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NETCARE LIMITED - Unaudited Interim Group Results for the six months ended 31 March 2016

Release Date: 16/05/2016 08:00
Code(s): NTC     PDF:  
Wrap Text
Unaudited Interim Group Results for the six months ended 31 March 2016

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 ZAE000011953

Unaudited Interim Group Results for the six months ended 31 March 2016

FINANCIAL HIGHLIGHTS

Group revenue up 15.4% R18 814m

Group profit after tax up 20.7% R1 329m

Group EBITDA 13.6% R2 663m

Interim dividend per share of 38.0c

Group HEPS 10.9% 90.3c



COMMENTARY

Overview
The Netcare Group reported an increase in profit after tax of 20.7% and growth in headline earnings per share (HEPS) of 10.9% in a year of integration
following the successful roll-out of its 2015 expansion programme in South Africa (SA), in which 584 new beds were added to the portfolio, and the
completion in the prior year of a major restructure of the United Kingdom (UK) operations.

The accounting policies applied in preparing the unaudited interim Group financial statements are consistent in all material respects with those applied in
the audited financial statements for the year ended 30 September 2015.

Group financial review

Financial performance
Group revenue rose 15.4% to R18 814 million (2015: R16 304 million). Currency conversion contributed R1 916 million of the increase in a period of
extreme volatility for the Rand. The average exchange rate of R22.10 to the Pound Sterling (Pound), used to convert UK income and expenditure, was
24.4% weaker than the average rate of R17.76 for the six months ended 31 March 2015. The closing exchange rate, used to convert assets and liabilities,
ended at R21.20 at 31 March 2016 compared to R20.94 at 30 September 2015.

Group earnings before interest, tax, depreciation and amortisation (EBITDA) increased 13.6% to R2 663 million (2015: R2 344 million). Currency
conversion accounted for R136 million of the growth. Operating profit improved by 11.0% to R1 952 million (2015: R1 758 million).

Net financial expenses decreased to R249 million (2015: R298 million). This included a non-cash fair value accounting charge of R41 million or £1.9 million
(2015: R107 million or £5.9 million) relating to mark-to-market revaluations of the Retail Price Index (RPI) swaps that are included in some of BMI
Healthcare's property leases in the UK.

Profit before tax was up 16.6% to R1 781 million (2015: R1 527 million). The Group's tax expense increased to R452 million (2015: R426 million)
representing an effective tax rate of 25.4% (2015: 27.9%). The changes in the company tax rate in the UK and the capital gains tax rate in SA resulted in a
net R47 million credit to the tax charge in the statement of profit or loss. Profit after tax rose by 20.7% to R1 329 million (2015: R1 101 million).



Financial position and cash flow

Total assets increased 0.5% to R31 806 million at 31 March 2016, from R31 664 million at 30 September 2015. The weaker closing exchange rate
contributed R174 million to the increase. Total shareholders' equity increased to R15 017 million at 31 March 2016, from R14 281 million at 30 September
2015.

At 31 March 2016, Group net debt was R6 721 million (March 2015: R5 543 million). Net debt to EBITDA remains strong at 1.3 times (March 2015: 1.2
times), while interest cover improved to 10.4 times (March 2015: 9.6 times).

At 31 March 2016, SA net debt was R4 153 million (March 2015: R3 574 million). The increase from R3 292 million at 30 September 2015 is due to normal
seasonality and after funding requirements for capital expenditure, tax and dividend payments. Collectively these payments amounted to R2 207 million
(March 2015: R2 026 million) during the period.

At 31 March 2016 UK net debt was £121.1 million (March 2015: £109.6 million), which is marginally higher than the net debt of £119.3 million, at 30
September 2015. BMI Healthcare remains comfortably geared and fully compliant with the covenants of its debt facilities.

Group cash generated from operations was 10.7% lower at R1 625 million (2015: R1 820 million), influenced by an increase in UK working capital levels
attributable to currency conversion and a contractual “true up” payment on an outsourcing arrangement.

The Group invested R1 088 million (2015: R747 million) in capital expenditure (including intangible assets) and paid R726 million (2015: R710 million) to
shareholders in ordinary dividends.

Divisional review

South Africa
Revenue grew by 8.5% to R9 011 million (2015: R8 307 million) and EBITDA by 3.4% to R1 957 million (2015: R1 893 million) at an EBITDA margin of
21.7% (2015: 22.8%). Operating profit rose 0.9% to R1 655 million (2015: R1 640 million) and HEPS grew by 1.8% to 86.7 cents (2015: 85.2 cents). Adjusted
HEPS increased by 1.3%.

Capital expenditure, including intangible assets, was R886 million (2015: R531 million).

