NETCARE LIMITED - Unaudited Interim Group Results for the six months ended 31 March 2018

Release Date: 14/05/2018 08:00
Code(s): NTC NTCP
 
Wrap Text
Unaudited Interim Group Results for the six months ended 31 March 2018

NETCARE LIMITED
(Registration number 1996/008242/06)
JSE ordinary share code: NTC
ISIN: ZAE000011953
JSE preference share code: NTCP ISIN: ZAE000081121
("Netcare")

UNAUDITED INTERIM GROUP RESULTS
for the six months ended 31 March 2018

KEY HIGHLIGHTS
- 3.5% increase in patients days as SA market returns to growth
- Acquisition of Akeso provides important national network in mental healthcare sector
- Strategic decision to exit UK operations
- 8.1% increase in normalised Group EBITDA to R2 080 million
- 8.5% increase in adjusted HEPS from continuing operations to 87.7 cents
- 32.9% increase in cash generated from SA operations to R1 577 million
- 15.8% increase in interim dividend to 44.0 cents


COMMENTARY

KEY FINANCIAL RESULTS

                                                                                          6 Months ended

                                                                                      31 March      31 March
Rm                                                                                        2018        2017(1)     % change

Continuing operations
Revenue                                                                                  9 966         9 207           8.2
Normalised EBITDA                                                                        2 080         1 924           8.1
Normalised EBITDA margin                                                                  20.9%         20.9%
Normalised operating profit                                                              1 733         1 605           8.0
Normalised operating profit margin                                                        17.4%         17.4%
Normalised profit before taxation                                                        1 690         1 563           8.1
Normalised taxation                                                                       (479)         (436)
Normalised profit after taxation from continuing operations                              1 211         1 127           7.5
Discontinued operations
(Loss)/profit from discontinued operations                                                (473)          646
Normalised profit after taxation                                                           738         1 773
Exceptional items:                                                                       2 903           169
 Profit on loss of control                                                               4 205             -
 Impairment of contractual economic interest in debt of BMI Healthcare                  (1 534)            -
 Profit on sale of old Netcare CBMH land and buildings                                       -           203
 Taxation effect                                                                           232           (34)
Profit for the period                                                                    3 641         1 942

1. Restated for discontinued operations

The accounting policies applied in preparing the unaudited Group interim financial statements are consistent in all material respects with those applied in the audited
financial statements for the year ended 30 September 2017.

OVERVIEW

The first half of Netcare's 2018 financial year has been characterised by significant changes to the Group's operational profile.
In South Africa ("SA"), the hospital market has returned to growth and Netcare increased its patient days by 3.5%. Furthermore, Netcare is pleased to have secured
the approval of the Competition Tribunal for its acquisition of Akeso Clinics ("Akeso"), a national network of 12 dedicated mental healthcare facilities, comprising 811
beds. Netcare has provisionally accounted for the acquisition purchase price in the Group statement of financial position as at 31 March 2018, while the trading
results of Akeso will only be consolidated into the Group from 1 April 2018.

With regard to the United Kingdom ("UK"), as noted in the SENS announcement of 28 March 2018, Netcare made a strategic decision to exit this market and to
pursue the disposal of its interests in General Healthcare Group ("GHG"), comprising of 56.9% of BMI Healthcare, which operates the largest network of private
hospitals in the UK, and 56.9% of GHG PropCo 2, which owns 6 hospital properties leased by BMI Healthcare. This decision was informed by various inter-related
factors, including (i) Netcare's inability to conclude a commercially viable rent reduction transaction with BMI Healthcare's largest landlord, sufficient to generate an
appropriate risk-adjusted return for its shareholders; (ii) the deterioration of the UK healthcare market, which is expected to remain constrained in the medium to
longer term; and (iii) the demands of BMI Healthcare's lenders that shareholders of GHG relinquish effective control of the boards of directors of BMI Healthcare in
return for the extension of short-term funding to the business. Acting in the best interests of BMI Healthcare and its stakeholders, Netcare elected to accede to the
lenders' demands.

As a result of these events, the UK operations have been deconsolidated with effect from 28 March 2018. In addition, in accordance with the accounting standards,
the results of the UK operations have been classified as a discontinued operation in the Group statement of profit or loss and the comparative results have been
restated accordingly. Certain significant non-cash, non-recurring accounting adjustments have arisen related to the accounting treatment of the UK operations and
these are discussed in more detail later in this report. These exceptional items have been separately disclosed in the table above, in order to facilitate a meaningful
comparison of the Group's underlying trading results.

GROUP FINANCIAL REVIEW

The continuing operations of the Group now comprise Netcare's SA operations. Group revenue from continuing operations grew by 8.2% to R9 966 million (2017: 
R9 207 million).

Normalised Group earnings before interest, tax, depreciation and amortisation ("EBITDA") increased 8.1% to R2 080 million (2017: R1 924 million). Normalised
operating profit was 8.0% higher at R1 733 million (2017: R1 605 million).

Net financial expenses of R86 million (2017: R91 million) were broadly in line with H1 2017. Normalised Group profit before tax was 8.1% higher at R1 690 million
(2017: R1 563 million). The normalised taxation charge amounted to R479 million (2017: R436 million), reflecting a normalised effective Group tax rate of 28.3%.
Normalised Group profit after taxation increased by 7.5% to R1 211 million (2017: R1 127 million).

The after-tax results from discontinued operations amounted to a net loss of R473 million (2017: profit of R646 million) comprising a loss of R11 million (2017: 
R10 million) from the Mozambique emergency services operations, a profit of R10 million (2017: R9 million) from GHG PropCo 2, and a loss of R472 million (2017: profit
of R647 million) incurred by BMI Healthcare. The large swing in the period-on-period performance of BMI Healthcare is due to both a decline in the underlying UK
trading performance, as well as a significant H1 2017 non-cash accounting credit of R651 million (£40.8 million) after tax, arising from the fair value adjustment of its
Retail Price Index swap instruments.

Exceptional items amounted to a net after-tax profit of R2 903 million (2017: R169 million) arising on the sale of the old Netcare Christiaan Barnard Memorial Hospital
land and buildings) and relate purely to circumstances surrounding the UK operations. Firstly, a non-cash profit of R4 205 million arose on the deconsolidation of BMI
Healthcare. Secondly, a non-cash impairment of R1 302 million (after tax) has been recognised against the carrying value of Netcare's contractual economic interest
in the debt of BMI Healthcare. Although the economic and contractual rights with regard to this debt remain intact (including BMI Healthcare's obligation to repay the
debt), the accounting standards are prescriptive and provide that, when determining fair value of this contractual economic interest, cognisance may only be taken of
factors in existence at the reporting date of 31 March 2018. Given that BMI Healthcare had not negotiated a rental reduction with its major external landlord by the
reporting date; the rental negotiations have been ongoing for many years without success; no certainty exists as to whether a rent reduction transaction will be
agreed; and BMI Healthcare is currently in default of certain obligations under its 2nd lien debt facility (in which Netcare owns a contractual economic interest),
Netcare is of the view that it is prudent to impair this contractual economic interest in the debt of BMI Healthcare in full.

The reported Group profit after tax for the period amounted to R3 641 million (2017: R1 942 million). Adjusted Headline Earnings per Share ("HEPS") from continuing
operations grew by 8.5% to 87.7 cents (2017: 80.8 cents). Based on the improved performance of our South African operations, further informed by the decision to
exit the UK, confidence in the SA businesses going forward and the strong balance sheet, the Board has agreed to declare an interim dividend of 44.0 cents,
representing an increase of 15.8% against the 2017 interim dividend of 38.0 cents.

FINANCIAL POSITION AND CASH FLOW

SUMMARISED STATEMENT OF FINANCIAL POSITION

                                                                                       Actual                                                               Actual
                                                                                       30 Sep             UK        Akeso         Forex        Other        31 Mar
Rm                                                                                       2017           exit  acquisition        effect     movement          2018

Assets
PPE, goodwill and intangible assets                                                    15 945         (3 704)       1 489          (349)         107        13 488
Other non-current assets                                                                4 008         (2 389)           -          (192)         (26)        1 401
Current assets                                                                          8 116         (3 039)          99          (223)        (212)        4 741
Assets classified as held-for-sale                                                         43            203            -            (1)          47           292
Total assets                                                                           28 112         (8 929)       1 588          (765)         (84)       19 922
Equity and liabilities
Total shareholders' equity                                                              8 862            927            3           120          (72)        9 840
Borrowings                                                                              8 910         (3 517)       1 337          (332)        (187)        6 211
Other liabilities                                                                      10 340         (6 339)         248          (553)         175         3 871
Total equity and liabilities                                                           28 112         (8 929)       1 588          (765)         (84)       19 922

The Group statement of financial position at 31 March 2018 includes only SA assets, liabilities and reserves, other than assets held for sale, which include Netcare's
56.9% interest in GHG PropCo 2 in the UK. Rental income earned by GHG PropCo 2 for H1 2018 amounted to £3.7 million (2017: £3.6 million) with a rental cover at
the six operating facilities of approximately 2.0 times. Total assets decreased 29.1% to R19 922 million at 31 March 2018 from R28 112 million at 30 September 2017,
largely due to the deconsolidation of the UK operations, partially offset by the inclusion of Akeso's provisional acquisition balance sheet. Total shareholders' equity
increased to R9 840 million at 31 March 2018, from R8 862 million at 30 September 2017.

