Jerry Vilakazi : Good morning, let me take this opportunity to - - PDF document

Jerry Vilakazi: Good morning, let me take this opportunity to introduce myself

• nce more, I’m Jerry Vilakazi, Chairman of the Netcare board, and I would like

to take this opportunity to welcome all of our guests this morning who have joined us in the release of our interim results. In particular, I want to welcome my colleagues from the board who are with us this morning, and also the entire executive team that is here under the leadership of the CEO, Dr Richard Friedland who’s going to make the first presentation this morning, I’m also pleased to welcome our CFO who will also be coming forward to make a

• presentation. Joining us as usual our colleagues from the UK GHG CEO Stephen

Collier is with us, welcome again, and I would also like to welcome the CFO from the UK Craig, he’s also sitting here at the front. We are always pleased to have them with us and joining us as we release our results. I’ve also seen in our midst here a number of our partners that we partnered with in our different

• perations throughout the country. We welcome you this morning and are

excited to have our partners with us and finally I want to welcome everybody who is joining us even those that are going to join us in remote areas as we present our results. We are very pleased with our results again. Our results continue to show very strong outputs from our operations and as you will hear from the presentation, you will appreciate why we as the board are very pleased with the results that management has delivered in the first 6 months. Both in the UK, as well as in South Africa noting some of the challenges that continue to remain in the UK broadly in the macro‐economic environment which therefore impacts us in that area. I would like without any waste of time at this point to welcome Dr Richard Friedland our CEO to make his presentation, thank you. Dr Richard Friedland: Thank you very much Jerry and thank you for your and that of our board of directors. Good morning ladies and gentlemen and thank you for joining us this morning. We understood from the slur of results out this morning from Vodacom and Barloworld and able that we might not fill the front row. So thank you for your loyalty. A warm welcome also to those joining us on the live feed, whether you be overseas or here in South Africa. And a huge thank you to our management teams in United Kingdom, South Africa and Lesotho, for your commitment and dedication in producing these results

and allowing us to stand and present them here this morning. Just looking as we always do I’ll take you through a group overview and some of the

• perational features in our different geographies and then hand over to our

chief financial officer Keith Gibson who’s going to unpack the financial results in some detail. We’ve had a very good trading performance in South Africa. Two stand out features here is that price inflation has been well contained across all of our divisions I’ll speak to that a bit later, and despite our concerted effort on costs and efficiencies we maintain a very strong focus on quality and

• n quality leadership. It’s begun to show in a number of the outcomes where

demonstrating particularly, in the hospital division and also in our fledging PPP in Lesotho and I’m pleased to say that we’ve decided to proceed with construction of two new hospitals towards the end of this year. We’ve also had a good performance in the United Kingdom, despite a very challenging set of macro‐economic circumstances. There’s no question that the United Kingdom as has the rest of the Euro zone weathered a tremendous storm. It’s not yet

• ver, but they’ve certainly produced a credible set of results. They’ve made a

positive contribution to earnings for the group and you’ll recall that in November last year we said our aim was to break‐even in the United Kingdom. I’m pleased to say that we’ve exceeded that and we’re on track to break‐even for the full year. A reminder that we purchased a minority shareholder stake in GHG in January of this year for a price consideration of some 11 Million Pounds to take and increase our stake in the OpCo by some 3% and probably the stand

• ut feature of these results that Keith will talk to in some detail is that after the

year‐end last year, we took a decision to deconsolidate the property assets that we own in the United Kingdom and we believe that this now reflects far more realistically the commercial position of our investment in the UK. Keith will talk through that a bit later. Let’s just pause here and look at the comprehensive network of healthcare services we provide in these three geographies and I think when you look at this you can see certainly in South Africa how we differentiate ourselves from our competitors in terms of the range and diversity of services we offer. If you look at revenue and EBITDA South Africa contributing just over half of our revenue and EBITDA, and the United Kingdom even though somewhat smaller in terms of size and scale but given the strength of the Pound against the Rand contributing just under 50%

