Trading statement NETCARE LIMITED (Registration number 1996/008242/06) JSE ordinary share code: NTC ISIN: ZAE000011953 JSE preference share code: NTCP ISIN: ZAE000081121 ("Netcare") TRADING STATEMENT In terms of paragraph 3.4 (b) of the JSE Listings Requirements, a listed company is required to publish a trading statement as soon as it is satisfied that a reasonable degree of certainty exists that the financial results for the period to be reported upon next will differ by at least 20% from those of the previous corresponding period. The results for the year ended 30 September 2020 (“FY2020”) have been affected by the following factors: COVID-19 pandemic As a leading South African healthcare provider, the COVID-19 pandemic (“COVID-19” or “the pandemic”) had a material negative impact on Netcare’s overall performance for FY2020. In particular, the last seven months of FY2020 was one of the most extraordinary periods in the Group’s 23-year history. Since Netcare’s first case on 9 March 2020, we have treated 27 968 COVID-19 patients of whom 13 395 were admitted to our hospitals. Of those admitted during the period, 25% were treated in high care or intensive care units. We currently have 310 COVID-19 patients in our hospitals. In the first five months of the financial period, our average full week occupancy amounted to 62.5% and 67.7% on weekdays. However, acute hospital full week occupancy levels ended the year at 52.5% (2019: 66.0%), with weekday occupancies of 56.2% compared to 71.6% in the prior year. We continue to see a steady improvement in average acute occupancy levels. As a result, FY2020 can be characterised as a year of two halves with strong trading during the first five months of the financial year offset by the adverse impact of COVID-19 on revenue and costs. It is broadly estimated that the pandemic resulted in the loss of approximately R3.7 billion in revenues and R2.3 billion in EBITDA to the Group. The Group’s available cash and committed undrawn facilities as at 30 September 2020 were R5.6 billion. IFRS 16: Leases Netcare adopted the new accounting standard IFRS 16: Leases with effect from 1 October 2019. Under this new accounting standard leases are brought onto the statement of financial position through the capitalisation of a right of use asset and recognition of a related lease liability. Rental payments are no longer expensed through the statement of profit and loss, but are applied to reduce the lease liability. The right of use asset is depreciated over the lease period, creating an additional depreciation charge, while an interest charge is recognised on the balance of the lease liability. As Netcare has elected to apply the modified approach for the adoption of IFRS 16, comparative figures for the year ended 30 September 2019 (“FY2019”) have not been restated. Accordingly, the FY2020 results are not directly comparable to the comparative year’s results which were not prepared under IFRS 16. The adoption of IFRS 16 has resulted in a reduction in Earnings per Share (“EPS”), Headline Earnings per Share (“HEPS”) and adjusted HEPS (which is the primary measure used by management to assess Netcare’s underlying financial performance) of 15.1 cents per share in the FY2020 results. Broad-based Black Economic Empowerment transaction On 15 October 2019, Netcare approved a further allocation of 61 110 000 previously unallocated Netcare shares that were available under its Health Partners For Life Broad-based Black Economic Empowerment (“B-BBEE”) scheme concluded in 2005. The shares were allocated to 20 370 Netcare employees (excluding executives), of whom 80% are black and 65% are black women, as part of Netcare’s commitment to the imperative of building a transformed South Africa characterised by values of social and economic equality and inclusion for all. The transaction further enabled Netcare to strengthen the ownership component of its empowerment rating. A once-off, non-cash share-based payment expense of R348 million arising from the implementation of this B-BBEE transaction has been recognised in the FY2020 results and equates to a charge of 26.0 cents against EPS and HEPS respectively. However, this charge is excluded from the calculation of adjusted HEPS. Profit on disposal of associate During FY2020 an after tax profit of R474 million was realised on the disposal of the GHG PropCo 2 associate entities, following the sale of their six United Kingdom hospital properties. Netcare’s share of the related sale proceeds of R778 million was received during September 2020. The profit on disposal of associate equates to a benefit of 35.5 cents within EPS. However, this profit is excluded from HEPS in terms of Circular 1/2019 issued by the South African Institute of Chartered Accountants (SAICA) and is also excluded from the calculation of adjusted HEPS. Financial performance, EPS, HEPS and adjusted HEPS As a result of the matters discussed above, the financial results for FY2020 are expected to vary from the prior year’s results as set out in the table below: Reported result for Expected result for % change FY2019 FY2020 Revenue R21 589m R18 567m to R19 106m -11.5% to -14.0% EBITDA¹ R4 388m R2 523m to R2 633m -40.0% to -42.5% EBITDA¹ (measured R4 388m R2 040m to R2 150m -51.0% to -53.5% on pre IFRS 16 basis) EPS 176.7 cents 23.9 cents to 32.7 cents -81.5% to -86.5% HEPS 165.9 cents 0.0 cents to -8.3 cents -100.0% to -105.0% Adjusted HEPS 171.2 cents 25.7 cents to 34.2 cents -80.0% to -85.0% Adjusted HEPS 171.2 cents 42.8 cents to 51.4 cents -70.0% to -75.0% (measured on pre IFRS 16 basis) ¹ Excluding the impact of exceptional items, comprising profit on disposal of investment in associate, a once off non-cash share-based payment expense on B-BBEE transaction and 2019 realisation of foreign currency translation reserve. Netcare will be releasing its audited Group results for FY2020 on Monday, 23 November 2020 and further detail on the above matters will be disclosed in these results. The information provided in this trading statement has not been reviewed or reported on by Netcare’s external auditors. Johannesburg 19 November 2020 Sponsor Nedbank Corporate and Investment Banking Date: 19-11-2020 05:00:00 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.