At 31 March 2018, Group net debt was R5 582 million (March 2017: Group R6 657 million; SA R4 724 million), inclusive of the Akeso purchase consideration of 
R1 233 million and the acquisition of its existing debt of R242 million. Net debt to normalised EBITDA is stable at 1.3 times (March 2017: 1.2 times), while interest cover
is healthy at 20.6 times. The increase in SA net debt from R3 908 million at 30 September 2017 is due to capital expenditure, tax and dividend payments which
collectively amounted to R1 767 million (March 2017: R2 050 million) during the period under review, as well as funding required for the acquisition of Akeso.

The Group invested R742 million (2017: R960 million) in capital expenditure (including intangible assets) and paid R784 million (2017: R773 million) to shareholders in
ordinary dividends.

DIVISIONAL REVIEW

South Africa

The SA normalised EBITDA margin has remained stable at 20.9%, with a consistent normalised operating profit margin of 17.4%. In terms of our ‘asset lighter'
approach, capital expenditure for the period, including intangible assets, of R462 million reduced from the R744 million invested in H1 2017.

Cash generated from operations during the six month period was 32.9% higher at R1 577 million (2017: R1 187 million), benefitting from, inter alia, higher EBITDA and
good traction in our Green Procurement initiative, which is focused on optimising stock holdings across the Group, and has reduced overall inventory balances.

Hospital and Emergency Services

Revenue showed strong growth of 9.3% to R9 637 million (2017: R8 818 million), attributable to patient day growth of 3.5% and an increase in net revenue per patient
day of 5.1%. Full week occupancy levels improved to 65.0% (2017: 63.2%). Week day occupancies for the same period were 70.8%, compared to 69.0% in the
comparative period. The specialist base grew by a net 51 doctors, with strong support from surgical disciplines.

EBITDA increased by 8.3% to R2 029 million (2017: R1 874 million), at an EBITDA margin of 21.1% (2017: 21.3%). This includes non-recurring expenditure of 
R39 million relating to legal and advisory costs associated with the Competition Tribunal approval of the Akeso acquisition and UK-related advisory fees. The underlying
EBITDA, excluding these costs, was R2 068 million, at an EBITDA margin of 21.5% (2017: 21.3%). Operating profit improved 8.2% to R1 706 million (2017: 
R1 577 million).

The Emergency Services business in SA has been restructured and losses from this division have been curtailed during the period. The closure of the Mozambican
emergency services operations was completed by 31 December 2017.

Netcare's various ongoing efficiency projects continue to add value. These include: the optimisation of ward and theatre staffing; automation and centralisation of
administrative processes; and extensive sustainability programmes focused on curbing the costs of electricity, water and waste. Given the unprecedented and
crippling effects of the water shortages in the Western Cape, Netcare has completed a programme to ensure total sustainability of our operations in the event of a
‘Day Zero' scenario, should the Western Cape run out of water. This programme entailed installing a fully-fledged desalination plant at the Netcare Christiaan Barnard
Memorial Hospital in Cape Town. In addition, boreholes have been sunk at all hospitals and several Medicross and NRC facilities in the Western Cape region. Lastly,
extensive water savings initiatives have been introduced to ensure water utilisation per patient is significantly conserved. Netcare has been recognised as a global
leader in the movement towards the delivery of climate-smart healthcare, and recently received four Climate Champion Awards, two gold and two silver awards, at the
international 2020 Health Care Climate Challenge organised by Global Green Healthy Hospitals. Globally, this achievement has only been equalled by one other
organisation, which is based in the United States.

Netcare has partnered with a team of skilled global specialists on a three-year journey to implement fully digitised patient and clinical records in terms of the strategy
to deliver person-centred health and care which is digitally enabled. These will improve patient care and safety, the accuracy of record keeping and allow patients to
have quick and easy access to their own medical records. As the platform operates on mobile devices off the Apple iOS platform, it will further allow clinicians to
access records offsite from their mobile phones or iPads in order to respond immediately, where necessary. Importantly, it will allow nurses to spend more time caring
for patients by reducing repetitive administrative tasks and will streamline overall administration services and increase case management capabilities. World leading
drug interaction software will also be introduced to automatically flag and prevent any potential drug interactions or medication related errors, further enhancing the
quality of patient care.

In terms of Netcare's ‘asset lighter' strategy, aimed at leveraging our existing capacity and maintaining a highly disciplined approach to capital allocation throughout
the Group, no new hospital beds were added during the period. Twenty under-utilised beds were transferred to a hospital with higher demand and 10 under-utilised
beds were converted to higher demand disciplines during the period.

Key clinical quality focus areas include the maintenance of a world class Quality Management System and Netcare is currently completing accreditation by the British
Standards Institute ("BSI") towards achieving an ISO 9001 - 2015 certification for the entire Group. We expect this to be completed by August 2018. Patient safety and
excellence in care are essential goals, pursued through the fostering of collaborative stakeholder relationships, clinical governance processes and focused clinical
improvement projects. At the centre of our core values is ‘care', placing the patient at the centre of our clinical quality strategy for the Group, whilst also ensuring the
wellbeing of individual members of the care-delivery team.

The acquisition of Akeso provides a sizable platform for Netcare's expansion into the rapidly growing mental and psychiatric healthcare services segment, comprising
a 28% share of this sector. Akeso's co-founder and Managing Director, Allan Sweidan, along with his existing senior management team, will continue to manage the
business within Netcare and will assist in developing and extending Netcare's mental healthcare offering under the Akeso brand. A condition of the Competition
Tribunal approval of the Akeso acquisition was the disposal by Netcare of its Bell Street and Rand hospitals (which collectively contribute approximately 0.5% to
revenue) within 12 and 18 months respectively. The property, plant and equipment of these entities has been classified as held-for-sale at 31 March 2018, as they are
expected to be sold within the next 12 months, based on strong interest expressed to date.

Primary Care

The H1 2018 reported performance of this division's results is affected by the structural changes implemented in FY2017. Revenue of R329 million reduced by 15.4%
compared to the prior period of R389 million. However, H1 2017 included retail pharmacy revenue for the two months prior to the outsourcing to Clicks (effected from
1 December 2016), which replaced a revenue business model for a rental model, as well as three month's revenue from managed care administration services, which
were wound down in H1 2017. The underlying increase in revenue on a like-for-like basis was 7.4%. Three new Medicross medical and dental centres were opened
during H1 2018 and are expected to contribute more fully in H2 2018. The transformation of the business is reflected in the improved EBITDA margin of 15.5% (2017:
12.9%). EBITDA of R51 million remained in line with the comparative period's R50 million.

Operating profit reduced slightly by 3.6% to R27 million (2017: R28 million) as a result of higher depreciation charges on the new day theatre and sub-acute facilities,
which were operational for the full period.

United Kingdom

Operational performance

Trading conditions in the UK have remained challenging across the entire private healthcare market. Inpatient and day caseload decreased by 3.5%. The impact of
the National Health Services ("NHS") demand management initiatives saw NHS caseload decline by 4.5% (2017: growth of 8.5%) during the period under review.
Private Medical Insurance ("PMI") demand remains weak and caseload reduced by 9.6% (2017: decline of 3.6%). The Self-pay segment achieved growth of 2.3%
(2017: growth of 6.4%). There was a further change in case mix with inpatient volumes declining at a higher rate than the reduction in day cases during the reporting
period.

Revenue of £438.9 million (2017: £458.0 million) decreased by 4.2%. The business incurred significant strategic restructuring costs during the period amounting to
£9.6 million. EBITDA prior to these costs amounted to £3.1 million, reflecting a sharp drop of 87.1% against the comparative period of £24.0 million, while the EBITDA
margin declined to 0.7% (2017: 5.2%). After the strategic restructuring costs the business reported an EBITDA loss of £6.5 million (2017: profit of £24.0 million). After
depreciation and amortisation charges, an operating loss of £20.3 million (2017: operating profit of £6.0 million) was reported.

Exit from UK market

On 28 March 2018 Netcare announced that it had made a strategic decision to exit the UK market and pursue the disposal of its interests in the UK.

