Wrap Text
Unaudited interim group results for the six months ended 31 March 2015
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 INTERIM GROUP RESULTS for the six months ended 31 March 2015
FINANCIAL HIGHLIGHTS
Group EBITDA up 14.6% to R2 344 million
Cash generated from operations up 27.5% to R1 820 million
Adjusted HEPS up 19.6% to 90.8 cents
Interim dividend per share up 18.8% to 38.0 cents
COMMENTARY
Overview
The Group grew adjusted headline earnings per share (adjusted HEPS) by 19.6% to 90.8 cents (2014: 75.9 cents). A strong performance from our operations
in South Africa (SA) and further improvement from BMI Healthcare in the United Kingdom (UK) underpinned this result.
The accounting policies applied in preparing 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 2014.
Group financial review
Financial performance
Group revenue rose 5.8% to R16 304 million (2014: R15 411 million), with both SA and the UK delivering local currency revenue growth. Currency conversion
accounted for R268 million of the increase. The average exchange rate of R17.76 to the Pound Sterling (Pound), used to convert UK income and expenditure, was
3.6% weaker than the average rate of R17.15 for the six months ended 31 March 2014. However, the closing exchange rate of R17.97 at 31 March 2015, used to
convert assets and liabilities, strengthened marginally by 1.7% from R18.29 at 30 September 2014.
Group earnings before interest, tax, depreciation and amortisation (EBITDA) grew 14.6% to R2 344 million (2014: R2 046 million). Currency conversion accounted for
only R11 million of the increase. EBITDA before rent paid to the GHG Property Businesses of R1 276 million (2014: R1 202 million) increased by 11.5% to R3 620
million (2014: R3 248 million). Operating profit improved by 18.0% to R1 758 million (2014: R1 490 million).
Net financial expenses were R298 million (2014: R183 million). This included a non-cash fair value accounting charge of R107 million (£5.9 million) relating to a
mark-to-market revaluation of the RPI (Retail Price Index) swaps that are related to some of BMI Healthcare's property leases. The sharp decline in UK inflation
expectations and the European stimulus actions pushed RPI to record low levels. Excluding the RPI swaps, net financial expenses increased marginally to R191
million.
Profit before tax was up 13.8% to R1 527 million (2014: R1 342 million). The Group's tax expense increased to R426 million (2014: R393 million), representing an
effective tax rate of 27.9% (2014: 29.3%). Profit after tax rose by 16.0% to R1 101 million (2014: R949 million).
Financial position and cash flow
Total shareholders' equity increased to R12 450 million at 31 March 2015 from R12 172 million at 30 September 2014, notwithstanding a negative currency conversion
impact of R87 million.
At 31 March 2015, Group net debt was R5 543 million (March 2014: R5 562 million). Net debt to EBITDA strengthened to 1.2 times (March 2014: 1.4 times), while
interest cover improved to 9.6 times (March 2014: 8.4 times).
SA net debt at 31 March 2015 was R3 574 million (March 2014: R3 653 million). The increase from R2 967 million at 30 September 2014 was in line with normal
seasonality and after funding requirements for capital expenditure, tax and dividend payments. Collectively these payments amounted to R2 026 million (March 2014:
R1 595 million) during the period.
UK net debt at 31 March 2015 was £109.6 million (March 2014: £108.9 million), unchanged from 30 September 2014. BMI Healthcare remains fully compliant with
the covenants of its debt facilities.
Group cash generated from operations rose 27.5% to R1 820 million (2014: R1 428 million), supported by stringent management of working capital.
The Group invested R747 million (2014: R624 million) in capital expenditure, including intangible assets, and paid R710 million (2014: R543 million) to shareholders in
ordinary dividends.
Divisional review
South Africa
The division delivered a strong performance. Sustained demand for private healthcare services, notwithstanding the pressures in the general SA economy, supported
growth that was largely organic. Strict cost management combined with operational and process efficiencies resulted in a further improvement in operational
leverage.
Revenue grew by 7.3% to R8 307 million (2014: R7 740 million) and EBITDA by 14.2% to R1 893 million (2014: R1 658 million) at an EBITDA margin of 22.8% (2014:
21.4%). Operating profit rose 15.0% to R1 640 million (2014: R1 426 million) and adjusted HEPS by 18.4% to 86.8 cents (2014: 73.3 cents). Cash generated from
operations was 27.0% higher at R1 506 million from R1 186 million. Capital expenditure, including intangible assets, was R531 million (2014: R422 million).
