|Johannesburg: Monday, 17 May 2010 Netcare, the largest provider of private healthcare services in South Africa (SA) and the United Kingdom (UK), today released a set of sound interim financial results.
In a strong vote of confidence in the future of SA, Dr Richard Friedland, Group Chief Executive Officer (CEO) of Netcare Limited, at the same time announced that over and above the R800 million budgeted for 2010 for capital investment, an additional investment of close on R700 million in infrastructure will be made over the next three years within South Africa.
The Group?s results were characterised by ongoing growth underpinned by continued demand for healthcare services, greater efficiencies and a sizeable reduction in debt levels. Currency conversions that saw an 18.5% change in the Rand against the Pound average exchange rate, for the six months when compared to the prior period, somewhat dampened the actual results achieved. Headline earnings per share effectively increased by 28.5% to 42.8 cents with the exclusion of the currency impact.
Group Financial Highlights
- a 13.7% increase in constant currency operating profit
- a 28.4% increase in adjusted1 basic headline earnings per share
- a 7.9% reduction in net financial expenses at constant currency
- a 18.8% increase in capital reduction per share
Group Business Highlights
- For the second year running Netcare is credited as the most empowered company in the JSE?s healthcare sector2
- Netcare is ranked as the 13th most empowered JSE listed company overall, out of 100 organisations2
- Netcare?s spend with B-BBEE accredited suppliers is now more than 80% of all spend
- Netcare Education celebrates 21 years of existence. More than 3 500 nurses are presently in training at the five Netcare Education campuses
1 Adjusted to exclude the effects of the ineffective portion of the interest rate swaps
2 Financial Mail?s Top Empowerment Companies Survey May 2010
Commenting on the results, Friedland noted an improved overall performance in both SA and the UK with basic earnings per share from continuing operations increasing by 48.6%. ?Netcare?s SA businesses delivered sound results across the board. A good turnaround in the performance of the Primary care division has placed SA operations on a sound footing for the future. Improved performance in Netcare 911 and positive earnings from our investment in associates - which include our Private Public Partnerships (PPPs) - were also achieved,? he said.
?Despite challenging market conditions characterised by higher unemployment and little to no inflation, the UK operations increased its growth in revenue by 2.8% to ?418.7 million. NHS volumes continued to grow strongly while the ?Self Pay? market showed early signs of recovery,? added Friedland.
Substantial re-investment in SA operations underscores commitment to country of origin.
In his financial overview Netcare?s Chief Financial Officer (CFO), Vaughan Firman outlined that capital expenditure of R423 million was incurred compared to R592 million in the prior period. ?This was mainly due to the timing of expenditure in SA and the UK. During the period under revue, revenue grew by 7.1% to R6 014 million (2009: R5 616 million). Operating profit increased by 12.3% to R849 million (2009: R756 million) within the South African operations and EBITDA reflected an improvement of 9.1% to R1 029 million. Increased spend on nursing training and the treatment of indigent patients both in hospital and by Netcare 911 are reflected in the results,? he added.
?Within the SA hospital division the period under review was characterised by ongoing re-investment in infrastructure. Seventy-seven new beds were commissioned while several new facilities within existing hospitals were opened. This included the addition of a 17-bed neo-natal intensive care unit at Netcare Garden City, the commissioning of a new Cardiac Catheterisation Laboratory at Netcare Linksfield, the renovation of a 30-bed paediatric unit at Netcare Park Lane and the refurbishment of five theatres at Netcare Milpark.?
Adding to this Firman said that a fully integrated oncology centre was opened at Netcare Clinton, specialising in intensity modulated and image guided radiation therapy. ?In addition, we also opened the first neuro-interventional MRI (magnetic resonance imaging) and CT (computed tomography) theatre in Africa at Netcare N1 City,? he said.
CEO, Dr Richard Friedland noted that Netcare?s Primary care division had achieved a significant turnaround as a result of a strategic review of the managed healthcare business and the subsequent termination of loss making contracts.
?A noteworthy improvement in operating efficiencies and working capital was achieved within Medicross where a refurbishment programme was initiated across the network. A new practice management IT system was also in the process of being rolled out.?
He added that Primary healthcare would remain a key strategic focus within Netcare?s corporate strategy. ?Due to the ongoing significance of primary healthcare services within the country we have invested a substantial amount of time, effort and capital in positioning Medicross and Prime Cure for future growth.?
