NETCARE LIMITED – Voluntary buying and selling replace for the six months ended 31 March 2022 – SENS

Voluntary trading update for the six months ended 31 March 2022

NETCARE LIMITED
(Registration number 1996/008242/06)
JSE ordinary share code: NTC
ISIN: ZAE000011953
JSE preference share code: NTCP
ISIN: ZAE000081121
(‘Netcare’ or the ‘Group’)

Voluntary trading update for the six months ended 31 March 2022

Netcare is pleased to provide a voluntary trading update for the six months ended 31 March 2022
(“H1 2022” or “the period”). Further details on H1 2022 performance and the outlook for H2 2022
will be provided with the half-year results to be released on Monday, 23 May 2022.

Highlights
– Group revenue growth of 2.0% to 2.5%
– Robust improvement in activity as the business transitioned out of the fourth wave, with average
occupancy in February and March 2022 of 62.4%
– Group normalised EBITDA growth of 8.5% to 9.0%
– Underlying EBITDA margins excluding strategic costs improved to around 16.8% from 15.8%
– Net debt to annualised EBITDA ratio strengthened to c.1.7 times from 2.0 times in March
2021

Group performance
% change
H1 2022 vs H1 2021

Revenue 2.0% to 2.5%
Normalised* EBITDA 8.5% to 9.0%

H1 2022 H1 2021

Normalised* EBITDA margin 15.8% 14.8%

March March September
2022 2021 2021

Cash and undrawn committed facilities (R billion) 3.4 6.6 5.6
Net debt/annualised EBITDA (times) 1.7 2.0 1.7

Note: All figures, metrics and variances reflect the Group’s latest financial estimates and have
not been reviewed or reported on by Netcare’s external auditors.

* Normalised EBITDA excludes the impact of non-trading related costs and income. The normalised
information is the responsibility of the directors of Netcare, has been prepared for illustrative
purposes only and because of its nature, may not fairly present Netcare’s financial position.

There was a steady improvement in non-COVID-19 activity in the first two months of H1 2022.
However, trading in December 2021 and January 2022 was adversely impacted by the
emergence of the Omicron variant. While the Omicron variant was more contagious, there was a
decoupling in the direct correlation between community transmission and hospitalisation,
reflected in a 70.3% decline in COVID-19 patient days in H1 2022 against the six months ended
31 March 2021 (“H1 2021”). From late January 2022, as we emerged from the fourth wave, an
increase in non-COVID-19 activity has been experienced, with activity levels in the month of
March 2022 achieving the highest acute and mental health occupancy levels since the onset of
the pandemic. Notwithstanding the disruption to the operating environment caused by the fourth
wave, there has been a steady improvement in financial performance in H1 2022 when measured
against H1 2021.

Group revenue increased within a range of 2.0% to 2.5% against H1 2021. Normalised EBITDA
grew by 8.5% to 9.0%, and the normalised EBITDA margin improved to approximately 15.8% (H1
2021: 14.8%), with the higher occupancy levels since late January 2022, tight control of costs
and a reduction in COVID-19 PPE expenditure absorbing the negative impact of lower
occupancies during the fourth wave.

The Group incurred operational costs relating to strategic projects of R112 million (H1 2021: R96
million) during the period, with a further R161 million to be incurred in H2 2022. Pleasingly,
normalised EBITDA margins, excluding the strategic operational costs, strengthened from 15.8%
in H1 2021 to 16.8% in H1 2022.

Cash generation remains strong and Group net debt (exclusive of IFRS 16 lease liabilities) has
declined to R5.4 billion from R6.1 billion at 31 March 2021. The ratio of net debt to annualised
EBITDA at 31 March 2022 was c. 1.7 times, improving from 2.0 times at 31 March 2021. During
the period, and in light of increasing certainty of the impacts of COVID-19, the Group reduced
its committed facilities by R2.1 billion. At 31 March 2022, the Group had cash resources and
available undrawn committed facilities of R3.4 billion.

