Headline earnings attributable to ordinary

Transcription

2
FINANCIAL HIGHLIGHTS
O P E R AT I N G P R O F I T ( E B I T )
increased by 24,3% to R589 million
H E A D L I N E E A R N I N G S AT T R I B U TA B L E
TO ORDINARY SHAREHOLDERS
increased by 38,4% to R373 million, resulting in an
increase of 38,1% in headline earnings per share
CASH INFLOW FROM
O P E R AT I N G A C T I V I T I E S
improved by 68,5% to R590 million
C A P I TA L E X P E N D I T U R E
of R229 million was invested to restore, maintain
and enhance the core income-generating
infrastructure of the Group
CASH DISTRIBUTION
increased by 70%
We have built
a sustainable
healthcare
business
O U R R E S U LT S A N D T H E S T R E N G T H O F
O U R B A L A N C E S H E E T I N D I C AT E S O U N D
S T R AT E G I E S , A S T R O N G T E A M A N D A
C O M P R E H E N S I V E P O RT F O L I O O F A S S E T S .
O U R B U S I N E S S F U N D A M E N TA L S A R E I N
P L A C E A N D W E N O W H AV E A S E C U R E
P L AT F O R M F R O M W H I C H T O C O N T I N U E
D E L I V E R I N G VA L U E T O A L L N E T C A R E
S TA K E H O L D E R S .
Umhlanga Hospital
KWAZULU NATAL
REGION
The Bay Hospital
KWAZULU NATAL
REGION
ANNUAL REPORT 2001
Unitas Hospital
PRETORIA REGION
Greenacres Hospital
CAPE REGION
Milpark Hospital
GAUTENG WEST
REGION
3
FINANCIAL HIGHLIGHTS
2001
Rm
2000
Rm
Change
%
3 586,0
697,2
589,0
373,1
2 848,8
547,1
473,8
269,5
25,9
27,4
24,3
38,4
27,9
38,0
8,5
124,2
199
20,2
24,7
5,0
105,1
91
38,1
53,8
70,0
18,2
118,7
Financial ratios
Interest cover (times)
Debt/equity ratio (%)
EBITDA margin (%)
6,7
27,4
19,4
4,9
35,8
19,2
Operating profit return on net assets (%)
Return on ordinary shareholders’ equity (%)
27,9
24,4
23,2
19,8
Trading
Revenue
Operating profit before depreciation and amortisation (EBITDA)
Operating profit (EBIT)
Headline earnings
Ordinary share performance (cents)
Headline earnings per share
Cash equivalent earnings per share
Capital distributions per share
Net equity per share
Share price at 30 September
4 000
600
28
550
26
3 500
24
500
22
450
3 000
20
400
18
2 500
2 000
350
16
300
14
250
12
1 500
10
200
8
150
1 000
6
100
4
500
0
’97
’98
’99
’00
R EV EN U E
Femina Clinic
PRETORIA REGION
50
2
0
0
’97
’01
(Rm )
’98
’99
’00
’01
O P E R AT I NG P R OF I T
( E B I T ) (R m )
Kingsway Hospital
KWAZULU NATAL
REGION
Jakaranda Hospitaal
PRETORIA REGION
’97
’98
’99
’00
’01
HE ADL I NE E AR NI NGS
P E R S H A R E (cents)
N1 City Hospital
CAPE REGION
Medicross Clinic
Edenvale
GAUTENG EAST
REGION
ANNUAL REPORT 2001
4
1996
1997
1998
REVENUE
R2 097,3 million
REVENUE
R171,7 million*
HEADLINE EARNINGS PER SHARE
9,3 cents*
Listing on the
JSE Securities Exchange South Africa
on 4 December 1996
Medicross Clinic
Boksburg
GAUTENG EAST
REGION
REVENUE
R909,4 million
HEADLINE EARNING
13,0 cents
9,9 cents
Acquisition of Excel Med
Acquisition of St Anne’s H
Acquisition of controlling interest in
Clinic Holdings Limited and Clinfed
Investments
Acquisition of Pretoria Ea
Acquisition of Durban
Oncology Centre
Launch of Traumanet (Ne
Investment in the Ampat
Acquisition of Sunninghill Hospital
Launch of HIVCARE Inter
*Listing forecast
Launch of Clinical Partne
Christiaan Barnard
Memorial Hospital
CAPE REGION
Ferncrest Hospital
PRETORIA REGION
Krugersdorp Hospital
GAUTENG WEST
REGION
Rosebank Clinic
GAUTENG WEST
REGION
5
NETCARE MILESTONES
1999
2000
2001
REVENUE
R3 586,0 million
REVENUE
R2 848,8 million
REVENUE
R2 566,1 million
S PER SHARE
ical Holdings
Hospital
27,9 cents
HEADLINE EAR NINGS PER SHARE
20,2 cents
Buyout of Clinics
minorities and delisting
15,1 cents
Settlement of Clinics Vendor legal issues
Capital restructure
Registration of Hemopure with Biopure
Corporation
PPP with
Bronkhorstspruit Hospitaal
and in Bloemfontein
Establishment of Blood
Conservation programme
Strategic association with
Community Healthcare Holdings
Expansion of Storks Nest
Niche clinics
Investment in Lodox
Investment in Mediswitch
Launch of SAA-Netcare Travel Clinics
ast Hospital
th Trust
etcare 911)
Investment in Prometheus
Healthcare Holdings
rnational
Establishment of Centres of Excellence
ers
Rationalisation of corporate structure
Sunninghill Hospital
GAUTENG EAST
REGION
St Anne’s Hospital
KWAZULU NATAL
REGION
Parklane Clinic
GAUTENG WEST
REGION
Moot Algemene
Hospitaal
PRETORIA REGION
Netcare Rehabilitation
Hospital
GAUTENG WEST
REGION
ANNUAL REPORT 2001
6
VA L U E C H A I N
We have made key ancillary
healthcare investments to augment the
core hospital business.
TRAUMA
CLINICAL
PA RT N E R S
Roadside/Air Services
Pre-hospital Insurance
Event & Disaster
Management
Risk Sharing
Case Management
Gain Share Models
H
O
S
P
I
T
A
L
N AT I O N A L
RENAL CARE
National Dialysis Centres
TRANSPLANT
National Transplant Units
INFO-TECH
ADT
Virtual Private
Healthcare Network
Prometheus
Mediswitch
Tridata
College of Nursing
Emergency Medical Services
Continuing Medical Education
Skills Lab
Hospital School
COMMUNITY
H E A LT H C A R E
HIVCARE
Management
Diagnosis/Treatment
Corporate Advisory
NICHE CLINICS
Centres of Excellence
Breast Care
Epilepsy
Storks Nest
INSURANCE
Netcare Medical Scheme
Hospital Insurance Product
Third Party Administration
NETCARE
I N T E R N AT I O N A L
Consultancy to
UAE & Saudi Arabia
SP
MEDICROSS
General Practitioners
Dentists
National Travel Clinics
Infectious Disease Management
N
E
T
W
O
R
K
TRAINING
ACADEMY
Public Private Partnerships
Outsourcing
Co-locations
Joint Investments
TRAVEL
CLINICS
N
EC
IO
IAL
I S E D A D M I N I S T R AT
AN
D L
ES
OGISTICAL SERVIC
RADIOTHERAPY
DIAGNOSTIC SERVICES
PHARMACROSS
RADIOLOGY
Hospital & Retail Pharmacy Outlets
ANNUAL REPORT 2001
A M PAT H
Pathology
Genepath
Toga Laboratories
Pietersburg
Ellisras
6
19
1
1
Richards Bay
Kroonstad
Kimberley
1
Empangeni
1
1
Pinetown
1
5
Bloemfontein
1
East London
10
6
Medicross Centres
Full diagnostic
services
Ampath satellite depots
and phlebotomy sites
7
N AT I O N A L P R E S E N C E
N E T C A R E H O S P I TA L S / C L I N I C S
GAUTENG WEST
REGION
Constantia
Garden City
Krugersdorp
Milpark
Netcare Rehabilitation
Parklane
Protea•
Randburg Day•
Rand
Rosebank
GAUTENG EAST
REGION
Clinton
Bagleyston•
Linksfield Park
Linmed
Mulbarton
Olivedale
Optiklin Eye•
Sunninghill
Sunward Park
Union
Vaalpark
N17 ▲
PRETORIA REGION
Akasia
Bronkhorstspruit
Femina
Ferncrest
Jakaranda
Kroon
Moot Algemene
Pretoria East
Unitas
Bougainville ▲
Montana ▲
CAPE REGION
Christiaan Barnard
Memorial
Cuyler
Greenacres
N1 City
Southern Cross
Kuilsrivier ▲
K W A Z U L U N ATA L
REGION
Durban Oncology Centre
Kingsway
Parklands
St Anne's
St Augustine's
The Bay
Umhlanga
▲ Community Hospitals
• Day Clinic
NORT HE RN
P ROV INCE
Population 5,6 million
Pretoria
11
Johannesburg
NORT H WE S T
22
GAUTENG
MPUMALANGA
F RE E S TAT E
7
K WAZ UL U
Durban
NATAL
N O RTH ER N C A PE
E AS T E RN CAP E
Number of
Netcare Hospitals/Clinics
WESTER N C A PE
4
Cape Town
2
Port Elizabeth
MEDICROSS CENTRES
GAUTENG WEST
REGION
Bell Street
Greymont*•
Kempton Park*•
Krugersdorp*
Kembirch*
Meldene
Monument*
Randburg*•
Potchefstroom*•
Rand-en-Dal
Roodepoort*
Schoongezicht*
Springs*
Triomf*
GAUTENG EAST
REGION
Benoni*
Boksburg*•
Edenvale*
Germiston*•
Vereeniging*
PRETORIA
REGION
Constantia Park*•
Elardus Park
Gezina*
Pretoria-North*
Pretoria-West*
Silverton*•
K W A Z U L U N ATA L
REGION
Bluff*•
Empangeni
Hayfields*
Hillcrest
Malvern*•
Meer-en-See
Pinetown*•
Richards Bay*
F R E E S TAT E
REGION
Bloemfontein*
Noordstad
WESTERN
CAPE REGION
Brackenfell
Kenilworth*
Langeberg*•
Northpine
Parow*•
Protea Heights
Roslin
Tableview*
Tokai*•
Vredekloof
EASTERN CAPE
REGION
Algoa Park
Cape Road*
East London*
Greenacres
Loraine Gardens
Walmer*
Westerling*
NORTHERN CAPE
REGION
Kimberley
* Pharmacross on site
• Day Clinic
A M PAT H
FULL SERVICE LABS
74 Nationally
S AT E L L I T E U N I T S / P H L E B O T O M Y S I T E S
174 Nationally
1 Maputo, Mozambique
ANNUAL REPORT 2001
8
CHAIRMAN’S AND CHIEF EXECUTIVE OFFICER’S REVIEW
World-class
healthcare
N E T C A R E R E P R E S E N T S A P P R O X I M AT E LY
3 4 % O F A L L P R I VAT E H O S P I TA L B E D S
IN SOUTH AFRICA. THIS CORRESPONDS
T O A R A N D VA L U E S H A R E O F A R O U N D
47%,
WITH
A
CUSTOMER
SHARE
OF
A S S O C I AT E D S P E C I A L I S T S I N P R I VAT E
PRACTICE OF ALMOST 60%.
INTRODUCTION
The past five years at Netcare have been a remarkable
experience. During that time Netcare has demonstrated
that it is a dynamic and responsive South African company
unafraid to embrace new ideas, nor to confront tough
obstacles. The financial results for 2001 are impressive by
any measure, reflecting a significant growth in earnings
for the fifth successive year.
GROWTH IN CORE BUSINESS
Since its formation, Netcare has grown from four hospitals
and two day clinics with 651 beds, into a network of 43
hospitals and 18 day clinics with approximately 7 650 beds.
Turnover for the 2001 financial year reached R3 586 million,
more than 20 times greater than the projected turnover
ANNUAL REPORT 2001
indicated in the 1996 Prospectus, all of this being the
result of new business development, carefully selected
acquisitions and organic growth.
Today, the Group and its subsidiaries and associates
employ more than 18 000 people and is supported by
approximately 2 900 medical professionals.
Although the Group represents approximately 34% of all
private hospital beds in South Africa, its Rand value share
of hospital spend is approximately 47%, whilst almost
60% of all specialists in private practice are associated
with Netcare’s hospitals.
The focus of the hospital division has been aimed at the
tertiary end of the acute care market providing cutting
edge technology with a full range of specialised services.
9
Michael Sacks
CHAIRMAN
With Government’s shift away from acute care to primary
care, Netcare is experiencing an ever-increasing referral
base from the public sector.
V A L U E A N D S U P P LY C H A I N
From a pure hospital organisation, Netcare has followed a
deliberate strategy of investing in healthcare activities,
which directly or indirectly support the core hospital
business, both in order to ensure the sustainability of
Netcare’s core business as well as ensuring the natural
expansion of the business model.
The strategic investments in the supply chain, such as National
Renal Care, emergency medical services, transplantation,
radiotherapy and travel clinics have contributed to our
increased market share and superior growth.
Dr Jack Shevel
CHIEF EXECUTIVE OFFICER
The intellectual capital of the Group is applied to provide
administration expertise and services to related activities
in the healthcare value and supply chain. These include
53 primary care medical facilities (Medicross), 81 pharmacy
outlets (Pharmacross/IM Davis), 78 pathologists (Ampath)
and eight radiology practices.
The development of centres of excellence or niche clinics,
such as the Storks Nest, Breast Care Centre, Endometriosis
and Epilepsy Clinics have also contributed to Netcare’s
excellent service offering. The Group will continue to
identify, develop and expand specialised centres and
clinics in the pursuit of developing its healthcare plans.
ANNUAL REPORT 2001
10
CHAIRMAN’S AND CHIEF EXECUTIVE OFFICER’S REVIEW
O P E R AT I O N S
This year’s results and the strength of our balance sheet
indicate that we have implemented the correct strategies,
assembled the appropriate team and developed and
acquired the proper assets. The fundamentals are in place
and we now have a secure platform from which to
continue delivering value to all our stakeholders.
F I N A N C I A L R E S U LT S
Many of our investments have matured beyond the
incubation phase and have contributed positively to the
profitability of the Group with headline earnings per share
increasing 38,1% to 27,9 cents (2000: 20,2 cents). Despite
significant resources applied to the Group’s investing and
acquisition activities, Netcare’s debt/equity ratio is
maintained well below the self-imposed constraint of 50%.
Notably, the Group's strong operating cash generation of
approximately R700 million positions Netcare well for
further investment into Group businesses, strategic
acquisitions and shareholder distributions in the future.
DE-LISTING OF CLINICS
One of the crucial events during the year was the
settlement of the litigation between Netcare, Clinics and
the original Clinics Vendors. The price adjustment finally
agreed to by the Clinics Vendors, together with the
additional Clinics shares allotted to Netcare by Clinics to
settle its claims, effectively reduced the price of the Clinics
acquisition from R920 million to less than R750 million.
The settlement also enabled Netcare to acquire the
remaining minority shareholders’ interests via a Scheme of
Arrangement post the year-end in October 2001.
ACQUISITIONS
During the period, Netcare made the following acquisitions:
• Umhlanga Hospital (“Umhlanga”)
Umhlanga, with 150 registered beds, was acquired with
effect 1 October 2000 and adds a significant facility in
terms of the Group’s strategy to invest in high growth
areas.
• Medicross Healthcare Group (“Medicross”)
Medicross, was acquired on a debt-free basis for
R128,5 million as part of the disposal of the healthcare
enterprises owned by Fedsure Holdings Limited. The
consideration for Medicross, which represented a
discount to the book value of the net assets acquired,
was paid from a long-term loan facility raised for this
purpose in October 2001.
ANNUAL REPORT 2001
The current restructuring of the business is expected to
add value to the Medicross model and improve
profitability going forward.
• Community Healthcare Holdings (“Community”)
As part of the Group's black empowerment activities,
Netcare, at a nominal cost, subscribed for a minority
interest in certain hospitals within the Community
Hospital Group (“ CHG” ), a wholly-owned subsidiary of
Community.
I N F O R M AT I O N T E C H N O L O G Y ( “ I T ” )
We have always placed great importance on the capacity
and innovation of the Group’s IT resources and personnel.
This business unit is not only responsible for systems
architecture and the processing of accounting and
management information, but is actively engaged in
researching and developing leading technologies for use
on advanced healthcare applications. The current spend
on IT is 1,75% of turnover and is expected to increase to
2,5% in the medium term. There are several exciting IT
initiatives currently being developed which will improve
Netcare's operational efficiencies by enhancing electronic
connectivity with the various elements in the healthcare
chain. This investment and focus will ensure that Netcare
can offer integrated healthcare solutions and benefit from
the application of this intellectual property.
E M P O W E R M E N T PA R T N E R S
Netcare has been involved in several empowerment
initiatives and is particularly committed to the promotion
of black empowerment healthcare enterprises. During
the past year, Netcare was instrumental in assisting with
the creation of Community, the first wholly-owned black
healthcare group in South Africa. In addition, Tshepo
Pharmaceuticals, a joint venture between Netcare and
Community, was instrumental in obtaining registration
and secured exclusive distribution rights for Biopure, an
oxygen carrying drug which was launched as a world first
in April this year. Community currently controls four
private hospitals in South Africa and is in the process of
developing a fifth in Botswana. In exchange for a minority
interest in the hospitals, Netcare has provided financial
guarantees to the extent of R40 million for Community’s
hospital operations. We are extremely proud of the
progress made by Community and will continue to assist
and support their expansion objectives of becoming a
formidable black-owned private healthcare network.
11
P U B L I C P R I VAT E PA R T N E R S H I P S ( “ P P P” )
Whilst it has taken time to gain the confidence of
provincial health authorities, Netcare successfully
concluded two PPPs during the year under review. The
first partnership was concluded with the Gauteng
Department of Health at Bronkhorstspruit Hospital. Under
this agreement, Netcare is leasing beds and providing
medical care to public sector patients. Whilst modest in its
initial scope, it is hoped that larger projects will follow.
Netcare, jointly with Community, is the preferred bidder for
a second PPP involving the Universitas and Pelonomi
Hospitals in Bloemfontein. Under this concession, private
beds will be made available in the public hospitals on a
co-location basis.
An agreement has been concluded with the University of
Witwatersrand's Health Consortium and Faculty of Health
Sciences, and KwaZulu Natal’s Nelson Mandela School of
Medicine, to develop satellite post-graduate teaching
facilities in Netcare hospitals. The objective is to enhance
and expand the Faculty’s scope and the standard of
teaching to attract and retain medical specialists within
the academic sector.
A F F O R D A B L E H E A LT H C A R E
South Africa in general, and Netcare in particular, is one of
the lowest cost producers of healthcare in the world. For
this reason, a growing number of foreign patients are
travelling especially to South Africa for elective surgery in
Netcare hospitals.
Netcare has made considerable progress with medical
schemes and administrators who target members from the
emerging market. It is a core objective to foster and
encourage such activities to ensure that the most
affordable products and services are available to all
economic sectors in South Africa. Selected medical aid
schemes servicing this market have created products in
which Netcare enjoys preferred provider status.
The Board of directors of Netcare has approved and will
allocate approximately R12 million for the forthcoming
year to the Foundation for the discretionary appropriation
by its Board of Trustees.
PROSPECTS
The Group is cautiously confident that with the
operational efficiencies at work internally, the new
initiatives currently being pursued, and the reducing
capacity of comparable public sector services, Netcare can
look forward to further increasing its market share during
the ensuing year.
Certain regulatory policies are in the process of being
finalised, but there is unlikely to be any significant impact
on the Group’s business.
Consequently, in the absence of a material destabilisation
or change in economic and/or regulatory conditions,
shareholders can look forward to continuing growth.