?In the six months under review Netcare 911 grew its managed lives by 5.3% to 7.9 million, and continued to focus on improving operational efficiencies,? said Friedland. He added that he was very proud to announce that Netcare 911 recently became SA?s first aero-medical emergency evacuation specialist to be accredited by the European Air Medical Institute (EURAMI). ?This is the highest accreditation level available, confirming the proven capabilities of Netcare 911 in the air transportation of special high-risk patients,? Friedland noted.
?The Netcare 911 accreditation report, compiled by EURAMI, attested to the high medical standards within SA. The operations of Netcare 911, on the other hand, were lauded for their superior quality and were described as ?highly focused and state of the art?. The EURAMI accreditation was preceded by the announcement of a newly forged partnership between Netcare 911 and RMSI MEDEVAC, a company with considerable experience in medical evacuations throughout the Middle East, Central Asia and Northern Africa,? added Friedland.
According to Friedland, the firm commitment of Netcare to the objective of increased access to quality healthcare throughout SA by way of PPPs continues at a steady pace. ?In the period under review considerable strides were made with several well-placed PPPs. In the past six months we continued to work closely fostering strong relationships with government through two new hospitals in the Eastern Cape namely the 91-bed Port Alfred Hospital and the 249-bed Settlers Hospital in Grahamstown. In the Free State the 214-bed Universitas/Pelonomi Hospital continues to show sound growth and improved operational performance.?
?The 425-bed Lesotho Hospital PPP is firmly on track for completion in 2011 while operations recently commenced in one of three primary healthcare clinics in Lesotho. The remaining two clinics are scheduled for completion later this month,? he added.
In the period under review Netcare maintained its position as the most empowered company in the JSE?s healthcare sector and was ranked 13th most empowered listed company overall in the Financial Mail?s Top Empowerment Companies survey for 2010.
Friedland said that Netcare continued to make substantial advances in the empowerment arena by increasing its spend with B-BBEE accredited suppliers which now accounted for more than 80% of all purchases.
In terms of education and skills development he highlighted the recent celebration of Netcare Education?s 21st anniversary. ?Over the years Netcare Education has gone though a massive metamorphosis to become the largest private sector nursing education and training institution in the country. It contributes greatly to the pool of skilled nurses in SA. In the last nine years alone Netcare Education has increased its nursing graduates by almost ten-fold from a total of 195 in 1998 to more than 3 500 in 2010 - across five campuses. It now also offers programmes in Emergency Services and Leadership and Management Development as part of its service offering,? added Friedland.
Readiness for the 2010 FIFA World Cup?
Commenting of readiness for the 2010 FIFA World Cup? Friedland said that SA?s private healthcare sector was one of the best in the world and that it was ready for the event.
?Twenty one Netcare hospitals have been designated as strategic healthcare providers for the 2010 FIFA World Cup? and Netcare 911 has been awarded a tender by National Treasury to provide emergency services during the event.?
?As a group we have spent the past few years engaging all key stakeholders and putting in place protocols and disaster management training to ensure that we are able to deal with any emergency, large or small, should we be required to do so. Netcare has an excellent national footprint with 34 emergency centres, situated countrywide and in close proximity to the soccer stadiums. These centres all offer world-class emergency services and are staffed by some of the finest healthcare professionals.?
?All our hospitals have undertaken major incident exercises to test all of their systems and we have a national disaster line and call system supported by centralised control structure in the event of major incidents. Netcare is fully prepared and is looking forward to the event, which will provide South Africans with an opportunity to truly show the world what we can do,? asserted Friedland.
In the period ending 31 March 2010 the overall case load in the UK grew by 5.6% year on year, reflecting both organic growth and the integration of the acquisitions of the previous financial year.
- United Kingdom operations
?The General Healthcare Group (GHG) remains the UK?s number one independent healthcare provider. Despite a recessionary climate, high unemployment levels and low to almost no inflation, GHG continues to deliver a solid performance underpinned by ongoing demand for private healthcare services.
?The three new sites added in 2009/10, namely Harley Street Diagnostic Centre, Weymouth Street Clinic and Phoenix Hospital in Southend, have increased GHG?s national coverage to 70 healthcare facilities. The business has benefitted considerably from ongoing investment of this nature, which significantly extends its breadth of services and geographic footprint,? comments Friedland.