Across all SA operations Netcare has continued to track well against the more than 300 quality measures monitored within the overall Netcare quality
management system. In addition, targets have been set for core focus areas to reinforce specific elements aligned to global healthcare priorities including
infection risk, patient safety and five elements of patient feedback, all of which reinforce the Triple Aim objectives of best patient outcome, best patient
experience and cost-effective care.

Netcare received the following notable accolades during the period under review:

Top 100 Most Empowered JSE-listed Companies Report 2015
Netcare has been ranked first in the healthcare sector and 11th overall (up from 15th position last year), in the 2015 Top 100 Most Empowered JSE-listed
Companies Report.

PMR.africa Diamond Arrow Award for Corporate Social Responsibility Initiatives 2016
Netcare won the national Diamond Arrow Award, the highest accolade, in the category for private hospital and clinic groups for the Group's corporate
social responsibility initiatives for the fourth consecutive year.



Hospital and Emergency Services

Netcare experienced strong demand for its private healthcare services, despite low economic growth and a further decline of 0.3% in total medical
scheme beneficiaries from 8.81 million at 30 June 2015 to 8.79 million at 30 September 2015 (as reported by the Council for Medical Schemes). The
division delivered patient day growth of 2.8% for the six-month period. Patient day growth tracked at 4.0% for the five months to February 2016, but was
adversely affected by the Easter holidays that fell in March in the current year as compared to April in 2015. The timing of these public holidays between
2015 and 2016 has had an impact on comparability of the reporting periods. Year-to-date patient day growth normalised to 4.0% by the end of April 2016.

Occupancy levels were diluted by the 584 new beds added in the prior year, decreasing to 64.4% (March 2015: 66.6%). Our new hospitals in Polokwane
and Pinehaven have performed well, both achieving occupancies above 50% in February and March 2016. This is a milestone that was only
anticipated to be reached by the 2016 financial year-end.

Revenue grew 8.9% to R8 438 million (2015: R7 749 million). Revenue per patient day increased by 5.2%, reflecting a shift from surgical to medical cases
which attract a lower income per admission. EBITDA was up 3.1% to R1 904 million (2015: R1 847 million) and the EBITDA margin narrowed to 22.6%
(2015: 23.8%). Margins have been influenced by a number of factors including a combination of rising inflation and currency weakness impacting on
labour, cost of sales and other operating costs; negative contribution from the two new hospitals that are still in ramp-up phase and the shift in mix in
favour of medical cases.

Operational excellence initiatives including the tight management of nursing acuity and staffing, energy consumption management and efficient
procurement have continued to yield results, although these were insufficient to absorb the countervailing margin pressures. Group efficiency projects,
which are focused on optimising our IT platform and digitalising many paper-based processes, are expected to yield further benefits over the next 18 to 24
months.

Operating profit grew by 0.6% to R1 621 million (2015: R1 611 million) influenced by the increased depreciation charges arising on the greenfield hospitals
and brownfield beds added in 2015.

At 31 March 2016, the division had a total of 10 421 registered beds (March 2015: 9 869 beds), including the Lesotho Public Private Partnership of 425
beds. No new beds were added in the period under review as the focus for 2016 is to ramp-up utilisation of the significant capacity additions in 2015.
There are plans to add approximately 85 new beds by the end of the financial year and a number of expansion projects are underway to address
bottlenecks and capacity constraints. Major expansion projects include the re-development of Netcare Milpark Hospital and the ongoing construction of
the relocated Netcare Christiaan Barnard Memorial Hospital, which is progressing well. This world-class medical precinct is expected to open in
December 2016.



Primary Care

Our national network of Medicross family medical and dental centres posted a stable performance, while Prime Cure performed solidly. Revenue was 2.7%
higher at R573 million (2015: R558 million) and EBITDA was up by 15.2% to R53 million (2015: R46 million). The EBITDA margin improved to 9.2% from
8.2%, due to refinements to the business model. Operating profit grew by 17.2% to R34 million (2015: R29 million).

Following a strategic review, the Primary Care division has elected to focus on provider services as it winds down its managed care administration
services. Prime Cure has adjusted its business operations in line with changes to its managed care contracts and the cost base has been rationalised
accordingly.

Medicross has a large national day theatre network comprising 13 facilities. The division is focused on expanding its offering in the areas of day theatres
and sub-acute facilities. In this regard Medicross acquired a 16-bed sub-acute facility in Pietermaritzburg and a 20-bed sub-acute facility in Amanzimtoti
during the reporting period. Plans are in place to further extend our footprint in the provision of these services. In the 2017 and 2018 financial years,
Medicross will be opening four new day theatre clinics in Kimberley, Upington, Cape Town and Richards Bay as well as three new sub-acute facilities in
Hillcrest, Cape Town and Richards Bay.