By way of background, in May 2006, Netcare invested £219.0m at R11.73: £1 for 52.6% of GHG. At that time, approximately 97.5% of BMI Healthcare's volumes were
PMI and private Self-pay patients, with publicly funded NHS caseload only contributing approximately 2.5% of activity. Funding for the transaction was secured by the
property portfolio (collectively "GHG PropCo 1" or "PropCo"), which was separated from the operating company ("BMI Healthcare" or "OpCo"). The cost of the
funding placed on the PropCo entities was fixed by way of interest rate swap instruments. These steps were common market practice at the time and were
implemented with the benefit of extensive professional advice.

However, the Global Financial Crisis ("GFC") of 2008/2009 created a structural change in the private healthcare market. The UK experienced large-scale job losses,
which resulted in a significant reduction of beneficiaries in the PMI market. In the decade since then PMI demand has not recovered. BMI Healthcare was able to
partially compensate for lower PMI demand by treating an increasing number of NHS patients at lower tariffs. Currently ±45% of BMI Healthcare's caseload is for
NHS patients. This change in payor mix necessitated BMI Healthcare undertaking several restructuring exercises over the years, aimed at improving efficiencies.

A further notable consequence of the GFC was that interest rates plummeted to near-zero levels and remained suppressed at these levels for an extended period. As
a result, the interest rate swap instruments related to the debt of GHG PropCo 1 moved heavily out-of-the-money, to the extent that it made the 2013 refinancing of the
GHG PropCo 1 property debt unachievable. Netcare has always maintained a ring-fenced approach to its offshore investments and advocated a disciplined
approach to capital allocation. Therefore, it chose not to commit to a substantial rights issue in order to fund a GHG PropCo 1 refinancing. During the GFC a large
portion of the GHG PropCo 1 debt was acquired by distressed debt investors and they precipitated a complex restructuring of the GHG PropCo 1 debt obligations,
including forcing GHG shareholders to relinquish control of GHG PropCo 1.

Even prior to the completion of the first GHG PropCo 1 restructuring, it was evident that BMI Healthcare's rental obligations would need to be altered. BMI Healthcare,
together with its shareholders (including Netcare) continued to explore a rent reduction transaction with GHG PropCo 1 and its distressed debt investor shareholders.
Over this period, Netcare spent considerable time and resources pursuing a rent reduction transaction with GHG PropCo 1 (BMI Healthcare's largest landlord).
However, after more than five years of negotiation, Netcare concluded that a rent reduction transaction under which BMI Healthcare would have the resources
necessary to invest in the estate and simultaneously generate an appropriate risk-adjusted return for Netcare shareholders, was highly unlikely.

In addition to the items summarised above, over the years there have been several other factors that negatively affected BMI Healthcare's performance, some internal
and many external.

Towards the end of the 2017 calendar year, in light of the deteriorating UK healthcare landscape and BMI Healthcare's poor performance, particularly in H2 of 2017,
Netcare undertook a comprehensive strategic review of the UK healthcare market. This review concluded that the constrained prevailing market conditions are likely
to persist beyond the short term and remain in place through the medium to longer term.

Unfortunately, BMI Healthcare's ability to respond adequately to the changing market circumstances continues to be impacted by its onerous long-term leases and its
limited capital.

In a SENS announcement on 18 January 2018, Netcare advised that in the absence of an appropriate commercially viable rent reduction, and given the poor market
conditions, it would not be providing any further capital to support the UK.

BMI Healthcare secured a short-term funding arrangement with its lenders, which matured on 31 March 2018. The lenders conditioned any extension of this
short-term funding beyond that date on GHG's shareholders relinquishing effective control of the boards of directors of BMI Healthcare. As a result of the
abovementioned inter-related factors, Netcare agreed to accede to this demand, in the interests of the business, and made a strategic decision to exit the UK market
and to explore the disposal of its UK interests.

Accordingly, as required by the relevant accounting standards, the UK operations have been deconsolidated from Netcare's accounts with effect from 28 March 2018.

OUTLOOK

The SA healthcare market has returned to growth and Netcare expects demand for private healthcare to remain resilient over the medium to longer term as a function
of the aging population, growing burden of disease and medical innovation. The growth in patient days experienced to date (excluding the Akeso facilities) is
expected to continue into H2 2018, albeit at a slower rate than the H1 2018 growth. The trading results of Akeso will be included in the Group results from H2 2018.

Netcare has no current plans to add any new acute hospital beds in the second half of the year and will complete projects in progress to convert beds to higher
demand disciplines and transfer beds from under-utilised to higher demand facilities. However, management will continue to evaluate selective investments in high
growth areas. A further 61 new beds will be added to the Akeso clinics at no additional capital cost. Planned capital expenditure in SA of approximately R1.4 billion
for the full year is expected, which will cover continued work on the major Netcare Milpark Hospital expansion project, refurbishment of certain hospitals and cyclical
replacement and technological upgrades of medical and theatre equipment, as well as growing the footprint of our cancer services and day theatre networks.

In the Primary Care division there are a number of factors which are expected to positively impact performance in the second half. There will be a contribution for the
full period from the three new Medicross medical and dental centres taken on during H1 2018, along with benefits from increasing activity and occupancy levels at
the new day theatres in Kimberley and Upington. The business has grown its occupational health and safety offering and has secured two new contracts which will
come on-stream in the second half.

Netcare has a disciplined approach to capital allocation, focused on value creation for Netcare and its shareholders. Our 'asset lighter' strategy complements this
goal. We are reviewing the return on capital of our portfolio of assets to ensure greater value creation for all stakeholders.

With respect to international acquisitions, Netcare will continue to assess new market opportunities, but only with a focus on long term value creation for shareholders.

Provisional findings of the SA Health Market Inquiry were expected to be released on 30 April 2018, but the release has now been delayed to 31 May 2018. Netcare
has contributed significantly to this market-wide review and believes that the SA hospital sector is highly competitive demonstrated by significant levels of new
entrants into the hospital segment.

CHANGE IN DIRECTORSHIP
Mr Meyer Kahn ("Mr Kahn") retired from the Board with effect from the close of business on 31 March 2018. The Board wishes to express its profound gratitude and
appreciation to Mr Kahn for the extraordinary contribution he made to Netcare during his term of office.

Mrs Thevendrie Brewer, an independent non-executive member of the Board since January 2011 and deputy chair since November 2015, assumed the role of chair
effective 1 April 2018. Netcare looks forward to her continuing stewardship.

Declaration of interim dividend number 18

Notice is hereby given that a gross interim dividend of 44.0 cents per ordinary share is declared in respect of the period ended 31 March 2018. The dividend has
been declared from income reserves and is payable to shareholders recorded in the register at the close of business on Friday, 06 July 2018. The number of ordinary
shares (inclusive of treasury shares) in issue at date of this declaration is 1 470 682 370. The dividend will be subject to a local dividend withholding tax at a rate of
20%, which will result in a net interim dividend to those shareholders not exempt from paying dividend withholding tax of 35.2 cents per ordinary share and 
44.0 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                                                       Tuesday, 03 July 2018
Trading ex-dividend commences                                                      Wednesday, 04 July 2018
Record date                                                                           Friday, 06 July 2018
Payment date                                                                          Monday, 09 July 2018

Share certificates may not be dematerialised nor rematerialised between Wednesday, 04 July 2018 and Friday, 06 July 2018, both dates inclusive.

On Monday, 09 July 2018, 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, 09 July 2018.

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

On behalf of the Board
Thevendrie Brewer                     Chair
Richard Friedland                     Chief Executive Officer
Keith Gibson                          Chief Financial Officer
Sandton

11 May 2018

Disclaimer
Any forward-looking statements incorporated in these financial results have not been audited or reviewed by our external auditors.


