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

Jerry Vilakazi : Good morning, let me take this opportunity to introduce myself once more, I’m Jerry Vilakazi, Chairman of the Netcare board, and I would like to take this opportunity to welcome all of our guests this morning who have joined us in the release of our interim results. In particular, I want to welcome my colleagues from the board who are with us this morning, and also the entire executive team that is here under the leadership of the CEO, Dr Richard Friedland who’s going to make the first presentation this morning, I’m also pleased to welcome our CFO who will also be coming forward to make a presentation. Joining us as usual our colleagues from the UK GHG CEO Stephen Collier is with us, welcome again, and I would also like to welcome the CFO from the UK Craig, he’s also sitting here at the front. We are always pleased to have them with us and joining us as we release our results. I’ve also seen in our midst here a number of our partners that we partnered with in our different operations throughout the country. We welcome you this morning and are excited to have our partners with us and finally I want to welcome everybody who is joining us even those that are going to join us in remote areas as we present our results. We are very pleased with our results again. Our results continue to show very strong outputs from our operations and as you will hear from the presentation, you will appreciate why we as the board are very pleased with the results that management has delivered in the first 6 months. Both in the UK, as well as in South Africa noting some of the challenges that continue to remain in the UK broadly in the macro ‐ economic environment which therefore impacts us in that area. I would like without any waste of time at this point to welcome Dr Richard Friedland our CEO to make his presentation, thank you. Dr Richard Friedland : Thank you very much Jerry and thank you for your and that of our board of directors. Good morning ladies and gentlemen and thank you for joining us this morning. We understood from the slur of results out this morning from Vodacom and Barloworld and able that we might not fill the front row. So thank you for your loyalty. A warm welcome also to those joining us on the live feed, whether you be overseas or here in South Africa. And a huge thank you to our management teams in United Kingdom, South Africa and Lesotho, for your commitment and dedication in producing these results

and allowing us to stand and present them here this morning. Just looking as we always do I’ll take you through a group overview and some of the operational features in our different geographies and then hand over to our chief financial officer Keith Gibson who’s going to unpack the financial results in some detail. We’ve had a very good trading performance in South Africa. Two stand out features here is that price inflation has been well contained across all of our divisions I’ll speak to that a bit later, and despite our concerted effort on costs and efficiencies we maintain a very strong focus on quality and on quality leadership. It’s begun to show in a number of the outcomes where demonstrating particularly, in the hospital division and also in our fledging PPP in Lesotho and I’m pleased to say that we’ve decided to proceed with construction of two new hospitals towards the end of this year. We’ve also had a good performance in the United Kingdom, despite a very challenging set of macro ‐ economic circumstances. There’s no question that the United Kingdom as has the rest of the Euro zone weathered a tremendous storm. It’s not yet over, but they’ve certainly produced a credible set of results. They’ve made a positive contribution to earnings for the group and you’ll recall that in November last year we said our aim was to break ‐ even in the United Kingdom. I’m pleased to say that we’ve exceeded that and we’re on track to break ‐ even for the full year. A reminder that we purchased a minority shareholder stake in GHG in January of this year for a price consideration of some 11 Million Pounds to take and increase our stake in the OpCo by some 3% and probably the stand out feature of these results that Keith will talk to in some detail is that after the year ‐ end last year, we took a decision to deconsolidate the property assets that we own in the United Kingdom and we believe that this now reflects far more realistically the commercial position of our investment in the UK. Keith will talk through that a bit later. Let’s just pause here and look at the comprehensive network of healthcare services we provide in these three geographies and I think when you look at this you can see certainly in South Africa how we differentiate ourselves from our competitors in terms of the range and diversity of services we offer. If you look at revenue and EBITDA South Africa contributing just over half of our revenue and EBITDA, and the United Kingdom even though somewhat smaller in terms of size and scale but given the strength of the Pound against the Rand contributing just under 50% of revenue and adjusted EBITDA. Adjusted EBITDA because we stripping out

the once ‐ off impact of the profit on deconsolidation and we’ve added back the rental charge for 2013 so we can compare like ‐ for ‐ like. And so, briefly looking at some of those financial highlights revenue up some 8.5% to 13.3 Billion in line with the guidance we’ve given previously adjusted EBITDA up to 2.8 Billion, very nice operating leverage coming there with a 14.7% increase, and pleasingly, profit after tax up almost 30% for the group. Adjusted HEPS 20.8% allowing Netcare to declare an interim dividend of some 27cents up 22.7% on the prior year. And just to remind you the prior year we had held a dividend flat for that reporting period. Turning now to South Africa, Netcare experienced very good revenue growth in South Africa in Hospitals and emergency services this was however offset by a decline in Primary Care and I’m going to unpack in some detail for you a bit later. Again, very good operating leverage coming through, an 8% increase in EBITDA to 1.479 Billion Rand and the margin widening by some 50 basis points again due to a focus on costs and efficiencies and given the high nurse wage inflation I think that’s a particularly pleasing result for us. So turning to Hospitals and emergency services a 2.3% increase in patient days last year we recorded 1.8%. We had an unusual March not withstanding seasonal trends. We were impacted by Easter and Public Holidays and I think when we now look all of that has normalised through our group when we look at April trading our patient day growth is in the order of 3.3% so we’re back on track after a somewhat impacted March and we saw a similar effect in the United Kingdom for March trading. Revenue per patient day has been extremely well contained at 4.8% and it really reflects our efforts to contain hospital inflation below CPI. This is a very important fact particularly as we look back over the last ten years, because revenue per patient day is a rough estimate of hospital cost inflation and in a report published you might remember our last results presentation we showed you a report from Finweek that came out in May last year that looked a number of services and indices across South Africa over a decade and our revenue per patient day had only increased by 109% over that 10 year period compared to other items for instance maize meal that had gone up by 213%, coffee by 191% and milk I think it was a 158%. So, price inflation or cost inflation very well contained over the last decade. We only brought on a handful of beds, 4 new beds in the last 6 months. So our growth has been largely organic we are expecting to bring on 89 new beds in the second half. I’m pleased to say that