The division is on track to meet its goals for the full year in terms of the quality leadership balanced scorecard, which monitors over 300 measures across all SA
operations.
Stringent quality assurance and sustained system improvements that meet the Triple Aim objectives of best patient outcome, best patient experience and cost-
effective care, continue to support the division's pursuit of quality leadership.
Load shedding has become prevalent in the past six months as a result of national electricity supply constraints. Netcare has taken substantial steps to insulate itself
from these events and has equipped its facilities to ensure continuity of care and patient outcomes. In line with our long-term strategy to mitigate the impact of
ongoing power interruptions and rising utility costs, a number of energy efficiency and sustainability projects are underway across the entire network.
Netcare was the recipient of the following accolades during the period under review:
- The 2015 RobecoSAM Bronze Class Sustainability Award for excellent sustainability performance. Netcare has also been included in the 2015 RobecoSAM's 'The
Sustainability Yearbook', the world's most comprehensive publication on corporate sustainability.
- The 2015 PMR.africa Diamond Arrow Award for Corporate Social Responsibility Initiatives in the category for private hospital and clinic groups, for corporate social
responsibility initiatives. This is the third consecutive year that Netcare has received the highest recognition by PMR.africa.
- The 2014 Trialogue Strategic CSI Award for our Sexual Assault Centres located at 36 Netcare hospitals and the sustained programme over 17 years to holistically
assist survivors of sexual assault.
Hospitals and Emergency Services
The demand for private hospital services and the benefits from business improvement projects resulted in a strong contribution from the Hospitals and Emergency
Services division.
Revenue grew 7.3% to R7 749 million (2014: R7 221 million) driven by patient day growth of 1.4%, off a high base of over 2.2 million patient days per annum.
Revenue per patient day increased by 6.2%, which is largely in line with historic trends. EBITDA was up 13.9% to R1 847 million (2014: R1 621 million) and the
EBITDA margin widened to 23.8% (2014: 22.4%) as a result of management actions to extract efficiencies. Operating profit grew by 14.7% to R1 611 million (2014:
R1 405 million).
The division added 32 new beds during the period with the acquisition of the Ceres Private Hospital in the Western Cape in November 2014 accounting for 28 of
these beds. Furthermore, Netcare disposed of its interest in the 12 bed Optimed Clinic during the period under review.
At 31 March 2015, the division had a total of 9 444 registered beds (2014: 9 296 beds). Plans to add approximately 510 new beds in total by the end of the financial
year are firmly on track. Brownfield expansion projects will add 212 new beds at existing facilities. The new 100-bed hospital in Pinehaven, west of Johannesburg,
and the new 170-bed hospital in Polokwane, are both expected to be commissioned by 30 September 2015. The new Netcare Christiaan Barnard Memorial Hospital
in Cape Town is progressing well.
Primary Care
Our national network of Medicross family medical and dental centres experienced stable demand in patient visits and scripts dispensed, while Prime Cure's
managed healthcare administration business grew its customer base. Revenue was 7.5% higher at R558 million (2014: R519 million) and EBITDA was up by 24.3% to
R46 million (2014: R37 million). The EBITDA margin improved to 8.2% from 7.1% due to structural and operational refinements to the business model. Operating
profit grew by 38.1% to R29 million (2014: R21 million).
SA private healthcare market inquiry
The Competition Commission commenced its inquiry into the functioning of the private healthcare market in 2014. In October 2014 Netcare made comprehensive
submissions to the Inquiry panel on the Competition Commission Statement of Issues. The non-confidential versions of these submissions were released on 5
February 2015 resulting in Netcare submitting a comprehensive response to these public submissions as part of Phase II of the process, 'Initial Analysis'.
United Kingdom
BMI Healthcare delivered an improved performance in a persistently challenging environment.
While total inpatient and day case volumes were up 2.5%, the economic recovery has not filtered through to the Private Medical Insurance (PMI) market. However,
strong growth of 14.8% in National Health Service (NHS) procedures offset the decline in PMI caseload. Patient choice and waiting list pressures are driving the
increase in NHS procedures, which accounted for 38.9% of total caseload (2014: 34.8%). Self-pay caseload grew marginally in the period. Outpatient activity
continued to grow in line with the increasing range of outpatient services.