SA private healthcare market inquiry

The Healthcare Market Inquiry regarding the functioning of the private healthcare market commenced in 2014. Netcare is actively engaged and has made
comprehensive submissions to the Inquiry panel in 2014, 2015 and 2016. HMI position papers on the topics under review are still to be published. The
completion date of the Inquiry and a final Inquiry report, which may include recommendations, is expected by 15 December 2016.



United Kingdom

Overall activity continued to grow with a 0.4% increase in BMI Healthcare's inpatient and day caseload. The timing of the Easter holidays resulted in lower
activity in March 2016 and has had an impact on the comparability of the reporting periods. Year-to-date inpatient and day case growth normalised to
1.2% by the end of April 2016. Revenue continues to be affected by a change in business mix towards more National Health Service (NHS) volumes, while
a greater number of procedures and services are taking place in an outpatient environment. NHS caseload grew by 5.4% with growth of 8.5% in
e-Referrals (previously Choose & Book) caseload being offset by a slowdown in spot work. NHS work now comprises 41.1% (2015: 38.9%) of BMI
Healthcare's total caseload. There has been little change in Private Medical Insurance (PMI) membership trends and this market remains soft. However, the
business has experienced growth in demand for Self-pay, with caseload up by 4.6%. Outpatient activity has also experienced solid growth, boosted by an
increasing range of outpatient services.

Revenue decreased by 1.4% to £444.0 million (2015: from £450.2 million), reflecting the ongoing shift in payor mix from private patients to NHS. EBITDA
improved by 26.4% to £32.1 million (2015: £25.4 million) at a margin of 7.2% (2015: 5.6%). Results for the period under review benefited from a non-
recurring reversal of an impairment of £2.0 million. In the prior reporting period, non-recurring costs of £6.1 million were incurred as part of a business
restructure. The EBITDA margin excluding non-recurring items of 6.8% (2015: 7.0%) reflects the impact of further adverse payor mix in the period.
Operating profit improved by 103.0% to £13.6 million (2015: £6.7 million). Attributable equity accounted earnings from GHG PropCo 2 amounted to £1.0
million (2015: loss of £0.1 million). Profit after tax of £5.8 million improved from a loss of £4.7 million in the prior period.

Capital expenditure, including intangible assets, of £9.1 million (2015: £12.3 million) was invested in various targeted projects aimed at new revenue
generation and enhancing the hospital portfolio.

The confidential negotiations with the PropCos are continuing with regard to a possible rent reduction transaction. It is taking longer than expected for the
parties to reach agreement, but given the long-term implications of a rent reduction transaction for BMI Healthcare, it is essential that we are able to
conclude on terms that are appropriate and economically sensible for both parties.



Outlook

We expect the weakness in the SA economy to persist. Notwithstanding the low levels of growth in formal employment, demand for private healthcare is
expected to remain resilient. As the new capacity opened in 2015 gains traction, we expect to see further improvement in occupancy levels.

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 efficiency benefits from our IT and automation projects in the
years ahead.

Planned capital expenditure in SA for the year ahead is expected to reach approximately R2 billion as the Netcare Christiaan Barnard Memorial Hospital
reaches completion and further expansion projects gain traction. We have plans in place to expand our service offering, including growing our footprint in
day theatres and sub-acute services.

In the UK, BMI Healthcare will continue to service the supply gap as increasing constraints in the NHS drive healthcare demand. Additional government
funding committed from April 2016 is not expected to be sufficient to alleviate the pressures on the NHS in the medium term. Growth in the e-Referrals
segment is expected to continue. For the first time in seven years the NHS announced a tariff increase of approximately 1% for the 2016/17 NHS year,
coming into effect from April 2016. We do not anticipate growth in the PMI market in the short term, but expect higher demand in the Self-pay segment to
continue, driven by high NHS waiting lists.

We will continue to focus on re-engineering patient pathways and driving operating efficiencies.

BMI Healthcare expects to spend approximately £43.0 million in 2016 on capital projects to enhance its hospital infrastructure and to keep abreast of
technological developments.

The Group will continue to evaluate international expansion opportunities that meet its strategic criteria and investment expectations.



Declaration of interim dividend number 14

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 2016. The
dividend has been declared from income reserves and is payable to shareholders recorded in the register at the close of business on Friday, 8 July 2016.

The number of ordinary shares (inclusive of treasury shares) in issue at date of this declaration is 1 461 509 779. The dividend will be subject to 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                             Friday, 1 July 2016
Trading ex dividend commences                              Monday, 4 July 2016
Record date                                                Friday, 8 July 2016
Payment date                                               Monday, 11 July 2016


Share certificates may not be dematerialised nor rematerialised between Monday, 4 July 2016 and Friday, 8 July 2016, both days inclusive.

