 170
Accrued interest 85 28 17
Arrangement fees (16) (5) (17)
3 184 3 145 2 531
7 381 7 391 6 430
11. DEBT continued
Maturity profile
Rm Total <1 year 1 - 2 years 2 - 3 years 3 - 4 years >4 years
31 March 2014
Debt in South African Rand 4 197 764 1 011 1 259 607 556
Debt in foreign currency 3 184 896 433 29 381 1 445
7 381 1 660 1 444 1 288 988 2 001
31 March 2013
Debt in South African Rand 4 246 999 614 1 011 1 009 613
Debt in foreign currency 3 145 814 1 155 1 148 28
7 391 1 813 1 769 2 159 1 037 613
30 September 2013
Debt in South African Rand 3 899 1 094 1 177 1 011 8 609
Debt in foreign currency 2 531 46 418 400 355 1 312
6 430 1 140 1 595 1 411 363 1 921
Unaudited
six months ended Year ended
Restated Restated
31 March 31 March 30 September
Rm 2014 2013 2013
12. COMMITMENTS
Capital commitments 1 919 1 193 1 915
South Africa 1 505 903 1 776
United Kingdom 414 290 139
Operating lease commitments 47 788 40 622 45 722
South Africa 1 033 1 483 1 368
United Kingdom 46 755 39 139 44 354
13. CONTINGENT LIABILITIES
South Africa 406 535 481
14. EVENTS AFTER THE REPORTING PERIOD
There were no events which are material to the understanding of these unaudited condensed Group interim financial statements that have occurred
after the end of the reporting period.
15. RESTATEMENT OF COMPARATIVE FIGURES
The comparative figures have been restated as a result of the adoption of the new accounting standard IFRS 11 - Joint Arrangements and the
amended accounting standard IAS 19 - Employee Benefits. The impact of the restatement is as follows:
Unaudited Audited
six months ended 31 March 2013 Year ended 30 September 2013
Previously Effect of Previously Effect of
Rm reported restatement Restated reported restatement Restated
GROUP INCOME STATEMENT
Revenue 13 344 (201) 13 143 27 801 (419) 27 382
Cost of sales (7 604) 89 (7 515) (15 746) 178 (15 568)
Gross profit 5 740 (112) 5 628 12 055 (241) 11 814
Other income 145 145 306 306
Administrative and other expenses (4 357) 91 (4 266) (9 301) 184 (9 117)
Operating profit before profit on deconsolidation 1 528 (21) 1 507 3 060 (57) 3 003
Profit on deconsolidation 1 3 270 3 270 3 257 3 257
Operating profit 4 798 (21) 4 777 6 317 (57) 6 260
Investment income 103 (1) 102 351 (61) 290
Financial expenses (448) (448) (756) 2 (754)
Other financial losses - net (44) (44) (193) (193)
Attributable earnings of associates 16 16 58 (5) 53
Attributable earnings of joint ventures 14 14 36 36
Profit before taxation 4 425 (8) 4 417 5 777 (85) 5 692
Taxation (239) 5 (234) (673) 31 (642)
Profit for the period 4 186 (3) 4 183 5 104 (54) 5 050
Attributable to:
Owners of the parent 4 136 4 136 5 093 (49) 5 044
Preference shareholders 24 24 47 47
Profit attributable to shareholders 4 160 4 160 5 140 (49) 5 091
Non-controlling interest 26 (3) 23 (36) (5) (41)
4 186 (3) 4 183 5 104 (54) 5 050
Earnings per share (cents)