• f revenue and adjusted EBITDA. Adjusted EBITDA because we stripping out

the once‐off impact of the profit on deconsolidation and we’ve added back the rental charge for 2013 so we can compare like‐for‐like. And so, briefly looking at some of those financial highlights revenue up some 8.5% to 13.3 Billion in line with the guidance we’ve given previously adjusted EBITDA up to 2.8 Billion, very nice operating leverage coming there with a 14.7% increase, and pleasingly, profit after tax up almost 30% for the group. Adjusted HEPS 20.8% allowing Netcare to declare an interim dividend of some 27cents up 22.7% on the prior year. And just to remind you the prior year we had held a dividend flat for that reporting period. Turning now to South Africa, Netcare experienced very good revenue growth in South Africa in Hospitals and emergency services this was however offset by a decline in Primary Care and I’m going to unpack in some detail for you a bit later. Again, very good

• perating leverage coming through, an 8% increase in EBITDA to 1.479 Billion

Rand and the margin widening by some 50 basis points again due to a focus on costs and efficiencies and given the high nurse wage inflation I think that’s a particularly pleasing result for us. So turning to Hospitals and emergency services a 2.3% increase in patient days last year we recorded 1.8%. We had an unusual March not withstanding seasonal trends. We were impacted by Easter and Public Holidays and I think when we now look all of that has normalised through our group when we look at April trading our patient day growth is in the order of 3.3% so we’re back on track after a somewhat impacted March and we saw a similar effect in the United Kingdom for March trading. Revenue per patient day has been extremely well contained at 4.8% and it really reflects

• ur efforts to contain hospital inflation below CPI. This is a very important fact

particularly as we look back over the last ten years, because revenue per patient day is a rough estimate of hospital cost inflation and in a report published you might remember our last results presentation we showed you a report from Finweek that came out in May last year that looked a number of services and indices across South Africa over a decade and our revenue per patient day had only increased by 109% over that 10 year period compared to

• ther items for instance maize meal that had gone up by 213%, coffee by 191%

and milk I think it was a 158%. So, price inflation or cost inflation very well contained over the last decade. We only brought on a handful of beds, 4 new beds in the last 6 months. So our growth has been largely organic we are expecting to bring on 89 new beds in the second half. I’m pleased to say that

we still attract doctors of high quality and standing and we’ve granted admission privileges to 50 new specialists and doctors in our network over the last 6 months. And we remain very committed to quality leadership not just within our own organisation in terms of improving our standards and our qualities and our outcomes but certainly in forming this evolving debate in South Africa. For instance, last year we completed rolling out the national core standards in our primary care network and throughout our hospitals and I’m pleased to say in collaboration with the department of health we are now informing the technical aspects are of those standards and refining them as they are being rolled out on a national basis. I think its common cause that most people would say that the quality of health care particularly within the private sector is of an extremely high standard. The difficulty is how do we measure it and how do we measure it objectively. There is a lot of data out there that suggests this but it is very difficult to compare subsets of data. And so, part of what Netcare is trying to do is to look at International benchmarks with a view that hopefully some of these benchmarks can inform what’s going

• n in South Africa and hopefully be introduced in South Africa. Patient

experience is just one of those examples. And if you look at the United States before 2005, there was no national benchmark, but subsequent to that a benchmark has been introduced it’s mandated, it’s regulated across some 3800 hospitals. Everyone is asked the same set of questions and one is able to compare objectively as to how one performs. It’s known as the hospital consumer assessment of hospital providers and systems. And you can see from this graph here that Netcare actually compares reasonably favourably to some

• 3800. The average of some 3800 hospitals across the US.We’re hoping it’s

these kinds of national benchmarks that will be introduced as national health

• r universal coverage becomes a reality in our own country. Turning now to

some of the numbers on hospitals and emergency services aside from the price inflation of some 4.8% and a 2.3% increase in patient days, our case mix the variation between surgical and medical cases and high acuity and low acuity cases remain pretty static and you can see as a result of our length of stay is constant at about 3.54 days. A question we’re often asked we’ve stabilised our alternative reimbursement at around 50% the remainder is fee for service and I’m pleased to say that the margin improved again due to ongoing efficiency programs and again against the backdrop of a much higher nurse wage