On Monday, 11 July 2016, 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, 11 July 2016.

Netcare Limited's tax reference number is 9999/581/71/4.



On behalf of the Board

Meyer Kahn             Non-executive Chairman
Richard Friedland      Chief Executive Officer
Keith Gibson           Chief Financial Officer

Sandton

12 May 2016


GROUP STATEMENT OF PROFIT OR LOSS

                                                                                Unaudited six months
                                                                                       ended                      Year ended
                                                                                 31 March    31 March         % 30 September
Rm                                                                  Notes            2016        2015    change         2015

Revenue                                                                            18 814      16 304      15.4       33 711
Cost of sales                                                                     (10 627)     (9 213)               (18 948)
Gross profit                                                                        8 187       7 091      15.5       14 763
Other income                                                                          213         217                    498
Administrative and other expenses                                                  (6 448)     (5 550)               (11 533)
Operating profit                                                        2           1 952       1 758      11.0        3 728
Investment income                                                       3             174         125                    367
Financial expenses                                                      4            (362)       (309)                  (700)
Other financial losses - net                                            5             (61)       (114)                  (134)
Attributable earnings of associates                                                    54          47                     66
Attributable earnings of joint ventures                                                24          20                     48
Profit before taxation                                                              1 781       1 527      16.6        3 375
Taxation                                                                6            (452)       (426)                  (936)
Profit for the period                                                               1 329       1 101      20.7        2 439
Attributable to:
Owners of the parent                                                                1 257       1 111                   2 412
Preference shareholders                                                                25          24                      49
Profit attributable to shareholders                                                 1 282       1 135      13.0         2 461
Non-controlling interest                                                               47         (34)                    (22)
                                                                                    1 329       1 101      20.7         2 439

Earnings per share (cents)
Basic                                                                                92.7        82.6      12.2         178.9
Diluted                                                                              91.1        80.7      12.9         174.8
Dividend per share (cents)                                                           38.0        38.0         –          92.0



GROUP STATEMENT OF OTHER COMPREHENSIVE INCOME

                                                                                            Unaudited six months
                                                                                                    ended          Year ended
                                                                                             31 March  31 March  30 September
Rm                                                                                               2016      2015          2015

Profit for the period                                                                           1 329     1 101         2 439
Items that may not subsequently be reclassified to profit or loss                                   -         -           (88)
Remeasurement of defined benefit obligation                                                         -         -          (123)
Taxation on items that may not subsequently be reclassified to profit or loss                       -         -            35
Items that may subsequently be reclassified to profit or loss                                     108      (113)          912
Effect of cash flow hedge accounting                                                               39        (7)           44
  Amortisation of cash flow hedge accounting reserve                                                -        17             -
  Change in the fair value of cash flow hedges                                                     18       (25)            7
  Reclassification of cash flow hedge accounting reserve                                           21         1            37
Effect of translation of foreign entities                                                          77      (109)          878
Taxation on items that may subsequently be reclassified to profit or loss                          (8)        3           (10)
Other comprehensive income/(loss) for the period                                                  108      (113)          824
Total comprehensive income for the period                                                       1 437       988         3 263
Attributable to:
Owners of the parent                                                                            1 318     1 042         2 814
Preference shareholders                                                                            25        24            49
Non-controlling interest                                                                           94       (78)          400
                                                                                                1 437       988         3 263

GROUP STATEMENT OF FINANCIAL POSITION

                                                                                     Unaudited
                                                                               31 March   31 March 30 September
Rm                                                                     Notes       2016       2015         2015
ASSETS
Non-current assets
Property, plant and equipment                                                    14 094     11 677       13 622
Goodwill                                                                          4 543      3 819        4 482
Intangible assets                                                                   375        379          397
Equity-accounted investments, loans and receivables                       7       2 708      2 202        2 545
Financial assets                                                          8          78         45           57
Deferred lease assets                                                                16          -           16
Deferred taxation                                                                 1 468      1 513        1 597
Total non-current assets                                                         23 282     19 635       22 716
Current assets
Loans and receivables                                                     7          80         64           71
Inventories                                                                       1 241      1 088        1 107
Trade and other receivables                                                       5 634      5 172        5 192
Taxation receivable                                                                  60          -           19
Cash and cash equivalents                                                         1 501      2 092        2 551
                                                                                  8 516      8 416        8 940
Asset classified as held for sale                                                     8          8            8
Total current assets                                                              8 524      8 424        8 948
Total assets                                                                     31 806     28 059       31 664
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital and premium                                                4 185        970        4 033
Treasury shares                                                                  (3 795)      (711)      (3 713)
Other reserves                                                                    3 165      2 522        3 090
Retained earnings                                                                 7 391      6 208        6 902
Equity attributable to owners of the parent                                      10 946      8 989       10 312
Preference share capital and premium                                                644        644          644
Non-controlling interest                                                          3 427      2 817        3 325
Total shareholders' equity                                                       15 017     12 450       14 281
Non-current liabilities
Long-term debt                                                            9       5 961      6 026        6 104
Financial liabilities                                                     8         269        213          224
Post-retirement benefit obligations                                                 409        269          400
Deferred lease liabilities                                                          126         80          118
Deferred taxation                                                                 1 599      1 502        1 633
Provisions                                                                          153        118          150
Total non-current liabilities                                                     8 517      8 208        8 629
Current liabilities
Trade and other payables                                                          6 008      5 775        6 403
Short-term debt                                                           9       2 258      1 609        2 162
Financial liabilities                                                     8           3          -            4
Taxation payable                                                                      -         17          110
Bank overdrafts                                                                       3          -           75
Total current liabilities                                                         8 272      7 401        8 754
Total equity and liabilities                                                     31 806     28 059       31 664