Revenue increased by 0.8% to £450.2 million (2014: £446.8 million). EBITDA before GHG Property Business rentals and non-recurring costs was up by 4.2% to
£103.3 million (2014: £99.1 million) at a margin of 22.9% (2014: 22.2%). EBITDA before non-recurring restructuring costs improved by 8.6% to £31.5 million (2014:
£29.0 million). In the period, non-recurring expenses of £6.1 million were incurred in restructuring the business to compensate for the margin compression from the
shift in business mix from PMI to NHS cases. Management continues to restructure the business, re-engineer patient pathways and drive greater process efficiency
across a range of business streams. Reported EBITDA increased by 13.4% to £25.4 million from £22.4 million and operating profit improved by 86.1% to £6.7 million
(2014: £3.6 million). Adjusted HEPS, which excludes non-recurring costs and the non-cash fair value adjustment on the RPI swaps, improved by 53.8% to 4.0 cents
from 2.6 cents.
Capital expenditure, including intangible assets, of £12.3 million (2014: £11.6 million) was invested in projects to enhance revenue generation and maintain the
hospital portfolio.
GHG Property Businesses
The General Healthcare Group (GHG) Property Businesses comprise GHG PropCo 1, made up of 35 hospital properties acquired in 2006, and GHG PropCo 2,
consisting of 6 remaining hospital properties acquired in 2008.
Attributable earnings from GHG PropCo 2 amounted to a loss of £0.1 million (2014: profit of £0.3 million). This was as a result of non-recurring interest rate swap
cancellation charges of £0.5 million incurred in January 2015 on the refinancing of its debt facility.
Arrangements to conclude the restructuring of the £1.5 billion GHG PropCo 1 debt facility are well progressed. The lender groups, comprising junior, senior and swap
counterparties, have signed up to a global restructuring agreement and a consent solicitation memorandum was issued to noteholders on 10 April 2015. Sufficient
consents to allow the restructuring to progress were obtained by the early voting deadline of 22 April 2015. The debt maturity date has been extended to 15 June
2015 and we anticipate that the restructuring will be completed ahead of this date.
The investment in GHG PropCo 1 was impaired to zero in prior years and no further losses have been accounted for. The debt of GHG PropCo 1 is ring-fenced from
BMI Healthcare and GHG PropCo 2 and there is no recourse to Netcare and its SA operations in this regard.
Outlook
We expect the weakness in the SA economy to persist. Notwithstanding the low levels of growth in formal employment, demand for private healthcare should remain
resilient. We will continue to concentrate on growth projects and initiatives to drive operational excellence and quality improvement, in line with our commitment to best
outcomes, best experience and cost-effective care for our patients. We expect to extract further efficiency benefits from our IT optimisation projects in the years
ahead. We continue to evaluate international opportunities.
In the UK, demand for healthcare services remains robust. In the face of a slower recovery in PMI membership, we expect that this will place increasing pressure on a
capacity constrained NHS resulting in sustained demand for private hospital capacity. Programmes are in place to mitigate the impact of the margin compression
associated with the increased volume in public patients and the challenges of industry wide clinical staff shortages.
Board changes
Mr Jerry Vilakazi, the non-executive Chairman of Netcare, has informed the Board of his intention to retire at the end of May 2015. Mr Vilakazi served as Chairman of
the Board from June 2008 and the Board expresses its gratitude for his valued contribution to the Group. Mr Meyer Kahn, a non-executive director of the Netcare
Board, has been appointed as acting Chairman until such time as the Board appoints a permanent replacement.
Declaration of interim dividend number 12
Notice is hereby given that a gross interim dividend of 38.0 cents per ordinary share is declared in respect of the six months ended 31 March 2015. The dividend has been
declared from income reserves and is payable to shareholders recorded in the register at the close of business on Friday, 19 June 2015. The number of ordinary shares
(inclusive of treasury shares) in issue at date of this declaration is 1 479 553 333. The dividend will be subject to a local dividend withholding tax at a rate of 15%,
which will result in a net interim dividend to those shareholders not exempt from paying dividend withholding tax of 32.3 cents per ordinary share and 38.0 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 Thursday, 11 June 2015
Trading ex dividend commences Friday, 12 June 2015
Record date Friday, 19 June 2015
Payment date Monday, 22 June 2015
Share certificates may not be dematerialised nor rematerialised between Friday, 12 June 2015 and Friday, 19 June 2015, both days inclusive.
