Netcare Limited (NTC) Earnings Call Transcript

A very warm welcome to Netcare Limited's group results presentation for the year ended the 30th of September 2020. A warm welcome also to the Chair of Netcare, Thevendrie Brewer, members of the Netcare Board, the Executive Committee and our senior management team. I want to pause here, pause to thank, acknowledge and pay tribute to the extraordinary work done by our management teams and staff; and all our health care workers, nurses, doctors, paramedics, pharmacists, allied health professionals, support staff, IT and technical teams and administration teams on the front line across South Africa and Lesotho for their remarkable efforts in caring for and treating our patients during this pandemic. I also want to thank our Chair and the Board of Directors for their ongoing support and sage guidance provided throughout this very challenging period. This is very much appreciated. We also recognize the enormous loss of life in South Africa and globally from the pandemic and the profound pain it has caused. Our thoughts and prayers remain with all of those who've lost their loved ones. Our presentation today is, therefore, dedicated to the thousands of health care workers across South Africa, in the public and private sector, who have risked their lives in the fight against COVID-19, and especially to those who lost their lives in the process. South Africa owes a huge debt of gratitude to our frontline warriors. I will begin with an overview of our group's performance and the operational performance of our various divisions as well as the impact of COVID-19 before handing over to our Chief Financial Officer, Keith Gibson, who will unpack our financial results in more detail. I will conclude the presentation with a review of our strategy, share some detail on 3 exciting initiatives, and finally, present our guidance for the year ahead. Turning to the overview of our performance for the year. At Netcare, we feel privileged to play a role in supporting our country through the pandemic. 2020 has very much been a year of 2 very different halves, a first half for COVID-19 and a second half coping with the devastating impact of the pandemic and attempt to recover from it. Looking at our performance overall, and the first half, in particular, the first 5 months to the end of February was very much business as usual, and Netcare delivered a solid underlying operational performance, in line with the guidance we had given the market. After the peak of the pandemic in July and from about the middle of August, we have begun to experience a positive recovery in volumes and admissions in our hospitals and Akeso and an increase in GP and dental visits. Now many people have asked what health care delivery will look like after COVID-19. In reality, health care delivery was not exactly pristine prior to the pandemic, and COVID-19 has exposed the deep fault lines in the delivery of health care. What it has done, however, is very strongly and definitively reaffirmed just how relevant the strategy is, which we have embarked upon in terms of person-centered health and care, digitally-enabled and data-driven. I'm very pleased to inform you that having put most of our strategic projects on hold during the pandemic, we have now reignited the engines and are back on track in terms of rolling these out. Looking broadly at our financial performance now over the past year, and doing so on a normalized basis to exclude the impact of IFRS 16 and the exceptional items referenced at the bottom of this slide. Revenue declined by 12.7% to ZAR 18.8 billion. EBITDA declined by 52.4% to just over ZAR 2 billion demonstrating the significant negative leverage of reduced volumes on our relatively high fixed cost base. Adjusted HEPS declined by 72.2% to 47.6% (sic) [ ZAR 0.476 ]. Our net debt-to-EBITDA ratio climbed to 3.1x versus a ratio of 1.2x last year. And as a result of our intentional cash preservation strategy through the pandemic, cash and committed facilities of ZAR 5.6 billion were available to us at year-end. Unfortunately, given all of this and the fact that we're still operating under a covenant waiver, no dividend has been declared by the Board. Turning now to our operational review in more detail. Looking at key activity drivers in more detail, it's helpful to split this past year into the first 5 months to the end of February prior to the impact of COVID-19, then the remaining 7 months, and finally, the full year, in order to understand the impact of COVID-19. As you can see, total patient days declined by 1.2% in the first 5 months but by 32.2% in the remaining 7 months and almost 20% for the full year. Acute hospital patient days declined by 1.7% in the first 5 months but by 31.6% in the remaining 7 months and, again, by almost 20% for the full year. Total mental health patient days grew by 4.7% in the first 5 months but declined by 37.6% in the remaining 7 months and by just over 21% for the full year. As can be seen from this table, this had a commensurate effect on occupancy in this division. In terms of Primary Care, patient visits declined by 4% in the first 5 months and by 25.5% in the remaining 7 months and by almost 17% for the full year. Looking at this slightly differently and graphically, and in terms of the timing of the various stages of the lockdown, this graph demonstrates the significant drop-off in patient volumes in our Hospital division as a result of the level 5 lockdown imposed, the cessation of elective surgery and the slow relaxation of these lockdown measures through to September. One can also observe the continued recovery in patient volumes through October, and pleasingly, we have reached a 57% occupancy during this past week in November, or differently put, we have recovered 86% of the volume as recovered as compared to November last year. This graph similarly demonstrates the precipitous drop-off in patient volumes in our Mental Health division as a result of the level 5 lockdown imposed, the cessation of group therapy sessions and the slow relaxation of these lockdown measures through to September. Patient volumes have continued to recover through October, with average occupancies of 68%. Netcare 911 experienced a 47% drop in patient volumes as a result of level 5 lockdown, the ban on the sale of alcohol and the curfew imposed, followed again by the slow relaxation of these lockdown measures through to September. These volumes have recovered and are now at approximately 87% of pre-COVID levels. And