ACKNOWLEDGEMENTS
An organisation is only as good as its people and we are
especially proud of the team in the Netcare Group. Our
management teams have all worked extremely hard this
year, diligently instilling our culture of caring and at the
same time exercising strong fiscal discipline. Our doctors
and care-givers deserve a special word of appreciation and
gratitude.
We also convey our sincere thanks to our colleagues on
the Board of directors for their support, their assistance
and their guidance.
Michael (Motty) Sacks
CHAIRMAN
Dr Jack Shevel
CHIEF EXECUTIVE OFFICER
T H E N E T C A R E F O U N D AT I O N
As the largest private healthcare provider in South Africa,
Netcare is cognisant of its important role in addressing the
needs of the broader community. Contributions,
sponsorships and donations to public projects, charitable
institutions and other community organisations have in
the past been dealt with largely on an ad hoc basis.
ANNUAL REPORT 2001
12
C H I E F O P E R AT I N G O F F I C E R ’ S R E V I E W
INTRODUCTION
The Group’s strategies and focus again resulted in strong
operational results and increased market share for the
2001 financial year, marking the fifth year since listing on
the JSE Securities Exchange South Africa.
C O R E H O S P I TA L O P E R AT I O N S
The operational focus has been on enhancing the delivery
of care, improving nursing structures to optimise such
delivery, and continually improving performance by
driving efficiencies through the business.
ANNUAL REPORT 2001
In spite of the highly competitive healthcare environment,
the hospital division recorded a strong growth in turnover
of 19,7%, or 16,2% excluding the acquisition of
Umhlanga.
This growth was further demonstrated by an increase in
several key activity indicators, which include:
Total hospital admissions increased by 5%, resulting in the
average occupancy increasing by 2%; Patient day-beds
increased by 3,8% to 1,45 million; theatre hours increased
by 9,4% to 321 000, births rose by 6,6% to 26 000 and
outpatients and casualty cases increased by 10,6%.
13
Dr Richard Friedland
C H I E F O P E R AT I N G O F F I C E R
An optimal
platform
for solid
growth
EFFECTIVE
S T R AT E G I E S
R E S U LT E D
IN INCREASED MARKET SHARE AND
GROWTH
IN
KEY
PERFORMANCE
I N D I C AT O R S .
EBITDA margins increased from 19,6% to 20,1%,
reflecting enhanced capacity utilisation and further
operating efficiency gains throughout the division. This is
also reflected in a declining total cost/revenue ratio year
on year.
Further efficiency gains in working capital for the fourth
consecutive year since the acquisition of Clinics, resulted in
stock days reducing by 10%. Debtors’ collections equalled
the total billings for 2001 of R3,8 billion (VAT inclusive),
resulting in patient debtors’ days reducing from 51 days to
41 days and total accounts receivable reducing from
70 days to 60 days.
The centralisation and aggregation of food and catering
purchasing with a larger buying organisation has resulted
in substantial savings against CPI benchmarks and
enhanced volume related discounts. The first phase of
centralising non-pharmaceutical payments has been
completed and the next stage of connecting to suppliers
on an electronic platform is being piloted. In addition,
further efficiency gains in excess of R14 million were
achieved in medical capital purchasing.
ANNUAL REPORT 2001
14
C H I E F O P E R AT I N G O F F I C E R ’ S R E V I E W
“ Hands on” , a time and attendance management system,
involving biometric hand reading devices, was successfully
piloted during the year. It is currently being rolled out to
all hospitals and divisions in order to manage working
hours, facilitate the planning and management of staffing
levels, and play a key role in improving the accuracy of the
payroll. The efficiency gains of this system are expected to
result in Netcare recouping the full capital cost thereof
over 18 months.
Coupled with this venture, all wards and theatres within
the hospitals will be simultaneously computerised to
ensure future efficiencies in administrative functions,
particularly in billing, ordering of food and prescriptions.
The initiative will significantly lessen the administrative
burden on nursing personnel and allow for more focused
attention to patient care.
As Trauma contributes significantly to the hospital
division, a new division has been created to focus on
trauma and specifically Netcare’s trauma units. The
objective of this division is to ensure that trauma
treatment/management standards are maintained at the
highest levels, where clinical outcomes are constantly
monitored and staff are continually educated.
During 2001, a number of changes occurred to meet the
hospital division’s strategy of concentrating on areas of
high demand and reducing exposure in areas of
diminished demand. Notably, Unitas Hospital in Pretoria is
in the process of being expanded to 476 beds, making it
the largest private hospital in South Africa, whereas
Libertas Hospital in the Western Cape was closed.
In addition, the following building initiatives were
initiated to upgrade and increase capacity in our hospitals:
• new and upgraded maternity units at Greenacres,
Parklane and Pretoria East;
• new and upgraded ICU’s at City Park, Kingsway,
St Augustine’s, Union, Garden City, Jakaranda, Unitas
and Pretoria East;
• new and upgraded theatres at Umhlanga, Jakaranda
and Unitas;
ANNUAL REPORT 2001
• new doctors’ consulting suites at Unitas, Pretoria East,
Clinton, Linmed, St Augustine’s and Kingsway;
• new, and upgrades to, paediatric, cardio thoracic,
medical, orthopaedic, gastro-enterology and surgical
wards at various hospitals such as Pretoria East, Unitas,
Garden City, Union, Linmed, St Augustine’s and
Umhlanga; and
• a new cardiac catheterisation unit at Greenacres and
refurbishments to casualty units at Garden City, Milpark
and Vaalpark.
The most pressing challenge facing the hospital division is
the shortage of suitably qualified nurses. Through the
Group’s nursing training colleges, Netcare will double its
training capacity to 2000 students for the ensuing year and
will introduce new training courses. In addition, several
initiatives, including a loyalty and employee development
programme will be launched in the New Year.
The Group is confident that it will continue to optimise its
core hospital operations and in so doing, promote
sustainable and solid platforms for growth and further
entrench its reputation as a world-class provider of
healthcare with exceptional levels of care.
15
HUMAN RESOURCES
Peter Warrener
HR DIRECTOR
Netcare was selected as one of the top 49 companies to
work for in South Africa for two consecutive years and
believes it is because the Group takes care of its people by
offering competitive remuneration packages and
exceptional corporate benefits.
RETIREMENT FUND
Formed in 1999, the Netcare Retirement Fund is uniquely
structured to offer employees the option of a pension or
provident fund, where both options offer similar benefits.
The current contributions by Netcare and our employees
to the Retirement fund are 8,5% and 6,0% of pensionable
salary respectively.
MEDICAL AID
The Netcare Medical Scheme continues to outperform
public medical schemes. The targeted single-figure annual
premium increase was achieved in January this year, with
an increment of just 9% being instituted compared to the
industry norm of between 15% and 30%. Just three years
after its inception in July 1998, the scheme has grown its
reserves to 28% of contributions. Membership of the
scheme stands at approximately 7 000 members.
CONFIDENTIAL COUNSELLING
The employee well-being programme, which is paid for by
Netcare, was introduced in December 2000 as an
outsourced online counselling service. This is open to
members of staff and their immediate dependants.
SOCIAL UPLIFTMENT
Netcare will introduce a number of lifestyle enhancing
services to its employees, including a housing loan scheme
and an education loan facility for employees’ children.
The Group has piloted an AIDS awareness and education
initiative that will be centrally co-ordinated but managed
at hospital level.
Netcare is currently investigating the implementation of a
comprehensive human resources system with integrated
payroll functionality.
EMPLOYMENT EQUITY AND SKILLS
DEVELOPMENT
Training and development continues to be a major focus
area in the human resources arena. Accordingly, the
Group invests heavily in personnel education initiatives at
all levels. The training and development spend in the past
year qualified Netcare for a full rebate in terms of the
Skills Development Act.
Netcare has complied with its obligations under the
Employment Equity Act (1998) and continues to do so. In
addition, in compliance with the Skills Development Act
(1998), all subsidiaries of the Group have registered with
the relevant regulatory authorities. It is the intention that
the companies within the Group continue to fully optimise
the activities encouraged by this Act to further develop
their employees.
Netcare continues to be challenged by the outflow of
highly skilled and experienced personnel from the
industry and the country. The result is a labour force which
has to struggle to deal with the rapidly changing private
healthcare industry in terms of patient expectations and
technological advances.
Netcare’s response has been to focus on training nursing
staff at two levels:
• an investment in entry-level initiatives that have the
potential to attract quality candidates to the nursing
profession, and
• expansion of the knowledge base among qualified
nurses by offering clinical specialisation. Netcare is also
developing new categories of health professions – such
as ICU and surgical technologists – in order to attract
and accommodate more staff to hospital-related
positions.
DEVELOPING LEADERSHIP SKILLS
Following the successful management development
programme attended by nine management candidates
during 2000, 72 middle and senior managers attended
Netcare Leadership Programme workshops during 2001.
ORGANISED LABOUR
Netcare continues to have constructive relationships with
the three major unions that enjoy representation within
the Group. All salary negotiations with employee
representative bodies have been completed and a year
free of any industrial action has been enjoyed.
Transparent and consistent communication with all
relevant bodies remains the normal modus operandi.
ANNUAL REPORT 2001
16
O P E R AT I O N A L R E V I E W
N AT I O N A L R E N A L C A R E ( “ N R C ” )
• Dialysis units increased to 27 countrywide.
• Awarded acute dialysis contract at Pretoria Academic
Hospital.
• Developed patient database which generates monthly
reports on patient progress for doctors and Funders.
Highlights:
• Turnover increased by 17%.
• EBIT increased by 36%.
• Debtors’ days reduced to 40 days.
• Chronic dialysis business increased by 15%.
• Acute dialysis business increased by 21%.
ANNUAL REPORT 2001
NRC (a joint venture between Netcare and Adcock Ingram)
offers chronic haemodialysis, 24-hour acute haemodialysis,
peritoneal dialysis, plasma therapy and blood exchange.
The Company is experienced in the management of renal
units and provides holistic patient care, including patient
education, dietary advice, rehabilitation and the training
of renal nurses and renal technologists.
17
Ian Wilson
CHIEF EXECUTIVE OFFICER – NRC
NRC is the only private renal therapy provider in South
Africa that offers a national network of renal units with a
presence in every major centre throughout the country.
Two new units were commissioned during the financial
year in Queenstown and City Hospital in Durban.
The company has remained focused on forming
partnerships with private and public service providers for
the development of a low cost product for the emerging
market and in order to continuously improve quality
within the organisation.
NRC has been strategically repositioned to differentiate
itself from its competitors. Several qualitative initiatives
were introduced during the year, which have helped the
company to position itself as a Total Disease Management
Organisation. The most significant of these initiatives has
been the Healthy Start Clinic, which identifies and
educates patients in the pre-clinical stages of kidney
failure and has already lead to 180 new referrals.
ANNUAL REPORT 2001
18
TRAUMANET (“ NETCARE 911” )
• Response time performance improved to 90% within
10 minutes in metropolitan areas.
• Air ambulance patient transports increased by 61%.
• R3,5 million investment in new Call Centre CRM
technology.
Highlights:
• Insured principal member growth of 115%, from
1,3 million to 2,8 million.
• Emergency cases increased by 89% to 105 100 cases.
• Primary emergency cases attended rose by 56%.
• Emergency ambulance resources increased by 59%.
• 24-hour paramedic resources increased by 32%.
ANNUAL REPORT 2001
• Organisational restructure generating R3 million of
annualised savings.
Netcare 911 offers fully integrated, world-class pre-hospital
emergency medical assistance, evacuation by road or air
and telephonic advisory services.
Netcare 911 showed strong growth in revenue,
profitability and the paying client base. 183 clients have
contracted pre-hospital risk-management solutions,
including the majority of medical schemes, making
19
Chris Rose
CHIEF EXECUTIVE OFFICER – TRAUMANET
Netcare 911 the leading emergency assistance provider
with a significant market share through its pre-hospital
assistance products.
During the year, Traumanet (a wholly-owned subsidiary of
Netcare) increased its equity stake in its road division from
50% to 75% and retained its joint venture with Europ
Assistance in the air division.
Netcare invested in the production of a new 26 episode
actuality television series, Red Alert, on eTV after the
successful flighting of Code Red on MNet in 2000.
Audience response has exceeded expectations with the
show attracting one million viewers per weekly episode.
Consolidated turnover for the year rose to R73,2 million –
the result of strong organic growth of 94%, and the full
consolidation of the road division.
Trading as the branded and recognisable Netcare 911, the
operation is actively expanding its network of airborne
aeromedical services into West and East African countries,
Sub-Saharan Africa and Europe for the rapid and efficient
evacuation of clients.
ANNUAL REPORT 2001
20
I N F O R M AT I O N T E C H N O L O G Y
Key developments in IT this year included:
• Increasing electronic claims submission with 20% of
patient bills now submitted to the Funders
electronically, assisting in reducing patient debtor days.
Netcare has successfully created a Virtual Private
Healthcare Network (“ VPHN” ) that connects participants
in the healthcare sector and now forms the largest
electronic healthcare network in the country.
Netcare’s VPHN already provides connectivity to over
2 500 users, including doctors (specialists and GP’s), nurses,
paramedics and Netcare and Medicross management and
staff. The VPHN has increasingly become the central
nervous system that runs the Netcare enterprise.
ANNUAL REPORT 2001
• The integration of the Medicross Wide Area Network
and over 80 Netcare specialist practices into Netcare’s
VPHN.
• Implementation of a unique Employee Time and
Attendance System, which tracks and monitors the
movement of all Netcare staff and greatly enhances
personnel management.
• Computerisation and cabling of all hospital wards and
theatres.
• Introduction of formalised IT training programmes for
Netcare staff.
21
Dr Ian Kadish
IT DIRECTOR – NETCARE
w w w. n e t c a re . c o . z a
• Further development of the Netcare Internet site to
include more information on all facilities and a
comprehensive doctor search facility that allows
patients and potential patients to search for contact
details on all doctors within the Group.
The anticipated increase in IT spend will allow for a
further enhancement of the Group’s IT infrastructure and
the start of several exciting new developments to improve
operational efficiencies.
MEDISWITCH
Mediswitch, the company in which Netcare has a minority
stake, merged with QEDI (previously a subsidiary of
Persetel Q-Data) to create Digital Healthcare Solutions
(“ DHS” ) earlier this year.
DHS is a practice management and electronic switching
company that electronically transfers claims and eligibility
information between providers and funders. DHS has
already established a leading position in the medical
practice management and electronic switching markets
with transactions having increased at a compound annual
growth rate of 47% since Netcare acquired its interest in
October 1999, with the number of transactions
increasing to over 4,5 million per month (approximately
12 million line items).
DHS is profitable with strong future growth prospects and
partnerships with major Funders already underway.
ANNUAL REPORT 2001
22
Dr Johannes van Rooyen
Dr Reg Bush
N AT I O N A L PAT H O L O G Y
D I R E C T O R – A M PAT H
EXECUTIVE
DIRECTOR – NETCARE
A M PAT H
During the year, Netcare increased its effective stake in
The Ampath Trust from 37% to 50%.
forensic sciences, veterinary, genomics and molecular
biology.
The Ampath Trust administers and provides logistical
services to a network of high technology laboratories and
operations management centres in and around South
Africa that perform an estimated 16,8 million tests
annually. It has also developed expertise in a wide range
of value added services including nutritional health,
With its investments in Genepath and Toga laboratories,
Ampath is well positioned as a leader in cutting edge
technological initiatives in order to meet the dynamic
needs of diagnostic services.
ANNUAL REPORT 2001
Ampath remains a strong cash generator and continued
growth is anticipated in this division.
23
Norman Weltman
EXECUTIVE
DIRECTOR – NETCARE
RADIOTHERAPY
Throughout the Group, Netcare has three radiosurgery
centres using state-of-the-art equipment for the
treatment of brain lesions and two brachytherapy centres
for direct irradiation. The stereotactic equipment in four
of the units makes Netcare the only hospital group
capable of conducting radio surgery in South Africa.
The units are located in each of the major metropolitan
cities of Johannesburg, Pretoria, Durban and Cape Town,
with a new unit currently being developed in
Pietermaritzburg. During the year, a leading facility was
established at Olivedale Clinic with all aspects of oncology
comprising medical oncology, radiation therapy and
radiotherapy.
The units currently treat approximately 3 500 patients
with radiotherapy and conduct approximately 130 radio
surgery procedures per year.
ANNUAL REPORT 2001
24
SAA-NETCARE TRAVEL CLINICS
For the first time since its inception in 1999, this division
achieved a modest operating profit. It has demonstrated
substantial organic growth and reached critical mass and
improved economies of scale through the acquisition of
British Airways Travel Clinics and by successfully winning
the tender to provide health services to the Mozal II
Smelter Project.
ANNUAL REPORT 2001
With 11 centres nationally, SAA-Netcare Travel Clinics is
the largest chain of its kind in South Africa, delivering an
important consulting and treatment service to the travel
and tourist industry as well as infectious disease
management to interested parties. The clinics are now
seeing in excess of 1 000 patients per month.
Drs Jamieson and Toovey, both executives employed by
SAA-Netcare Travel Clinics, were recently certified in Clinical
Tropical Medicine and Travelers’ Health by The American
Society of Tropical Medicine and Hygiene. They are the only
two doctors in South Africa, with 358 physicians worldwide,
to have been awarded this recognition.
25
C O M M U N I T Y H E A LT H C A R E
HOLDINGS (“ Community” )
Community is the first wholly-owned black healthcare
Group in South Africa to enter the private hospital
industry, and includes Hospital Management Services and
a Product Distribution Division. As part of the Group’s
black empowerment activities, Netcare made various
co-investments into hospitals and other healthcare
initiatives with Community during the year. It is
anticipated that Netcare will selectively co-invest in
healthcare related projects with Community in order to
further Community’s strategy of expanding its network to
increase the accessibility of healthcare to the growing
medically insured population. Initiatives include the
development of hospitals in Gabarone (Botswana) and
Mbabane (Swaziland) for which licences have already
been granted, as well as the PPP in Bloemfontein with the
Free State Department of Health.
ANNUAL REPORT 2001
26
MEDICROSS
Founded in the early 1990’s, the Medicross Family Medical
and Dental Centre concept was inspired by a belief that
effective healthcare should be available to everyone at a
price they could afford, without compromising the quality
of the service or the overall treatment outcome. Today
Medicross is a household brand across South Africa, with
53 branded medical and satellite centres across the country
delivering an extensive healthcare provider network.
ANNUAL REPORT 2001
Operating over extended hours, seven days a week, each
Medicross Centre provides a wide range of medical, dental
and community healthcare services under one roof.
Warmth, efficiency and convenience are the hallmarks of
these centres, together with state-of-the-art facilities –
including emergency care, sonar/radiology, pathology and a
contracted in-house Pharmacross Pharmacy. Many of the
centres also have additional facilities, such as day theatres
and optometry services.
The professional resource base currently comprises
320 doctors and 150 dentists. They are supported by
25 physiotherapists, 20 dieticians, 20 psychologists and
150 medical specialists, who are either based at the
centres, or visit on a regular basis. Approximately
250 000 patients visit the Medicross Centres every month,
amounting to more than three million patients a year.
27
Dr Elbert Steyn
CHIEF EXECUTIVE OFFICER – MEDICROSS
Ingrid Davis
EXECUTIVE DIRECTOR – MEDICROSS
Committed to serving all patients, whether medically
insured or not, Medicross offers several service models,
including the traditional fee-for-service model and a
range of unique, comprehensive managed healthcare
plans on a capitated basis. Every effort is made to ensure
consistent quality outcomes using comprehensive practice
audits; independent peer reviews; continuing medical
education; clinical guidelines; disease management
programmes and a scientific formulary.
The acquisition by Netcare has added a primary healthcare
infrastructure to the existing sophisticated tertiary
network operated by Netcare, effectively enhancing
Netcare’s private healthcare offering.
As part of its strategy to expand its services and delivery,
Medicross has developed a new franchise model that it will
seek to market to the industry in order to work closer with
Primary care professionals in administering their practices.