On Monday, 22 June 2015, 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, 22 June 2015.
Netcare Limited's tax reference number is 9999/581/71/4.
On behalf of the Board
Meyer Kahn
Acting Chairman
Richard Friedland
Chief Executive Officer
Keith Gibson
Chief Financial Officer
Sandton
14 May 2015
Group income statement
Unaudited
six months ended Year ended
31 March 31 March % 30 September
Rm Notes 2015 2014 change 2014
Revenue 16 304 15 411 5.8 31 783
Cost of sales (9 213) (8 777) (18 227)
Gross profit 7 091 6 634 6.9 13 556
Other income 217 157 350
Administrative and other expenses (5 550) (5 301) (10 653)
Operating profit 3 1 758 1 490 18.0 3 253
Investment income 4 125 96 213
Financial expenses 5 (309) (274) (564)
Other financial losses - net 6 (114) (5) (80)
Attributable earnings of associates 47 18 39
Attributable earnings of joint ventures 20 17 36
Profit before taxation 1 527 1 342 13.8 2 897
Taxation 7 (426) (393) (801)
Profit for the period 1 101 949 16.0 2 096
Attributable to:
Owners of the parent 1 111 943 2 107
Preference shareholders 24 23 46
Profit attributable to shareholders 1 135 966 17.5 2 153
Non-controlling interest (34) (17) (57)
1 101 949 16.0 2 096
Cents
Earnings per share (cents)
Basic 82.6 70.6 17.0 157.5
Diluted 80.7 68.9 17.1 154.2
Dividend per share (cents) 38.0 32.0 18.8 80.0
Group statement of comprehensive income
Unaudited
six months ended Year ended
31 March 31 March 30 September
Rm 2015 2014 2014
Profit for the period 1 101 949 2 096
Items that may not subsequently be reclassified to profit or loss - - (13)
Remeasurement of defined benefit obligation - - (18)
Taxation on items that may not subsequently be reclassified to profit or loss - - 5
Items that may subsequently be reclassified to profit or loss (113) 450 694
Effect of cash flow hedge accounting (7) (18) (39)
Amortisation of cash flow hedge accounting reserve 17 (18) -
Change in the fair value of cash flow hedges (25) - (39)
Reclassification of cash flow hedge accounting reserve 1 - -
Effect of translation of foreign entities (109) 463 732
Taxation on items that may subsequently be reclassified to profit or loss 3 5 1
Other comprehensive (loss)/income for the period (113) 450 681
Total comprehensive income for the period 988 1 399 2 777
Attributable to:
Owners of the parent 1 042 1 191 2 469
Preference shareholders 24 23 46
Non-controlling interest (78) 185 262
988 1 399 2 777
Group statement of financial position
Unaudited
31 March 31 March 30 September
Rm Notes 2015 2014 2014
ASSETS
Non-current assets
Property, plant and equipment 11 677 10 702 11 504
Goodwill 3 819 3 727 3 879
Intangible assets 379 454 437
Equity-accounted companies, loans and receivables 8 2 202 1 843 2 015
Financial assets 9 45 34 45
Deferred taxation 1 513 1 355 1 419
Total non-current assets 19 635 18 115 19 299
Current assets
Loans and receivables 8 64 41 26
Inventories 1 088 1 042 987
Trade and other receivables 5 172 4 759 4 688
Taxation receivable - 18 5
Cash and cash equivalents 2 092 2 107 1 712
8 416 7 967 7 418
Non-current asset held for sale 8 - -
Total current assets 8 424 7 967 7 418
Total assets 28 059 26 082 26 717
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital and premium 970 947 962
Treasury shares (711) (748) (735)
Other reserves 2 522 2 411 2 560
Retained earnings 6 208 5 185 5 859
Equity attributable to owners of the parent 8 989 7 795 8 646
Preference share capital and premium 644 644 644
Non-controlling interest 2 817 2 798 2 882
Total shareholders' equity 12 450 11 237 12 172
Non-current liabilities
Long-term debt 10 6 026 5 721 4 939
Financial liabilities 9 213 16 97
Post-retirement benefit obligations 269 237 260
Deferred lease liability 80 79 74
Deferred taxation 1 502 1 347 1 360
Provisions 118 121 138
Total non-current liabilities 8 208 7 521 6 868
Current liabilities
Trade and other payables 5 775 5 317 5 726