• inflation. Now, before I unpack the numbers in Primary Care perhaps to

answer 2 questions or to refresh your memory. What is primary care in Netcare? And why do we hold on to primary care and insist that it is such an important strategic element in the delivery of healthcare services. Well Primary Care as two divisions, the 1st is Medicross medical and dental services, a national network of some 80 centres across the country looking after some 3 Million patients. In the last 6 months we opened 3 new centres, one in Khayelitsha in the Western Cape. One in Midrand in Carlswald and one in the far West Rand in Range view and that is the delivery arm of our primary care

• network. Providing a fully comprehensive range of primary care services. The

second aspect of our service offering is that we’ve developed a expertise in managing low income options for medical schemes. But what we’ve noticed

• ver the past few years is as the risk within these schemes normalises and

reduces, schemes tend to take these low risk options in‐house and last year risk was managed particularly well. A lot of schemes took that business internally within their own schemes. And so, we’ve converted this business from a risk taking, a managed health care model into more of a medical scheme administration model. And so, there is a difference you can see in the fall off in revenue. Primarily, because in the risk taking options we’re also accounting for the fee dispersed to pay medical claims and we don’t have that when we have the pure administrative service. So we are seeing a decline in

• revenue. It still will settle and we’re probably likely to see that over the next 6
• months. Now we remain very focused on primary care because we believe as

the Minister of health said last week in his budget presentation that primary care is the bedrock of a sustainable health care system. Not only in South Africa, but certainly internationally. Care given at the appropriate level at the appropriate cost by the appropriate provider provides the real sustainable foundation to hopefully universal coverage and to NHI, and we think this is an extremely important division for us. You know if I reflect on what we’re achieving within Lesotho in one of the poorest countries in Africa. Through our primary care network of some 4 clinics we have reduced maternal mortality by more than half in a country that has one of the highest mortalities in the world some 1115 deaths per 100 000 births, we’ve reduced that to some 448. And how have we done that? Simply by introducing 24 hour midwife services through our primary care centres. And so, this remains a very important

division for us. Having a look at South Africa going forward, we are confident about the demand for future, for private healthcare going forward. As I mentioned we’ve got a lot of brownfield expansion with some 89 beds coming

• n stream. We have licence applications pending for a lot more beds obviously

they have yet to be approved we are going ahead with the construction of 2 new hospitals, one in the Mogali City or Pinehaven on the West Rand, an area

• f high growth for us and also, in Polokwane and we believe these will be very

successful hospitals going forward. As you know there is a pending enquiry into the private entire healthcare market by the competition commission and we look forward to an impartial and independent review of the entire healthcare system to inform hopefully the roll out of universal coverage. So I’d said earlier that the United Kingdom had weathered a storm. So I thought I’d put up a beautiful picture of London in the late afternoon with not too many rain clouds

• about. As I’ve said the macro‐economic environment remains very challenging.

The United Kingdom has just avoided what we call a triple dip recession a third quarter of negative GDP growth it was marginally positive but it does reflect the kind of static growth environment that exists within the United Kingdom and within which our own operations have had to exist and adapt to and I’m pleased to say that despite the fact that we’ve had volume challenges, we continue as we’ve said in previous reporting periods to see a drop off in private

• patients. This has been largely compensated by a growth in NHS referrals and

NHS patients choosing to come to the private sector. And you’ll see from the next slide the full extent of that. As a result of this the BMI OPCO and management have had to really change their entire operating modus operandi for lack of a better word and really evolving to a much leaner organisation, one that’s focused on being a core hospital operator and to that extent we’ve been disposing of non‐core assets and in the last 6 months we completed the disposal of Transform and also of Care Fertility. I think that one of the stand‐