Segmental performance – Hospitals and emergency services
Hospitals and emergency services comprise acute and mental hospitals, as well as emergency
and ancillary services.
% change
H1 2022 vs
H1 2021

Revenue 2.0% to 2.5%

EBITDA 7.7% to 8.2%

Patient days total 2.7%
Patient days – acute hospital 2.3%
Patient days – mental health 6.1%

Acute COVID-19 patient days (70.3)%
Acute non-COVID-19 patient days 19.8%
Revenue per patient day (0.8)%
Theatre cases 14.1%

H1 2022 H1 2021 FY 2021

EBITDA margin 15.5% 14.7% 15.0%
Occupancy (full week) acute hospital 55.5% 53.8% 55.9%
Occupancy (week day) acute hospital 59.8% 57.1% 59.2%
Occupancy (full week) mental health 64.2% 60.6% 62.1%

Hospital activity during December 2021 and the first three weeks of January 2022 was impacted
by low COVID-19 admissions, in conjunction with reduced non-COVID-19 admissions due to
sector seasonality and patient sentiment around hospitalisation during a wave, informed by the
devastating effect of the previous Delta wave. However, after the wave subsided and schools
opened, the division experienced a steady ramp-up in activity in both medical and surgical cases,
which continued throughout the last two months of the reporting period. The reduction in length of
stay to 4.2 days (H1 2021: 4.7 days) is indicative of the shift towards the normalisation of case mix to
pre-COVID-19 levels.

Notwithstanding the dilutive impact of the lower occupancy levels in December 2021 and January
2022, full week occupancy levels within acute hospitals increased to 55.5% in H1 2022 from
53.8% in the comparative period, with average occupancy across February and March 2022 of
62.4%. Occupancy levels have shown strong recovery in our mental health facilities, improving from
60.6% in H1 2021 to 64.2% for H1 2022, with average occupancy across February and March
2022 of 78.8%.

Total patient days for H1 2022 grew by 2.7% against H1 2021, comprising growth of 2.3% in acute
hospitals and 6.1% in mental health facilities.

Revenue for H1 2022 increased by between 2.0% to 2.5% against H1 2021, while normalised
EBITDA grew by around 7.7% to 8.2%. Normalised EBITDA margins strengthened from 14.7% in
H1 2021 to around 15.5%.

The normalised EBITDA margin within the hospital and pharmacy operations sub-segment,
excluding the impact of operational costs related to strategic projects, strengthened to approximately
16.7% from 15.6%. The higher margin was attributable to improving occupancy levels, cost
management and lower COVID-19 costs.

Segmental performance – Primary Care
Increased medical and dental patient visits and growth in the occupational health business in H1
2022 contributed to revenue growth of between 5.2% to 5.7% against H1 2021. EBITDA improved
by around 30.0% to 32.0% due to the recovery in activity and stringent cost management. As a
result, the EBITDA margin improved to around 23.0% from 18.4% in H1 2021.

Strategic projects
The new 427-bed Netcare Alberton hospital opened on 11 April 2022 and construction of the new
36-bed Akeso Richards Bay facility is complete and is expected to open shortly.

The various strategic and digitisation initiatives across all divisions of Netcare are progressing well
and remain on schedule. In the Hospital Division, the CareOn electronic medical record project is
well on track to have 20 hospitals completed by the end of 2022.

Environmental sustainability
For the second consecutive year, Netcare has achieved the distinction of being the only healthcare
institution in the world to win Gold Medals in all four categories (Greenhouse Gas Reduction (Energy),
Renewable Energy, Climate Resilience and Climate Leadership) in the latest global Health Care
Climate Challenge Awards. The awards are organised by Global Green and Healthy Hospitals (GGHH),
an initiative of Health Care Without Harm (HCWH). The GGHH network comprises over 1 500 members
in 75 countries representing the interests of over 60 000 hospitals and health centres.

In addition, the Group was recently awarded the Commercial Corporate Company of the Year Award in
South Africa by the Southern African Energy Efficiency Confederation (SAEEC) for outstanding
accomplishments in developing, organising, managing and implementing its corporate energy
management program.

These awards solidify the Group’s standing in the global and local community of environmentally
conscious healthcare institutions across all continents

KwaZulu-Natal floods
Our thoughts and prayers are with the people of KwaZulu-Natal during this traumatic time that has seen
lives lost, people injured and extensive damage to property, leaving many people without homes amidst
the catastrophic heavy rainfall and floods. Netcare 911 is privileged to continue to play a supportive and
collaborative role along with multiple agencies in the search, rescue and retrieval operations throughout
this time. Disruptions to power, water and oxygen supply at our various facilities continue to be well
managed.

Acknowledgement
We express our thanks and appreciation to our staff and doctors for their unwavering commitment and
dedication in supporting our core purpose of delivering the best and safest care and enabling us to
achieve our Group’s strategic and operational goals.

The information presented above reflects the Group’s latest estimates of its financial results and
related metrics and has not been reviewed or reported on by Netcare’s external auditors. Further
detail on the Group’s financial performance for H1 2022 and the outlook for the remainder of the
2022 financial year will be provided in the unaudited interim Group results due to be released on
Monday, 23 May 2022.

26 April 2022

Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank Limited

4

Date: 26-04-2022 08:00:00
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