GROUP STATEMENT OF PROFIT OR LOSS

                                                                                                     Unaudited
                                                                                                 six months ended                      Year ended

                                                                                             31 March          31 March          %   30 September
Rm                                                                             Notes             2018            2017(1)    change         2017(1)

Revenue                                                                                         9 966             9 207        8.2         19 114
Cost of sales                                                                                  (4 975)           (4 624)                   (9 661)
Gross profit                                                                                    4 991             4 583        8.9          9 453
Other income                                                                                      246               214                       460
Administrative and other expenses - excluding items below                                      (3 504)           (3 192)                   (6 582)

Operating profit before items below                                                2            1 733             1 605        8.0          3 331
 Profit on sale of old Netcare CBMH2 land and buildings                                             -               203                       203
 Impairment of contractual economic interest in the debt of BMI Healthcare         7           (1 534)                -                         -

Operating profit                                                                                  199             1 808                     3 534
Investment income                                                                  3              197               137                       343
Financial expenses                                                                 4             (281)             (228)                     (489)
Other financial (losses)/gains - net                                               5               (2)                -                         3
Attributable earnings of associates                                                                22                34                        36
Attributable earnings of joint ventures                                                            21                15                        53
Profit before taxation                                                                            156             1 766                     3 480
Taxation                                                                           6             (247)             (470)                     (942)

(Loss)/profit for the period from continuing operations                                           (91)            1 296                     2 538
(Loss)/profit from discontinued operations                                        10             (473)              646                    (5 267)
Profit on loss of control                                                         11            4 205                 -                         -

Profit/(loss) for the period                                                                    3 641             1 942                    (2 729)

 Attributable to:
 Owners of the parent                                                                           3 811             1 632                      (549)
 Preference shareholders                                                                           28                28                        56
 Profit/(loss) attributable to shareholders                                                     3 839             1 660                      (493)
 Non-controlling interest                                                                        (198)              282                    (2 236)
                                                                                                3 641             1 942                    (2 729)
Cents

Basic earnings/(loss) per share                                                                 279.5             120.0      132.9          (40.9)
Continuing operations                                                                            (9.5)             92.9                     182.1
Discontinued operations                                                                         289.0              27.1                    (223.0)
Diluted earnings/(loss) per share                                                               275.7             118.5      132.7          (40.9)
Continuing operations                                                                            (9.3)             91.8                     179.7
Discontinued operations                                                                         285.0              26.7                    (220.6)

Dividend per share (cents)                                                                       44.0              38.0       15.8           95.0

1. Restated for discontinued operations
2. Christiaan Barnard Memorial Hospital



GROUP STATEMENT OF OTHER COMPREHENSIVE INCOME

                                                                                             Unaudited
                                                                                          six months ended             Year ended

                                                                                  31 March            31 March       30 September
Rm                                                                                    2018                2017               2017

Profit/(loss) for the period                                                         3 641               1 942             (2 729)
Items that may not subsequently be reclassified to profit or loss                        -                   -                (29)
Remeasurement of defined benefit obligation                                              -                   -                (40)
Taxation on items that may not subsequently be reclassified to profit or loss            -                   -                 11
Items that may subsequently be reclassified to profit or loss                       (1 891)               (231)               (38)
Effect of cash flow hedge accounting                                                    (2)                (10)               (43)
 Amortisation of cash flow hedge accounting reserve                                      1                   1                  2
 Change in the fair value of cash flow hedges                                           (3)                (11)               (45)
Effect of translation of foreign entities                                               86                (224)                (7)
Recycling of foreign currency translation reserve on loss of control                (1 976)                  -                  -
Taxation on items that may subsequently be reclassified to profit or loss                1                   3                 12

Other comprehensive loss for the period                                             (1 891)               (231)               (67)

Total comprehensive income/(loss) for the period                                     1 750               1 711             (2 796)

Attributable to:
 Owners of the parent                                                                1 613               1 499               (604)
 Preference shareholders                                                                28                  28                 56
 Non-controlling interest                                                              109                 184             (2 248)
                                                                                     1 750               1 711             (2 796)


GROUP STATEMENT OF FINANCIAL POSITION
                                                                   Unaudited
                                                              31 March   31 March  30 September
Rm                                                   Notes        2018       2017          2017

ASSETS
Non-current assets
Property, plant and equipment                                   11 742     14 476        13 908
Goodwill                                                         1 602      3 897         1 705
Intangible assets                                                  144        268           332
Equity-accounted investments, loans and receivables      7         971      2 598         2 876
Financial assets                                         8           2          9            17
Deferred lease assets                                               27         26            23
Deferred taxation                                                  401      1 171         1 092
Total non-current assets                                        14 889     22 445        19 953
Current assets
Loans and receivables                                    7          53         52            53
Financial assets                                         8           -         11             1
Inventories                                                        656      1 138           984
Trade and other receivables                                      3 197      5 567         4 541
Taxation receivable                                                 16         19             6
Cash and cash equivalents                                          819      1 630         2 531
                                                                 4 741      8 417         8 116
Assets classified as held-for-sale                                 292          -            43
Total current assets                                             5 033      8 417         8 159
Total assets                                                    19 922     30 862        28 112

EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital and premium                               4 383      4 205         4 205
Treasury shares                                                 (3 888)    (3 738)       (3 720)
Other reserves                                                     546      2 340         2 481
Retained earnings                                                8 106      8 109         5 316
Equity attributable to owners of the parent                      9 147     10 916         8 282
Preference share capital and premium                               644        644           644
Non-controlling interest                                            49      2 375           (64)
Total shareholders' equity                                       9 840     13 935         8 862
Non-current liabilities
Long-term debt                                           9       5 112      4 492         7 232
Financial liabilities                                    8          50      1 344         1 187
Post-retirement benefit obligations                                512        442           497
Deferred lease liabilities                                          34        124           149
Deferred taxation                                                  191      1 134         1 049
Provisions                                                           -         94         1 470
Total non-current liabilities                                    5 899      7 630        11 584
Current liabilities
Trade and other payables                                         2 881      5 473         5 912
Short-term debt                                          9       1 099      3 570         1 678
Financial liabilities                                    8          10          8             9
Taxation payable                                                     3         21            56
Bank overdrafts                                                    190        225             6
                                                                 4 183      9 297         7 661
Liabilities classified as held-for-sale                              -          -             5
Total current liabilities                                        4 183      9 297         7 666
Total equity and liabilities                                    19 922     30 862        28 112


GROUP STATEMENT OF CASH FLOWS

                                                                                      Unaudited
                                                                                   six months ended      Year ended

                                                                                 31 March    31 March  30 September
Rm                                                                                   2018        2017          2017

Cash flows from operating activities
Cash received from customers                                                        9 141      16 433        34 508
Cash paid to suppliers and employees                                               (7 641)    (15 096)      (30 239)
Cash generated from operations                                                      1 500       1 337         4 269
Interest paid                                                                        (442)       (324)         (732)
Taxation paid                                                                        (474)       (466)         (874)
Ordinary dividends paid by subsidiaries                                               (14)         (9)          (37)
Ordinary dividends paid                                                              (784)       (773)       (1 296)
Preference dividends paid                                                             (28)        (28)          (56)
Distributions to beneficiaries of the HPFL B-BBEE trusts                               (8)        (30)          (49)
Net cash from operating activities                                                   (250)       (293)        1 225
Cash flows from investing activities
Acquisition of property, plant and equipment                                         (741)       (958)       (2 419)
Additions to intangible assets                                                         (1)         (2)          (28)
Proceeds on disposal of property, plant and equipment and intangible assets            18           8           338
Acquisition of businesses                                                          (1 233)       (140)         (139)
Bank overdraft related to acquisition of business                                    (185)          -             -
Proceeds from disposal of businesses                                                    -           2             3
Cash and cash equivalents of business deconsolidated                                 (673)          -             -
Decrease in investments and loans                                                      73          46            50
Interest received                                                                      97          62           151
Dividends received                                                                     16          12            15
Increase in equity interest from associates and joint ventures to subsidiaries         (2)          -             -
Net cash from investing activities                                                 (2 631)       (970)       (2 029)
Cash flows from financing activities
Proceeds from issue of ordinary shares                                                  3           7             8
Proceeds on disposal of treasury shares                                                10          31            48
Long-term debt raised/(repaid)                                                      1 628      (1 538)        1 018
Short-term debt (repaid)/raised                                                      (579)      2 249           287
Settlement of derivatives                                                              (2)          -             -
Acquisition of non-controlling interests                                                -          (5)           (1)
Net cash from financing activities                                                  1 060         744         1 360
Net (decrease)/increase in cash and cash equivalents                               (1 821)       (519)          556
Translation effects on cash and cash equivalents of foreign entities                  (81)        (55)           21
Cash and cash equivalents at the beginning of the period                            2 525       1 979         1 979
Cash and cash equivalents related to assets held-for-sale                               6           -           (31)
Cash and cash equivalents at the end of the period                                    629       1 405         2 525
Consisting of:
Cash on hand and balances with banks                                                  819       1 630         2 531
Short-term money market borrowings and bank overdrafts                               (190)       (225)           (6)
                                                                                      629       1 405         2 525


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 as at 30 September 2016                                 4 197      (3 768)          (14)       2 000         479       7 283       10 177           644         2 188     13 009