• ut features is that our operating margin is beginning to stabilise in the UK and

this against the back drop of increased NHS work, increased NHS referral, but also against the backdrop of deflationary prices in the NHS where tariffs have been coming down for the past couple of years. And a stand out feature of the UK is their cash generation and working capital management and I’m pleased to say they’ve produced another record within 132 Million pounds of cash on hand at the end of the reporting period. So I put this slide up here just to show

you the evolution of BMI for some of you in the audience and I see those faces will remember there are an acquisition we have bought an essentially a private hospital operator mainly based in the south of England where PMI or private medical insurance were strongest. Where 97% of the work we were doing was essentially private medical insurance and self pay. But as we’ve seen the vicissitudes of the market and we’ve seen this huge macro‐economic changes in the UK. You can see how the business has changed that today some 32% of the work we now do is public sector is NHS at a substantially lower tariff, lower contribution and we’ve had to adapt the business accordingly and I think when you look at the margins that we’re achieving today I think that’s testimony to the outstanding work that our management teams have done in the UK. So let’s unpack the income statement. Revenue was flat for the period under

• review. Notwithstanding a 2% decline in case load this was offset by a 3%

increase in complex cases. I’m pleased to say that EBITDAR before rental improved by some 4.2% to a 102.5 Million Pounds. And really as a result of on‐ going efficiencies and the factors I’ve already mentioned. Because we’ve deconsolidated the properties and rental no longer is eliminated on

• consolidation. Rental will remain a feature of this income statement and so

whether you look at EBITDAR or EBITDA, in other words, after rental you can see a 13.8% increase to 25.6 Million Pounds. Very nice leverage being obtained there and after non‐recurring items even higher at some 27.1 Million Pounds. So the margin improving overall before rental by some 80 basis points to 23.8. Just a regulatory update for the UK it’s been a very busy 6 months, there’s been a completion of the competition commission’s enquiry into the entire sector and we’re expecting the provisional report to come out in July. It was initially envisaged this would come out earlier we’ve now been told that it will be out in the summer in July. And there has been a complete review of commissioning in the NHS an introduction of the clinical commissioning groups if you remember these replace the primary care trust that’s used to commission work. The PCT’s and that occurred and is now in place. And so looking forward we still expect the UK to have a very tough macro‐economic environment and to present challenges for the private health care demand in the United Kingdom. Certainly for at least the next 6 months under review. What is interesting is that NHS funding remains flat and this is despite the demographic demand for health care rising for some 3‐4%. If you will add on

the fact the NHS is under pressure to find 20 Billion Pounds of efficiencies you can see that there is an enormous funding squeeze evidencing itself in terms of public health care provision in the United Kingdom. The changes that we’ve seen in the NHS commissioning may well be disruptive in the short term. We not expecting that to impact longer‐term demand for cash flow. I’m pleased to say that given the dispute we had with one of the funders two reporting periods ago, we’ve now signed multi‐year contracts with the majority of PMI providers and I’m also pleased to say that whilst our capex spend in the first 6 months was largely pedestrian we certainly going to accelerate that and Keith will speak to that number under guidance going forward so, without much further ado, Keith if I can hand over to you. Thank you. Keith Gibson: Thank you Richard and good morning ladies and gentlemen. Let’s now turn our attention to the unaudited results for the half‐year ended 31 March 2013. No doubt you’re all aware that we announced to the market in November 2012 that following an evaluation of the overall factors of control, including a decision by Netcare to sell down its equity interest in GHG PropCo 1 to 50% that the board of Netcare Limited deemed it appropriate to deconsolidate the GHG Property Businesses, which comprise both GHG PropCo 1 and GHG PropCo 2 with effect from 16 November 2012. However, given that Netcare continues to exercise significant influence over the GHG Property Businesses they are reflected as investments and associates and their results have been equity accounted for the period post deconsolidation. The deconsolidation creates a structural change in the way we present Netcare’s group results. So, beginning firstly the statement of financial position the substantial liabilities of the GHG Property Businesses comprising mostly debt and interest rate swap liabilities are no longer consolidated on our statement

• f financial position. For the same token the property and related assets

against which this ring fenced debt is secured are also no longer reflected. The result is that Netcare’s statement of financial position emerges significantly strengthened as a result of the deconsolidation. I am going to put up some slides later in the presentation to talk you through this in more detail. With regards to the income statement, the rent charge paid by BMI OpCo to the GHG Propert Businesses which previously eliminated on consolidation now reflects as a real charge against income and as a result the EBITDA margin of

• ur UK business declines to that of a pure OpCo. However by the same token

we no longer reflect the depreciation and the interest charges of the GHG Property Businesses therefore this creates a broadly neutral outcome in terms