ANNUAL REPORT 2001
28
OTHER INVESTMENTS
A N D I N I T I AT I V E S
H I V C A R E I N T E R N AT I O N A L
Given the widespread incidence of people living with
HIV/AIDS and the minimal number of medical aid patients
officially receiving anti-retroviral treatment, Netcare has
taken a decision to reposition HIVCARE and its strategy on
intervention.
ANNUAL REPORT 2001
Additional doctors will be trained in the appropriate
treatment of this epidemic, and Netcare, in partnership
with an employee benefits company, a pathology
company, Toga Laboratories (a subsidiary of Ampath) and
an absenteeism management company, will be piloting an
intervention programme aimed at effectively managing
the impact of the disease within industry, where the
prevalence is reported to be as high as 36%.
29
LODOX
Together with the Industrial Development Corporation
and De Beers Technology (“ Debtec” ), a division of De Beers,
Netcare is poised to launch LODOX, a unique radiological
device that will substantially alter the conventional
approach to trauma radiology.
LODOX is a low dose, but high-resolution, full body
screening device that is able to produce digital images
within 30 seconds, following a 13 second screening.
Developed by Debtec, a division of De Beers, originally for
screening purposes in the diamond industry, its application
in the medical field has been developed over the last seven
years in conjunction with researchers at the University of
Cape Town.
The device will be launched at the North American
Radiological Society Assembly and Exhibition in the USA
during November 2001.
Netcare has acquired a 20% equity stake in the company.
ANNUAL REPORT 2001
30
P R O M E T H E U S H E A LT H C A R E H O L D I N G S
(“ PROMETHEUS” )
Prometheus was founded earlier this year by two Netcare
doctors and provides comprehensive online healthcare
information for doctors and patients.
Prometheus for the doctor
Prometheus for the Doctor consists of a clinical database,
an electronic medical record, a pharmacopoeia
(pharmaceutical reference file), and electronic scripting
modules. It assists doctors with educating and interacting
with their patients and to date has been piloted with
doctors at Unitas Hospital and will be phased into the
entire Netcare network of doctors.
Prometheus for the family
In November 2001, Prometheus launched “ Prometheus for
the Family” , an electronic medical encyclopaedia for the
layperson. It is written by South African specialists and
covers all major disease and health related matters.
Netcare has purchased a 25% equity stake in the company
with an option to increase its holding by another 25%.
Progress has been promising and the company is projected to
begin generating revenues in November 2001.
B L O O D C O N S E R VAT I O N
Netcare has embarked on a blood conservation programme
to provide a safe and responsible alternative to patients.
Internationally, Netcare is the first network of hospitals to
comprehensively embrace and adopt blood conservation
across all its hospitals. To date, over 2 700 healthcare
professionals have been trained in Netcare hospitals on the
principles of blood conservation. A marked decline in the
usage of blood has already been recorded in hospitals
promoting the programme.
In addition, Netcare aims to launch Pre-autologous Donation
Clinics at its hospitals throughout South Africa in conjunction
with the South African National Blood Services to reduce the
reliance on homologous blood donation.
ANNUAL REPORT 2001
BIOPURE
Netcare and Community have been awarded the exclusive
five year marketing and distribution rights in Africa for
“ Hemopure“ , an oxygen therapeutic developed by the
NASDAQ listed Biopure Corporation (BPUR). Hemopure is a
drug that carries oxygen in the blood stream and offloads it
to the body’s tissues.
The drug has distinct clinical advantages as it is stable at room
temperature, has a shelf life of two years, is universally
compatible across all blood types and groups and is free of all
pathogens or infectious diseases. In South Africa, with the
high incidence of HIV, Hepatitis B and many other infectious
diseases as well as the lack of refrigeration facilities in rural
and semi-urban areas, a substitute for blood may, under
specific conditions, prove life saving.
The rights to Hemopure, which was successfully registered
with the South African Medicines Control Council on
31 March 2001, are vested in Tshepo Pharmaceuticals, a joint
venture between Netcare and Community. Netcare has been
awarded 625 000 warrants in Biopure and all warrants have
a cashless option and a three year expiry from date of issue.
Biopure completed their pivotal Phase III trial in September
2000 and aims to file for FDA approval in 2002. As this is a
totally new class or type of drug, the process is expected to
be lengthy and will be subjected to intense scrutiny.
Netcare expects to launch the product commercially
during the latter part of next year.
C L I N I C A L PA R T N E R S
Clinical Partners, a wholly-owned subsidiary of Netcare, is
primarily concerned with the development of alternative
reimbursement solutions. The Clinical Partners’ model has
been launched to the market via several medical schemes
and is best illustrated by the Netcare Medical Scheme,
referred to on page 15.
Clinical Partners has developed unique risk assessment
methodologies and has partnered with several schemes to
effectively manage the outcome and costs of treatment of
their members.
31
TRANSPLANT DIVISION
The transplant division continues to perform well and
conducted 173 transplants in 2001. Netcare continues to
play a leading role in the procurement and transplantation
of organs both for the public and private sectors.
Survival rates of recipients in Netcare’s specialised
transplant units rank among the highest worldwide.
Netcare is the only hospital Group to provide artificial
cardiac devices such as the “ Berlin Heart” and the
“ CardiacAssist VAD” as temporary bridges to recovery of
heart disease or transplantation.
SPECIALISED CENTRES OF EXCELLENCE
In keeping with Netcare’s strategy of remaining at the
forefront of medical technology and advances in medicine
and surgery, the Group established three centres of
excellence during the year.
In conjunction with South Africa’s leading experts, the
Endometriosis Institute was established to offer advice and
treatment to the several thousand women suffering from
this condition.
An Epilepsy Centre was started at Milpark Hospital to offer
definitive and curative diagnostic and surgical treatment
for chronic epilepsy sufferers.
In addition, due to breast cancer being the number one
cancer killer among women, a Breast Care Centre was
launched to offer advice and treatment with the ultimate
aim to develop a countrywide screening programme for all
South Africans.
S E X U A L A S S A U LT C E N T R E S
Over the past three years Netcare has developed Sexual
Assault Care Centres to address the need for providing
appropriate treatment to survivors of sexual abuse. Nine
Sexual Assault Care Centres have been established,
adhering to strict treatment and counselling protocols.
N E T C A R E I N T E R N AT I O N A L
Over the past few years, Netcare has researched the effective
use of its intellectual capital and management information
systems internationally in order to expand its’ offering and
identify strategic opportunities. With numerous enquiries
being received about the Group’s turnaround successes by
both Private and State foreign enterprises, there are
significant opportunities for selective consulting and
management services. Three short-term consultancy contracts
were awarded to Netcare International during the year and
are in progress in the United Arab Emirates and Saudi Arabia,
with a total value of US$ 800 000.
In addition, Netcare’s Central Referral Office has been
successfully established in order to market our network of
hospitals and clinics to the increasing number of patients being
referred from outside South Africa. The Group’s facilities
continue to deliver quality healthcare at significantly lower
prices when compared to the United States and Europe.
M AT E R N I T Y / S T O R K S N E S T
In keeping with the Group’s strategy of developing centres
of excellence, Netcare has established an all encompassing
maternity offering to ensure the very best in
gynaecological, obstetric and paediatric care. Seventeen
Mother and Well Baby Clinics, called Stork’s Nest, have
been created to provide a comprehensive range of
antenatal, postnatal and well baby services. In addition,
pregnant women are also offered free complementary
services, such as a three dimensional ultrasound scan; the
Maternity Passport; a package of ancillary benefits and the
Netbaby giftpack.
Over 500 rape survivors have been seen in Gauteng in 2001
alone. A major focus of this division is to increase the
number of charges laid in rape cases. This has risen
dramatically and of all cases seen, 88% resulted in charges
being laid, which is more than double the national
average.
ANNUAL REPORT 2001
32
C O R P O R AT E A N D S O C I A L R E V I E W
As the largest private healthcare provider in South Africa,
Netcare is committed to addressing the healthcare needs
of its communities. Netcare’s corporate and social
responsibility strategy is to focus our efforts around
related healthcare services and within the framework of
our programme, to make healthcare more accessible to
the under-privileged. Netcare aims to be as involved in
caring for the communities outside the hospitals as we are
with our patients inside our hospitals.
T H E N E T C A R E F O U N D AT I O N
During the year the Group established The Netcare
Foundation (formerly The Netcare Endowment Trust) to
manage the distribution of the Group’s sponsorships and
social budget, including donations obtained from third
parties.
The Trust was established as a non-profit trust to promote
medical research and education, to support community
healthcare projects and charitable institutions, including
healthcare related activities for the aged, the poor and
other underprivileged members of the community.
R E S C U E O P E R AT I O N S
Mozambique Floods
At the time of the devastating floods in Mozambique,
Netcare responded by sending a 40-man team with more
than ten tons of medical supplies, food, water and
clothing in order to assist.
The team of nursing sisters and paramedics from Netcare
provided assistance and care over a two week period to
areas in Mozambique that had received no medical care or
emergency supplies after the floods.
Indian Earthquake
In early 2001 a 31-member South African Search and
Rescue team headed for India to join other international
rescue teams following the devastating earthquake.
Netcare played a major role in facilitating the mission,
which was sponsored by the Department of Foreign
Affairs, by sponsoring all communication, food, supplies
and vaccinations.
Cholera Outbreak
Netcare worked closely with the communities in the 2001
KwaZulu Natal outbreak of cholera by donating
intravenous fluids, medication and disinfectants to the
cholera prevention effort.
ANNUAL REPORT 2001
H O S P I TA L S
Netcare’s hospitals all play an active role in their different
communities.
Free Treatment for Needy Patients
Several Netcare hospitals and their staff offer operations
and specialised treatment to needy patients.
Some of the several operations conducted this year
included:
• Corrective spinal surgery for three-year-old Chelsea
Oortmann – removing a metal spinal rod and correcting
her spine.
• Operating on a Siamese twin, Xodwa Langa, to correct
her curved spine.
• Heart surgery on a 13-month-old baby, Peter Malambo.
• Treatment of a patient for acute respiratory distress on
an Extra Corporeal Membrane Oxygenation System
(“ ECMO” ). The ECMO is an extreme life support system
and is the only one of its kind in Africa.
• Treatment for children from the Van Riebeeck Children’s
Home in Cape Town.
Children of Fire
Children of Fire is a non-profit organisation that helps
communities with fire prevention education and severely
burned children with surgery and therapy. Netcare has
played a major role in providing surgeons, nursing and
covering theatre fees for burn victims.
Netcare and Children of Fire is planning reconstructive
surgery for 25 young burn survivors in the first half of 2002
in Netcare’s Gauteng hospitals. The pioneering initiative is
planned to be expanded nationally to help address the
15 000 serious paediatric burn cases a year.
The “ Right To Sight Eye Care” Campaign
During the year, the "Right to Sight Eye Care" Campaign
was launched as a joint venture between the Bureau for
the Prevention of Blindness, a division of the SA National
Council for the Blind, the Ophthalmologic Society of SA,
the SA Optometric Association and private hospital groups
such as Netcare. The focus of the campaign was, and is, to
assist with the surgery of indigent South African patients
having cataracts with their best-corrected vision being
below predetermined levels. In addition, various
Ophthalmologists and Optometrists countrywide
committed themselves to provide screening tests,
spectacles at a reduced cost, and free surgery based on
weekly quotas. Netcare was proud to be associated with
this initiative which ultimately helps eliminate cataract
blindness in people.
33
Christiaan Barnard Memorial Hospital
In memory of Professor Chris Barnard, Netcare has
renamed its Cape Town, City Park Hospital the Christiaan
Barnard Memorial Hospital. Netcare has also formalised an
arrangement with the Christiaan Barnard Foundation in
Austria to ensure the continued treatment of
underprivileged children suffering from heart disease and
related conditions.
Netcare 911
Netcare 911 provides emergency services to a significant
number of indigent patients on an annual basis. If a public
hospital is not available in emergencies, patients are
stabilised at a Netcare hospital without any charge and
then taken to a public hospital. Every year, about
R12-15 million is spent on emergency hospital services to
indigent patients.
Training
Netcare sponsors nurses at universities each year, providing
them with practical experience in hospitals and a two-year
contract on completion of their studies. In addition,
Netcare is a founding member of the Manto TshabalalaMsimang Health Professionals Bursary Trust which provides
bursaries for students from previously disadvantaged
communities wishing to pursue careers in medicine.
Netcare 911 is also involved in assisting local and
provincial services in providing medical services to road
users over holiday periods. Netcare staff joins forces with
their local ambulance services to augment staff levels
during these critical periods.
Screening
Netcare and Medicross provide free screening days during
all South Africa’s health weeks. Some of the services
offered are blood pressure and cholesterol testing, cancer
screening and breast self-examination education. Hospitals
also play an active role during these weeks in fund-raising
events, such as hosting a Cuppa for Cancer day.
Sexual Assault Care Centres
Netcare provides medical and psychological care at several
sexual assault care centres. Netcare is the only private
hospital group providing care to these victims on a pro
deo basis. Netcare also provides free medical training to
health professionals on how to treat sexual assault victims.
A paediatric sexual assault care centre has also recently
been established at Garden City clinic.
Community Projects
Netcare is involved in several community projects, such as
mobile health clinics, first-aid training for domestic
workers and primary school children, education
programmes for children and medical assistance at school
events. Netcare has recently sponsored several provincial
paramedics with global positioning devices that help them
attend to the injured more quickly.
Netcare also runs training programmes for the South
African Police on emergency life saving procedures in the
field where they are issued with medical kits and medical
stocks.
In partnership with Daimler Chrysler, Netcare has
introduced ambulances into two previously disadvantaged
communities and initiated paramedic training and
administrative assistance to develop a sustainable
emergency infrastructure. A further two communities
have been earmarked for 2002.
HIV/AIDS
Netcare has established national HIV clinics where
treatment and medicine are provided at heavily subsidised
rates.
Nurses at several Netcare hospitals volunteer their services
to people living with HIV/AIDS in their communities and in
Gauteng, Netcare funded a house in a village for
abandoned children living with HIV/AIDS in Roodepoort.
As part of its commitment to HIV education, the Group
pioneered an HIV writing competition at different schools,
asking children how they would tackle the HIV problem if
they were the Minister of Health. The winning children
and schools each received a donation from Netcare.
Furthermore, Netcare is a founder donor to the Northern
Province Aids Trust, a new institution dedicated to the
support of people living with HIV/AIDS.
Corporate Donations
Over and above Netcare’s community involvement
projects, many requests for financial assistance from
charities and community-based non-profit organisations
are received and funded during any particular year.
Netcare runs programmes for traffic officers operating in
the field to help them cope with stress and trauma.
ANNUAL REPORT 2001
34
DIRECTORS
Motty Sacks
Dr Jack Shevel
Dr Richard Friedland
Bobby Favish
Ingrid Davis
Dr Reg Bush
Meyer Kahn
Peter Warrener
Dr Sam Rossolimos
Hymie Levin
Dr Johannes Van Rooyen
ANNUAL REPORT 2001
Dr Ian Kadish
Norman Weltman
Sindi Zilwa
Dr Azar Jammine
Piet Lindeque
35
EXECUTIVE DIRECTORS
Michael Sacks❖❈ (58) Chairman
CTA CA(SA) AICPA (ISR)
Michael Sacks acted as an independent corporate advisor for
25 years prior to his appointment as Chairman of Netcare. He has
served and continues to serve as a non-executive director of a
number of listed companies and Empowerment Committees.
Mr Sacks is also an officer of the International Association of
Political Consultants.
Dr Jack Shevel (44) Chief Executive Officer
MBBCh (Wits)
Dr Shevel is known for his exceptional entrepreneurial flair and indepth knowledge of the healthcare industry. The results of his predefined strategy for establishing a healthcare value chain bears
testament to his ability and vision.
Dr Richard Friedland (40) Chief Operating Officer
BVSc (Pret) MBBCh (Wits) Dip Fin Man
Dr Friedland entered the healthcare industry in 1993 after
practising as a Veterinary Surgeon in South Africa and the United
Kingdom for several years. He later joined Medicross and was
responsible for overall operations and establishing the medical
centres on a national basis. Dr Friedland joined Netcare in early 1997
to lead the transformation and re-engineering of the businesses.
Bobby Favish❖ (45) Chief Financial Officer
BCom CA(SA) MBA
Bobby Favish has seven years experience as chief financial officer
for JSE listed companies, as well as ten years experience in
merchant banking where he was involved in a wide range of highlevel corporate finance activities.
Dr Reg Bush (46)
MBBCh (Wits) DCH (SA)
Dr Bush has 13 years’ experience in hospital operations, and
healthcare corporate development. He is currently responsible for
the Gauteng East region and oversees the Group’s involvement in
Ampath, Radiology and Medicross.
He is chairman of the National Hospital Network and MedEmas
(Pty) Limited, serves on the board of trustees of the Ampath
Holdings Trust, and is a non-executive director of a number of
companies, including the IMP Group.
Ingrid Davis (48)
Dip Pharm (MPS)
Ingrid Davis has 20 years’ experience as a qualified pharmacist in
the private hospital industry. Ingrid heads up the division that
provides infrastructural, administration and logistical support
services to the retail pharmacies.
Dr Ian Kadish (39)
MBBCh (Wits) MBA (Wharton)
Dr Kadish has extensive experience in hospital management and
healthcare management consulting in the United States and
Canada.
Dr Kadish is responsible for Information Technology (“ IT” ) and
Managed Care at Netcare and holds directorships in various private
IT and managed care related companies in which Netcare has
interests.
Piet Lindeque (38)
CA(SA)
Piet Lindeque has more than eight years’ healthcare experience
and is the former financial director of the JSE listed Excel Medical
Holdings Limited (“ Excel” ). He is currently responsible for the
financial control of the Gauteng East region and is the manager of
Linmed Hospital.
❖ Board Audit Committee
❈ Board Remuneration Committee
† British
Dr Sam Rossolimos (49)
MBBCh (Wits) (DMS) Dip Bus M Prac Acc
Dr Rossolimos has been involved in the healthcare industry since
1982, with a focus on design, development and management of
hospitals. Since September 1999, when Excel was integrated into
Netcare, Dr Rossolimos has been responsible for Netcare’s
globalisation programmes.
Peter Warrener❈† (40)
BSocSci DPLR Dip Fin Man
Peter Warrener, with 15 years of Human Resource (“ HR” )
management expertise has headed up the HR division since 1997
and has a sound balance of industry and function related
experience and knowledge.
Norman Weltman (53)
CA(SA)
Norman Weltman has been with the Group since 1993. His
portfolios include funder negotiations and relationships, managed
healthcare, radiotherapy and nursing budgets. He is a director of
the Hospital Association of South Africa and the National Hospital
Network.
NON-EXECUTIVE DIRECTORS
Dr Azar Jammine❈ (52)
BSc(Hons) BA(Hons) (Wits) MSC London (LSE) PhD London (LBS)
Dr Jammine has been a Director and Chief Economist of
Econometrix (Pty) Limited since 1985 and a non-executive director
of many other companies, including Federated Employers Mutual,
Iron Fireman, African Merchant Bank and Heckett Multiserv.
Meyer Kahn (62)
BA(Law) MBA DCom(hc) SOE
Mr Kahn is the former managing director and executive chairman
of the South African Breweries Limited. He has served two-and-ahalf years as Chief Executive of the South African Police Service. He
is currently chairman of South African Breweries plc, a director of
companies and trustee of numerous organisations.
Hymie Levin❖❈ (56)
BCom LLB LLM H Dip Tax Law H Dip Co Law (Wits)
Hymie Levin is a specialist corporate and tax lawyer. He is the senior
partner of HR Levin Attorneys and his experience spans more than
thirty years. He is also a non-executive director of various
companies listed on the JSE. The areas of activities covered by such
companies include, inter alia, financial services, the glass industry,
healthcare, education, franchising and resources.
Dr Johannes van Rooyen (46)
MBBCh (Pretoria) M Med (Clin Path) (Stellenbosch)
Dr van Rooyen has significant medical and commercial pathology
experience and is currently the national pathology director of The
Ampath Trust.