Shares issued during the period                                     8           -             -            -           -           -            8             -             -          8
Sale of treasury shares                                             -          30             -            -           -           2           32             -             -         32
Share-based payments reserve movements                              -           -             -            -          10           -           10             -             -         10
Tax recognised in equity                                            -           -             -            -           -           9            9             -             -          9
Preference dividends paid                                           -           -             -            -           -           -            -           (28)            -        (28)
Dividends paid                                                      -           -             -            -           -        (773)        (773)            -            (9)      (782)
Distributions to beneficiaries of the HPFL B-BBEE trusts            -           -             -            -           -         (30)         (30)            -             -        (30)
Increase in equity interest in subsidiaries                         -           -             -            -           -         (16)         (16)            -            12         (4)
Total comprehensive (loss)/income for the period                    -           -            (7)        (128)          -       1 634        1 499            28           184      1 711

Balance as at 31 March 2017                                     4 205      (3 738)          (21)       1 872         489       8 109       10 916           644         2 375     13 935
Sale of treasury shares                                             -          18             -            -           -          (2)          16             -             -         16
Share-based payments reserve movements                              -           -             -            -          36           -           36             -             -         36
Tax recognised in equity                                            -           -             -            -           -         (23)         (23)            -             -        (23)
Preference dividends paid                                           -           -             -            -           -           -            -           (28)            -        (28)
Dividends paid                                                      -           -             -            -           -        (523)        (523)            -           (28)      (551)
Distributions to beneficiaries of the HPFL B-BBEE trusts            -           -             -            -           -         (19)         (19)            -             -        (19)
Decrease in equity interest in subsidiaries                         -           -             -            -           -         (18)         (18)            -            21          3
Total comprehensive (loss)/income for the period                    -           -           (24)         129           -      (2 208)      (2 103)           28        (2 432)    (4 507)

Balance as at 30 September 2017                                 4 205      (3 720)          (45)       2 001         525       5 316        8 282           644           (64)     8 862
Shares issued during the period                                   178        (175)            -            -           -           -            3             -             -          3
Sale of treasury shares                                             -           7             -            -           -           3           10             -             -         10
Share-based payments reserve movements                              -           -             -            -          18           -           18             -             -         18
Transfer to retained earnings                                       -           -             -            -         (11)         11            -             -             -          -
Tax recognised in equity                                            -           -             -            -           -          23           23             -             -         23
Preference dividends paid                                           -           -             -            -           -           -            -           (28)            -        (28)
Dividends paid                                                      -           -             -            -           -        (784)        (784)            -           (14)      (798)
Distributions to beneficiaries of the HPFL B-BBEE trusts            -           -             -            -           -          (8)          (8)            -             -         (8)
Increase in equity interest in subsidiaries                         -           -             -            -           -         (10)         (10)            -            18          8
Total comprehensive (loss)/income for the period                    -           -            (2)      (1 908)        (32)      3 555        1 613            28           109      1 750
 Ordinary movements                                                 -           -            (2)          68           -        (392)        (326)           28          (181)      (479)
 Deconsolidation of BMI Healthcare                                  -           -             -       (1 976)        (32)      3 947        1 939             -           290      2 229

Balance as at 31 March 2018                                     4 383      (3 888)          (47)          93         500       8 106        9 147           644            49      9 840


HEADLINE EARNINGS

                                                                                       Unaudited
                                                                                   six months ended                 Year ended

                                                                                 31 March    31 March         %   30 September
Rm                                                                                   2018      2017(1)   change         2017(1)

Reconciliation of headline earnings
Profit/(loss) for the period                                                        3 641       1 942      87.5         (2 729)
Less:
 Dividends paid on shares attributable to the Forfeitable Share Plan                   (7)         (4)                      (7)
 Preference shareholders                                                              (28)        (28)                     (56)
 Non-controlling interest                                                             198        (282)                   2 236

Profit/(loss) attributable to owners of the parent used in the calculation of
basic and diluted earnings per share                                                3 804       1 628     133.7           (556)

Adjusted for:
 Fair value gains on investments on acquisition of control                             (3)          -                      (16)
 Impairment of goodwill                                                                 -           -                    2 354
 Profit on loss of control                                                         (4 205)          -                        -
 Recognition of impairment of investments                                               -           -                        8
 Recognition of impairment of property, plant and equipment                             -           -                    1 543
 Net profit on disposal of property, plant and equipment                              (10)       (200)                    (193)
 Net profit on disposal of investments                                                 (2)         (4)                      (7)
 Tax effect of headline adjusting items                                                 2          34                       32
 Non-controlling share of headline adjusting items                                     (1)         (1)                  (1 672)

Headline (loss)/earnings                                                             (415)      1 457    (128.5)         1 493

Adjustments for discontinued operations:
 Loss/(profit) from discontinued operations                                           473        (646)                    5267
 Non-controlling interest                                                            (201)        279                    (2236)
 Impairment of goodwill                                                                 -           -                    (2354)
 Recognition of impairment of property, plant and equipment                             -           -                    (1540)
 Net profit on disposal of property, plant and equipment                               (2)         (1)                      (4)
 Tax effect of headline adjusting items                                                 -           -                        1
 Non-controlling share of headline adjusting items                                      1           1                    1 672

Headline (loss)/earnings from continuing operations                                  (144)      1 090    (113.2)         2 299

1. Restated for discontinued operations

                                                                                      Unaudited
                                                                                   six months ended                Year ended

                                                                                 31 March    31 March         %  30 September
Rm                                                                                   2018      2017(1)   change        2017(1)

Adjusted headline earnings
Headline (loss)/earnings                                                             (415)      1 457                   1 493
Adjusted for:
 Settlement loss on FEC option                                                          2           -                       -
 Amortisation of the cash flow hedge accounting reserve                                 1           1                       2
 Ineffectiveness gains on cash flow hedges                                             (1)         (1)                     (5)
 Fair value losses/(gains) on derivative financial instruments                         85        (665)                   (937)
 (Reversal)/recognition of onerous lease provisions                                  (168)          -                   1 668
 Recognition of loan impairment                                                         -           -                       7
 Recognition of impairment of contractual economic interest in debt of BMI
 Healthcare                                                                         1 534           -                       -
 Competition Commission costs                                                           8          10                      14
 Restructure costs incurred by BMI Healthcare                                         212           -                     124
 Restructure costs incurred by Netcare in respect of BMI Healthcare                    23           -                       8
 Akeso related transaction costs                                                       16           -                       -
 Tax effect of adjusting items                                                       (250)         11                     (28)
 Non-controlling share of adjusting items                                             (43)        281                    (359)

Adjusted headline earnings                                                          1 004       1 094      (8.2)        1 987
Adjustments for discontinued operations:
 Loss/(profit) from discontinued operations                                           473        (646)                  5 267
 Non-controlling interest                                                            (201)        279                  (2 236)
 Headline earnings adjustments relating to discontinued operations                     (1)          -                  (2 225)
 Fair value losses/(gains) on derivative financial instruments                        (85)        665                     937
 (Reversal)/recognition of onerous lease provisions                                   168           -                  (1 668)
 Restructure costs incurred by BMI Healthcare                                        (212)          -                    (124)
 Tax effect of adjusting items                                                          4         (14)                     22
 Non-controlling share of adjusting items                                              43        (281)                    359

Adjusted headline earnings from continuing operations                               1 193       1 097       8.8         2 319

1. Restated for discontinued operations
                                                                                            Unaudited
                                                                                         six months ended                        Year ended

                                                                                    31 March         31 March            %     30 September
Rm                                                                                      2018           2017(1)      change           2017(1)

Headline (loss)/earnings per share                                                     (30.5)           107.4       (128.4)           109.9
 Continuing operations                                                                 (10.6)            80.3                         169.2
 Discontinued operations                                                               (19.9)            27.1                         (59.3)
Diluted headline (loss)/earnings per share                                             (30.5)           106.0       (128.8)           108.6
 Continuing operations                                                                 (10.6)            79.3                         167.3
 Discontinued operations                                                               (19.9)            26.7                         (58.7)
Adjusted headline earnings per share                                                    73.8             80.6         (8.4)           146.2
 Continuing operations                                                                  87.7             80.8                         170.6
 Discontinued operations                                                               (13.9)            (0.2)                        (24.4)

1. Restated for discontinued operations


CONDENSED SEGMENT REPORT

                                                                                                                             United
                                                                                              South Africa                  Kingdom

                                                                                     Hospital
                                                                                          and
                                                                                    Emergency      Primary                      BMI
Rm                                                                               services(1,2)        Care       Total Healthcare(1)        Group

31 March 2018
Statement of profit or loss
Revenue                                                                                 9 637          329       9 966            *         9 966
EBITDA - before item below                                                              2 029           51       2 080            *         2 080
Operating profit - before item below                                                    1 706           27       1 733            *         1 733
Impairment of contractual economic interest in debt of BMI Healthcare                  (1 534)           -      (1 534)           -        (1 534)

Operating profit                                                                          172           27         199            *           199
Attributable earnings of associates and joint ventures                                      -            -          43            *            43
Segment assets and liabilities
Total assets                                                                                                    19 719          203        19 922
Total liabilities                                                                                              (10 082)           -       (10 082)