Short-term debt 10 1 609 1 660 1 739
Financial liabilities 9 - 3 3
Taxation payable 17 56 203
Bank overdrafts - 288 6
Total current liabilities 7 401 7 324 7 677
Total equity and liabilities 28 059 26 082 26 717
Group statement of cash flows
Unaudited
six months ended Year ended
31 March 31 March 30 September
Rm 2015 2014 2014
Cash flows from operating activities
Cash received from customers 15 744 15 068 31 456
Cash paid to suppliers and employees (13 924) (13 640) (27 074)
Cash generated from operations 1 820 1 428 4 382
Interest paid (309) (274) (545)
Taxation paid (610) (518) (822)
Ordinary dividends paid by subsidiaries (6) (1) (3)
Ordinary dividends paid (710) (543) (973)
Preference dividends paid (24) (23) (46)
Distributions to beneficiaries of the HPFL trusts (163) (85) (154)
Net cash from operating activities (2) (16) 1 839
Cash flows from investing activities
Purchase of property, plant and equipment (744) (613) (1 902)
Proceeds on disposal of property, plant and equipment and intangible assets 6 8 80
Additions to intangible assets (3) (11) (43)
Decrease in investments and loans (128) (27) (103)
Interest received 61 41 96
Dividends received 5 15 18
Proceeds from disposal of businesses 3 - 46
Acquisition of business (6) - (19)
Cash related to acquisition of business 5 - -
Increase in equity interest in subsidiaries (4) (12) -
Net cash from investing activities (805) (599) (1 827)
Cash flows from financing activities
Proceeds from issue of ordinary shares 8 13 28
Proceeds on disposal of treasury shares 191 71 121
Acquisition of non-controlling interests - - (4)
Settlement of derivatives 2 - -
Long-term debt raised/(repaid) 1 125 259 (614)
Short-term debt (repaid)/raised (120) 453 535
Net cash from financing activities 1 206 796 66
Net increase in cash and cash equivalents 399 181 78
Translation effects on cash and cash equivalents of foreign entities (13) 96 125
Cash and cash equivalents at the beginning of the period 1 706 1 542 1 503
Cash and cash equivalents at the end of the period 2 092 1 819 1 706
Consisting of:
Cash on hand and balances with banks 2 092 2 107 1 712
Short-term money market borrowings and bank overdrafts - (288) (6)
2 092 1 819 1 706
Condensed Group statement of changes in equity
Ordinary Equity Preference
share Cash flow Foreign attributable share
capital hedge currency to owners capital Non- Total
and Treasury accounting translation Other Retained of the and controlling shareholders'
Rm premium shares reserve reserve reserves earnings parent premium interest equity
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
Tax 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)
Increase in equity interest in subsidiaries - - - - - (6) (6) - 3 (3)
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
Shares issued during the period 15 - - - - - 15 - - 15
Sale of treasury shares - 13 - - - 37 50 - - 50
Share-based payments reserve movements - - - - 20 - 20 - - 20
Tax recognised in equity - - - - 2 4 6 - - 6
Preference dividends paid - - - - - - - (23) - (23)
Dividends paid - - - - - (430) (430) - (2) (432)
Distributions to beneficiaries of the HPFL trusts - - - - - (69) (69) - - (69)
Increase in equity interest in subsidiaries - - - - - (19) (19) - 9 (10)
Total comprehensive income for the period - - (12) 139 - 1 151 1 278 23 77 1 378
Balance at 30 September 2014 962 (735) (19) 2 172 407 5 859 8 646 644 2 882 12 172
Shares issued during the period 8 - - - - - 8 - - 8
Sale of treasury shares - 24 - - - 133 157 - - 157
Share-based payments reserve movements - - - - 15 - 15 - - 15
Tax recognised in equity - - - - 16 (15) 1 - - 1
Preference dividends paid - - - - - - - (24) - (24)
Dividends paid - - - - - (710) (710) - (6) (716)
Distributions to beneficiaries of the HPFL trusts - - - - - (163) (163) - - (163)
Increase in equity interest in subsidiaries - - - - - (7) (7) - 19 12