Sindi Zilwa (34)
CA (SA) Adv Tax Cert (SA) CFP (SA)
Sindi Zilwa is presently the Executive Chairman of the firm of
Chartered Accountants Nkonki Sizwe Ntsaluba Inc. and having
been appointed to the Netcare Board on 14 November 2001, brings
a wealth of knowledge and expertise to the Group. She is also the
Chairman of the Eastern Cape Provincial Audit committee; deputy
Chairman of the Eastern Cape Provincial Housing Board; a member
of the Competition Tribunal and a director of various listed and
private companies.
ANNUAL REPORT 2001
36
F I N A N C I A L C O M M E N TA R Y
A solid
platform for
future growth
NETCARE HAS DELIVERED EXCELLENT
R E S U LT S
ARE
AND
F I R M LY
THE
IN
F U N D A M E N TA L S
PLACE
TO
DRIVE
SOLID GROWTH INTO THE FUTURE.
O P E R AT I N G R E S U LT S
Netcare’s revenue increased by 25,9% to R3 586,0 million
(2000: R2 848,8 million), with organic growth of 17,4%.
EBITDA amounted to R697,2 million (2000: R547,1 million),
reflecting a 27,4% increase. An analysis of revenue and
EBITDA for the major business divisions is set out
alongside:
Hospitals
EBITDA (Rm)
2001 2000
EBITDA
Margin (%)
2001 2000
3 337,2 2 788,8
672,2 545,1
20,1
19,6
National
Renal Care
34,6
29,6
5,3
4,0
15,3
13,5
Medicross
112,0
N/A
18,6
N/A
16,6
N/A
Traumanet
73,2
21,8
5,5
1,1
7,5
5,0
Other and
unallocated
central costs
29,0
8,6
(4,4)
(3,1)
N/A
N/A
697,2 547,1
19,4
19,2
Total
ANNUAL REPORT 2001
Revenue (Rm)
2001
2000
3 586,0 2 848,8
37
Bobby Favish
CHIEF FINANCIAL OFFICER
S H A R E H O L D E R R E P R E S E N TAT I O N
Institutions, Doctors
and Public
13%
77%
10%
Directors and Management
Public Investment
Commissioner
Although EBITDA margins increased to 19,4% (2000:
19,2%), EBIT margins have decreased marginally to 16,4%
(2000: 16,6%) due to relatively high depreciation costs
incurred in Medicross.
In the Group’s core hospital division, revenue increased by
19,7%, (16,2% ignoring the acquisition of Umhlanga
Hospital). The EBITDA margins for the hospital division
were improved due to increased capacity utilisation and
further efficiencies throughout the division.
The Medicross results have been included from May 2001
and they represent the performance of the Group prior to
the restructuring of their operations, which commenced in
September 2001. This restructuring is anticipated to result
in a significantly improved operating performance in the
2002 financial year.
Net finance charges decreased to R87,6 million (2000:
R96,5 million) reflecting strong cash flows and reduced
interest rates.
The effective taxation rate for the year was 25,4%
(2000: 24,0%). Attributable earnings from associates
amounted to R25,9 million (2000: R22,3 million), an
improvement of 16,1%.
Headline earnings per share (“ HEPS” ) increased by 38,1%
to 27,9 cents (2000: 20,2 cents). Since 1997, the compound
annual growth rate in HEPS has amounted to 29,6%.
The strength of the results is demonstrated by the
significant improvement in the return on ordinary
shareholders’ equity to 24,4% (2000: 19,8%).
ANNUAL REPORT 2001
38
F I N A N C I A L C O M M E N TA R Y
BALANCE SHEET REVIEW
Following the recent change to South African accounting
standards, the Group now accounts for goodwill. Negative
goodwill (effectively the purchase of assets at a discount)
arose during the year as a result of the acquisition of
Medicross.
Vendors for acquisition, amounting to R128,5 million,
relates to the acquisition of Medicross. The amount was
paid subsequent to the year-end in October 2001 from a
long-term loan facility raised for this purpose.
Net interest-bearing debt reduced to R494,1 million (2000:
R577,7 million) resulting in the debt/equity ratio reducing
to 27,4% (2000: 35,8%). Including vendors for acquisition,
the 2001 debt and debt/equity ratio figures amount to
R622,6 million and 34,5% respectively. The reduced debt
levels arose primarily from strong underlying cash flows,
and occurred despite capex of R229 million, a share
buyback (R60,5 million), the acquisition of additional
shares in Clinic Holdings Limited (“ Clinics” ) from the
original vendors of Clinics (R61,0 million) and the
acquisition of the Umhlanga Hospital (R32,5 million).
During the financial year the majority of the Group’s
borrowings were converted into a long-term funding
structure.
CHANGE IN ACCOUNTING POLICY –
I M PA I R M E N T
In terms of the new accounting statement on impairment
of assets (AC 128), the Group has provided an amount of
R26,0 million in 2001 relating to specific properties
included in the property portfolio (currently aggregating
R1 799,3 million at written down value). Although such
impairment occurred in prior financial periods, no prior
year adjustment is permitted in terms of AC128. Headline
earnings have been adjusted to take account of the
impairment provision.
ANNUAL REPORT 2001
S T R AT E
The Company’s ordinary shares are in the process of being
transferred to the new STRATE system of electronic
settlement on the JSE Securities Exchange South Africa
(“ JSE” ). Dematerialisation of the Company’s shares will
commence on 19 November 2001 with the first electronic
settlement taking place on 26 November 2001. From
19 November 2001, all transactions executed on the JSE
will be for electronic settlement and the Company’s share
certificates will no longer be good for delivery.
Full details of the transfer to STRATE were forwarded to
shareholders during September 2001.
C O R P O R AT E R E S T R U C T U R E
A scheme of arrangement (“ the scheme” ) proposed by
Netcare, in terms of which the minorities of Clinics were
acquired by Netcare for a consideration of 170 Netcare
shares for every 100 Clinics shares held, was concluded
after the year-end in October 2001. Consequently, the
necessity to report on Clinics as a separate listed entity no
longer applies. The scheme has simplified the Netcare
structure, with only one JSE listed entity remaining.
In addition, an internal corporate restructure was
completed during the year. The Group’s hospital and
property interests were rationalised into a more practical
corporate structure by eliminating a large number of
separate operating and property companies, while
divisionalising the Group’s operations within appropriate
corporate entities.
F I N A L C A P I TA L D I S T R I B U T I O N
In accordance with the authority given to the directors by
way of an ordinary resolution passed on 4 July 2001, the
Board of directors has declared a final capital distribution
out of share premium of 5,0 cents per ordinary share,
payable to shareholders recorded in the register of the
Company on 8 February 2002. Taken together with the
interim distribution of 3,5 cents per share, the total
distribution paid and to be paid in respect of the 2001
financial year amounts to 8,5 cents (2000: 5,0 cents) per
ordinary share, an increase of 70,0% over the prior period.
39
D I R E C T O R AT E A N D A D M I N I S T R AT I O N
EXECUTIVE DIRECTORS
MI Sacks (58)
CTA CA(SA) AICPA (ISR)
Chairman
Dr J Shevel (44)
MBBCh (Wits)
Chief Executive Officer
Dr RH Friedland (40)
BVSc (Pret) MBBCh (Wits) Dip Fin Man
Chief Operating Officer
SR Favish (45)
BCom CA(SA) MBA
Chief Financial Officer
Dr RH Bush (46)
MBBCh (Wits) DCH (SA)
IM Davis (48)
Dip Pharm (MPS)
Dr I Kadish (39)
MBBCh (Wits) MBA (Wharton)
Director – Managed Care Operations and
Information Technology
PJ Lindeque (38)
CA(SA)
Dr S Rossolimos (49)
MBBCh (Wits) (DMS) Dip Bus M Prac Acc
Chief Executive Officer – International
P Warrener (40)
BSocSci DPLR Dip Fin Man
Director – Human Resources
N Weltman (53)
CA(SA)
NON-EXECUTIVE DIRECTORS
Dr APH Jammine (52)
BSc(Hons) BA(Hons) (Wits) MSC London (LSE)
PhD London (LBS)
JM Kahn (62)
BA(Law) MBA DCom(hc) SOE
HR Levin (56)
B Com LLB LLM H Dip Tax Law H Dip Co Law (Wits)
Dr JA van Rooyen (46)
MBBCh (Pretoria) MMed (Clin Path) (Stellenbosch)
BUSINESS ADDRESS AND
REGISTERED OFFICE
Network Healthcare Holdings Limited
Registration number 1996/008242/06
3rd Floor, Sanlam Park South
9 Fredman Drive (cnr Bute Lane), Sandown
Sandton 2196
South Africa
Private Bag X34, Benmore 2010
Telephone +27 (0) 11 301-0000
T R A N S F E R S E C R E TA R I E S
Ultra Registrars (Pty) Limited
11 Diagonal Street, Johannesburg 2001
PO Box 4844, Johannesburg 2000
Telephone +27 (0) 11 370-5775
P R I N C I PA L B A N K E R S
Investec Bank Limited
Nedcor Bank Limited
BOE Bank Limited
MLS Bank Limited
JOINT AUDITORS
Fisher Hoffman PKF (JHB) INC
Chartered Accountants (SA)
Registered Accountants and Auditors
FHS House, 15 Girton Road
Parktown 2193
Private Bag X30500, Houghton 2041
Grant Thornton Kessel Feinstein
Chartered Accountants (SA)
Registered Accountants and Auditors
Grant Thornton Kessel Feinstein Office Park
137 Daisy Street
Sandown, Sandton 2196
Private Bag X28, Benmore 2010
AT T O R N E Y S
HR Levin
Kentgate, 64 Kent Road (cnr Oxford Road)
Dunkeld 2196
PO Box 52235, Saxonwold 2193
SPONSOR
Merrill Lynch South Africa (Pty) Limited
138 West Street, Sandown
Sandton 2196
J S E S E C U R I T I E S E X C H A N G E I N F O R M AT I O N
Netcare
JSE share code: NTC
ISIN code: ZAE000011953
SV Zilwa (34)
CA (SA) Adv Tax Cert (SA) CFP (SA)
S E C R E TA R Y
J Wolpert (57)
CA(SA) FCMA
ANNUAL REPORT 2001
40
F I V E - Y E A R TA B L E S
2001
Rm
2000
Rm
1999
Rm
1998
Rm
1997
Rm
2 282,4
1 996,5
1 906,7
1 810,8
1 350,3
Balance sheets
Assets
Non-current assets
Property, plant and equipment
Intangible assets
(82,1)
31,2
114,0
643,2
455,7
Investments and loans
122,4
94,5
78,8
148,7
1,7
34,1
33,6
32,0
–
–
2 356,8
2 155,8
2 131,5
2 602,7
1 807,7
Inventories
164,2
151,3
133,0
90,8
63,1
Accounts receivable
855,4
599,6
541,8
579,5
412,0
1 019,6
750,9
674,8
670,3
475,1
3 376,4
2 906,7
2 806,3
3 273,0
2 282,8
1 661,5
1 394,0
1 324,4
1 652,5
1 186,3
144,2
218,8
205,2
173,8
169,7
Total shareholders’ equity
1 805,7
1 612,8
1 529,6
1 826,3
1 356,0
Net interest-bearing debt
494,1
577,7
642,0
775,8
546,7
Deferred taxation
Total non-current assets
Current assets
Total current assets
Total assets
Equity and liabilities
Ordinary shareholders’ equity
Interest of outside shareholders
in subsidiaries
Non-current liabilities
Deferred taxation
100,1
60,0
45,3
2,4
–
976,5
656,2
589,4
668,5
380,1
3 376,4
2 906,7
2 806,3
3 273,0
2 282,8
124,2
105,1
100,4
139,8
140,4
Current liabilities
Total equity and liabilities
Net equity per share (cents)
400
50
360
45
320
40
280
35
350
240
30
300
200
25
160
20
120
15
80
10
40
5
600
550
500
450
400
250
200
150
100
50
0
0
0
’97
’98
’99
’00
’01
C A SH I N FLO W
F R O M O P ERATI N G
A C T I V I T I E S ( Rm )
ANNUAL REPORT 2001
’97
’98
’99
’00
’01
HE ADL I NE
E A R N I N G S (Rm)
’97
’98
’99
’00
’01
DE B T / E QUI T Y
R A T I O (%)
41
Four-year
compound
growth % p.a.
2001
Rm
2000
Rm
1999
Rm
1998
Rm
1997
Rm
Revenue
40,9
3 586,0
2 848,8
2 566,1
2 097,3
909,4
Operating profit before
depreciation (EBITDA)
49,5
Income statements
Depreciation
Operating profit (EBIT)
50,5
Net finance charges
Taxation
697,2
547,1
484,3
389,5
139,5
(108,2)
(73,3)
(73,9)
(58,8)
(24,8)
589,0
473,8
410,4
330,7
114,7
(87,6)
(96,5)
(162,5)
(131,6)
(56,7)
(11,7)
(127,2)
(90,7)
(52,1)
(51,1)
Attributable earnings
of associates
25,9
22,3
19,9
20,4
Outside shareholders’
interests
(27,0)
(39,4)
(31,4)
(20,2)
(13,0)
83,0
373,1
269,5
184,3
148,2
33,3
29,6
27,9
20,2
15,1
13,0
9,9*
8,5
5,0
4,0
1,0•
1,0•
Cash flow statements
2001
Rm
2000
Rm
1999
Rm
1998
Rm
1997
Rm
Cash generated from operations
691,0
534,0
477,9
381,8
139,5
Headline earnings
–
Earnings per share (cents)
Headline
Capital distributions
to shareholders (cents)
*Annualised
• Dividends paid
Working capital movements
74,5
(42,8)
(1,5)
(12,2)
19,7
Net finance charges
(87,6)
(96,5)
(162,5)
(131,6)
(54,7)
Taxation paid
(87,4)
(44,2)
(9,7)
(2,5)
(1,3)
Cash inflow from operating activities
590,5
350,5
103,2
(4,4)•
Capital distributions paid
(86,3)
(99,1)
–
235,5
(7,5)•
Net cash retained
504,2
251,4
304,2
228,0
98,8
(432,2)
(187,1)
(170,4)
(254,3)
(122,6)
Other investing and
financing activities
304,2
Net cash resources/(debt) assumed on
acquisition of subsidiaries
11,6
–
–
(202,8)
(522,9)
Movement in net
interest-bearing debt
83,6
64,3
133,8
(229,1)
(546,7)
At beginning of year
(577,7)
(642,0)
(775,8)
(546,7)
At end of year
• Dividends paid
(494,1)
(577,7)
(642,0)
(775,8)
ANNUAL REPORT 2001
–
(546,7)
42
S U M M A R Y O F S TAT I S T I C S A N D
STOCK EXCHANGE PERFORMANCE
2001
2000
1999
1998
1997
Share performance
Attributable earnings per share
(cents)
basic
25,8
19,4
14,6
12,2
fully diluted
25,0
19,4
N/A
N/A
27,9
20,2
15,1
13,0
9,9*
N/A
(cents)
basic
fully diluted
9,9*
27,1
20,2
N/A
N/A
N/A
(cents)
41,0
22,7
21,5
17,6
26,4
Cash equivalent earnings per share (cents)
38,0
24,7
20,6
16,9
16,8
(%)
107,9
91,9
104,4
104,1
157,1
Capital distribution to shareholders
per share
(cents)
8,5
5,0
4,0
1,0•
1,0•
Capital distribution cover
(times)
3,0
3,9
3,7
12,2
9,9
Net equity per share
(cents)
124,2
105,1
100,4
139,8
140,4
Tangible net equity per share
(cents)
130,3
102,8
91,7
85,4
86,5
(%)
19,4
19,2
18,9
18,8
15,3
Operating profit return on net assets (%)
27,9
23,2
18,4
16,0
6,0
Return on ordinary shareholders’ equity (%)
24,4
19,8
12,4
10,4
2,8
Effective tax rate
(%)
25,4
24,0
21,6
26,9
19,5
(%)
27,4
35,8
42,0
42,5
40,3
(times)
6,7
4,9
2,5
2,5
2,0
year-end
(cents)
199
91
60
82
172
high
(cents)
225
113
128
265
262
low
(cents)
72
55
57
67
115
(cents)
137
82
95
170
198
11 551
6 638
8 774
9 551
12 471
774 485
278 702
380 891
399 506
261 370
Attributable cash flow per share
Cash realisation rate
Returns and productivity
EBITDA margin
Solvency and liquidity
Debt/equity ratio
Interest cover
Stock exchange performance
Market prices per share
Weighted average price traded
Number of share transactions
Value of share transactions
(R’000)
Volume of shares traded
(million)
566,0
340,1
401,9
235,2
131,9
Number of shares in issue
(million)
1 337,7
1 326,2
1 319,7
1 182,2
844,7
(%)
42,3
25,7
30,5
19,9
15,6
(R million)
2 662,0
1 206,8
791,8
969,4
1 452,9
(%)
14,0
22,2
25,2
15,9
6,2
7,1
4,5
4,0
6,3
16,0
Volume traded to issued
Market capitalisation
Earnings yield†
Price: Earnings ratio†
*Annualised
† Based on year-end price
• Dividends paid
ANNUAL REPORT 2001
43
VA L U E A D D E D S TAT E M E N T
T H E VA L U E A D D E D S TAT E M E N T R E F L E C T S T H E T O TA L W E A LT H C R E AT E D B Y T H E G R O U P
I N R E N D E R I N G H E A LT H C A R E S E R V I C E S A N D S H O W S H O W T H E W E A LT H H A S B E E N
D I S T R I B U T E D , B O T H T O M E E T O B L I G AT I O N S A N D T O R E W A R D T H O S E R E S P O N S I B L E
F O R I T S C R E AT I O N .
2001
Rm
2000
Rm
%
%
Turnover
3 586,0
2 848,8
Less: Payments to suppliers of materials and services
1 601,7
1 226,6
Wealth created
1 984,3
1 622,2
100
Shared as follows:
Employees
Salaries, wages and other benefits
1 292,6
66
1 062,8
65
87,6
4
96,5
6
83,4
4
86,1
5
Outside shareholders
24,8
1
39,4
2
127,2
6
90,7
6
Profit retained
260,5
13
173,4
11
Depreciation
108,2
6
73,3
5
1 984,3
100
1 622,2
100
Providers of loan capital
Finance charges paid
Shareholders
Government
Income tax
Re-invested in the Group
N E T D I S T R I B U T I O N O F W E A LT H C R E AT E D
6%
Employees
66%
5%
65%
13%
11%
Providers of loan capital
6%
6%
Shareholders
7%
5%
Government
4%
6%
Profit retained
Depreciation
2 0 0 1
2 0 0 0
ANNUAL REPORT 2001
44
A N A LY S I S O F S H A R E H O L D E R S
Holdings
Breakdown
of shares
Number of
shareholders
Percentage of
shareholders
Number of shares
millions
Percentage of
issued shares
1 – 1 000
1 419
37,9
0,4
0,0
1 001 – 50 000
1 745
46,6
20,4
1,5
50 001 – 100 000
238
6,3
17,1
1,3
100 001 – 10 000 000
324
8,7
209,6
15,7
10 000 001 – 250 000 000
18
0,5
1 090,2
81,5
Totals
3 744
100,0
1 337,7
100,0
Number of
shareholders
Percentage of
shareholders
Number of shares
millions
Percentage of
issued shares
Individuals
3 544
94,7
289,6
21,7
Companies
27
0,7
190,8
14,3
Investment and trust companies
84
2,2
34,8
2,6
Nominee companies
70
1,9
821,8
61,4
Category
Other corporate bodies
Totals
19
0,5
0,7
0,0
3 744
100,0
1 337,7
100,0
SHARE OWNERSHIP AT 30 SEPTEMBER 2001
Major individual holdings
The register of shareholders does not reflect, nor have the directors been informed of, any beneficial shareholdings at
30 September 2001 which represent 5% or more of the total issued shares of the Company other than the following:
Category (note 1)
Number of shares
millions
Percentage of
issued shares
Standard Bank Nominees (Tvl) (Pty) Limited
295,0
22,05
Nedcor Bank Nominees Limited
281,9
21,07
The Netcare Trust (note 2)
133,6
9,99
First National Nominees (Pty) Limited
94,8
7,09
Basfour 2078 (Pty) Limited
78,0
5,83
Notes:
1. Beneficial holding disclosures*
Pursuant to the provisions of Section 140A of the Companies Act, 1973, as amended, the only beneficial shareholding
included in nominee holdings, exceeding 5% in aggregate, was The Public Investment Commissioner (“ the PIC” ). In
aggregate the PIC has a beneficial interest of 133,2 million shares representing 9,96% of issued shares.