GROUP STATEMENT OF CASH FLOWS

                                                                              Unaudited six months
                                                                                     ended           Year ended
                                                                               31 March   31 March 30 September
Rm                                                                                 2016       2015         2015
Cash flows from operating activities
Cash received from customers                                                     18 404     15 744       33 523
Cash paid to suppliers and employees                                            (16 779)   (13 924)     (28 567)
Cash generated from operations                                                    1 625      1 820        4 956
Interest paid                                                                      (346)      (309)        (600)
Taxation paid                                                                      (512)      (610)      (1 104)
Ordinary dividends paid by subsidiaries                                              (5)        (6)          (9)
Ordinary dividends paid                                                            (726)      (710)      (1 166)
Preference dividends paid                                                           (25)       (24)         (49)
Distributions to beneficiaries of the HPFL trusts                                   (53)      (163)        (211)
Net cash from operating activities                                                  (42)        (2)       1 817
Cash flows from investing activities
Purchase of property, plant and equipment                                        (1 068)      (744)      (2 641)
Additions to intangible assets                                                      (20)        (3)         (12)
Proceeds on disposal of property, plant and equipment and intangible assets          24          6           68
Acquisition of businesses                                                           (13)        (6)         (35)
Acquisition of business loans                                                       (25)         -            -
Cash related to acquisition of businesses                                             1          5            -
Proceeds from disposal of businesses                                                 20          3            3
Decrease/(increase) in investments and loans                                         39       (128)        (145)
Interest received                                                                    83         61          152
Dividends received                                                                   16          5           12
Increase in equity interest in subsidiaries                                           -         (4)         (49)
Net cash from investing activities                                                 (943)      (805)      (2 647)
Cash flows from financing activities
Proceeds from issue of ordinary shares                                               11          8           37
Proceeds on disposal of treasury shares                                              74        191          300
Settlement of derivatives                                                             -          2            -
Long-term debt (repaid)/raised                                                     (175)     1 125          828
Short-term debt raised/(repaid)                                                      83       (120)         278
Net cash from financing activities                                                   (7)     1 206        1 443
Net (decrease)/increase in cash and cash equivalents                               (992)       399          613
Translation effects on cash and cash equivalents of foreign entities                 14        (13)         157
Cash and cash equivalents at the beginning of the period                          2 476      1 706        1 706
Cash and cash equivalents at the end of the period                                1 498      2 092        2 476
Consisting of:
Cash on hand and balances with banks                                              1 501      2 092        2 551
Short-term money market borrowings and bank overdrafts                               (3)         -          (75)
                                                                                  1 498      2 092        2 476


CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY

                                                                                                                                          Equity
                                                       Ordinary                 Cash flow        Foreign                            attributable     Preference                      Total
                                                          share                     hedge       currency                               to owners          share           Non-      share-
                                                    capital and   Treasury     accounting    translation       Other    Retained          of the    capital and    controlling    holders'
Rm                                                      premium     shares        reserve        reserve    reserves    earnings          parent        premium       interest      equity

