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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