2. The Netcare Trust owns, holds or has rights directly or indirectly to 133,6 million shares.
3. Shareholder spread
Other than directors (13 shareholders holding in aggregate 12,23% of the Company’s shares), there were no “ nonpublic” shareholders holding in excess of 10% of the share capital of the Company.
*Excluding directors: For directors’ shareholdings see directors’ report.
ANNUAL REPORT 2001
45
DEFINITIONS
NETCARE GROUP OR “ THE GROUP”
Network Healthcare Holdings Limited and its subsidiaries,
associates and incorporated joint ventures.
NACM
Nacm represents an interest rate expressed as “ nominal
annual cumulative monthly” .
NETCARE
Network Healthcare Holdings Limited.
D E B T / E Q U I T Y R AT I O
Net interest-bearing debt to total shareholders' equity.
ORDINARY SHAREHOLDERS’ EQUITY
Issued share capital, share premium and reserves.
O P E R AT I N G P R O F I T R E T U R N O N A S S E T S
Operating profit and pre-tax income from associates
divided by average capital employed.
NET EQUITY PER SHARE
Ordinary shareholders’ equity divided by the number of
shares in issue at the year-end date.
C A P I TA L E M P L O Y E D
Total shareholders’ equity and net interest-bearing debt.
TA N G I B L E N E T E Q U I T Y P E R S H A R E
Net equity per share adjusted for intangible assets.
EBIT
Earnings before interest and taxation.
EARNINGS PER SHARE
Earnings attributable to ordinary shareholders divided by
the weighted average number of shares in issue during
the year.
EBITDA
Earnings before interest, taxation, depreciation and
amortisation.
HEADLINE EARNINGS
This comprises the earnings attributable to ordinary
shareholders after adjusting for profits and losses on items
of a capital nature in accordance with the guidelines set
out in AC306.
RETURN ON ORDINARY SHAREHOLDERS’
EQUITY
Headline earnings attributable to ordinary shareholders
divided by average ordinary shareholders' equity.
T O TA L S H A R E H O L D E R S ’ E Q U I T Y
Ordinary shareholders’ equity and outside shareholders'
interests.
INTEREST COVER
Operating profit before exceptional items divided by
interest paid.
AT T R I B U TA B L E C A S H F L O W P E R S H A R E
Cash inflow from operating activities after adjusting for
minority interests divided by the weighted average
number of shares in issue during the year.
C A S H E Q U I VA L E N T E A R N I N G S
This comprises the earnings attributable to ordinary
shareholders after adjusting for attributable non-cash
charges and credits, including equity accounted retained
earnings divided by the weighted average number of
shares in issue during the year.
C A S H R E A L I S AT I O N R AT E
This is the rate at which cash equivalent earnings are
actually realised and is derived by dividing cash flow per
share by cash equivalent earnings per share.
THE JSE
The JSE Securities Exchange South Africa.
ANNUAL REPORT 2001
46
C O R P O R AT E G O V E R N A N C E
INTRODUCTION
The Netcare Group remains fully committed to the
principles of effective Corporate Governance and
application of the highest ethical standards in the conduct
of its business. The Group endorses the principles of
integrity and accountability advocated by the Code of
Corporate Practices and Conduct set out in the King report
on Corporate Governance. Efforts have been made in the
Group over a number of years to conform to current
international trends towards improving transparency in
reporting and accountability. In all dealings the Group
The primary responsibilities of the Board include regular
review of strategic direction of investment decisions and
performance against approved plans, budgets and best
practice standards. The Board retains full and effective
control over the organisation and decisions on material
matters are reserved by the Board. The Board meets at
least four times annually and more frequently if
circumstances
or
decisions
require.
Meetings
are
conducted in accordance with a formal agenda, ensuring
that all substantive matters are properly addressed.
Standing sub-committees of the Board have been
foremost in its decisions and that they are fully informed
appointed, details of which are set out below, while ad
hoc sub-committees are created as and when necessary.
of the process.
All directors have access to the advice and services of the
BOARD OF DIRECTORS
The Board currently comprises five non-executive and
Group’s secretariat who is responsible to the Board. The
directors are also entitled to seek professional advice
11 executive directors. During the financial year, changes
in the institutional shareholder profile resulted in the
about the affairs of the Group and have unrestricted
access to all company information, records, documents
resignation of two non-executive directors.
and property.
No executive director has a service contract exceeding two
BOARD SUB-COMMITTEES
years. Generally, directors have no fixed term of
appointment but retire by rotation every three years and,
if available, are considered for re-appointment at the
annual general meeting.
Executive Management Committee
The executive directors meet on a regular basis to
consider, inter alia, major investment and capital
expenditure proposals, general operational matters, and
various issues of strategic importance to the Group.
strives to ensure that the interests of stakeholders are
The Board presently considers it to be in the Group’s
interest to maintain the office of executive chairman.
Board Remuneration Committee
The Board Remuneration Committee is responsible for
approving the remuneration of executive directors.
Independent external studies and comparisons are used to
ensure that remuneration is market related and is linked
to both individual and company performance.
Membership of the Remuneration Committee comprises
two non-executive directors and the Chairman. Refer to
page 35 for details of membership.
ANNUAL REPORT 2001
47
Board Audit Committee
EMPLOYEES
The Audit Committee is responsible for overseeing on
behalf of the Board and reporting to the Board on the
The Group believes that the importance of the effective
development of its people cannot be over-emphasised and
financial reporting process, the audit thereof, the internal
represents a key factor in the success of the Group. The
control of the business and its review. For details of
membership refer to page 35.
human resource policies in operation are directed by a
broad framework of corporate values and are driven by
The Audit Committee is constituted as a sub-committee of
the board and comprises three members. The chairman is
the need to ensure effective utilisation and investment in
human resources. Merit and competence are the two
a non-executive director. The Audit Committee meets
criteria for advancement in the Company; however, the
formally at least three times per annum to consider
diversity of the cultures existing in the Group is
acknowledged and appreciated. The Group continually
financial reporting issues and to advise the Board on a
range of matters, including corporate governance
seeks to redress historical imbalances so that all employees
practices, internal control policies and procedures, and
internal and external audit management. The external
can compete on equal terms. The Group actively
participates in initiatives directed at the economic
auditors attend the formal committee meetings and also
empowerment of previously disadvantaged groups in the
have unrestricted informal access to the chairman of the
Audit Committee.
South African community and expects that extensive
benefits will accrue from this process in the short and
ETHICS
The Group strives to ensure that directors and employees
maintain the highest ethical standards of business
practice, which extend to the selection of the Group’s
business partners and suppliers. In any instance where
ethical standards are called into question, the
circumstances are investigated and, where necessary, dealt
with by an appropriate executive.
The Group has developed principles of conduct designed
to give a clear guide to the expected behaviour of all
employees.
longer terms. The Group also operates a share incentive
scheme to enable employees to participate, on merit, in
the equity of the Group.
The Group recognises the rights of employees with regard
to freedom of association and representation within the
context of corporate economic viability arising from its
responsibility to its shareholders. The Group affirms that
employees have the right to choose whether or not they
wish to participate in organised labour structures and has
provided assistance to employees to set up employee
forums.
The Group is mindful of the professional codes which
govern the conduct and ethics of health professionals in
South Africa. The Group supports the Health Professions
Council in all its endeavours to enforce any breaches of its
code, its principles and its values.
ANNUAL REPORT 2001
48
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
• the Board of directors should, at least annually, conduct
The Board is responsible for preparing the financial
statements and other information presented in reports to
a review (internally or outsourced) of the effectiveness
of the Group’s system of internal control and should
shareholders in a manner that fairly presents the state of
report to the shareholders that they have done so,
affairs and results of the Group’s business operations. The
external auditors are responsible for carrying out an
independent examination of the financial statements in
accordance with South African Auditing Standards.
The annual financial statements are prepared in
laying out the findings of such review;
• the review should include an opinion, which covers all
controls, including financial, operational and
compliance control and risk management; and
accordance with South African Statements of Generally
• the review should explain how an opinion on the
internal controls has been reached.
Accepted Accounting Practice, based on appropriate
accounting policies which have been consistently applied
Various elements of this process are already in place and
and are supported by reasonable and prudent judgements
and estimates.
Going Concern
The financial statements have been prepared on a going
concern basis and there is no reason to believe that the
Group will not continue as a going concern in the next
financial year.
INTERNAL CONTROL AND INTERNAL AUDIT
The Board is responsible for ensuring that appropriate
internal control systems are maintained to endeavour to
ensure that company assets are safeguarded and
managed, and losses arising from fraud and or other
illegal acts are minimised. Control systems are continually
the Group is awaiting the guidance to be provided by the
Report on Corporate Governance for South Africa to be
issued by the King Committee on Corporate Governance,
expected in March 2002 (“ King 2” ).
RISK MANAGEMENT
The Board, in liaison with senior executives, is responsible
for the overall risk management, which is a process of
identifying and managing the risk factors across the Group.
The Group has an independent risk management
department which is involved in the implementation and
monitoring of processes designed to incorporate a risk
management philosophy into the day to day activities of
the Group.
monitored and improved in accordance with generally
accepted best practices.
Risk management is addressed in the areas of general
business risks, credit risks, exchange rate exposure,
insurable losses, interest rates and liquidity risks.
The internal audit department is a function established at
Group level, reporting to the Audit Committee, to assist
executive management and the Audit Committee in the
S TA K E H O L D E R C O M M U N I C AT I O N
effective discharge of their respective responsibilities, by
means of independent financial, internal control and
operational systems reviews.
Nothing has come to the attention of the Board of
directors to indicate that any material breakdown in the
functioning of the abovementioned internal controls and
systems has occurred during the year under review.
The Group is reviewing the requirement set out in
paragraph 22.9.1 of Schedule 22 of the JSE Listings
Requirements whereby:
ANNUAL REPORT 2001
The Board considers that balanced and understandable
communication of the Group’s activities to stakeholders is
essential and strives to clearly present any matters
material to a proper appreciation of the Group’s position.
The interests and concerns of stakeholders are addressed
wherever
possible
by
communicating
material
information, as it becomes known, regardless of the
potentially positive or negative impact.
The Company adopts a proactive stance in disseminating
appropriate operational information to stakeholders
through print and electronic news releases and the
statutory publishing of the Group’s financial performance.
N E T W O R K H E A LT H C A R E H O L D I N G S L I M I T E D
ANNUAL REPORT 2001
49
FOR THE YEAR ENDED 30 SEPTEMBER 2001
A N N U A L F I N A N C I A L S TAT E M E N T S
Directors’ Approval of the Annual Financial Statements
50
Certificate by Secretary
50
Report of the Independent Auditors
51
Directors’ Report
52 – 54
Principal Accounting Policies
55 – 57
Balance Sheets
58
Income Statements
59
Cash Flow Statements
60
Statements of Changes in Shareholders’ Equity
61
Notes to the Financial Statements
62 – 73
Annexure A – Investment in Principal Subsidiaries
74
Annexure B – Interest in Principal Associated
Entities and Joint Ventures
75
ANNUAL REPORT 2001
A N N U A L F I N A N C I A L S TAT E M E N T S F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 0 1
F I N A N C I A L TA B L E O F C O N T E N T S
50
D I R E C T O R S ’ A P P R O VA L
O F T H E A N N U A L F I N A N C I A L S TAT E M E N T S F O R T H E Y E A R E N D E D 3 0 S E P T E M B E R 2 0 0 1
The directors of Network Healthcare Holdings Limited
are responsible for the preparation and integrity of the
annual financial statements of the Company and the
Group. The Group’s external auditors are engaged to
express an independent opinion on these annual financial
statements.
In order to fulfil this responsibility, the Group maintains
internal accounting and administrative control systems
designed to provide reasonable assurance that assets
are safeguarded and that transactions are executed and
recorded in accordance with the Group’s policies and
procedures.
The directors are satisfied that such accounting and
administrative control systems have been maintained
during the year.
The annual financial statements are prepared on a
going-concern basis and in accordance with South African
Statements of Generally Accepted Accounting Practice.
These financial statements are examined by our auditors in
conformity with South African Auditing Standards.
The annual financial statements were approved by the
directors on 14 November 2001 and are signed on their
behalf by:
Michael I Sacks
Chairman
Sandton
C E R T I F I C AT E B Y S E C R E TA R Y
I hereby certify, that in accordance with section 268(G)(d)
of the Companies Act 1973, as amended, the Company
has lodged with the Registrar of Companies all such
returns as are required of a public Company in terms
of the Act and that such returns are true, correct and
up to date.
J Wolpert CA(SA) FCMA
Secretary
Sandton
14 November 2001
ANNUAL REPORT 2001
Dr Jack Shevel
Chief Executive Officer
52
DIRECTORS’ REPORT
Your directors have pleasure in presenting their report on the activities of the Company and of the Group for the year
ended 30 September 2001.
N AT U R E O F B U S I N E S S
Netcare is an investment holding Company and through it’s subsidiaries carries on the business as South Africa’s largest
surgical and medical private hospital group, providing an extensive range of general and specialised medical care services
throughout South Africa.
F I N A N C I A L R E S U LT S
The results are set out in the annual financial statements. Comments thereon are provided in the Chairman’s and Chief
Executive Officer’s Statement, the Chief Operating Officer’s Review and the Financial Commentary.
S U B S I D I A R I E S , A S S O C I AT E S A N D J O I N T V E N T U R E S
During the period under review the Group acquired 100% of Medicross Healthcare Holdings (Pty) Limited for
R128,5 million. The effective date was 1 May 2001 and the purchase consideration was settled after the year-end on
30 October 2001.
In addition, the balance (80%) of the Umhlanga Medical Centre, previously an associate, was acquired for R32,5 million
including external debt assumed of R8,9 million. The effective date was 1 October 2000 and the purchase consideration
was settled in cash.
Details of interests in subsidiaries, associates and joint ventures are shown on pages 74 and 75.
A G G R E G AT E P R O F I T S A N D L O S S E S O F S U B S I D I A R I E S , A S S O C I AT E S A N D J O I N T
VENTURE INTERESTS
The aggregate profits and losses of the subsidiaries, associates and joint ventures attributable to the holding Company are:
2001
2000
Rm
Rm
Profits after taxation
Losses
406,6
(55,3)
273,5
(14,6)
Net
351,3
258,9
S P E C I A L R E S O L U T I O N S A D O P T E D B Y S U B S I D I A RY C O M PA N I E S
The statutory information relating to special resolutions passed by subsidiary companies, is available from the registered
office on request.
S H A R E C A P I TA L
Authorised and issued
Details of the authorised and issued share capital of the Company are reflected in note 6 to the annual financial
statements.
Issued during the year
66 487 083 (2000: 9 975 000) ordinary shares were issued as follows:
Details
Ampath final adjustment
Employee Share
Incentive Scheme
Netcare Trust
Vendors of Clinics settlement
Total shares issued
Date
Number of
shares
2001
Issue
price
R
October 2000
7 106 500
0,80
Various
November 2000
December 2000
9 380 583
40 000 000
10 000 000
0,83
1,10
0,80
66 487 083
The total amount of share premium arising from the above share issues was R64,2 million (2000: R9,9 million).
ANNUAL REPORT 2001
53
S TAT E M E N T O F C H A N G E S I N S H A R E H O L D E R S ’ E Q U I T Y
AT 3 0 S E P T E M B E R 2 0 0 1
Acquisition of Company’s own shares
Authority
At a general meeting of shareholders held on 14 April 2000, the Company’s Articles of Association were amended to allow
the Company to acquire its own shares if shareholders have, by way of special resolution, either given the Company a
general authority to effect such purchase or a specific authority to effect a specific purchase of its own shares, subject to
the requirements of the Companies Act, 1973, as amended, and the JSE Listings Requirements.
Members will be requested to consider a special resolution at the Annual General Meeting giving the directors general
authority to permit the Company or a subsidiary of the Company to acquire its own shares.
Treasury shares acquired
During the year a subsidiary Company acquired 55 000 000 (2000: 3 479 452) ordinary shares at a cost of R60,5 million
(2000: R2,9 million).
Directors and secretary
Details of the Company’s directors and secretary appear on page 39. The following changes have occurred during the
period under review:
Resigned
Mr TM Motsisi and Mr DAJ Donald resigned as non-executive directors on 31 October 2000 and 23 March 2001
respectively. Mr RH Magennis resigned on 1 December 2000. Mr DS Avnit did not offer himself for re-election as a director
at the Annual General Meeting held on 23 January 2001.
Appointed
Mrs SV Zilwa CA(SA) was appointed to the Board on 14 November 2001. Mrs Zilwa is the chairperson of Nkonki Sizwe
Ntsaluba, Chartered Accountants (SA).
Retiring directors
Messrs. RH Bush, SR Favish, RH Friedland, PJ Lindeque, J Shevel and Mrs SV Zilwa retire in accordance with the Company’s
Articles of Association at the Annual General Meeting to be held on 25 January 2002, but offer themselves for re-election.
Interests of directors
The beneficial and non-beneficial interests of the directors of Netcare in Netcare shares and share options at 30 September
2001, were as follows:
Beneficial
Non-beneficial
Total
Average
number of
number of
number of
strike
shares
shares
shares Unexercised
price
Name of director
Direct
Indirect
Direct
Indirect
held
options
(cents)
Executive directors
MI Sacks
Dr J Shevel
Dr RH Friedland
SR Favish
Dr RH Bush
IM Davis
Dr I Kadish
PJ Lindeque
Dr C Rossolimos
N Weltman
P Warrener
Non-executive directors
HR Levin
JA van Rooyen
Total
2 000 000
2 000 000
4 318 450
9 100
1 616 082
3 160 773
1 204 392
50 148
1 472 042
1 280 000
1 250 000
650
650
650
1 900
000
000
000
000
44 259 041
81 290 394
7 692
1 760 000
650 000
2 248 682
46
83
4
3
1
3
1
2
1
1
1
909
940
976
669
616
810
204
298
472
280
250
041
394
142
100
082
773
392
830
042
000
000
260 468
240 791
549 069
128 437
10 000 000
10 937 974
240 791
18 862 246
5 049 069
1 888 437
137 805 809
163 605 561
4
4
4
1
2
2
1
1
2
300
200
200
720
554
920
920
154
210
920
1 720
000
000
000
000
000
000
000
000
000
000
000
27 818 000
Directors holding in excess of 1% in Netcare are: Dr J Shevel 6,27% and Mr MI Sacks 3,51%.
(At 30 September 2000 directors held, in the aggregate, 84 858 639 shares).
ANNUAL REPORT 2001
64,7
63,8
63,8
64,7
76,2
63,6
64,4
93,4
96,6
67,0
64,7
54
DIRECTORS’ REPORT
Directors’ meetings
During the period four meetings of the directors of the Company were held. Details of directors’ attendances are:
Names of directors
No. of meetings attended
Dr RH Bush, IM Davis, SR Favish, Dr RH Friedland, Dr I Kadish, JM Kahn, PJ Lindeque, MI Sacks, Dr J Shevel,
P Warrener and N Weltman
APH Jammine and HR Levin
C Rossolimos and Dr JA van Rooyen
4
3
2
Contracts
The following directors are restrained from competing with the Group and have entered into service agreements with the
Company for periods not exceeding one year:
IM Davis, SR Favish, Dr RH Friedland, Dr I Kadish, Dr J Shevel, P Warrener and N Weltman.