Basic 313.3 313.3 384.9 (3.7) 381.2
Diluted 306.1 306.1 375.8 (3.6) 372.2
1. Profit on deconsolidation of the GHG Property Businesses. Refer to note 3 for more detail.
15. RESTATEMENT OF COMPARATIVE FIGURES continued
Unaudited Audited
six months ended 31 March 2013 Year ended 30 September 2013
Previously Effect of Previously Effect of
Rm reported restatement Restated reported restatement Restated
GROUP STATEMENT OF COMPREHENSIVE INCOME
Profit for the period 4 186 (3) 4 183 5 104 (54) 5 050
Items that may not subsequently be reclassified to profit or loss 270 270 191 49 240
Actuarial losses on defined benefit schemes (4) (4) (103) 61 (42)
Effect of translation of foreign entities - Deconsolidation of GHG Property Businesses 274 274 274 274
Taxation on items that may not subsequently be reclassified to profit or loss 20 (12) 8
Items that may subsequently be reclassified to profit or loss 2 625 2 625 3 559 3 559
Effect of cash flow hedge accounting 2 624 2 624 3 108 3 108
Deconsolidation of GHG Property Businesses 2 473 2 473 2 473 2 473
Change in the fair value of cash flow hedges 177 177
Reclassification of the cash flow hedge accounting reserve 151 151 458 458
Effect of translation of foreign entities 34 34 520 520
Deconsolidation of GHG Property Businesses 310 310 310 310
Other (276) (276) 210 210
Taxation on items that may subsequently be reclassified to profit or loss (33) (33) (69) (69)
Other comprehensive income for the period 2 895 2 895 3 750 49 3 799
Total comprehensive income for the period 7 081 (3) 7 078 8 854 (5) 8 849
Attributable to:
Owners of the parent 5 704 5 704 7 139 7 139
Preference shareholders 24 24 47 47
Profit attributable to shareholders 5 728 5 728 7 186 7 186
Non-controlling interest 1 353 (3) 1 350 1 668 (5) 1 663
7 081 (3) 7 078 8 854 (5) 8 849
15. RESTATEMENT OF COMPARATIVE FIGURES continued
Unaudited Audited
six months ended 31 March 2013 Year ended 30 September 2013
Previously Effect of Previously Effect of
Rm reported restatement Restated reported restatement Restated
GROUP STATEMENT OF FINANCIAL POSITION
ASSETS
Non-current assets
Property, plant and equipment 9 639 (83) 9 556 10 487 (86) 10 401
Goodwill 3 045 (18) 3 027 3 484 (18) 3 466
Intangible assets 294 294 389 389
Equity-accounted companies, loans and receivables 1 167 118 1 285 1 552 127 1 679
Financial asset - Derivative financial instruments 51 51 49 49
Deferred taxation 1 213 (5) 1 208 1 225 (7) 1 218
Total non-current assets 15 409 12 15 421 17 186 16 17 202
Current assets
Loans and receivables 257 257 34 34
Inventories 961 (7) 954 920 (8) 912
Trade and other receivables 3 933 (50) 3 883 4 073 (40) 4 033
Taxation receivable 20 (3) 17
Cash and cash equivalents 2 257 (52) 2 205 1 686 (27) 1 659
Total current assets 7 408 (109) 7 299 6 733 (78) 6 655
Total assets 22 817 (97) 22 720 23 919 (62) 23 857
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital and premium 861 861 934 934
Treasury shares (767) (767) (766) (766)
Other reserves 2 039 2 039 2 146 2 146
Retained earnings 3 608 3 608 4 846 4 846
Equity attributable to owners of the parent 5 741 5 741 7 160 7 160
Preference share capital and premium 644 644 644 644
Non-controlling interest 2 594 (15) 2 579 2 628 (17) 2 611
Total shareholders' equity 8 979 (15) 8 964 10 432 (17) 10 415
15. RESTATEMENT OF COMPARATIVE FIGURES continued
Unaudited Audited
six months ended 31 March 2013 Year ended 30 September 2013
Previously Effect of Previously Effect of
Rm reported restatement Restated reported restatement Restated
GROUP STATEMENT OF FINANCIAL POSITION
continued
Non-current liabilities
Long-term debt 5 588 (10) 5 578 5 293 (3) 5 290
Financial liability - Derivative financial instruments 122 122 8 8
Post-retirement benefit obligations 221 221 229 229
Deferred lease liability 68 (1) 67 71 (1) 70
Deferred taxation 1 135 1 135 1 129 1 129
Provisions 451 451 97 97
Total non-current liabilities 7 585 (11) 7 574 6 827 (4) 6 823
Current liabilities