31 March 2017
Statement of profit or loss
Revenue                                                                                 8 818           389      9 207            *         9 207
EBITDA - before item below                                                              1 874            50      1 924            *         1 924
Operating profit - before item below                                                    1 577            28      1 605            *         1 605
 Profit on sale of old Netcare CBMH land and buildings                                    203             -        203            -           203

Operating profit                                                                        1 780            28      1 808            *         1 808
Attributable earnings of associates and joint ventures                                      -             -         49            *            49
Segment assets and liabilities
Total assets                                                                                                    18 726       12 136        30 862

Total liabilities                                                                                               (8 817)      (8 110)      (16 927)

1. Restated for discontinued operations
2. EBITDA and operating profit in 2018 are inclusive of UK related restructure costs amounting to R23 million, and Akeso transaction costs
   amounting to R16 million
*  Results now included under discontinued operations

                                                                                                                                  United
                                                                                             South Africa                        Kingdom

                                                                                    Hospital
                                                                                         and
                                                                                   Emergency          Primary                        BMI
Rm                                                                                services(1)            Care      Total    Healthcare(2)       Group

30 September 2017
Statement of profit or loss
Revenue                                                                               18 403              711     19 114               *       19 114
EBITDA before item below                                                               3 867              108      3 975               *        3 975
Operating profit - before item below                                                   3 268               63      3 331               *        3 331
 Profit on sale of old Netcare CBMH land and buildings                                   203                -        203               -          203

Operating profit                                                                       3 471               63      3 534               *        3 534
Attributable earnings of associates and joint ventures                                     -                -         89               *           89
Segment assets and liabilities
Total assets                                                                                                      19 864           8 248       28 112

Total liabilities                                                                                                 (9 215)        (10 035)     (19 250)

1 EBITDA and operating profit are inclusive of an R8 million impairment of a joint venture
2 Restated for discontinued operations
* Results now included under discontinued operations


CONDENSED NOTES TO THE UNAUDITED INTERIM GROUP FINANCIAL STATEMENTS

1.   Basis of preparation and accounting policies
     The condensed unaudited interim Group financial statements for the six months ended 31 March 2018 have been prepared
     in compliance with the Listings Requirements of the JSE Limited, the framework concepts and the measurement and
     recognition requirements of International Financial Reporting Standards (IFRS), the requirements of International Accounting
     Standard (IAS) 34, Interim Financial Reporting, SAICA Financial Reporting Guidelines as issued by the Accounting Practices
     Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the Companies Act,
     No. 71 of 2008. These condensed unaudited interim financial statements were compiled under the supervision of Mr KN
     Gibson (CA) SA, Group Chief Financial Officer.
     
     The accounting policies applied in the preparation of these results are in accordance with IFRS and are consistent in all
     material respects with those applied in the audited financial statements for the year ended 30 September 2017.
     
     Due to the significance of the impairment of the contractual economic interest in the debt of BMI Healthcare, both
     quantitatively and qualitatively, it has been presented separately on the face of the statement of profit or loss, together with
     the profit on the sale of the old Netcare Christiaan Barnard Memorial Hospital land and buildings in the prior year.
     
     We believe this presentation is in line with IAS 1: Presentation of Financial Statements which notes that additional line items
     may be presented in the statement of profit or loss when such presentation is relevant to an understanding of the entity's
     financial performance.
     The interim results have not been reviewed or audited by the Group's independent external auditors, Grant Thornton
     Johannesburg.

                                                                                                  Unaudited
                                                                                              six months ended          Year ended

                                                                                           31 March      31 March     30 September
     Rm                                                                                        2018        2017(1)          2017(1)

2.   OPERATING PROFIT
     After including:
     Depreciation and amortisation                                                             (347)         (319)            (644)
     Impairment of property, plant and equipment                                                  -             -               (1)
     Operating lease charges                                                                   (278)         (241)            (560)
     Profit on disposal of property, plant and equipment                                         12           203              203

3.   INVESTMENT INCOME
     Interest on bank accounts and other                                                         93            60              148
     Interest income on contractual economic interest in the debt of BMI Healthcare             104            77              195
                                                                                                197           137              343
4.   FINANCIAL EXPENSES
     Interest on bank loans and other                                                          (117)         (114)            (243)
     Interest on promissory notes                                                              (143)          (95)            (207)
     Total funding financial expense                                                           (260)         (209)            (450)
     Retirement benefit plan financial expenses                                                 (21)          (19)             (39)
                                                                                               (281)         (228)            (489)
     1 Restated for discontinued operations


                                                                                                    Unaudited
                                                                                               six months ended         Year ended

                                                                                           31 March       31 March    30 September
     Rm                                                                                        2018        2017(1)          2017(1)

5.   OTHER FINANCIAL (LOSSES)/GAINS - NET
     Amortisation of the cash flow hedge accounting reserve                                      (1)           (1)              (2)
     Settlement loss on FEC option                                                               (2)            -                -
     Ineffectiveness gains on cash flow hedges                                                    1             1                5
                                                                                                 (2)            -                3
6.   TAXATION
     South African normal and deferred taxation
     Current year                                                                              (235)         (440)            (923)
     Prior years                                                                                  -            12               26
     Capital gains tax                                                                           (2)          (32)             (32)
                                                                                               (237)         (460)            (929)
     Foreign normal and deferred taxation
     Current year                                                                               (10)          (10)             (18)
     Prior years                                                                                  -             -                5
                                                                                                (10)          (10)             (13)
     Total taxation per the statement of profit or loss                                        (247)         (470)            (942)
     1. Restated for discontinued operations


                                                                                                  Unaudited

                                                                                           31 March      31 March      30 September
     Rm                                                                                        2018          2017              2017

7.   EQUITY-ACCOUNTED INVESTMENTS, LOANS AND RECEIVABLES
     Non-current
     Associated companies                                                                       534           773               817
     Joint ventures                                                                             195           210               228
     Contractual economic interest in the debt of BMI Healthcare                                  -         1 345             1 575
     Other loans and receivables                                                                242           270               256
                                                                                                971         2 598             2 876
     Current
     Loans and receivables                                                                       53            52                53
                                                                                              1 024         2 650             2 929

     At 31 March 2018, an amount of R1 534 million relating to a contractual economic interest in the debt of BMI
     Healthcare was impaired. Refer to note 11 for further details on the impairment.

                                                                                                   Unaudited

                                                                                            31 March      31 March      30 September
     Rm                                                                                         2018          2017              2017

8.   DERIVATIVE FINANCIAL INSTRUMENTS
     Derivative financial assets
     Interest rate swaps
     South African Rand                                                                            1            12                 6
     Non-derivative financial asset
     Investment in Cell Captive                                                                    1             8                12
                                                                                                   2            20                18
     Included in:
     Non-current assets                                                                            2             9                17
     Current assets                                                                                -            11                 1
                                                                                                   2            20                18
     Derivative financial liabilities
     Interest rate swaps
     South African Rand                                                                          (29)          (16)              (34)
     Inflation rate swaps
     South African Rand                                                                          (31)          (22)              (29)
     Foreign currency                                                                              -        (1 314)           (1 133)
                                                                                                 (60)       (1 352)           (1 196)
     Included in:
     Non-current liabilities                                                                     (50)       (1 344)           (1 187)
     Current liabilities                                                                         (10)           (8)               (9)
                                                                                                 (60)       (1 352)           (1 196)
     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             Total

     31 March 2018
     Derivative financial assets
     Interest rate swaps                                                                                         1                 1
     Non-derivative financial asset
     Cell Captive                                                                                                1                 1
                                                                                                                 2                 2
     Derivative financial liabilities
     Interest rate swaps                                                                                       (29)              (29)
     Inflation rate swaps                                                                                      (31)              (31)
                                                                                                               (60)              (60)
     31 March 2017 
     Derivative financial assets
     Interest rate swaps                                                                                        12                12
     Non-derivative financial asset
     Cell Captive                                                                                                8                 8
                                                                                                                20                20
     Derivative financial liabilities
     Interest rate swaps                                                                                       (16)              (16)
     Inflation rate swaps                                                                                   (1 336)           (1 336)
                                                                                                            (1 352)           (1 352)


      Rm                                                                                                   Level 2             Total

      30 September 2017
      Derivative financial assets
      Interest rate swaps                                                                                        6                 6
      Non-derivative financial asset
      Cell Captive                                                                                              12                12
                                                                                                                18                18
      Derivative financial liabilities
      Interest rate swaps                                                                                      (34)              (34)
      Inflation rate swaps                                                                                  (1 162)           (1 162)
                                                                                                            (1 196)           (1 196)