Details of the capital distributions for the year are:
2001
Rm
2000
Rm
Interim distribution of 3,5 cents (2000: 2,5 cents) per share paid on 13 July 2001
46,9
33,0
Final distribution of 5,0 cents (2000: 2,5 cents) per share payable on 11 February 2002
71,8
33,2
118,7
66,2
Capital distributions are accounted for on the date of declaration. As a result, the final capital distribution is not reflected
in the financial statements for the year ended 30 September 2001.
Employee Share Incentive Scheme
The Network Healthcare Holdings Limited Share Incentive Scheme has been established for the purpose of facilitating the
acquisition of shares in the Company by the Group’s employees. At 30 September 2001 approximately 95,1 million (2000:
77,9 million) shares had been “ reserved” from the capital of Netcare in respect of options granted to employees to acquire
shares in the Company. 27,7 million options were exercisable at R1,00 per share in five equal annual tranches from
1 June 2000 and the balance are exercisable at R0,62 per share in five equal annual tranches from 1 June 2001. A summary
of share option movements during the year is reflected in note 6.
Settlement of claims
The protracted litigation with the vendors of Clinics and the price adjustment claims between Netcare and Clinics were
satisfactorily settled during the period under review. Shareholders are referred to the press announcements dated
14 December 2000 and 3 April 2001 for further details.
Events after the balance sheet date
A scheme of arrangement (“ the scheme” ) proposed by Netcare, in terms of which the shares of the minorities of Clinics
were acquired by Netcare in consideration for the issue of 170 Netcare shares for every 100 Clinics shares held, was
concluded subsequent to the year-end in October 2001.
This resulted in the issue during October 2001 of an additional 98,5 million Netcare shares.
Shareholders are referred to the press announcement dated 31 August 2001 for further details.
ANNUAL REPORT 2001
55
S T A T E M E N T O F C H APNRGI N
E SC I IPNA LS HAACRCEOHUONLTDI E
N RGS ’P O
EQ
L IUC II TE Y
S
AT 3 0 S E P T E M B E R 2 0 0 1
B A S I S O F P R E S E N TAT I O N
The annual financial statements are prepared on the
historical cost basis and incorporate the following
principal accounting policies which are consistent with
those of the previous year, save for the changes set out on
page 57, and comply with South African Statements of
Generally Accepted Accounting Practice.
B A S I S O F C O N S O L I D AT I O N
The Group annual financial statements incorporate those
of the Company, its subsidiaries and a proportionate share
of the annual financial statements of joint ventures;
results
of
associates
are
equity
accounted.
The results of subsidiaries or joint ventures acquired are
included from the effective dates of acquisition to the
effective dates of disposal. Inter-company transactions and
balances have been eliminated.
GOODWILL
Goodwill is the excess of the cost of shares acquired over
the attributable fair value of the net assets of subsidiaries,
associates and joint ventures at dates of acquisition and is
amortised on the straight line basis over its estimated
useful life up to a maximum of 20 years. Where the net
assets of a subsidiary, associate or joint venture at date of
acquisition exceed the cost of the shares acquired, the
excess (negative goodwill) is included in goodwill.
Negative goodwill is released to the income statement
over a period not exceeding 20 years.
I M PA I R M E N T
The carrying value of assets is reviewed at balance sheet
date to assess whether there is any indication of
impairment. If any such indication exists, the recoverable
amount of the asset is estimated. Where the carrying value
exceeds the estimated recoverable amount, such assets are
written down to their recoverable amounts.
SUBSIDIARIES
Subsidiaries are enterprises controlled by the Company.
Control is achieved where the Company has the power to
govern the financial and operating policies of an investee
enterprise so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during
the year are included in the consolidated income
statement from the effective date of acquisition up to the
effective date of disposal.
I N V E S T M E N T I N A S S O C I AT E S
An associate is an enterprise in which the Group has
between 20% and 50% of the voting rights, or over which
the Group exercises significant influence but which is
neither a subsidiary or a joint venture. Investments in
associates are accounted for under the equity method in
the preparation of the Group annual financial statements,
adjusted for impairment losses.
Details of the Group’s principal associates are set out in
Annexure B.
JOINT VENTURES
A joint venture is a contractual arrangement between the
Company and another party to undertake an economic
activity which is subject to agreed sharing of control.
Interests in joint ventures are stated at cost less any
provision for impairment. In the consolidated financial
statements, interests in joint ventures are accounted for
using the proportionate consolidation method.
Additional details about the Group’s principal joint
ventures are reflected in Annexure B.
P R O P E R T Y, P L A N T A N D E Q U I P M E N T
Freehold property is stated at cost adjusted for
impairment losses. No depreciation is provided on
properties and details of the latest valuations are reflected
on page 62.
Borrowing costs and certain direct costs relating to major
capital projects are capitalised during the period of
construction.
Initial supplies of medical instruments acquired when
establishing or expanding a hospital, as well as
replacements of instruments, are stated at cost. The
depreciation charge for medical instruments is the
estimated average level of expenditure required to
maintain their operating capability, and approximates to a
straight-line write down over five years.
Other items of plant and equipment are depreciated on
either the straight-line or reducing balance bases at rates
calculated over the following estimated useful lives:
Hospital plant and equipment
three – ten years
Medical instruments
five years
The identifiable assets and liabilities of enterprises
acquired are assessed and included in the balance sheet at
their fair values at the date of acquisition.
A schedule of the Group’s principal subsidiaries is set out
in Annexure A.
ANNUAL REPORT 2001
56
P R I N C I PA L A C C O U N T I N G P O L I C I E S
DEVELOPMENT EXPENDITURE
Development expenditure is deferred until the project to
which it relates commences trading. This expenditure is
then written off over periods varying between three and
ten years. Where a project is terminated, the related
development expenditure is immediately written off.
FINANCE LEASES
Assets held under finance leases are capitalised. At the
commencement of the leases, these assets are recorded at
their cash cost equivalent and the related liability is
recognised at an equivalent amount. Finance charges are
charged over the periods of the leases based on the
effective rates of interest.
FOREIGN CURRENCIES
Transactions and balances
Transactions denominated in foreign currencies are
translated at the rate of exchange ruling at the
transaction date. Monetary items denominated in foreign
currencies are translated at the rate of exchange ruling at
the balance sheet date. Gains or losses arising on
translation are credited to or charged against income.
Where foreign exchange contracts have been entered into
to hedge the exposure for recognised foreign
denominated transactions, these foreign exchange
contracts are designated as fair value hedges. Fair value
hedges are measured to fair value with the resultant gains
or losses being charged against income.
INVENTORIES
Inventories, comprising drugs and medical supplies, are
valued at the lower of cost and net realisable value,
determined on the first-in, first-out basis. Consumables,
including crockery, cutlery, linen and soft furnishings are
valued at average cost and written down with regard to
their age and condition.
PROVISIONS
Provisions are recognised when the Group has a present
legal or constructive obligation as a result of past events,
for which it is probable that an outflow of resources
embodying economic benefits will be required to settle
the obligation, and a reliable estimate of the amount of
the obligation can be made.
INCOME RECOGNITION
Revenue comprises the amount charged to patients for
nursing fees, theatre fees, drugs and medical supplies and
excludes value added tax. Revenue within the Group is
eliminated on consolidation. Revenue also includes
administration fees charged to third parties.
Revenue from charges to patients is recognised when the
service giving rise to this revenue is rendered.
Interest is recognised on a time proportion basis that takes
into account the effective yield on the asset.
Dividends are recognised when the shareholders’ right to
receive payment is established.
Foreign entities
Foreign operations in which the Group has an interest but
whose activities are not an integral part of the Group. The
financial statements of foreign entities are translated into
South African Rand as follows:
RETIREMENT BENEFITS
Retirement funds
Current contributions to the Group’s defined contribution
retirement funds are based on current service and current
salary and are recognised in the results for the year.
• assets, including intangibles such as goodwill and
liabilities, at rates of exchange ruling at balance sheet
date; and
Medical funds
Medical aid contributions are recognised as an expense in
the period during which the employees render services to
the Group. Post-retirement medical aid contributions are
charged against income in the year they become payable.
• income, expenditure and cash flow items at weighted
average rates.
All resulting exchange differences are reflected in a
foreign currency translation reserve as part of
shareholders’ equity. On disposal, such translation
differences are recognised in the income statement as part
of the cumulative gain or loss on disposal.
ANNUAL REPORT 2001
EXCEPTIONAL ITEMS
Exceptional items are material items of income and
expense resulting from occurrences, the underlying nature
of which is not typical of the ordinary trading or operating
activities of the Group.
57
AT 3 0 S E P T E M B E R 2 0 0 1
TA X AT I O N
Deferred taxation is provided using the balance sheet
liability method. Full provision is made for all temporary
differences between the taxation base of an asset or
liability and its balance sheet carrying amount. Deferred
taxation assets are raised in respect of assessed losses
where it is probable that future taxable profits will be
available for utilisation in the foreseeable future.
FINANCIAL INSTRUMENTS
Financial assets are recognised when the Group has rights
or other access to economic benefits. Such assets consist of
cash, equity instruments, a contractual right to receive
cash or another financial asset, or a contractual right to
exchange financial instruments with another entity on
potentially favourable terms. Financial liabilities are
recognised when there is an obligation to transfer benefits
and that obligation is a contractual liability to deliver cash
or another financial asset or to exchange financial
instruments with another entity on potentially
unfavourable terms. If a legally enforceable right exists to
set-off recognised amounts of financial assets and
liabilities, which are in determinable monetary amounts,
and the Group intends to settle on a net basis, the relevant
financial assets and liabilities are offset and are not
disclosed separately.
D E R I VAT I V E F I N A N C I A L I N S T R U M E N T S
The derivative financial instruments used by the Group,
which are used solely for hedging purposes, comprise
interest rate swaps. Such derivative instruments are used
to alter the risk profile of an existing underlying exposure
of the Group in line with the Group’s risk management
policies.
Interest rate differentials under swap arrangements used
to manage interest rate exposures, are recognised by
adjustment to net interest payable. Premiums or discounts
arising on the purchase of derivative instruments are
amortised over the shorter of the life of the instrument
and the underlying exposure.
CHANGES IN ACCOUNTING POLICIES
The Group prepares its financial statements in accordance
with South African Statements of Generally Accepted
Accounting Practice. During the year under review the
Group changed its accounting policies in respect of
provisions, impairment and intangible assets, in
compliance with these statements.
These changes in accounting policies had no material
effect on the reported earnings save for the impairment
loss on properties, details of which are set out in note 1.
Interest costs are charged against income in the year in
which they are incurred. Premiums or discounts arising
from the difference between the net proceeds of financial
instruments purchased or issued and the amounts
receivable or repayable at maturity are taken to net
interest payable over the life of the instrument.
Financial assets and liabilities are valued either at cost or
at fair value, which includes the utilisation of discounted
cash flow models where appropriate. Where the fair value
of an asset’s carrying amount falls below the asset’s
carrying value, any difference is, in the case of long-term
assets, provided for if it is regarded that an impairment
exists. In the case of short-term assets, provision is only
made to the extent that it is considered as resulting in a
lower net realisable value.
ANNUAL REPORT 2001
58
BALANCE SHEETS
AT 3 0 S E P T E M B E R 2 0 0 1
Group
Company
2001
2000
Rm
Rm
Notes
2001
Rm
2000
Rm
1
2 282,4
1 996,5
Intangible assets
2
(82,1)
31,2
–
–
Investments and loans
3
122,4
94,5
1 423,7
1 304,3
Deferred taxation
9
34,1
33,6
–
–
2 356,8
2 155,8
1 423,7
1 304,3
Assets
Non-current assets
Total non-current assets
–
–
Current assets
Inventories
4
164,2
151,3
–
–
Accounts receivable
5
855,4
599,6
0,5
–
1 019,6
750,9
0,5
–
3 376,4
2 906,7
1 424,2
1 304,3
767,6
844,0
827,6
846,9
Total current assets
Total assets
Equity and liabilities
Capital and reserves
Share capital and premium
6
Reserves
7
Ordinary shareholders’ equity
Interest of outside shareholders in subsidiaries
Total shareholders’ equity
893,9
550,0
395,3
402,7
1 661,5
1 394,0
1 222,9
1 249,6
144,2
218,8
–
–
1 805,7
1 612,8
1 222,9
1 249,6
8
494,1
577,7
67,0
47,5
9
100,1
60,0
–
–
10
695,8
500,5
5,5
6,9
Vendors for acquisition
128,5
–
128,5
–
Current taxation
152,2
155,7
0,3
0,3
Non-current liabilities
Deferred taxation
Current liabilities
Accounts payable
Total current liabilities
976,5
656,2
134,3
7,2
3 376,4
2 906,7
1 424,2
1 304,3
124,2
105,1
Net equity per share (cents)
ANNUAL REPORT 2001
59
I N C O M E S TAT E M E N T S
Group
Notes
2001
Rm
2000
Rm
Revenue
11
3 586,0
2 848,8
Net operating costs before depreciation
12
(2 888,8)
(2 301,7)
Operating profit/(loss) before depreciation
697,2
547,1
Company
2001
2000
Rm
Rm
–
–
(1,5)
(0,3)
(1,5)
(0,3)
Depreciation
13
(108,2)
(73,3)
Operating profit/(loss)
13
589,0
473,8
(1,5)
(0,3)
Net finance (charges)/income
14
(87,6)
(96,5)
(5,9)
0,9
501,4
377,3
(7,4)
0,6
Profit/(loss) before exceptional items
Exceptional items
15
Profit/(loss) before taxation
Taxation
16
Profit/(loss) after taxation
Attributable earnings of associates
(31,4)
(10,0)
470,0
367,3
(127,2)
(90,7)
342,8
276,6
25,9
22,3
Profit/(loss) after taxation including associates
368,7
298,9
Outside shareholders’ interests
(24,8)
(39,4)
Earnings/(loss) attributable to ordinary shareholders
343,9
259,5
–
–
(7,4)
–
(7,4)
–
(7,4)
–
–
–
0,6
–
0,6
–
0,6
–
(7,4)
0,6
Earnings per share (cents)
Attributable
17.1
25,8
19,4
Headline
17.2
27,9
20,2
Interim
3,5
2,5
3,5
2,5
Final
5,0
2,5
5,0
2,5
Capital distributions (cents)
ANNUAL REPORT 2001
60
C A S H F L O W S TAT E M E N T S
Group
Company
2001
2000
Rm
Rm
Notes
2001
Rm
2000
Rm
Cash generated from operations
18.1
691,0
534,0
(1,5)
(0,3)
Working capital movements
18.2
74,5
(42,8)
(1,9)
5,5
765,5
491,2
(3,4)
5,2
(87,6)
(96,5)
(5,9)
0,9
(87,4)
(44,2)
590,5
350,5
(9,3)
6,1
Capital distributions paid
(86,3)
(99,1)
(83,4)
(86,0)
Cash generated from operating activities
Net finance charges
Taxation paid
18.3
Net cash retained
Cash utilised in investment activities
–
–
504,2
251,4
(92,7)
(79,9)
(425,5)
(179,7)
9,1
31,6
Investment to maintain operations
18.4
(69,7)
(39,2)
–
–
Investment to expand operations
18.5
(201,8)
(137,6)
9,1
31,6
Net investment in subsidiaries
18.6
Share re-purchase
–
–
(60,5)
(93,5)
(2,9)
–
–
–
(6,7)
(7,4)
64,1
–
(19,5)
Cash effects of financing activities
Net equity movements
18.7
72,0
64,3
Net cash resources assumed on acquisition of subsidiaries
11,6
–
Increase in cash and cash equivalents
83,6
64,3
(19,5)
(48,3)
At beginning of year
(577,7)
(642,0)
(47,5)
0,8
At end of year
(494,1)
(577,7)
(67,0)
(47,5)
–
(48,3)
–
ANNUAL REPORT 2001
61
S TAT E M E N T S O F C H A N G E S I N S H A R E H O L D E R S ’ E Q U I T Y
AT 3 0 S E P T E M B E R 2 0 0 1
Group
Company
2001
2000
Rm
Rm
2001
Rm
2000
Rm
844,0
1 007,1
846,9
1 033,9
–
26,8
–
–
Restated balance
844,0
1 033,9
846,9
1 033,9
Share capital and premium movements
(76,4)
Share capital and premium
Balance at beginning of year
Change in accounting policy to comply with
AC129 intangible assets
(189,9)
(19,3)
(187,0)
Issue of shares
0,7
0,1
0,7
0,1
Share premium
64,2
9,9
64,2
9,9
Goodwill written off
Share issue and listing expenses
(57,1)
–
(0,8)
(2,9)
–
(111,0)
–
–
(0,8)
–
(111,0)
–
(83,4)
(86,0)
(83,4)
(86,0)
Balance at end of year
767,6
844,0
827,6
846,9
–
–
403,2
403,2
Movement during year
–
–
–
–
–
–
403,2
403,2
550,0
290,5
(0,5)
Earnings attributable to ordinary shareholders
343,9
259,5
(7,4)
0,6
893,9
550,0
(7,9)
(0,5)
Non-distributable reserve
Retained earnings/(loss)
ANNUAL REPORT 2001
(1,1)
62
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
Group
2001
Rm
2000
Rm
1 825,3
1 591,4
1 . P R O P E R T Y, P L A N T A N D E Q U I P M E N T
1.1 Land and buildings
– Cost
– Impairment loss
Total land and buildings
(26,0)
–
1 799,3
1 591,4
1 221,2
949,9
1.2 Land and buildings are stated at cost less impairment losses.
During May 1999 Mills Fitchet Valuation Surveyors
carried out an external valuation of the Group's
properties based on the continuation of existing use
as fully operational hospitals ("Going Concern Value").
Together with subsequent additions valued at cost
and the impairment referred to in note 1.1, this has
resulted in a valuation of land and buildings of
R2 057,7 million.
The revaluation surplus has not been recognised
in the financial statements.
1.3 A register containing details of land and buildings is
available for inspection at the registered office of the
Company.
1.4 Land and buildings having a book value of
R1 010,4 million (2000: R1 249,3 million) are
encumbered by bonds in terms of various
outstanding liabilities referred to in note 8.
1.5 Plant and equipment (note 8.1)
1.5.1 Assets owned
Hospital plant and equipment
– Cost
– Accumulated depreciation
Total plant and equipment
Total property, plant and equipment
(738,1)
(544,8)
483,1
405,1
2 282,4
1 996,5
1 591,4
1 535,6
233,9
55,8
1.6 Movement in property, plant and equipment
Land and buildings:
Net book value at beginning of year
Additions
Impairment loss
Net book value at end of year
(26,0)
–
1 799,3
1 591,4
Net book value at beginning of year
405,1
369,8
Additions
187,7
110,0
Plant and equipment:
Disposals
Depreciation
Net book value at end of year
ANNUAL REPORT 2001
(1,5)
(1,4)
(108,2)
(73,3)
483,1
405,1
Company
2001
2000
Rm
Rm
63
AT 3 0 S E P T E M B E R 2 0 0 1
Group
2001
Rm
2000
Rm
26,8
26,8
Company
2001
2000
Rm
Rm
2 . I N TA N G I B L E A S S E T S
2.1 Goodwill
Cost at beginning of year
Acquisitions
Accumulated amortisation at beginning of year
Negative goodwill amortised
Accumulated amortisation at end of year
Net carrying amount at end of year
(113,2)
–
(86,4)
26,8
–
–
0,9
–
0,9
–
(85,5)
26,8
4,4
4,5
2.2 Development expenditure
Cost at beginning of year
Amounts capitalised
Projects fully impaired
Cost at end of year
Accumulated amortisation at beginning of year
0,7
2,6
(1,3)
(2,7)
3,8
4,4
–
–
Amortisation current year
(0,4)
–
Accumulated amortisation at end of year
(0,4)
–
Net carrying amount at end of year
Total intangible assets
3,4
4,4
(82,1)
31,2
3. INVESTMENTS AND LOANS
3.1 Investments in subsidiaries (note 8.4)
Shares at cost less amounts written off
Amounts owing by subsidiaries
1 139,9
1 128,1
271,4
176,2
1 411,3
1 304,3
A schedule of the Group’s principal subsidiaries is
set out in Annexure A.