Trade and other payables 4 040 (73) 3 967 5 145 (31) 5 114
Short-term debt 1 816 (3) 1 813 1 147 (7) 1 140
Taxation payable 84 5 89 251 (3) 248
Bank overdrafts 313 313 117 117
Total current liabilities 6 253 (71) 6 182 6 660 (41) 6 619
Total equity and liabilities 22 817 (97) 22 720 23 919 (62) 23 857
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
Previously Effect of
reported restatement Restated
Balance at 30 September 2012 (2 666) (12) (2 678)
Dividends paid (1) (1)
Increase in equity interest in subsidiaries 100 100
Deconsolidation of GHG Property Business 3 808 3 808
Total comprehensive income for the period 1 353 (3) 1 350
Balance at 31 March 2013 2 594 (15) 2 579
Dividends paid (2) (2)
Increase in equity interest in subsidiaries (268) (268)
Deconsolidation of GHG Property Business (11) (11)
Total comprehensive income for the period 315 (2) 313
Balance at 30 September 2013 2 628 (17) 2 611
15. RESTATEMENT OF COMPARATIVE FIGURES continued
CONDENSED SEGMENT REPORT
Previously reported South Africa Effect of restatement South Africa Restated South Africa
Hospital Hospital Hospital
and Adjustments and Adjustments and Adjustments
Emergency Primary and Emergency Primary and Emergency Primary and
Rm services Care eliminations Total services Care eliminations Total services Care eliminations Total
31 March 2013
Income Statement
Revenue 6 767 608 7 375 (175) (175) 6 592 608 7 200
Attributable earnings of associates and joint ventures 20 20 20 20
EBITDA 1 441 36 1 477 (25) (25) 1 416 36 1 452
EBITDA before capital items 1 443 36 1 479 (25) (25) 1 418 36 1 454
Capital items (2) (2) (2) (2)
Operating profit 1 213 20 1 233 (18) (18) 1 195 20 1 215
Operating profit before capital items 1 215 20 1 235 (18) (18) 1 197 20 1 217
Capital items (2) (2) (2) (2)
Segment assets and liabilities
Total assets 11 945 (76) 11 869
Total liabilities (7 106) 61 (7 045)
Previously reported UK Effect of restatement UK Restated UK
Adjustments Adjustments Adjustments
BMI GHG and BMI GHG and BMI GHG and
Rm OpCo PropCo eliminations Total OpCo PropCo eliminations Total OpCo PropCo eliminations Total
31 March 2013
Income Statement
External revenue 5 969 5 969 (26) (26) 5 943 5 943
Inter-segment revenue 245 (245) 245 (245)
GHG PropCo1 rent 234 (234) 234 (234)
GHG PropCo2 rent 11 (11) 11 (11)
Revenue 5 969 245 (245) 5 969 (26) (26) 5 943 245 (245) 5 943
Attributable earnings of associates and joint ventures 10 10 10 10
EBITDA 378 245 3 270 3 893 (7) (7) 371 245 3 270 3 886
EBITDA before capital items and profit on
deconsolidation 379 245 624 (7) (7) 372 245 617
Capital items and profit on deconsolidation (1) 3 270 3 269 (1) 3 270 3 269
Operating profit 43 181 3 341 3 565 (3) (3) 40 181 3 341 3 562
Operating profit before capital items and profit
on deconsolidation 44 181 71 296 (3) (3) 41 181 71 293
Capital items and profit on deconsolidation (1) 3 270 3 269 (1) 3 270 3 269
Segment assets and liabilities
Total assets 10 872 (21) 10 851
Total liabilities (6 732) 21 (6 711)
15. RESTATEMENT OF COMPARATIVE FIGURES continued
CONDENSED SEGMENT REPORT continued
Previously reported Effect of restatement Restated
Adjustments Adjustments Adjustments
South and South and South and
Rm Africa UK eliminations Total Africa UK eliminations Total Africa UK eliminations Total
31 March 2013
Income Statement
Revenue 7 375 6 214 (245) 13 344 (175) (26) (201) 7 200 6 188 (245) 13 143
Attributable earnings of associates and joint ventures 20 10 30 20 10 30
EBITDA 1 477 623 3 270 5 370 (25) (7) (32) 1 452 616 3 270 5 338
EBITDA before capital items and profit
on deconsolidation 1 479 624 2 103 (25) (7) (32) 1 454 617 2 071
Capital items and profit on deconsolidation (2) (1) 3 270 3 267 (2) (1) 3 270 3 267
Operating profit 1 233 224 3 341 4 798 (18) (3) (21) 1 215 221 3 341 4 777
Operating profit before capital items and profit
on deconsolidation 1 235 225 71 1 531 (18) (3) (21) 1 217 222 71 1 510
Capital items and profit on deconsolidation (2) (1) 3 270 3 267 (2) (1) 3 270 3 267