• f its impact on the group results and I am going to demonstrate the numerical

impact of that in my next slide. A further feature is that a non‐recurring non‐ cash profit on deconsolidation arises which amounted to approximately 3.3 Billion Rands and that is reflected in our group income statement for the first

• half. Now it is important to appreciate when reviewing the results for the first

half year that we have something of a hybrid outcome given that the date of deconsolidation falls within the reporting period. The South African operations in the BMI OpCo has been consolidated as usual for the full 6 month period however the GHG Property Businesses has been consolidated for the first one‐ and‐a‐half months of the reporting period and have been equity accounted for the remaining four‐and‐a‐half months. The result is that for the period up to 16 November 2012 the rental paid by the BMI OpCo paid to the GHG Property Businesses continues to eliminate but we reflect the interest and depreciation for that period. Thereafter the rental reflects as a charge on our income statement but by the same token it is broadly offset by lower interest and lower depreciation charges. We have tried throughout this presentation to set

• ut our results on a like for like basis wherever possible and I think you will see

this as we walk through the presentation. So, I have set out for you on this slide the numerical impact of our structural changes which illustrates that they are broadly neutral on Netcare’s group results. So from the date of deconsolidation onwards our income statement now reflects a rental charge of 703 Million Rands or approximately 51 Million Pounds. However we no longer take the depreciation of the GHG Property Businesses we therefore have a reduction in depreciation of about a 136 Million Rands or approximately 10 Million Pounds and similarly our interest charges reduce by 552 Million Rands

• r approximately 40 Million Pounds. This creates a marginal nett impact of

approximately 15 Million Rands or 1.1 Million Pounds. Obviously this analysis does not take into account the positive benefits of no longer being exposed to the non‐cash fair value adjustments and other accounting charges that arise from the GHG Property Businesses significant interest rate swap liabilities. Just to create an indication of the extent of that these non‐cash charges amounted to 92 Million Rands for the first one‐and‐a‐half months of this year.

So let’s take a look at the group income statement for the 6 months to the 31 st of March 2013. Revenue for the half‐year amounted to 13.3 Billion Rands representing an increase of 8.5% over the prior year comparative period. Both the SA operations and the UK operations grew their revenue in their respective local currencies although as Richard has alluded to, growth in the UK was

• marginal. Currency conversion however did have an impact here and as the

Rand weakened against the Pound Sterling the UK revenue growth has been amplified by 631 Million Rands which has been added to the revenue line as a result of currency conversion. Our EBITDA before the GHG PropCo rentals amounts to 2.8 Billion Rands which represents an increase of 14.7 % over the prior year comparative period. Now the remaining lines or the remaining couple of lines are impacted by the structural changes that I have spoken to for example our income statement now reflects a rental charge of 703 Million Rands and therefore our reported EBITDA of 2.1 Billion Rands declines from the prior year comparative period of 2.4 Billion Rands. Our operating profit as reported at 1.5 Billion Rands reflects the decrease of 15.1% against the prior

• year. However, if we measure this on a like for like basis, adding back the

property rentals and taking out the reduced depreciation. Group operating profits have actually increased by 16.5%. Just short of 2.1 Billion Rands during the period. Net financial expenses have reduced dramatically from 962 Million Rands down to 389 Million Rands. The bulk of this namely 552 Million Rands thereof arises as a result of the deconsolidation. However, it’s also worth noting that the 2013 net financial expense includes 92 Million Rands of non‐ cash fair value adjustments arising on the GHG Property Businesses interest rate swaps for the period of one‐and‐a‐half months during which we’ve consolidated the entities. And this is not going to repeat in future reporting. Going to the bottom line I’m very pleased to be able to report an increase of almost 30% in our profit after tax to 916 Million Rands for the 6 months under