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
Shares issued during the period                              29          -              -              -           -           -              29              -              -          29
Sale of treasury shares                                       -         32              -              -           -         111             143              -              -         143
Restructure of HPFL trusts                                3 034     (3 034)             -              -           -         (53)            (53)             -              -         (53)
Share-based payments reserve movements                        -          -              -              -          24           -              24              -              -          24
Tax recognised in equity                                      -          -              -              -         (16)        (75)            (91)             -              -         (91)
Preference dividends paid                                     -          -              -              -           -           -               -            (25)             -         (25)
Dividends paid                                                -          -              -              -           -        (456)           (456)             -             (3)       (459)
Distributions to beneficiaries of the HPFL trusts             -          -              -              -           -         (48)            (48)             -              -         (48)
Increase in equity interest in subsidiaries                   -          -              -              -           -           3               3              -             33          36
Total comprehensive income for the period                     -          -            31             529           -       1 212           1 772             25            478       2 275
Balance at 30 September 2015                              4 033     (3 713)             3          2 641         446       6 902          10 312            644          3 325      14 281
Shares issued during the period                             152       (141)             -              -           -           -              11              -              -          11
Sale of treasury shares                                       -         59              -              -           -          15              74              -              -          74
Share-based payments reserve movements                        -          -              -              -          14           -              14              -              -          14
Tax recognised in equity                                      -          -              -              -           -           6               6              -              -           6
Preference dividends paid                                     -          -              -              -           -           -               -            (25)             -         (25)
Dividends paid                                                -          -              -              -           -        (726)           (726)             -             (5)       (731)
Distributions to beneficiaries of the HPFL trusts             -          -              -              -           -         (53)            (53)             -              -         (53)
Increase in equity interest in subsidiaries                   -          -              -              -           -         (10)            (10)             -             13           3
Total comprehensive income for the period                     -          -            25              36           -       1 257           1 318             25             94       1 437
Balance as at 31 March 2016                               4 185     (3 795)           28           2 677         460       7 391          10 946            644          3 427      15 017
 

HEADLINE EARNINGS

Group
                                                                        Unaudited six months
                                                                               ended                   Year ended
                                                                        31 March   31 March        % 30 September
Rm                                                                          2016       2015   change         2015

Reconciliation of headline earnings
Profit for the period                                                      1 329      1 101     20,7        2 439
Less:
 Dividends paid on shares attributable to the Forfeitable Share Plan          (4)        (3)                   (6)
 Preference shareholders                                                     (25)       (24)                  (49)
 Non-controlling interest                                                    (47)        34                    22
Earnings used in the calculation of basic earnings per share               1 253      1 108     13,1        2 406
Adjusted for:
 (Profit)/loss on disposal of investments (net)                               (2)        (1)                    1
 Fair value gains on investments on acquisition of control                     -        (12)                  (77)
 Profit on disposal of property, plant and equipment and intangibles          (8)        (1)                  (30)
 Bargain purchase on acquisition of subsidiary                                 -         (1)                   (1)
 Reversal of impairment of investment                                        (44)         -                     -
 Reversal of impairment of property, plant and equipment                      (1)         -                     -
 Tax effect of headline adjusting items                                        1          -                     -
 Non-controlling share of headline adjusting items                            22          -                    42
Headline earnings                                                          1 221      1 093     11,7        2 341
Headline earnings adjusted for:
 Ineffectiveness losses on cash flow hedges                                   (1)         -                     -
 Fair value losses on derivative financial instruments                        41        125                   109
 Amount reclassified from the cash flow hedge accounting reserve              21          -                    36
 Reversal of loan impairment                                                   -          -                     4
 Competition Commission costs                                                 10         27                    42
 Restructure costs                                                             -        109                   223
 Change in tax rate                                                          (47)         -                     -
 Tax effect of adjusting items                                               (14)       (55)                  (87)
 Non-controlling share of adjusting items                                     (1)       (81)                 (126)
Adjusted headline earnings                                                 1 230      1 218      1,0        2 542
Headline earnings per share (cents)                                         90.3       81.4     10.9        174.1
Diluted headline earnings per share (cents)                                 88.8       79.6     11.6        170.0
Adjusted headline earnings per share (cents)                                91.0       90.8      0.2        189.0


CONDENSED SEGMENT REPORT

                                                                                                  United
                                                                       South Africa              Kingdom
                                                           Hospital
                                                                and
                                                          Emergency      Primary                     BMI
Rm                                                         services         Care      Total   Healthcare     Group

31 March 2016
Statement of profit or loss
Revenue                                                       8 438          573      9 011        9 803    18 814
Attributable earnings of associates and joint ventures           42            -         42           36        78
EBITDA                                                        1 904           53      1 957          706     2 663
Operating profit                                              1 621           34      1 655          297     1 952
Segment assets and liabilities
Total assets                                                                         16 896       14 910    31 806
Total liabilities                                                                    (7 967)      (8 822)  (16 789)

31 March 2015
Statement of profit or loss
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)

30 September 2015
Statement of profit or loss
Revenue                                                      16 119         1 170    17 289       16 422    33 711
Attributable earnings of associates and joint ventures           67             -        67           47       114
EBITDA                                                        3 837           111     3 948        1 033     4 981
Operating profit                                              3 335            76     3 411          317     3 728
Segment assets and liabilities
Total assets                                                                         16 788       14 876    31 664
Total liabilities                                                                    (8 384)      (8 999)  (17 383)


CONDENSED NOTES TO THE GROUP FINANCIAL STATEMENTS

1.   Basis of preparation and accounting policies
     The condensed unaudited interim Group financial statements for the six months ended 31 March 2016 have been
     prepared in compliance with the Listings Requirements of the JSE Limited, in accordance with the requirements of
     International Financial Reporting Standards (IFRS), and containing the information required by the International
     Accounting Standard (IAS) 34 - Interim Financial Reporting, SAICA Financial Reporting Guides 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 2015.