Segment assets and liabilities
Total assets 22 817 (97) 22 720
Total liabilities (13 838) 82 (13 756)
Previously reported South Africa Effect of restatement South Africa Restated South Africa
Hospital Hospital Hospital
and Adjustments and Adjustments and Adjustments
Emergency Primary and Emergency Primary and Emergency Primary and
Rm services Care eliminations Total services Care eliminations Total services Care eliminations Total
30 September 2013
Income Statement
Revenue 14 354 1 163 15 517 (370) (370) 13 984 1 163 15 147
Attributable earnings of associates and joint ventures 53 53 53 53
EBITDA 3 164 82 3 246 (65) (65) 3 099 82 3 181
EBITDA before capital items 3 158 83 3 241 (65) (65) 3 093 83 3 176
Capital items 6 (1) 5 6 (1) 5
Operating profit 2 705 48 2 753 (50) (50) 2 655 48 2 703
Operating profit before capital items 2 699 49 2 748 (50) (50) 2 649 49 2 698
Capital items 6 (1) 5 6 (1) 5
Segment assets and liabilities
Total assets 12 546 (42) 12 504
Total liabilities (6 802) 25 (6 777)
15. RESTATEMENT OF COMPARATIVE FIGURES continued
Previously reported UK Effect of restatement UK Restated UK
Adjustments Adjustments Adjustments
BMI GHG and BMI GHG and BMI GHG and
Rm OpCo PropCo eliminations Total OpCo PropCo eliminations Total OpCo PropCo eliminations Total
30 September 2013
Income Statement
External revenue 12 284 12 284 (49) (49) 12 235 12 235
Inter-segment revenue 275 (275) 275 (275)
GHG PropCo1 rent 264 (264) 264 (264)
GHG PropCo2 rent 11 (11) 11 (11)
Revenue 12 284 275 (275) 12 284 (49) (49) 12 235 275 (275) 12 235
Attributable earnings of associates and joint
ventures 36 36 36 36
EBITDA 652 274 3 257 4 183 (15) (15) 637 274 3 257 4 168
EBITDA before capital items and profit
on deconsolidation 658 274 932 (15) (15) 643 274 917
Capital items and profit on deconsolidation (6) 3 257 3 251 (6) 3 257 3 251
Operating profit (20) 227 3 357 3 564 (7) (7) (27) 227 3 357 3 557
Operating profit/(loss) before capital items (14) 227 100 313 (7) (7) (21) 227 100 306
Capital items and profit on deconsolidation (6) 3 257 3 251 (6) 3 257 3 251
Segment assets and liabilities
Total assets 11 373 (20) 11 353
Total liabilities (6 685) 20 (6 665)
Previously reported Effect of restatement Restated
Adjustments Adjustments Adjustments
South and South and South and
Rm Africa UK eliminations Total Africa UK eliminations Total Africa UK eliminations Total
30 September 2013
Income Statement
Revenue 15 517 12 559 (275) 27 801 (370) (49) (419) 15 147 12 510 (275) 27 382
Attributable earnings of associates and joint
53 36 89 53 36 89
ventures
EBITDA 3 246 926 3 257 7 429 (65) (15) (80) 3 181 911 3 257 7 349
EBITDA before capital items and profit
on deconsolidation 3 241 932 4 173 (65) (15) (80) 3 176 917 4 093
Capital items and profit on deconsolidation 5 (6) 3 257 3 256 5 (6) 3 257 3 256
Operating profit 2 753 207 3 357 6 317 (50) (7) (57) 2 703 200 3 357 6 260
Operating profit before capital items
and profit on deconsolidation 2 748 213 100 3 061 (50) (7) (57) 2 698 206 100 3 004
Capital items and profit on deconsolidation 5 (6) 3 257 3 256 5 (6) 3 257 3 256
Segment assets and liabilities
Total assets 23 919 (62) 23 857
Total liabilities (13 487) 45 (13 442)
SALIENT FEATURES
Unaudited Audited
six months ended year ended
31 March 31 March 30 September
2014 2013 2013
Share statistics
Ordinary shares
Shares in issue (million) 1 476 1 467 1 475
Shares in issue net of treasury shares (million) 1 333 1 321 1 329
Weighted average number of shares (million) 1 332 1 320 1 322
Diluted weighted average number of shares (million) 1 365 1 351 1 354
Market price per share (cents) 2 334 1 983 2 400
Currency conversion guide (R:£)
Closing exchange rate 17.53 13.92 16.22
Average exchange rate for the period 17.15 13.88 14.43
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, 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: 19/05/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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