Total comprehensive income for the period - - (9) (60) - 1 111 1 042 24 (78) 988
Balance at 31 March 2015 970 (711) (28) 2 112 438 6 208 8 989 644 2 817 12 450
Headline earnings
Unaudited
six months ended Year ended
31 March 31 March % 30 September
Rm 2015 2014 change 2014
Reconciliation of headline earnings
Profit for the period 1 101 949 16.0 2 096
Less:
Dividends paid on shares attributable to the Forfeitable Share Plan (3) (3) (5)
Preference shareholders (24) (23) (46)
Non-controlling interest 34 17 57
Earnings used in the calculation of basic earnings per share 1 108 940 17.9 2 102
Adjusted for:
Profit on disposal of investments (net) (1) - (10)
Fair value gain on investment on acquisition of control (12) - -
(Profit)/loss on disposal of property, plant and equipment and intangible assets (1) - 27
Bargain purchase on acquisition of subsidiary (1) - -
Impairment of property, plant and equipment - - 1
Tax effect of headline adjusting items - - (5)
Non-controlling share of headline adjusting items - - (4)
Headline earnings 1 093 940 16.3 2 111
Headline earnings adjusted for:
Fair value losses on derivative financial instruments 125 5 77
Reversal of loan impairment - - (4)
Competition Commission costs 27 108 145
Restructure costs 109 - -
Site closure costs - 31 31
Tax effect of adjusting items (55) (30) (56)
Non-controlling share of adjusting items (81) (43) (66)
Adjusted headline earnings 1 218 1 011 20.5 2 238
Headline earnings per share (cents) 81.4 70.6 15.3 158.2
Diluted headline earnings per share (cents) 79.6 68.9 15.5 154.9
Adjusted headline earnings per share (cents) 90.8 75.9 19.6 167.8
Condensed segment report
United
South Africa Kingdom Group
Hospitals
and
Emergency Primary BMI
Rm services Care Total OpCo
31 March 2015
Income Statement
Revenue 7 749 558 8 307 7 997 16 304
Attributable earnings of associates and joint ventures 51 - 51 16 67
EBITDA 1 847 46 1 893 451 2 344
Operating profit 1 611 29 1 640 118 1 758
Segment assets and liabilities
Total assets 15 430 12 629 28 059
Total liabilities (8 003) (7 606) (15 609)
31 March 2014
Income Statement
Revenue 7 221 519 7 740 7 671 15 411
Attributable earnings of associates and joint ventures 17 - 17 18 35
EBITDA 1 621 37 1 658 388 2 046
Operating profit 1 405 21 1 426 64 1 490
Segment assets and liabilities
Total assets 13 285 12 797 26 082
Total liabilities (7 065) (7 780) (14 845)
30 September 2014
Income Statement
Revenue 15 171 1 102 16 273 15 510 31 783
Attributable earnings of associates and joint ventures 35 - 35 40 75
EBITDA 3 499 98 3 597 807 4 404
Operating profit 3 045 65 3 110 143 3 253
Segment assets and liabilities
Total assets 13 694 13 023 26 717
Total liabilities (6 710) (7 835) (14 545)
Condensed notes to the unaudited interim Group financial statements
1. Basis of preparation and accounting policies
The condensed unaudited interim Group financial statements for the six months ended 31 March 2015 have been prepared in compliance with the Listings
Requirements of the JSE Limited, the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS),
the requirements of International Accounting Standard (IAS) 34, Interim Financial Reporting, SAICA Financial Reporting Guidelines as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the Companies Act, No. 71 of 2008. These
condensed unaudited interim financial statements were compiled under the supervision of Mr KN Gibson (CA) SA, Group Chief Financial Officer.
The accounting policies applied in the preparation of these results are in accordance with IFRS and are consistent in all material respects with those applied in the
audited financial statements for the year ended 30 September 2014.
The interim results have not been reviewed or audited by the Group's independent external auditors, Grant Thornton.
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 interim Group financial statements, unless expressed otherwise.