CFO, Vaughan Firman said that during the year under review, revenue from the UK operations increased by 2,8% to ?418.7 million. ?GHG achieved an EBITDA growth of 4.7% to ?110.9 million while operating profit grew by 9.4% to ?79.2 million. This performance continued to reflect the benefits of ongoing efficiency improvements and stringent cost control, which underpinned margins and standardisation. Efficiency programmes remained on track with margins reflecting a significant improvement,? he added.
The NHS volumes continued to grow strongly with NHS funding pressures likely to increase waiting times thereby growing the ?Self Pay? market. The NHS ?Choose and Book? programme, which allows patients - through their general practitioners - to select private facilities directly for their treatment has been well received and the uptake has been most encouraging. Future demand under this initiative should entrench the private healthcare sector as a key partner to the NHS in ensuring the delivery of the national healthcare needs of the UK.
According to Friedland, Netcare is wholly committed to working with both the SA and UK governments to meet the increasing demand while improving access to quality healthcare.
?Looking forward we are placing a strong vote of confidence in SA. Over the next three years we intend to invest an additional R670 million in expansion projects over and above our planned capital expenditure. Apart from the Waterfall Hospital project consisting of 132 beds and 8 theatres, we have an additional 12 large projects planned. These include the addition of a further 295 beds and refurbishment of 238 beds. We have approved a further 21 smaller projects and three new theatres and 30 consulting rooms. As a result, our estimated capital outlay for 2010 alone will increase from R800 million to R950 million.?
?In the UK we are looking forward to strengthening the business while consolidating our acquisitions. Our focus will remain on working capital and streamlining internal processes and efficiencies while driving improved patient care and quality outcomes. We look forward to engaging with the new government in providing solutions to expected fiscal constraints.?
Friedland remarked that as per the SENS announcement on 8 December 2009, Netcare?s partners in GHG, in accordance with the terms of the Partnership Agreement, informed Netcare of their desire to pursue an Initial Public Offering (IPO) of the GHG Operating Company (OpCo) on the London Stock Exchange (LSE).
?Whilst preparation for the IPO has progressed well, given prevailing market conditions, a final decision as to the IPO and its timing has yet to be made. Shareholders will be updated as and when the position changes,? concluded Friedland.
The Board of Netcare has declared a final reduction of capital of 19,0 cents per ordinary share (2009: 22.0 cents) payable as at 26 July 2010.
NOTES FOR JOURNALISTS
- More about Netcare Limited (Netcare)
Netcare Limited, an investment holding company listed since 1996 on the JSE Limited, SA, through its subsidiaries operates the largest private hospital network in SA and the UK.
Among its many comprehensive healthcare services, Netcare owns and operates:
- 54 private hospitals, comprising 8 843 registered beds in SA;
- 58 acute care private hospitals, comprising 2 891 beds, through GHG in the UK;
- 96 medical centres, providing primary healthcare through Medicross Family Medical and Dental Centres and Prime Cure Medicentres, with a compliant network of 559 healthcare practitioners;
- Netcare 911, the largest private emergency service with 7.9 million managed lives;
- Pharmacy services, rendered at 88 retail pharmacies throughout SA;
- Netcare (JSE code: NTC) has a market capitalisation of R19 billion as at 31 March 2010. The company is included in the JSE?s mid cap and Socially Responsible Investment (SRI) indices.
Netcare entered the UK market in 2001 to provide specialised healthcare services on contract to the NHS. In May 2006 the company acquired a controlling 50.1% interest in GHG, which owns BMI Healthcare, the largest private acute care hospital provider in the UK. The other equity partners in GHG are Apax Partners Worldwide LLP (31.7%), London and Regional Properties Limited (7.4%), Brockton Capital LLP (3.0%) and GHG local management (7.8%).
Through Netcare UK, GHG is also an established independent service provider to the NHS, under Independent Sector Treatment Centre (ISTC) contracts such as the Greater Manchester Surgical Centre and the Commuter Walk-in Centre in Leeds.
Netcare?s core value is care. We care about the dignity of our patients and all members of the Netcare family. We care about the participation of our people and our partners in everything we do. We care about truth in all our actions. We are passionate about quality care and professional service.
Netcare remains committed to making healthcare more accessible, affordable and sustainable for more people. In doing so it has committed itself to partnering with the SA Department of Health, the National Health Service in the UK and other stakeholders.
Issued by: Martina Nicholson Associates (MNA) on behalf of Netcare
Contact: Martina Nicholson
Telephone: (011) 469 3016 or 0836316647