• review. And of course once we add to that the substantial 3.3 Billion Rand

profit arising on the deconsolidation of the GHG Property Businesses our reported profit after tax increases to just short of 4.2 Billion Rands, representing a 493% increase over the prior year. I think my last point for this slide is just to highlight that an interim dividend distribution of 27cents per share has been approved and this represents an increase of 23% over the interim dividend for 2012. Moving on to headline earnings per share, headline

earnings per share for the group increased by almost 25% to 65.8cents for the half‐year. This is underpinned by a strong 16% improvement in the HEPS of the SA operations and a turnaround in the UK operations that they now make a positive contribution towards group headline earnings per share. We also typically put up an adjusted headline earnings per share as we believe this is a better indication of sustainable earnings for the group. And group adjusted headline earnings per share increased by a very solid 21% over the comparative period for last year. And I think very importantly, we should take note of the fact that the UK operations remain earnings positive on an adjusted headline basis, improving by a 121% from the result reported in March 2012. Let’s now move on to the statement of financial position and beginning firstly with the total assets of the group as at 31 March 2013. I mentioned up front that the deconsolidation of the PropCo has had a structural change on our statement of financial position. You’ll see the total assets have reduced from 44 Billion Rands in September 2012 down to just under 23 Billion Rands by March 2013. The deconsolidation has accounted for approximately 23 Billion Rands of that reduction. The weakening of the Rand relative to the Pound though, has added another 1.5 Billion Rands to our asset

• base. In terms of other movements, which are relatively small in the context of

those 2 adjustments, our capex for the period has totalled 455 Million Rands of which 306 Million Rands were spent by the SA operations and 10 Million pounds spent by BMI OpCo. Working capital continues to be well controlled. Not withstanding the fact that our period close ended over the Easter long

• weekend. I’m pleased to report the debtors’ collections remains strong and

we’ve seen improvements in debtors and debtors’ days from both the South African operations and the UK operations relative to the accomplishments of March 2012. This slide sets out the total equity and liabilities of the group. And you’ll notice that the total liabilities have reduced by approximately 33 Billion Rands because of the deconsolidation. The bulk of this comprising debt and interest rates swap liabilities. This 33 Billion rand reduction in the liabilities of the group is offset by the 23 Billion Rands reduction in the assets of the previous slide. Meaning the total shareholders’ equity has improved by 10 Billion Rands as a result of the deconsolidation. Finishing the reporting period

• n a very healthy balance of just short of 9 Billion Rands. The leverage of the

group has improved dramatically. With a net debt to EBITDA ratio reducing

from 5.2 times in September 2012 down to 1.3 times by March 2013. I think another factor to be aware of is that group interest cover has similarly improved from 4.4 times down to 2.1 times. Just having a closer look now at the debt in the SA operations. You’ll see that the gross debt at the half year of 4.2 Billion Rands compares to debt of 4.3 Billion Rands 1 year earlier. Net debt

• f the group at 4.1 Billion Rands equates to a net debt to annualised EBITDA

ratio of only 1.4 times on the SA operations. The net debt balance has been arrived at after outlaying a 163 Million Rands for the acquisition of an additional 3% interest in General Healthcare Group and also the distribution of 1.2 Billion Rands worth of cash used for capex, dividend payments and for tax

• payments. Netcare has managed to maintain its GCR credit rating of A for long

dated paper and A1 for short dated paper and I’m pleased to report that there’s been significant appetite for Netcare paper out in the market. In fact, we raised an additional 600 Million Rands under our domestic medium‐term note program in March of 2013. And this particular 5 year issuance was more than 4 times oversubscribed and raised at a very favourable credit spread of a 161 basis points. The cost of debt has decreased relative to the comparative period as has our net interest paid which has reduced from 98 Million Rands for the 6 months to March 2012 down to 66 Million Rands for this period. And

• ur interest cover has further strengthened to very healthy 18.7 times. Turning

now to the debt to the BMI OpCo you’ll see that the gross debt has reduced from 236 Million Pounds at September 2012 down to 226 Million Pounds by March 2013. This de‐gearing has been achieved through scheduled debt amortisation repayments. The business continues to hold on to high cash reserves though reflective of the good cash generative abilities of the group and strong working capital management and finish the half year with record cash balances for March of a 132 Million Pounds. This leaves net debt of the BMI OpCo at 94 Million Pounds at March 2013. If you compare that to the 145 Million Pounds at March 2012, the business has repaid 51 Million Pounds worth of debt over the course of the last twelve months. Netcare has acquired an economic interest in the debt of the BMI OpCo. We hold debt with a face value of 65 Million Pounds that was acquired at a discount of approximately 30% during 2012 and this holding equates to approximately 28% of the