     The interim results have not been reviewed or audited by the Group's independent external auditors, Grant Thornton.


                                                                                        Unaudited six months
                                                                                               ended               Year ended
                                                                                        31 March       31 March  30 September
     Rm                                                                                     2016           2015          2015
2.   OPERATING PROFIT
     After including:
     Depreciation and amortisation                                                          (711)          (586)       (1 253)
     Operating lease charges                                                              (2 100)        (1 706)       (3 625)
       GHG Property Businesses                                                            (1 633)        (1 276)       (2 683)
       Other                                                                                (467)          (430)         (942)
3.   INVESTMENT INCOME
     Expected return on retirement benefit plan assets                                         -              -            77
     Interest on bank accounts and other                                                     174            125           290
                                                                                             174            125           367
4.   FINANCIAL EXPENSES
     Amortisation of arrangement fees                                                         (3)             -            (7)
     Interest on bank loans and other                                                       (222)          (164)         (333)
     Interest on promissory notes                                                           (123)          (133)         (259)
     Retirement benefit plan interest cost                                                   (14)           (12)         (101)
                                                                                            (362)          (309)         (700)
5.   OTHER FINANCIAL LOSSES - NET
     Amount reclassified from the cash flow hedge accounting reserve                         (21)            (6)          (25)
     Fair value losses on inflation rate swaps (not hedge accounted)                         (41)          (107)         (109)
     Ineffectiveness losses on cash flow hedges                                                1             (1)            -
                                                                                             (61)          (114)         (134)
6.   TAXATION
     South African normal and deferred taxation
     Current year                                                                           (436)          (443)         (891)
     Prior years                                                                              (2)             4             -
     Tax rate adjustment                                                                     (10)             -             -
                                                                                            (448)          (439)         (891)
     Foreign normal and deferred taxation
     Current year                                                                            (61)            13           (30)
     Prior years                                                                               -              -           (15)
     Rate change                                                                              57              -             -
                                                                                              (4)            13           (45)
     Total taxation per the Group statement of profit or loss                               (452)          (426)         (936)


                                                                                        Unaudited six months
                                                                                               ended               Year ended
                                                                                        31 March       31 March  30 September
     Rm                                                                                     2016           2015          2015
7.   EQUITY-ACCOUNTED INVESTMENTS, LOANS AND RECEIVABLES
     Non-current
     Associated companies                                                                    699            665           668
     Joint ventures                                                                          189            167           197
     Loans and receivables                                                                 1 820          1 370         1 680
                                                                                           2 708          2 202         2 545
     Current
     Loans and receivables                                                                    80             64            71
                                                                                           2 788          2 266         2 616
     
     Included in loans and receivables is an investment of R1 503 million (March 2015: R1 133 million; September 2015:
     R1 398 million) relating to a contractual economic interest in the debt of BMI Healthcare.
     