IAS 32: Offsetting Financial Assets and Financial Liabilities (Amendment)
Amendments require entities to disclose gross amounts subject to rights of set-off, amounts set off in accordance with the accounting standards followed, and the
related net credit exposure. This information will assist investors in understanding the extent to which an entity has applied set-off in its statement of financial position
and the effect of rights of set-off on the entity's rights and obligations. The adoption of the amendments on the Group's performance and financial position will result
in additional presentation.
The amended standard becomes applicable to the Group for the financial year ending 30 September 2015.
IAS 36: Recoverable Amount Disclosures for Non-Financial Assets (Amendment)
Amendments will reduce the circumstances in which the recoverable amount of assets or cash-generating units is required to be disclosed, clarify the disclosures
required, and introduce an explicit requirement to disclose the discount rate used in determining impairment (or reversals) where the recoverable amount (based on
fair value less costs of disposal) is determined using a present value technique. The adoption of the amendments on the Group's performance and financial position
will result in additional presentation.
The amended standard becomes applicable to the Group for the financial year ending 30 September 2015.
Unaudited
six months ended Year ended
31 March 31 March 30 September
Rm 2015 2014 2014
3. OPERATING PROFIT
After including:
Depreciation and amortisation (586) (556) (1 151)
Operating lease charges (1 706) (1 533) (3 070)
GHG Property Businesses (1 276) (1 202) (2 464)
Other (430) (331) (606)
4. INVESTMENT INCOME
Expected return on retirement benefit plan assets - - 70
Interest on bank accounts and other 125 96 143
125 96 213
5. FINANCIAL EXPENSES
Amortisation of arrangement fees - (5) (6)
Interest on bank loans and other (164) (133) (206)
Interest on promissory notes (133) (126) (262)
Retirement benefit plan interest cost (12) (10) (90)
(309) (274) (564)
6. OTHER FINANCIAL LOSSES - NET
Amount reclassified from the cash flow hedge accounting reserve (6) - -
Fair value losses on inflation rate swaps (not hedge accounted) (107) (5) (78)
Fair value gains on interest rate swaps (not hedge accounted) - - 1
Ineffectiveness losses on cash flow hedges (1) - (3)
(114) (5) (80)
7. TAXATION
South African normal and deferred taxation
Current year (443) (382) (819)
Prior years 4 - (4)
Capital gains tax - - (6)
(439) (382) (829)
Dividend tax - - (1)
Foreign normal and deferred taxation
Current year 13 (11) (16)
Prior years - - 45
13 (11) 29
Total taxation per the income statement (426) (393) (801)
8. EQUITY-ACCOUNTED INVESTMENTS, LOANS AND RECEIVABLES
Non-current
Associated companies 665 662 602
Joint ventures 167 150 76
Loans and receivables 1 370 1 031 1 337
2 202 1 843 2 015
Current
Loans and receivables 64 41 26
2 266 1 884 2 041
Included in loans and receivables is an investment of R1 133 million (March 2014: R981 million; September 2014: R1 087 million)
relating to a contractual economic interest in the debt of BMI Healthcare.
9. DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial assets
Interest rate swaps
South African Rand 21 30 23
Inflation rate swaps
South African Rand - 3 2
Foreign currency - 1 -
21 34 25
Non-derivative financial instrument
Investment in Cell Captive 24 - 20
45 34 45
Derivative financial liabilities
Interest rate swaps
South African Rand (12) (6) (8)
Inflation rate swaps
South African Rand (24) (9) (7)
Foreign currency (177) (4) (85)
(213) (19) (100)
Included in:
Non-current liabilities (213) (16) (97)
Current liabilities - (3) (3)
(213) (19) (100)
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 2 Level 3 Total
31 March 2015
Derivative financial assets
Interest rate swaps 21 - 21
Non-derivative financial asset
Cell Captive 24 - 24
45 - 45
Derivative financial liabilities
Interest rate swaps (12) - (12)
Inflation rate swaps (24) (177) (201)
(36) (177) (213)
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)
30 September 2014
Derivative financial assets
Interest rate swaps 23 - 23
Inflation rate swaps 2 - 2
Non-derivative financial asset
Cell Captive 20 - 20
45 - 45
Derivative financial liabilities
Interest rate swaps (8) - (8)
Inflation rate swaps (7) (85) (92)
(15) (85) (100)
The Group has no financial instruments categorised as Level 1.