3.2 Interest in associated entities and joint ventures
Equity units at cost
Less: Goodwill written off
Retained earnings and loans
100,8
100,8
(100,8)
(100,8)
–
–
66,7
54,9
55,7
39,6
12,4
–
1 423,7
1 304,3
Details of the Group’s principal associated entities
and joint ventures are set out in Annexure B.
3.3 Other investments and loans
Other non-current loans
Total investments and loans
122,4
94,5
Directors’ valuation of unlisted investments and loans
223,2
195,3
ANNUAL REPORT 2001
64
Group
Company
2001
2000
Rm
Rm
2001
Rm
2000
Rm
139,2
130,3
–
–
25,0
21,0
–
–
164,2
151,3
–
–
Trade debtors
743,5
476,9
–
–
Other debtors and prepayments
107,5
117,6
0,5
–
4,4
5,1
–
–
855,4
599,6
0,5
–
25,0
25,0
25,0
25,0
500 000 000 "N" ordinary shares of 0,01 cent each
0,1
0,1
0,1
0,1
500 000 000 "N" cumulative convertible preference
shares of 0,01 cent each
0,1
0,1
0,1
0,1
14,0
13,3
14,0
13,3
58 479 452 (2000: 3 479 452) ordinary shares
acquired by a subsidiary
(60,0)
(2,9)
–
–
Share premium
813,6
833,6
813,6
833,6
Total share capital and premium
(2001: 1 337 666 522 ordinary shares)
767,6
844,0
827,6
846,9
1 008,8
1 092,4
1 008,8
1 092,4
95,1
77,9
95,1
77,9
1 103,9
1 170,3
1 103,9
1 170,3
4. INVENTORIES
Drugs and medical supplies
Consumables, crockery, cutlery, linen and soft furnishings
5 . A C C O U N T S R E C E I VA B L E
Loan to Employee Share Incentive Scheme
6 . S H A R E C A P I TA L A N D P R E M I U M
6.1 Authorised share capital
2 500 000 000 ordinary shares of 1,0 cent each
6.2 Issued share capital
1 396 145 974 ordinary shares of 1,0 cent each
(2000: 1 329 658 667)
Treasury shares held
6.3 Unissued ordinary shares (number of shares – million)
Under control of the directors
Reserved for the Employee Share Incentive Scheme
Unissued ordinary shares at 30 September 2001
The unissued ordinary shares are under the control of the
directors until the next Annual General Meeting.
ANNUAL REPORT 2001
65
AT 3 0 S E P T E M B E R 2 0 0 1
Group
Company
2001
2000
Rm
Rm
2001
Rm
2000
Rm
6.4.1 Included in accounts receivable is a loan to
the Share Incentive Scheme
4,4
5,1
6.4.2 Directors’ valuation
4,4
3,5
1 326,2
1 319,7
1 329,7
1 319,7
66,5
10,0
66,5
10,0
6 . S H A R E C A P I T A L A N D P R E M I U M (continued)
6.4
6.5
Employee Share Incentive Scheme
Reconciliation of issued shares (million)
In issue at beginning of year
Issued during year
–
–
1 337,7
1 326,2
1 396,2
1 329,7
Options at beginning of year
77,9
27,7
77,9
27,7
In issue at end of year
6.6
(55,0)
(3,5)
Reconciliation of share options
Options granted
26,6
62,7
26,6
62,7
Options exercised or lapsed
(9,4)
(12,5)
(9,4)
(12,5)
Options unexercised at end of year
95,1
77,9
95,1
77,9
–
–
403,2
403,2
7. RESERVES
7.1
Non-distributable reserve
Surplus on disposal of subsidiaries
7.2
Retained earnings
893,9
550,0
Total reserves
893,9
550,0
395,3
(7,9)
402,7
(0,5)
52,3
–
–
264,1
–
–
8 . N E T I N T E R E S T- B E A R I N G D E B T
8.1
Secured short-term loan
Secured by cession of 218,7 million shares in Clinic
Holdings Limited. The loan bears a variable
interest rate currently at 13,0% nacm.
8.2 Secured mortgage loans
Secured by mortgage bonds over land and buildings
having an aggregate book value of Rx xxx,x million
(2000: R1 249,3 million). The loans bear variable
interest rates currently between 12,2% and 14,5%
nacm. A register containing details of mortgage
loans is available for inspection at the registered
office of the companies.
ANNUAL REPORT 2001
66
Group
Company
2001
2000
Rm
Rm
2001
Rm
2000
Rm
220,3
179,2
–
–
169,9
140,8
–
–
657,5
258,4
–
–
70,2
–
70,2
–
–
316,4
–
–
9,8
11,4
–
47,5
8 . N E T I N T E R E S T- B E A R I N G D E B T
8.1 Secured liabilities
Secured in terms of suspensive sale agreements
over plant and equipment having a book value of
R235,2 million (2000: R166,0 million). The
liabilities bear variable interest rates currently
between 10,5% and 13,0% nacm, and are repayable
in monthly instalments or in terms of
banking facilities.
8.2 Unsecured short-term loans
Interest rates currently between 10,8% and
12,0% nacm.
8.3 Secured long-term financial instruments
Fair value of financial instruments issued by the
Group. The term of the instruments is over a period
ending in 2009, although arrangements are in place
for early redemption from 2007. The liability incurs a
variable interest rate, currently at 12,5% nacm.
Secured by covering bonds lodged over properties
with a book value of R1 010,4 million, and a pledge
of shares in certain subsidiaries.
8.4 Secured short-term loans
Secured by pledge of shares in certain subsidiaries
bearing interest currently at a variable interest rate of
11,7% nacm.
8.5 Secured mortgage and short-term loans
8.6
Bank overdrafts
Interest rate currently 13,0% nacm.
8.7
Financial assets
8.7.1 Bank balances and cash on call
(450,5)
(203,7)
8.7.2 Other financial assets
(183,1)
(124,8)
494,1
(3,2)
–
–
–
577,7
67,0
47,5
417,2
181,5
134,7
74,2
320,1
578,2
63,2
123,8
114,4
26,6
70,2
–
–
–
–
47,5
–
–
–
–
1 127,7
(633,6)
906,2
(328,5)
70,2
(3,2)
47,5
–
494,1
577,7
67,0
47,5
Fair value of rights to receive cash payments.
Repayable as follows:
Within 1 year
1 to 2 years
2 to 3 years
3 to 4 years
Over 4 years
Financial assets
ANNUAL REPORT 2001
67
AT 3 0 S E P T E M B E R 2 0 0 1
Group
9.
Company
2001
2000
Rm
Rm
2001
Rm
2000
Rm
34,1
33,6
27,1
22,9
Other temporary differences
73,0
37,1
100,1
60,0
Trade creditors
358,2
259,5
–
–
Other payables
337,6
241,0
5,5
6,9
695,8
500,5
5,5
6,9
3 337,1
2 785,4
–
–
D E F E R R E D TA X AT I O N
Deferred taxation asset comprises:
Tax losses
Deferred taxation liability comprises:
1 0 . A C C O U N T S PAYA B L E
11. REVENUE
Hospitals
Joint ventures
46,3
52,0
112,0
–
90,6
11,4
3 586,0
2 848,8
Cost of inventories sold
1 140,0
917,6
Employee costs
1 292,6
1 062,8
–
–
456,2
321,3
1,5
0,3
2 888,8
2 301,7
1,5
0,3
Administration fees
Other
12. N E T O P E R A T I N G C O S T S
Other net operating costs
ANNUAL REPORT 2001
68
Group
2001
Rm
2000
Rm
Company
2001
2000
Rm
Rm
1 3 . O P E R AT I N G P R O F I T
Operating profit is stated after (crediting)/charging:
Income
Profit on disposal of investments
(0,2)
(0,8)
Profit on disposal of plant and equipment
(0,7)
(2,3)
4,8
4,8
0,1
Current year
4,1
4,1
0,1
–
Prior year
0,4
0,6
–
–
–
–
–
Charges
Auditors' remuneration
Fees for other services
Depreciation – plant and equipment
Development expenditure
0,3
0,1
108,2
73,3
1,7
2,3
Foreign exchange gains
(0,2)
Operating lease charges
–
–
66,0
41,6
Land and buildings
54,0
32,3
Other
12,0
9,3
Retirement benefit contributions
66,5
49,8
Technical, managerial and secretarial services
15,7
18,0
11,6
12,2
11,6
12,2
0,2
0,1
11,8
12,3
Interest paid
158,5
142,5
11,9
Finance income received
(70,9)
(46,0)
(6,0)
(0,9)
87,6
96,5
5,9
(0,9)
Directors’ emoluments
Executive directors
Paid by subsidiaries
Basic remuneration, retirement and
medical benefits
Non-executive directors
For services as directors
14.NET FINANCE CHARGES
1 5 . E X C E P T I O N A L I T E M S (Net of tax)
Goodwill released to income statement
(0,9)
Restructuring and reorganisation costs
6,3
Impairment loss on properties
ANNUAL REPORT 2001
–
10,0
26,0
–
31,4
10,0
69
AT 3 0 S E P T E M B E R 2 0 0 1
Group
2001
Rm
2000
Rm
80,9
2,8
79,1
(1,4)
43,5
–
2,5
10,5
127,2
90,7
Reconciliation of rate of taxation
Standard rate
Adjusted for:
Permanent differences
Utilisation of assessed losses
%
30,0
%
30,0
0,1
(4,7)
(1,6)
(4,4)
Effective rate
25,4
24,0
Estimated taxation losses
Unused tax losses available for set-off against
future tax charges (Rm)
232,7
296,1
17. EARNINGS PER SHARE
17.1 Attributable earnings per share
Earnings (cents)
Weighted average number of shares (millions)
25,8
1 335,2
19,4
1 336,2
27,9
1 335,2
20,2
1 336,2
25,0
27,1
19,4
20,2
1 335,2
43,8
1 336,2
–
1 379,0
1 336,2
1 6 . TA X AT I O N
16.1 South African normal taxation
Current
Prior years
Deferred taxation
Current
Prior years
Net taxation for the year
16.2
16.3
17.2
17.3
Earnings (cents)
Fully diluted attributable earnings per share
Attributable earnings – fully diluted (cents)
Headline earnings – fully diluted (cents)
Dilutive effect of employee share options (millions)
17.3.1 Reconciliation between attributable earnings
and headline earnings
Exceptional items (net of tax)
Minority share of exceptional items
Headline earnings
343,9
31,4
(2,2)
259,5
10,0
–
373,1
269,5
Company
2001
2000
Rm
Rm
ANNUAL REPORT 2001
70
Group
2001
Rm
2000
Rm
590,5
350,5
(43,5)
(46,9)
547,0
303,6
1 335,2
1 336,2
41,0
22,7
343,9
259,5
Company
2001
2000
Rm
Rm
1 7 . E A R N I N G S P E R S H A R E (continued)
17.4 Attributable cash flow
Adjusted for:
Minority interests
Attributable cash flow per share (cents)
17.5 Cash equivalent earnings
Adjusted for:
108,2
73,3
Deferred taxation
Depreciation
43,5
13,0
Other non-cash flow items
25,2
(3,1)
Equity accounted retained earnings of associates
(2,6)
(2,2)
Adjustment for minority share of non-cash flow items
(11,2)
(10,9)
Cash equivalent earnings
507,0
329,6
1 335,2
1 336,2
38,0
24,7
557,6
463,8
108,2
Cash equivalent earnings per share
1 8 . C A S H F L O W S TAT E M E N T S
18.1 Cash generated from operations
Operating profit after exceptional items
(1,5)
(0,3)
Adjustments
Depreciation
73,3
–
–
Profit on disposal of plant and equipment
(0,7)
(2,3)
–
–
(0,8)
Profit on disposal of investment
(0,2)
–
–
Amortisation of goodwill
(0,9)
–
–
–
Impairment loss on properties
26,0
–
–
–
1,0
–
–
–
691,0
534,0
Other non-cash flow items
(1,5)
(0,3)
18.2 Working capital movements
Increase in inventories
(12,9)
(18,3)
(255,8)
(57,8)
(0,5)
–
Increase/(decrease) in accounts payable
195,3
33,3
(1,4)
5,5
Adjustment in respect of subsidiaries acquired
147,9
–
Increase in accounts receivable
–
–
–
–
74,5
(42,8)
(1,9)
5,5
(155,7)
(122,2)
(0,3)
(0,3)
(83,7)
(77,7)
18.3 Taxation paid
Amounts payable at beginning of year
Normal taxation charged to the income statement
Adjustments in respect of subsidiaries acquired
Amounts payable at end of year
ANNUAL REPORT 2001
–
–
–
–
–
152,2
155,7
0,3
0,3
(87,4)
(44,2)
–
–
(0,2)
71
AT 3 0 S E P T E M B E R 2 0 0 1
Group
2001
Rm
2000
Rm
Company
2001
2000
Rm
Rm
1 8 . C A S H F L O W S T A T E M E N T S (continued)
18.4 Investment to maintain operations
Additions to land and buildings
(20,9)
(10,1)
–
–
Replacement of plant and equipment
(51,0)
(32,8)
–
–
Proceeds on disposal of plant and equipment
2,2
3,7
–
–
(69,7)
(39,2)
–
–
Additions to land and buildings
(83,0)
(45,7)
–
–
Replacement of plant and equipment
(75,5)
(77,2)
–
–
(43,3)
(14,7)
9,1
31,6
(201,8)
(137,6)
9,1
31,6
18.5 Investment to expand operations
Increase in investments and loans
18.6 Net investment in subsidiaries
The fair value of assets acquired and liabilities
assumed were as follows:
Taxation
Working capital
191,2
–
3,7
–
147,9
–
Bank balances and cash on call
20,0
–
Long-term liabilities
(8,4)
–
Investments
(1,9)
–
Purchase of additional shares in subsidiary
61,0
–
Goodwill on acquisitions
(191,5)
–
Vendor for acquisition
(128,5)
–
93,5
–
18.7 Net equity movements
Share issues
51,2
–
64,9
–
Share issue and listing expenses
(0,9)
–
(0,8)
–
(57,0)
(7,4)
–
–
(6,7)
(7,4)
64,1
–
ANNUAL REPORT 2001
72
Group
2001
Rm
2000
Rm
39,5
199,6
282,8
27,7
172,8
296,7
Company
2001
2000
Rm
Rm
19. LEASES
The Group has entered into various operating lease
agreements on premises and vehicles. At 30 September 2001
future non-cancellable minimum lease rentals are payable
during the following financial years:
Within 1 year
1 to 5 years
Over 5 years
20. CONTINGENT LIABILITIES
20.1 Guarantees
The Group has guaranteed the obligations of certain subsidiaries of Community Healthcare Holdings (Pty)
Limited (“ Community” ) to the extent of R40 million. Community is a black empowerment healthcare group,
with which, inter alia, the Netcare Group has co-invested in certain hospital ventures.
The Company has provided guarantees in respect of securing certain subsidiaries’ loan finance obligations.
20.2 General
Litigation, current or pending, is not considered likely to have a material adverse effect on the Group.
Group
2001
Rm
2000
Rm
Authorised capital expenditure approved by
the Board of directors amounts to R155,5 million
at 30 September 2001 (2000: R74,4 million).
This expenditure will be financed from internally
generated funds and existing banking facilities.
Future capital expenditure
Contracted
155,5
74,4
To be expended
Within one year
155,5
74,4
Company
2001
2000
Rm
Rm
21.COMMITMENTS
22. RETIREMENT BENEFITS
Post-employment benefits – pensions
The Group contributed to several retirement funds, all of which are governed by the Pension Funds Act, 1956. The
funds cover the majority of its employees in terms of defined contribution schemes. Contributions paid by Group
companies are charged against income as incurred.
Post-retirement medical aid benefits
Although there are no contractual obligations, certain Group companies subsidise the post-retirement medical aid
contributions of certain pensioners. These subsidies are charged against income in the year they become payable.
ANNUAL REPORT 2001
73
S T A T E M E N T O FN O
C THEASN TGO
E ST H
I NE SFH
I NAAR N
EH
C IOALLD S
ET
RA
S T’ EEM
Q EUNI TT Y
S
F O R T H E Y E A R E N D EAD
T 30 SEPTEMBER 2001
23. BORROWING POWERS
In terms of the Company’s Articles of Association, borrowing powers are unlimited.
24. FINANCIAL INSTRUMENTS
Credit risk
The principal area of credit risk consists of trade accounts receivable which are governed by clearly defined credit
and collection policies and consist of a large number of individual patient accounts. It is Group policy to obtain
confirmation in respect of those accounts where patients have medical insurance, which comprises the majority of
the patient accounts. In other cases indebtedness is secured by advance deposits from patients.
Liquidity risk
The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised
borrowing facilities are maintained. Short-term cash surpluses are placed on call with major financial institutions.
Interest rate management
To manage interest rate volatility the Group makes use of interest rate derivatives to determine the fixed and floating
rate borrowings mix.
2 5 . R E L AT E D PA R T I E S
Related party relationships exist within the Group, all of which are on commercial arms length terms. Details of
certain transactions with related parties not disclosed elsewhere in the financial statements are set out below.
25.1 During the year certain subsidiaries of the Group, in the ordinary course of business, entered into various
rental arrangements with its associate, the Ampath Trust. These arrangements are on terms no less
favourable than those arranged with third parties. The amount of rental received by the Group amounted to
R5,0 million.
25.2 During the year the Group acquired all the shares in and claims against Umhlanga Medical Centre Limited
(“ Umhlanga” ) which were not already held by the Group, for a total consideration of R23,6 million. Certain
directors of Netcare, received 22,6% of this consideration as they were originally stakeholders in Umhlanga.
Such directors did not vote on the board resolution approving the acquisition of Umhlanga.
25.3 Certain relatives of executive directors entered into consultancy arrangements with Group companies on
commercial terms with a total value of R0,3 million.
25.4 One of the directors is the Company’s legal counsel. Services rendered are billed on a commercial arms length
basis.
25.5 Certain administrative, financing and logistic services are provided by the Group to a pharmacy purchasing
and dispensing organisation, in which one of the directors has an interest. Such services are provided on an
arms length basis.
2 6 . S E G M E N TA L R E P O R T I N G
While the Group has several business units, the South African hospital division, by far, generates the greater part of
revenue (approximately 93,1%) and employs the major portion of the net assets (approximately 98,5%) relating to
the Group. Consequently, no other business unit qualifies as a business segment, nor does any other geographical
area qualify as a geographical segment as envisaged by the Statement of Generally Accepted Accounting Practice on
Segment Reporting. Thus, no additional information on segmental reporting has been included.
2 7 . C O M PA R AT I V E F I G U R E S
Comparative figures have been regrouped or reclassified where appropriate to give a more meaningful comparison.
Other than goodwill which has been dealt with in the statements of changes in shareholders’ equity, the impact of
such regrouping or reclassification is not considered material.
ANNUAL REPORT 2001
74
A N N E X U R E A – I N V E S T M E N T I N P R I N C I PA L S U B S I D I A R I E S
N e t c a r e o w n s d i r e c t l y o r i n d i r e c t l y, 1 0 0 % o f t h e s h a r e s
in the following companies unless otherwise stated.