                                                                                       Unaudited
                                                                                        31 March       31 March  30 September
     Rm                                                                                     2016           2015          2015
8.   DERIVATIVE FINANCIAL INSTRUMENTS
     Derivative financial assets
     Interest rate swaps
     South African Rand                                                                       59             21            38
                                                                                              59             21            38
     Non-derivative financial asset
     Investment in Cell Captive                                                               19             24            19
                                                                                              78             45            57
     Included in:
     Non-current assets                                                                       78             45            57
     Derivative financial liabilities
     Interest rate swaps
     South African Rand                                                                       (5)           (12)           (7)
     Inflation rate swaps
     South African Rand                                                                      (17)           (24)          (13)
     Foreign currency                                                                       (250)          (177)         (208)
                                                                                            (272)          (213)         (228)
     Included in:
     Non-current liabilities                                                                (269)          (213)         (224)
     Current liabilities                                                                      (3)             -            (4)
                                                                                            (272)          (213)         (228)
     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 2016
     Derivative financial assets
     Interest rate swaps                                                                      59               -           59
     Non-derivative financial asset
     Cell Captive                                                                             19               -           19
                                                                                              78               -           78
     Derivative financial liabilities
     Interest rate swaps                                                                      (5)             -            (5)
     Inflation rate swaps                                                                    (17)          (250)         (267)
                                                                                             (22)          (250)         (272)
     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)
     30 September 2015
     Derivative financial assets
     Interest rate swaps                                                                      38               -          38
     Non-derivative financial asset
     Cell Captive                                                                             19               -          19
                                                                                              57               -          57
     Derivative financial liabilities
     Interest rate swaps                                                                      (7)             -           (7)
     Inflation rate swaps                                                                    (13)          (208)        (221)
                                                                                             (20)          (208)        (228)
     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                                                                                        2016        2015         2015
     Inflation rate swaps
     Balance at beginning of the period                                                        (208)        (85)         (85)
     Fair value movement recognised in the cash flow hedge accounting reserve                     -           -           37
     Fair value movement recognised in the Statement of profit or loss                          (41)        (93)        (134)
     Derecognition of interest rate swap                                                          -           1            -
     Translation of foreign entities                                                             (1)          -          (26)
                                                                                               (250)       (177)        (208)
9.   DEBT
     Long-term debt                                                                           5 961       6 026        6 104
     Short-term debt                                                                          2 258       1 609        2 162
     Total debt                                                                               8 219       7 635        8 266
     Comprising:
     Debt in South African Rand
      Secured liabilities
       Mortgage bond                                                                              1           -            2
       Finance leases                                                                            22          15           29
      Unsecured liabilities
       Promissory notes and commercial paper in issue                                         3 000       3 400        3 000
       Bank loans                                                                             1 618       1 552        1 602
       Other                                                                                      6           4            4
                                                                                              4 647       4 971        4 637
     Debt in foreign currency
      Secured liabilities
       Finance leases                                                                           330         285          308
       Bank loans                                                                             3 079       2 300        3 193
       Arrangement fees                                                                          (7)        (11)         (10)
      Unsecured liabilities
       Accrued interest                                                                         170          90          138
                                                                                              3 572       2 664        3 629
                                                                                              8 219       7 635        8 266

     Maturity profile
                                                                                        <1      1-2       2-3         3-4       >4
     Rm                                                                    Total      year    years     years       years    years
     31 March 2016
     Debt in South African Rand                                            4 647     1 259    1 614       564         13     1 197
     Debt in foreign currency                                              3 572       999      497     1 946         74        56
                                                                           8 219     2 258    2 111     2 510         87     1 253
     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
     30 September 2015
     Debt in South African Rand                                            4 637     1 016      265     1 609        560     1 187
     Debt in foreign currency                                              3 629     1 146      485       493      1 428        77
                                                                           8 266     2 162      750     2 102      1 988     1 264

                                                                                                  Unaudited
                                                                                            31 March     31 March 30 September
    Rm                                                                                          2016         2015         2015
10. COMMITMENTS
    Capital commitments                                                                        2 448        3 107        2 012
     South Africa                                                                              1 781        3 014        1 888
     United Kingdom                                                                              667           93          124
    Operating lease commitments                                                               56 713       52 095       57 653
     South Africa                                                                              1 549        3 048        1 497
     United Kingdom                                                                           55 164       49 047       56 156
11. CONTINGENT LIABILITIES
    South Africa                                                                                  74          132           99
12. 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 2016 or the results of its operations or cash flow for the period then ended.


SALIENT FEATURES

                                                                                                  Unaudited
                                                                                            31 March     31 March 30 September
Rm                                                                                              2016         2015         2015
Share statistics
Ordinary shares
 Shares in issue (million)                                                                     1 462        1 479        1 456
 Shares in issue net of treasury shares (million)                                              1 354        1 343        1 349
 Weighted average number of shares (million)                                                   1 352        1 342        1 345
 Diluted weighted average number of shares (million)                                           1 375        1 373        1 377
 Market price per share (cents)                                                                3 610        4 170        3 630
Currency conversion guide (R:£)
Closing exchange rate                                                                          21.20        17.97        20.94
Average exchange rate for the period                                                           22.10        17.76        18.55


ADMINISTRATION

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: JM Kahn (Non-executive Chairman), T Brewer (Deputy Chairperson), M Bower, B Bulo, APH Jammine, MJ Kuscus, KD Moroka,
N Weltman
Company Secretary: L Bagwandeen
Sponsor: Deutsche Securities (SA) Proprietary Limited, a non-bank member of the Deutsche Bank Group, 3 Exchange Square, 87 Maude Street,
Sandton 2196
Transfer secretaries: Trifecta Capital Services (Pty) Ltd, Trifecta Capital House, 31 Beacon Road, Florida-North 1709, South Africa,
Tel: +27 (0) 860 22 22 13, Postal address: PO Box 61272, Marshalltown 2107, South Africa.
Investor relations: ir@netcare.co.za

Any forward-looking information contained in this announcement has not been reviewed or reported on by the company's external auditors.

Date: 16/05/2016 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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