The reconciliation of the movements in the derivative financial assets and liabilities categorised in Level 3 is presented below:
Unaudited
31 March 31 March 30 September
Rm 2015 2014 2014
Inflation rate swaps
Balance at beginning of the period (85) 25 25
Fair value movement recognised in the cash flow hedge accounting reserve - (30) (32)
Fair value movement recognised in the income statement (93) - (76)
Ineffectiveness on the cash flow hedges - (6) -
Derecognition of interest rate swap 1 - -
Translation of foreign entities - 2 (2)
(177) (9) (85)
10. DEBT
Long-term debt 6 026 5 721 4 939
Short-term debt 1 609 1 660 1 739
Total debt 7 635 7 381 6 678
Comprising:
Debt in South African Rand
Secured liabilities 552 - -
Finance leases 15 42 23
Promissory notes and commercial paper in issue 4 400 4 154 3 567
Other 4 - -
Unsecured liabilities - 1 -
4 971 4 197 3 590
Debt in foreign currency
Secured liabilities 2 300 2 943 2 743
Finance leases 285 172 292
Accrued interest 90 85 67
Arrangement fees (11) (16) (14)
2 664 3 184 3 088
7 635 7 381 6 678
Maturity profile
1-2 2-3 3-4
Rm Total <1 year years years years >4 years
31 March 2015
Debt in South African Rand 4 971 1 053 1 258 1 604 557 499
Debt in foreign currency 2 664 556 48 411 1 558 91
7 635 1 609 1 306 2 015 2 115 590
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
30 September 2014
Debt in South African Rand 3 590 1 178 992 258 602 560
Debt in foreign currency 3 088 561 467 418 423 1 219
6 678 1 739 1 459 676 1 025 1 779
Unaudited
31 March 31 March 30 September
Rm 2015 2014 2014
11. COMMITMENTS
Capital commitments 3 107 1 919 2 600
South Africa 3 014 1 505 2 399
United Kingdom 93 414 201
Operating lease commitments 52 095 47 788 55 542
South Africa 3 048 1 033 4 326
United Kingdom 49 047 46 755 51 216
12. CONTINGENT LIABILITIES
South Africa 132 406 171
13. EVENTS AFTER THE REPORTING PERIOD
The directors are not aware of any matters or circumstances arising since the end of the reporting period, not otherwise dealt with in
the Group's unaudited interim financial statements, which significantly affect the financial position at 31 March 2015 or the results of its
operations or cash flows for the period then ended.
Salient features
Unaudited
31 March 31 March 30 September
2015 2014 2014
Share statistics
Ordinary shares
Shares in issue (million) 1 479 1 476 1 478
Shares in issue net of treasury shares (million) 1 343 1 333 1 337
Weighted average number of shares (million) 1 342 1 332 1 334
Diluted weighted average number of shares (million) 1 373 1 365 1 363
Market price per share (cents) 4 170 2 334 3 161
Currency conversion guide (R:£)
Closing exchange rate 17.97 17.53 18.29
Average exchange rate for the period 17.76 17.15 17.49
Disclaimer
Certain statements in this document constitute 'forward-looking statements'. Forward-looking statements may be identified by words such as 'believe', 'anticipate',
'expect', 'plan', 'estimate', 'intend', 'project', 'target', 'predict' and 'hope'. By their nature, forward-looking statements are inherently predictive, speculative and involve
risk and uncertainty because they relate to events and depend on circumstances that will occur in the future, involve known and unknown risks, uncertainties and
other facts or factors which may cause the actual results, performance or achievements of the Group, or the healthcare sector to be materially different from any
results, performance or achievement expressed or implied by such forward-looking statements. Forward-looking statements are not guarantees of future performance
and are based on assumptions regarding the Group's present and future business strategies and the environments in which it operates now and in the future. No
assurance can be given that forward-looking statements will prove to be correct and undue reliance should not be placed on such statements.
Forward-looking statements apply only as of the date on which they are made, and Netcare does not undertake other than in terms of the Listings Requirements of
the JSE Limited, to update or revise any statement, whether as a result of new information, future events or otherwise.
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), J Watts
Non-executive directors
SJ Vilakazi (Chairman - retiring 31 May 2015), JM Kahn (Acting Chairman), T Brewer, APH Jammine, MJ Kuscus, KD Moroka, N Weltman
Company Secretary
L Bagwandeen
Sponsor
Nedbank 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: 18/05/2015 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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