      The Group has no financial instruments categorised as Level 1 or Level 3. There were no transfers between categories in the
      current period.
                                                                                                 Unaudited

                                                                                          31 March      31 March      30 September
      Rm                                                                                      2018          2017              2017

9.    DEBT
      Long-term debt                                                                         5 112         4 492             7 232
      Short-term debt                                                                        1 099         3 570             1 678
      Total debt                                                                             6 211         8 062             8 910
      Comprising:
      Debt in South African Rand
       Secured liabilities
        Finance leases                                                                          25            28                25
       Unsecured liabilities
       Bank loans                                                                            1 740         2 651             2 700
       Promissory notes and commercial paper in issue                                        4 411         2 362             2 750
       Other                                                                                    35             6                15
                                                                                             6 211         5 047             5 490
      Debt in foreign currency
       Secured liabilities
        Finance leases                                                                           -           303               326
        Bank loans                                                                               -         2 527             3 109
        Arrangement fees                                                                         -             -               (89)
       Unsecured liabilities
        Accrued interest                                                                         -           185                74
                                                                                                 -         3 015             3 420
                                                                                             6 211         8 062             8 910

      Maturity profile(1)
                                                                                   <1        1-2         2-3          3-4       >4
      Rm                                                             Total       year      years       years        years    years
      31 March 2018
      Debt in South African Rand                                     7 804      1 605        452       2 827        1 236    1 684
      31 March 2017
      Debt in South African Rand                                     6 192      2 760        803         197          760    1 672
      Debt in foreign currency                                       3 341      1 077      1 676         487           48       53
                                                                     9 533      3 837      2 479         684          808    1 725
      30 September 2017
      Debt in South African Rand                                     6 758      2 005        868       1 550          183    2 152
      Debt in foreign currency                                       5 591        183        178         150          120    4 960
                                                                    12 349      2 188      1 046       1 700          303    7 112

      1. In terms of IFRS 7: Financial Instruments: Disclosures, this maturity analysis includes the contractual undiscounted cash
         flows, represented by gross commitments, including finance charges. These amounts are different to those reflected in
         the statement of financial position, which are based on discounted cash flows.

10.   (LOSS)/PROFIT FROM DISCONTINUED OPERATIONS
      Included in discontinued operations are the results of the Emergency Services business in Mozambique, the results of BMI
      Healthcare as well as the earnings of GHG PropCo 2.
      
      Mozambique Emergency Services business
      This entity was classified as discontinued at September 2017, as a decision was taken to dispose of the business. This
      process is still ongoing.
      
      BMI Healthcare and GHG PropCo 2
      On 28 March 2018 Netcare announced that it had made a strategic decision to exit the UK market and pursue the disposal
      of its interests in the UK. The operations represent a separate geographical area of operation (the UK), and therefore in
      terms of IFRS 5: Non-Current Assets Held for Sale and Discontinued Operations, we have classified BMI Healthcare and
      GHG PropCo 2 as a discontinued operation. Further detail can be found in note 11.


                                                                              Emergency
                                                                               Services          BMI        GHG
      Rm                                                                     Mozambique   Healthcare   PropCo 2  Total

      31 March 2018
      The (loss)/profit from discontinued operations is analysed as
      follows:

      Revenue                                                                         6        7 608          -   7 614

      (Loss)/profit after taxation for the period is analysed as follows:
      Operating (loss)/profit                                                        (6)        (184)         -    (190)
      Investment income                                                               -            4          -       4
      Financial expenses                                                              -         (226)         -    (226)
      Other financial losses - net                                                    -          (85)         -     (85)
      Attributable earnings of associates                                             -           11         10      21
      Attributable earnings of joint ventures                                         -            7          -       7

      (Loss)/profit before taxation                                                  (6)        (473)        10    (469)
      Taxation                                                                       (5)           1          -      (4)
      (Loss)/profit from discontinued operations                                    (11)        (472)        10    (473)
      Cash flows from discontinued operations
      Cash flows from operating activities                                           (8)        (265)         -    (273)
      Cash flows from investing activities                                            -         (310)         -    (310)
      Cash flows from financing activities                                            7          386          -     393

      Net decrease in cash and cash equivalents                                      (1)        (189)         -    (190)

      Operating (loss)/profit after charging:
      Depreciation of property, plant and equipment                                   -          239          -     239
      Employee costs - Salaries and wages                                             4        2 566          -   2 570
      Operating lease charges                                                         -        1 421          -   1 421
       GHG PropCo 1                                                                   -        1 280          -   1 280
       GHG PropCo 2                                                                   -           64          -      64
       Other                                                                          -           77          -      77


                                                                             Emergency
                                                                              Services           BMI        GHG
      Rm                                                                    Mozambique    Healthcare   PropCo 2    Total

      31 March 2017
      The (loss)/profit from discontinued operations is analysed as
      follows:

      Revenue                                                                       11         7 694          -    7 705

      (Loss)/profit after taxation for the period is analysed as follows:
      Operating (loss)/profit                                                      (10)           94          -       84
      Investment income                                                              -             2          -        2
      Financial expenses                                                             -          (115)         -     (115)
      Other financial gains - net                                                    -           665          -      665
      Attributable earnings of associates                                            -            11          9       20
      Attributable earnings of joint ventures                                        -             8          -        8
      (Loss)/profit before taxation                                                (10)          665          9      664
      Taxation                                                                       -           (18)         -      (18)

      (Loss)/profit from discontinued operations                                   (10)          647          9      646
      Cash flows from discontinued operations
      Cash flows from operating activities                                          (9)           27          -       18
      Cash flows from investing activities                                           -          (124)         -     (124)
      Cash flows from financing activities                                          15           203          -      218

      Net increase in cash and cash equivalents                                      6           106          -      112

      Operating (loss)/profit after charging:
      Depreciation of property, plant and equipment                                  1           304          -      305
      Employee costs - Salaries and wages                                            5         2 558          -    2 563
      Operating lease charges                                                        1         1 513          -    1 514
       GHG PropCo 1                                                                  -         1 212          -    1 212
       GHG PropCo 2                                                                  -            61          -       61
       Other                                                                         1           240          -      241


                                                                                 Emergency
                                                                                  Services           BMI           GHG
      Rm                                                                        Mozambique    Healthcare      PropCo 2        Total

      30 September 2017
      The (loss)/profit from discontinued operations is analysed as
      follows:

      Revenue                                                                           24        15 011             -       15 035

      (Loss)/profit after taxation for the period is analysed as follows:
      Operating loss                                                                   (48)       (5 928)            -       (5 976)
      Investment income                                                                  -            53             -           53
      Financial expenses                                                                 -          (347)            -         (347)
      Other financial gains - net                                                        -           937             -          937
      Attributable earnings of associates                                                -            23            18           41
      Attributable earnings of joint ventures                                            -            16             -           16
      (Loss)/profit before taxation                                                    (48)       (5 246)           18       (5 276)
      Taxation                                                                           2             7             -            9

      (Loss)/profit from discontinued operations                                       (46)       (5 239)           18       (5 267)
      Cash flows from discontinued operations
      Cash flows from operating activities                                             (31)          303             -          272
      Cash flows from investing activities                                               -          (764)            -         (764)
      Cash flows from financing activities                                              38           353             -          391

      Net increase/(decrease) in cash and cash equivalents                               7          (108)            -         (101)
      Operating loss after charging:
      Depreciation of property, plant and equipment                                      2           655             -          657
      Employee costs - Salaries and wages                                               15         5 082             -        5 097

      Operating lease charges                                                            2         4 712             -        4 714
      GHG PropCo 1                                                                       -         2 453             -        2 453
      GHG PropCo 2                                                                       -           122             -          122
      Other                                                                              2         2 137             -        2 139

11.   DECONSOLIDATION OF BMI HEALTHCARE

      The UK private healthcare market landscape has been challenging for a number of years. BMI Healthcare's ability to adapt
      sufficiently to the changing market has been severely hampered by its onerous long-term leases and limited capital. BMI
      Healthcare secured a short-term funding arrangement with its lenders which expired on 31 March 2018. BMI Healthcare's
      lenders conditioned any further extension of the short-term funding on GHG's shareholders relinquishing effective control of
      the boards of directors of BMI Healthcare. Netcare agreed, in the interests of the business, to accede to this demand and
      with effect from 28 March 2018 has representation of only one out of seven directors on the board. This allowed BMI
      Healthcare to conclude a further short-term funding arrangement with its lenders. Although Netcare has retained its
      shareholding and contractual economic interest in the debt of BMI Healthcare, which exposes it to variable returns, it is the
      board of BMI Healthcare that is the decision-making body directing the relevant activities of the company. The removal of
      Netcare's right to appoint a majority of directors to the board, along with other powers vested in the company and its
      committees, has removed Netcare's power over these entities. Netcare no longer has the ability to exert control in order to
      direct the relevant activities of BMI Healthcare and therefore the business has been deconsolidated with effect from 
      28 March 2018.