• utstanding gross debt of the BMI OpCo and represents more than two thirds
• f the net debt. Although no longer consolidated, I am pleased to be able to

report some progress in addressing the debt maturity of GHG PropCo 1. I can advise that the board of GHG PropCo 1 is currently engaged in discussions with the lenders to GHG PropCo 1 in order to facilitate an orderly and consensual solution to the PropCo1 debt facility maturity which occurs in October 2013. Recently all parties agreed an amendment to the loan facility agreements. This amendment required unanimous consent of all creditors and GHG PropCo has been successful in achieving this consensus. The amendment in essence diverts funds which would have otherwise been paid to the junior lenders in repayment of their debt to be made available to pay the costs and fees of advisors to ensure that all parties are appropriately advised, and the free up in these funds is important as it allows all relevant parties the opportunity to actively participate in the formulation of a solution which is consensual and

• rderly. This however doesn’t change Netcare’s position at all. Netcare has

said before and I’m going to reiterate that we will continue to act responsibly and we’ll continue to work diligently to achieve a specific solution to this debt

• maturity. However, we will not do anything that jeopardises the SA businesses
• r compromises the financial security of our SA operations. So with the first 6

months of the 2013 financial year under the belt, let’s now look forward to our expectations for the remainder of the year. We’re holding the guidance firm that we gave to the market in November 2012 with no change in our outlook with regard to either the SA operations or the UK operations. In South Africa we continue to expect organic revenue growth in the upper single digits and the business will continue to focus on and build upon standardisation and efficiency of improvements which has achieved to date. This should aid us in further grow in the margin and we still expect spend capex for the full year of approximately 800 Million Rands. With regards to the United Kingdom, we expect the broader macro‐economic environment and the private healthcare market to remain challenging. The business will continue to focus on its efficiency improvements and increasing case complexity and remains well positioned for recovery in the PMI markets. We expect the business to spend approximately 40 Million Pounds on capex for the full year to September 2013. Lastly, just a brief word of thanks and appreciation to the finance teams and both South Africa and the UK for their efforts in producing this set of financial results and the related presentation materials. With that I thank you for your attention, and I’ll hand back to our chairman. Thanks Jerry.

Jerry Vilakazi: Thank you Keith and thanks to both Richard and Keith and at this time I would like to pause even as I thank them to welcome one or two questions if any, that you would like to raise. And also knowing that the team will be around to take more questions and engage with yourselves but you’re welcome to raise your hand if you’ve got a question. Just introduce yourself. Question 1: Jerry: Answer 1: All right, any other question? 2, 3, gone. Ok thank you. Who’s going to take the question? Melanie da Costa, She’s one of the directors responsible for strategy. Melanie da Costa: Just with respect to the question on occupancy it has stayed largely unchanged from last year. The rationale for that is we added quite a few beds in the last year. We added about +/‐ 190 beds, but only 97 were active on average for the full year period. So not withstanding the increase in patient days. Occupancies have stayed +/‐ constant. Then on keycare access. As you know, the product was launched in January this year, so still a very small product. The last time we heard we were talking about 10 to 15 thousand beneficiaries. It hasn’t had a significant impact on occupancy. Jerry Vilakazi: Thank you Melanie. Ok colleagues in the absence of any further questions, I would like to thank you for coming once more and wish you a very fruitful day. You are welcome to join us for drinks and talk to the team around here and maybe as I close I think it’s appropriate that we also I add my voice to offering our condolences this morning the loss of Vuyo Mbuli who is a well‐ known figure to many of us around here and quite incidental he created chaos this morning whether I will be here this morning or not because I had a large meeting today with his wife and when I deleted the appointment. It deleted all my appointments so Keith almost fell down thinking I’m not coming this

• morning. So we do have spread our condolences as a company and wish the

family strength and the SABC also. Thank you. You’re welcome to join us for drinks.