P R I N C I PA L S U B S I D I A R I E S
Nature of business
Clindeb Investments (Proprietary) Limited
Financing
Clinical Partners (Proprietary) Limited
Medical aid marketing
Clinic Holdings Limited (92,6%)
Investment holding
Constantia Clinic (Proprietary) Limited (50%)
Hospital/healthcare services
Constellation Investments (Proprietary) Limited (80%)
Investment holding
Dumacre Investments (Proprietary) Limited
Property owning
Amount of
issued capital
2001
2000
Rm
Rm
7,9
7,3
Femina Properties (Proprietary) Limited
Property owning
0,1
0,1
Garden City Investments (Proprietary) Limited
0,2
0,2
Greenacres Hospital (Proprietary) Limited (90%)
Kingsway Hospital (Proprietary) Limited
Property owning
0,5
0,5
Kroon Hospitaal (Eiendoms) Beperk (80%)
Linksfield Grove (Proprietary) Limited
Property owning
Linksfield Park Clinic (Proprietary) Limited
Medicross Healthcare Group (Proprietary) Limited
Healthcare services
Milpark Hospital Properties (Proprietary) Limited
Mulbarton Hospital (Proprietary) Limited (75,3%)
N1 City Hospital (Proprietary) Limited (75%)
Book value of interest
Shares
Indebtedness
2001
2000
2001
2000
Rm
Rm
Rm
Rm
1 139,6
1 127,8
–
–
–
–
132,4
–
Nedbank Medical Centre Limited
Property owning
Netcare Finance Company (Proprietary) Limited
Financing
97,1
127,5
Netcare Health Systems (Proprietary) Limited
Healthcare management
services
54,5
48,8
Netcare Hospital Management (Proprietary) Limited
Hospital group
management services
(8,6)
Netcare International SA (Proprietary) Limited
Investment holding
Netcare Management (Proprietary) Limited
Netcare group
management services
Netcare International Holdings Limited (Mauritius)
Healthcare services
Optiklin (Proprietary) Limited
Park Lane Clinic (Proprietary) Limited
Property owning
Pretoria Oos Privaat Hospitaal Bedryfs
(Eiendoms) Beperk
Protea Clinic (Krugersdorp) (Proprietary) Limited
Randburg Nursing Home (Proprietary) Limited
SAA Netcare Travel Clinics (Proprietary) Limited (74%)
Travel clinics
Southern Cross Netcare Hospital (Proprietary)
Limited
St Augustine's Hospital (Proprietary) Limited
Sunninghill Hospital Limited
Taylam (Proprietary) Limited
Property owning
Trauma Link (Proprietary) Limited (75%)
Pre-hospital emergency services
Traumanet (Proprietary) Limited
Investment holding
Umhlanga Medical Centre Limited
Unitas Hospitaal Beleggings (Eiendoms) Beperk
0,3
0,2
0,2
0,2
–
0,3
(167,1)
–
(112,3)
Note 1: All companies are incorporated in South Africa.
Note 2: Information in respect of subsidiaries as required in terms of paragraphs 69 and 70 of the Fourth Schedule to the Companies Act is set out in
respect of only those subsidiaries, the financial position or results of which are material for a proper appreciation of the affairs of the Group.
A full list of subsidiary and associated companies is available on request.
ANNUAL REPORT 2001
75
S TAANTNE EMXEUNRTE OBF – C IHNATN
EG
R E S TI N
I N S PHRAI RNECHI POALLD EARSSS’O ECQ
I AUTI E
TD
Y
AT 3 0 S E P T E M B E R 2 0 0 1
ENTITIES AND JOINT VENTURES
Nature of
business
Entity
Carrying value
2001
2000
Rm
Rm
2001
Rm
% owned
2000
Rm
Joint ventures
National Renal Care (Pty) Limited
Note 1
2,8
50,0
50,0
Trauma Link (Pty) Limited
Note 2
–
10,0
(0,1)
–
50,0
Net-Air Aeronautical Services (Pty) Limited
Note 3
1,5
–
50,0
–
Parklands Stereotactic Radiosurgery (Pty) Limited
Note 4
0,3
0,2
50,0
50,0
Note 5
66,7
54,9
50,0
37,0
71,3
65,0
Associate
The Ampath Trust
Note
Note
Note
Note
Note
1:
2:
3:
4:
5:
Providers of acute and chronic renal care throughout South Africa.
Comprehensive pre-hospital emergency services and products. This investment has now become a subsidiary.
Pre-hospital emergency air services.
Providers of stereotactic radiosurgery.
Administration and logistical services to high technology pathology laboratories.
The Group’s effective share of balance sheet and income statement items in respect of principal associates and joint
ventures is as follows:
Associates
Joint ventures
2001
2000
2001
2000
Rm
Rm
Rm
Rm
Income statements
Revenue
Profit from operations
Financing costs
Profit before taxation
Taxation
Net profit for the year
281,5
229,9
46,3
52,0
46,6
39,8
5,9
5,4
(10,4)
(7,6)
(0,3)
(0,5)
36,2
32,2
5,6
4,9
(10,3)
(9,9)
(1,8)
(1,1)
25,9
22,3
3,8
3,8
155,6
78,7
17,8
21,5
Balance sheets
Total assets
Capital and reserves
66,8
43,0
8,9
1,2
Liabilities
88,8
35,7
8,9
20,3
155,6
78,7
17,8
21,5
ANNUAL REPORT 2001
76
NOTICE TO SHAREHOLDERS
Notice is hereby given that the fifth Annual General
Meeting of shareholders of Network Healthcare Holdings
Limited (“ Netcare” or “ the Company” ) will be held in the
Netcare Boardroom, 3rd Floor, Sanlam Park South,
9 Fredman Drive (cnr Bute Lane), Sandown, Sandton on
Friday, 25 January 2002 at 10:00 a.m. for the following
purposes:
1. To receive and adopt the annual financial statements.
7. To consider and, if deemed fit, to pass with or without
modification, the following resolution as an Ordinary
resolution (No. 3):
“ RESOLVED THAT in terms of Article 54.1, 54,2 and 54,7
of the Company’s Articles of Association and subject to
the Company obtaining a declaration of the directors
that
2. To confirm the directors’ fees payable as required by the
Articles of Association.
(a) the Company would be able, after the proposed
payments, to pay its debts as they become due in
the ordinary course of business; and
3. To re-elect Dr RH Bush, SR Favish, Dr RH Friedland,
PJ Lindeque, Dr J Shevel and Mrs SV Zilwa who retire in
accordance with the Company’s Articles of Association
but offer themselves for re-election.
(b) the consolidated assets of the Company, fairly
valued would, after the proposed payments, not be
less than the consolidated liabilities of the
Company,
4. To authorise the directors
remuneration of the auditors.
the directors of the Company shall be entitled, from
time to time, to pay by way of a reduction of share
premium, capital distributions to shareholders of the
Company in lieu of a dividend. Such distributions shall
be amounts equal to the amounts which the directors
would have declared and paid out of profits of the
Company as interim and final dividends in respect of the
financial year ending 30 September 2002. This authority
shall not extend beyond the date of the Annual General
Meeting following the date of the Annual General
Meeting at which this resolution is being proposed.”
to
determine
the
5. To consider and, if deemed fit, to pass, with or without
modification, the following Ordinary resolution (No.1):
“ That 1 004 716 633 unissued ordinary shares of 1,0 cent
each in the capital of the Company be placed under the
control of the directors.”
6. To consider and, if deemed fit, to pass with or without
modification, the following Ordinary resolution (No. 2):
“ RESOLVED THAT, subject to the passing of Ordinary
resolution No. 1, and in terms of the Listings Requirements
of the JSE Securities Exchange South Africa (“ JSE” ), the
directors be given the general authority to issue
ordinary shares for cash as and when suitable situations
arise, subject to the following conditions:
• that the authority shall not extend beyond 15 (fifteen)
months from the date of this Annual General Meeting;
• that a paid press announcement, giving full details
including the effect on net asset value and earnings
per share, will be published at the time of any issue
representing, on a cumulative basis within one year,
5% or more of the number of shares of the Company’s
issued share capital, in issue prior to the issues;
• that issues in the aggregate in any one year may not
exceed 15% of the number of shares of the
Company’s issued share capital;
• that, in determining the price at which an issue of
shares will be made in terms of this authority, the
maximum discount permitted will be 10% of the
average closing price of the shares in question, as
determined over the 30 days prior to either the date
of the paid press announcement or, where no
announcement is required and none has been made,
the date of issue of the instruments concerned; and
• the approval of a 75% majority of the votes cast by
shareholders present or represented by proxy at this
meeting is required for this ordinary resolution to be
carried.”
ANNUAL REPORT 2001
8. General authority for Netcare to facilitate the
acquisition of its own shares.
To consider and, if deemed fit, to pass with or without
modification, the following resolution as a special
resolution (Special resolution No. 1):
“ RESOLVED THAT pursuant to Articles 13.7 and 13.8 of
the Company’s Articles of Association, the acquisition by
the Company, or a subsidiary of the Company from time
to time, of the issued shares of the Company, upon such
terms and conditions and in such amounts as the
directors of the Company may from time to time decide,
but subject to a maximum of 10% of the Company’s
issued share capital and subject to the provisions of the
Companies Act, Act No. 61 of 1973 as amended (“ the
Act” ) and the Listings Requirements from time to time
of the JSE Securities Exchange South Africa (“ the
Listings Requirements” ) be and it is hereby approved,
which general approval shall endure until the next
Annual General Meeting of the Company whereupon
this approval shall lapse unless it is renewed at the
aforementioned Annual General Meeting, provided
that it shall not extend beyond fifteen (15) months of
the date of registration of this special resolution.”
77
S T A T E M E N T O F C H A N G E S INNOSTH
I CAER ET H
O OSLHDAE R ES H
’ O
EQ
LD
UEI TR Y
S
A T 3 0 S E P T E( cMoBnEt Ri n 2u 0e 0d1)
The following details are relevant to this proposed
special resolution:
a) The Listings Requirements currently require, inter
alia, that the Company may make a general
repurchase of securities only if:
• the repurchase of securities is implemented on the
JSE “ open market” ;
• the Company is authorised thereto by its Articles;
• the Company is authorised by shareholders in terms
of a special resolution of the Company, in general
meeting, which authority shall only be valid until
the next Annual General Meeting, provided it shall
not extend beyond 15 (fifteen) months from the
date of the resolution;
• the general repurchase is limited to a maximum of
20% of the Company’s issued share capital of that
class at the time the authority is granted in any one
financial year;
• repurchases must not be made at a price more than
the current trading price of the share or more than
10% above the weighted average of the market
value of the securities for the five business days
immediately preceding the repurchase; and
• a paid press announcement containing full details
of such acquisition will be published as soon as
shares have been acquired constituting, on a
cumulative basis, 3% of the number of shares in
issue prior to the acquisition.
b) The Board has no specific intention of effecting a
share repurchase. It is, however, proposed, and the
Board believes it to be in the best interests of the
Company, that Netcare’s ordinary shareholders pass a
special resolution granting Netcare and/or a subsidiary
of Netcare a general authority to facilitate the
acquisition of shares in the Company. Such general
authority will provide the directors with flexibility,
subject to the requirements of the Act and the JSE, to
effect such a share repurchase should it be in the
interest of the Company to do so at any time while
the general authority subsists. The general authority
will be subject to the Listing Requirements of the JSE.
c) The Board of directors is of the opinion that, based on
market prices of Netcare shares ruling at the last
practicable date before printing this document,
should the general authority be utilised to the
maximum permitted in terms of this resolution:
• the Company will be able to pay its debts as they
become due in the ordinary course of business;
• the consolidated assets of the Company, fairly
valued in accordance with generally accepted
accounting practice, will exceed the consolidated
liabilities of the Company;
• the issued share capital of the Company will be
adequate for the purpose of the business of the
Company, and of its subsidiaries for the
foreseeable future; and
• the working capital available to the Company and
its subsidiaries will be sufficient for the Netcare
Group’s requirements for the foreseeable future.
d) The reason for and effect of the special resolution is
to grant to the Company a general authority in terms
of the Act for the acquisition by the Company, or a
subsidiary of the Company, of its own shares, which
approval shall be valid until the earlier of the next
Annual General Meeting of the Company or its
variation or revocation of such general authority by
special resolution by any subsequent general meeting
of the Company, provided that the general authority
shall not be extended beyond 15 (fifteen) months
from the date of passing of this special resolution.
9. To transact any other business which may be transacted
at an Annual General Meeting.
Voting and proxies
A shareholder entitled to attend and vote at the meeting
may appoint a proxy to attend, speak and, on a poll, to
vote in his stead. A proxy need not be a shareholder of the
Company.
Proxy forms must be lodged at the registered office of the
transfer secretaries not later than 24 hours before the time
of the meeting.
Members who have already dematerialised their Netcare
shares may use the attached voting instruction form for
the purpose of advising their CSDP or broker of their
voting instructions. If however such members wish to
attend the general meeting in person, then they will need
to request their CSDP or broker to provide them with the
necessary authority in terms of the custody agreement
entered into between the dematerialised shareholder and
the CSDP or broker.
By order of the Board
J Wolpert CA(SA), FCMA
Secretary
Sandton
14 November 2001
ANNUAL REPORT 2001
78
FORM OF PROXY
O N LY F O R U S E B Y R E G I S T E R E D M E M B E R S ( i . e . m e m b e r s w h o h a v e n o t d e m a t e r i a l i s e d t h e i r s h a r e s )
(Incorporated in the Republic of South Africa)
(Registration number 1996/008242/06)
(“ Netcare” or “ the Company” )
I/We
(block letters)
being a shareholder/shareholders of the Company, entitled to
do hereby appoint
votes,
or failing him
or failing him,
the chairman of the meeting as my/our proxy to vote for me/us and on my/our behalf at the fifth Annual General Meeting
of the Company to be held on Friday, 25 January 2002 at 10:00 a.m. and at any adjournment thereof as follows:
In favour of Against
1.
Adoption of annual financial statements
2.
Confirmation of directors’ fees payable
3. a.
Resolution to re-elect Dr RH Bush
Abstain
3. b. Resolution to re-elect SR Favish
3. c.
Resolution to re-elect Dr RH Friedland
3. d. Resolution to re-elect PJ Lindeque
3. e.
Resolution to re-elect Dr J Shevel
3. f.
Resolution to re-elect Mrs SV Zilwa
4.
Authority to directors to determine auditors’ remuneration
5.
Renewal of directors’ control over unissued shares (Ordinary resolution No. 1)
6.
Specific authority to issue ordinary shares for cash (Ordinary resolution No. 2)
7.
Capital distribution (Ordinary resolution No. 3)
8.
Share buy-back (Special resolution No. 1)
Every person present and entitled to vote at the general meeting as a member or as a representative of a body corporate
shall on a show of hands have one vote only, irrespective of the number of shares such person holds or represents, but in
the event of a poll, every share shall have one vote.
Indicate instructions to proxy by way of a cross in space provided above.
Unless otherwise instructed, my/our proxy may vote as he/she thinks fit.
Signed on this
day of
2002
Signature
This proxy form is NOT for use by members who have already demateralised their Netcare shares. Such members must use
the attached voting instruction form. (Page xx)
ANNUAL REPORT 2001
79
S TAT E M E N T O F C H A N G E S I N S H A R E H O
FO
LD
RM
E R SO’F EPQRUOI X
TY
AT 3 0 S E P T E M B E R 2 0 0 1
NOTES
1. A member may insert the name(s) of one or more
proxies (none of whom needs to be a member of the
Company) in the space provided, with or without
deleting the words “ chairman of the meeting” . The
person whose name stands first on the form of proxy
and has not been deleted and who is present at the
meeting will be entitled to act as proxy to the
exclusion of those whose names follow. In the event
that no names are indicated, the proxy shall be
exercised by the chairman of the general meeting.
5. Documentary evidence establishing the authority of
the person signing the form of proxy in a
representative capacity must be attached to this form
of proxy unless previously recorded by the Company’s
transfer secretaries or waived by the chairman of the
general meeting.
2. A member’s instructions to the proxy must be indicated
by the insertion of the relevant number of votes
exercisable by that member in the appropriate
box/boxes provided. Failure to comply with the above
will be deemed to authorise the proxy to vote as
he/she thinks fit or, where the proxy is the chairman,
such failure shall be deemed to authorise the chairman
to vote in favour of the resolutions in respect of all the
members’ votes exercisable thereat.
7. Where shares are held jointly, all joint holders are
required to sign.
3. The completion and lodging of this form of proxy shall
in no way preclude the member from attending,
speaking and voting in person at the general meeting
to the exclusion of any proxy appointed in terms
hereof.
4. Should this form of proxy not be completed and or
received in accordance with these notes, the chairman
may accept or reject it, provided that in respect of this
acceptance, the chairman is satisfied as to the manner
in which the member wishes to vote.
6. Where this form of proxy is signed under power of
attorney, such power of attorney must accompany this
form unless it has previously been registered with the
Company.
8. A minor must be assisted by his/her parent or guardian
unless the relevant documents establishing his/her
legal capacity have been produced or have been
registered by the transfer secretaries of the Company.
9. Any alteration or correction made to this form of proxy
must be signed in full and not initialled by the
signatories.
10. This form of proxy must be lodged with the registered
office of the transfer secretaries, Ultra Registrars (Pty)
Limited, 11 Diagonal Street, Johannesburg 2004 (PO
Box 4844 Johannesburg 2000), not later than 24 hours
before the meeting.
ANNUAL REPORT 2001
80
V O T I N G SITNASTTERMUECNT TI OONF FCOHRAMN G E S I N S H A R E H O L D E R S ’ E Q U I T Y
O N L Y F O R U S E B Y M E M B E R S W H O H A V E D E M A T E R I A L I S E D T H E I R N E T C A R E S H A R EA
ST 3 0 S E P T E M B E R 2 0 0 1
For use in respect of the fifth Annual General Meeting of the Company to be held on Friday, 25 January 2002 at 10:00 a.m.
Members who have already dematerialised their Netcare shares may use this form to advise their CSDP or broker of their voting
instructions on the proposed resolutions in the spaces provided below. However, should such members wish to attend the
general meeting in person, then they will need to request their CSDP or broker to provide them with the necessary authority
in terms of the custody agreement entered into between the dematerialised shareholder and the CSDP or broker.
(Incorporated in the Republic of South Africa)
(Registration number 1996/008242/06)
(“ Netcare” or “ the Company” )
I/We
being a member/s of the Company who has/have dematerialised my/our shares in Netcare do hereby indicate in the spaces
provided below to my/our CSDP/broker my/our voting instructions on the resolutions to be proposed at the fifth Annual
General Meeting of the Company to be held on Friday, 25 January 2002 at 10:00 a.m. and at any adjournment thereof:
In favour of Against
1.
Adoption of annual financial statements
2.
Confirmation of directors’ fees payable
3. a.
Resolution to re-elect Dr RH Bush
Abstain
3. b. Resolution to re-elect SR Favish
3. c.
Resolution to re-elect Dr RH Friedland
3. d. Resolution to re-elect PJ Lindeque
3. e.
Resolution to re-elect Dr J Shevel
3. f.
Resolution to re-elect Mrs SV Zilwa
4.
Authority to directors to determine auditors’ remuneration
5.
Renewal of directors’ control over unissued shares (Ordinary resolution No. 1)
6.
Specific authority to issue ordinary shares for cash (Ordinary resolution No. 2)
7.
Capital distribution (Ordinary resolution No. 3)
8.
Share buy-back (Special resolution No. 1)
NOTES:
1. Please indicate in the appropriate spaces above the number of votes to be cast. Each share carries the right to one vote.
2. All the votes need not be exercised neither need all votes be cast in the same way, but the total of the votes cast and
in respect of which abstention is directed may not exceed the total of the votes exercisable.
3. Any alteration or correction made to this voting instruction form must be initialled by the signatory.
4. When there are joint holders of shares, any one holder may sign the voting instruction form.
5. Completed voting instruction forms should be forwarded to the CSDP or broker through whom the Netcare shares have
been dematerialised to reach their offices by not later than 10:00 a.m. on Friday, 18 January 2002.
Signed at
on
2002
Signature
This voting instruction is NOT for use by registered members (i.e. members who have NOT dematerialised their Netcare shares).
ANNUAL REPORT 2001

Headline earnings attributable to ordinary

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