      Following the changes described above, Netcare does not have significant influence over the affairs of BMI Healthcare, as it
      does not have power to participate in the financial and operating policy decisions of the business. Accordingly, BMI
      Healthcare is not an associate or joint venture, and it does not meet the qualifying criteria for Netcare to equity account its
      investment in the business.

      The investment in BMI Healthcare is accounted for as an available-for-sale financial instrument, and is carried at Rnil.
      
      With regard to the contractual economic interest held in the debt of BMI Healthcare, although the economic and contractual
      rights with regard to this debt interest remain intact (including BMI Healthcare's obligation to repay the debt), the accounting
      standards are prescriptive and provide that, when determining fair value of this contractual economic interest, cognisance
      may only be taken of factors in existence at the reporting date of 31 March 2018. Given that: BMI Healthcare had not
      negotiated a rental reduction with its major external landlord by the reporting date; the rental negotiations have been ongoing
      for many years without success; no certainty exists as to whether a rent reduction transaction will be agreed; and BMI
      Healthcare is currently in default of certain obligations under its 2nd lien debt facility (in which Netcare owns a contractual
      economic interest), Netcare believes it prudent to impair this contractual economic interest in the debt of BMI Healthcare in
      full.

      Netcare's 56.9% interest in GHG PropCo 2 has been classified as an asset held-for-sale and will therefore no longer be
      equity accounted.

11.   DECONSOLIDATION OF BMI HEALTHCARE continued
                                                                                                                            31 March
      Rm                                                                                                                        2018

      Net asset value deconsolidated
      Property, plant and equipment                                                                                           (2 597)
      Goodwill                                                                                                                  (940)
      Intangible assets                                                                                                         (167)
      Investment in joint ventures                                                                                               (36)
      Investment in associates                                                                                                   (54)
      Inventories                                                                                                               (372)
      Trade and other receivables                                                                                             (1 994)
      Cash and cash equivalents                                                                                                 (673)
      Long term debt                                                                                                           3 517
      Financial liabilities                                                                                                    1 121
      Deferred lease liability                                                                                                    98
      Provisions                                                                                                               1 505
      Trade and other payables                                                                                                 2 821
      Realisation of net asset value                                                                                           2 229
      Realisation of foreign currency translation reserve through statement of profit or loss                                  1 976

      Profit on loss of control                                                                                                4 205

12.   ACQUISITION OF BUSINESS

      Akeso Clinics Group

      Effective 27 March 2018, after approval by the Competition Tribunal, Netcare acquired the Akeso Clinics Group. Five of the
      operating companies have shareholding by doctors holding non-controlling interests between 2.5% and 33.3%. The
      transaction has been recorded effective 31 March 2018.
      
      In terms of IFRS 10: Consolidated Financial Statements, Netcare has control of the Akeso entities by virtue of its majority
      shareholding and majority on the board of directors, and they are therefore consolidated as subsidiaries.
      Critical accounting estimates and assumptions were made in the allocation of the purchase price on acquisition of the Akeso
      Clinics Group in accordance with IFRS 3: Business Combinations. The assets and liabilities acquired were measured at fair
      value at the acquisition date. No contingent liabilities were determined at the acquisition date.
      The fair value determination of the opening balance sheet of the Akeso Clinics Group at 31 March 2018 is provisional, as
      permitted by IFRS 3: Business Combinations, and is required to be finalised within 12 months from the acquisition date.
      
      The only significant intangible assets identified during the provisional purchase price allocation exercise have been the Akeso
      brand and intellectual property relating to the clinical therapeutic programmes.
      
      The Akeso brand has been valued using the relief from royalty methodology based on the projected revenue streams,
      discounted at a rate appropriate to the Akeso Clinics Group taking into account the risks associated with the revenue
      streams. It is intended that the Akeso brand will be used for the foreseeable future as it is closely associated with the current
      hospitals. The expected life span of the Akeso brand is uncertain and is therefore regarded as indefinite. The carrying
      amounts of indefinite life intangible assets are tested annually for impairment.
      
      Patient treatment is predicated on the clinical therapeutic programmes established in the Akeso Clinics Group and modified
      from time to time. These programmes have been determined to be an intangible asset on acquisition and the estimated
      replacement cost has been used as the fair value. The expected life of the clinical intellectual property has been determined
      to be five years.


                                                                                                                            31 March
      Rm                                                                                                                        2018

      Property, plant and equipment                                                                                              544
      Brand                                                                                                                       11
      Clinical intellectual property                                                                                              11
      Current assets                                                                                                              52
      Current liabilities                                                                                                        (43)
      Bank overdraft                                                                                                            (185)
      Current tax liability                                                                                                       (3)
      Short-term debt                                                                                                            (57)
      Deferred tax liability                                                                                                     (17)
      Non-controlling interest                                                                                                    (3)
      Fair value of net assets acquired                                                                                          310
      Goodwill                                                                                                                   923

      Consideration paid                                                                                                       1 233

      The value of the workforce in place and other intangible assets acquired have been subsumed into goodwill, which
      constitutes the balance of the purchase price. The goodwill arises as a result of the acquisition of a platform on which to
      expand mental health services in the Netcare Group, in appropriate dedicated hospitals which take cognisance of the
      specialist treatment needs.
      
      The effect on revenue of the Group would have been R161 million if the business had been acquired on 1 October 2017,
      and the profit for the period would have been R16 million (R15 million net of non-controlling interests).

                                                                                                         Unaudited

                                                                                                31 March         31 March   30 September
      Rm                                                                                            2018             2017           2017

13.   COMMITMENTS
      Capital commitments                                                                          1 848            2 491          1 697
       South Africa                                                                                1 848            2 040          1 467
       United Kingdom                                                                                  -              451            230
      Operating lease commitments                                                                  4 039           45 236         47 723
       South Africa                                                                                4 039            3 594          3 221
       United Kingdom                                                                                  -           41 642         44 502

14.   CONTINGENT LIABILITIES
      South Africa                                                                                    44               47             45

15.   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 signficiantly affect the financial position at 
      31 March 2018 or the results of its operations or cash flow for the period then ended.


SALIENT FEATURES
                                                                                                  Unaudited

                                                                                           31 March      31 March  30 September
                                                                                               2018          2017          2017
Share statistics
Ordinary shares
 Shares in issue (million)                                                                    1 471         1 463         1 462
 Shares in issue net of treasury shares (million)                                             1 361         1 359         1 360
 Weighted average number of shares (million)                                                  1 361         1 357         1 359
 Diluted weighted average number of shares (million)                                          1 380         1 374         1 374
 Market price per share (cents)                                                               2 800         2 582         2 380

Currency conversion guide (R:£)
Closing exchange rate                                                                         16.58         16.85         18.15

Average exchange rate for the period                                                          17.34         16.82         16.94

ADMINISTRATION

Netcare Limited
Registration number: 1996/008242/06
(Incorporated in the Republic of South Africa) JSE share code: NTC ISIN: ZAE000011953
("Netcare")

Registered office

76 Maude Street (corner West Street),
Sandton 2196, Private Bag X34,
Benmore 2010

Executive directors

RH Friedland (Chief Executive Officer),
KN Gibson (Chief Financial Officer)

Non-executive directors

T Brewer (Chair), 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

Terbium Financial Services (Pty) Ltd, Beacon 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

Disclaimer
Certain statements in this document constitute 'forward-looking statements'. Forward-looking statements may be identified by words such as 'believe', 'anticipate',
'expect', 'plan', 'estimate', 'intend', 'project', 'target', 'predict' and 'hope'. By their nature, forward-looking statements are inherently predictive, speculative and involve
risk and uncertainty because they relate to events and depend on circumstances that will occur in the future, involve known and unknown risks, uncertainties and
other facts or factors which may cause the actual results, performance or achievements of the Group, or the healthcare sector to be materially different from any
results, performance or achievement expressed or implied by such forward-looking statements. Forward-looking statements are not guarantees of future performance
and are based on assumptions regarding the Group's present and future business strategies and the environments in which it operates now and in the future. No
assurance can be given that forward-looking statements will prove to be correct and undue reliance should not be placed on such statements.
Any forward-looking information contained in this announcement/presentation has not been reviewed or reported on by the company's external auditors.
Forward-looking statements apply only as of the date on which they are made, and Netcare does not undertake other than in terms of the Listings Requirements of
the JSE Limited, to update or revise any statement, whether as a result of new information, future events or otherwise.

Date: 14/05/2018 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Email this JSE Sens Item to a Friend.

Share This Story