finally, the drop-off in patients in our Primary Care division as a result of the level 5 lockdown imposed and the recovery through to October is shown in this last graph. GP visits have recovered to approximately 88% of pre-COVID levels, and dental visits have fully recovered. Let's take a look at the Hospital and Emergency Services division in more detail. Revenue declined by 12.7% to ZAR 18.25 billion, largely as a result of the decline in activity elucidated in previous slides. This also comprised a revenue decline of 12.8% in our hospitals, an 18.6% decline in mental health revenue and an 8.7% increase in acute hospital revenue per patient day, largely as a result of our COVID-19 admissions and also a higher mix of more severe admissions. EBITDA declined by 52% mainly as a result of a decline in volumes, but also due to additional operating costs attributable to COVID-19 of about ZAR 300 million and a loss of ZAR 78 million in doctors and third-party rentals and parking income. A further ZAR 100 million was invested in strategic projects. This included ZAR 15 million for the CareOn project, ZAR 22 million for the development of our Microsoft Azure cloud data platform and analytics capabilities and ZAR 63 million on new business development. As a result of all of these, our overall EBITDA margin percentage declined to 11.2% from 20.4% in 2019. In Primary Care, revenue has been restated to reflect the impact of the 15 Medicross day clinics integrated into our Hospital division from October 1 -- from 1 October 2019. Revenue declined by 12.8% to ZAR 611 million due to the impact of COVID-19 and a rationalization of 7 loss-making clinics. Stripping out the rationalization of these clinics, underlying revenue declined by 6%. EBITDA declined by 66.7% to ZAR 36 million as a result of lower activity during the pandemic, which far outweighed the benefits of the clinic rationalization. These factors impacted the margin, which declined from 15.4% to 5.9%. It's worth noting that prior to the pandemic, Medicross was doing about 30 virtual or teleconsults a month, and this rose to about 12,800 during the height of the pandemic. It is currently at approximately 4,000 per month. We announced at our interim results that we've developed, together with A2D24, a telemedicine solution that allows doctors to conduct secure virtual video or voice consultations. This has been rolled out to over 3,000 doctors and health care professionals, and I'm delighted to inform you that at this month's Digital Innovation Awards sponsored by BCX, our virtual care platform was placed second to Checkers Sixty60 in the corporate category. Let's take a more detailed look now at the impact of COVID-19 on our business. Since our first COVID-19 positive case on the 9th of March, we have treated 28,016 COVID-19-positive patients, of whom 13,436 were admitted into our hospitals. Our initial assumptions, based on the guidance from the Center for Disease Control, the experience in China, Italy and elsewhere in Europe, was that up to 30% of people testing positive would require hospitalization, and of these patients, some 20% to 25% would require ICU or high care. However, given the unprecedented amount of published research and information made available on the pandemic, we have been fortunately able to benefit enormously from both global and local experience. Treatment regimens have substantially improved from the early dark days of this pandemic, and this has had a significant impact on outcomes. Pleasingly, our average length of stay have reduced dramatically from 22 days at the start of the pandemic to an average of 7 days as our treatment modalities improve. Also, patients requiring hospitalization have steadily reduced to between 10% to 15% of those testing positive. In order to prepare and effectively deal with COVID-19, we adopted a risk-adjusted abundance of caution approach, drawing from a combination of the principles of disaster management, the Quadruple Aim and occupational health and safety and also relied heavily on the guidelines and policies of the National Department of Health, the NICD and the World Health Organization. In order to successfully pivot our organization, we established clear command and control structures and focused on 6 very important factors, which we recognized were and remain absolutely critical in effectively managing our response. We also quickly understood that we needed to leverage off our extensive digital capabilities to be able to effectively manage the pandemic on a real-time basis and in the most efficient way. At the outset of the pandemic, no one really knew if we would have enough beds in South Africa, and so we did extensive actuarial modeling to try and plan for the various scenarios. The model we built was also dynamic and allowed us to manage daily bed capacity using a risk stratification approach. Given our digital capabilities, we were able, on a real-time 24/7 basis, to determine exact needs and requirements. With improvement treatment regimens and lengths of stay declining, we never exceeded our overall capacity, even though certain facilities were often completely full. At the peak of our pandemic, over a 2-week period in July, it may interest you to know that we had more than 2,200 COVID-19-positive patients in our hospitals at any one stage. It became very evident that different modalities of oxygen therapy were helpful in the treatment of COVID-19 and that ventilating patients could be successfully avoided in many cases, and so ensuring we had adequate supplies of oxygen became critical. Oxygen capacity was significantly increased at most of our facilities. Again, due to our digital capabilities, we were able to monitor on a live basis oxygen utilization and demand per hospital and per ward and exquisitively manage demand versus supply, something we believe will hold us in very good stead should a second wave eventuate. The availability of key drugs used in the fight against COVID-19, such as steroids, anticoagulants, antibiotics and certain antiretrovirals, was also critically important. Probably one of the most challenging aspects of this pandemic was attempting to ensure we had adequate supplies of good quality PPE. Given global demand, this proved challenging, both in terms of pricing and supply. A fundamental principle remains, never to compromise on health care worker safety. And so we procured well in excess of our requirements in case the surge lasted and extended period of time. This can be seen in our results where we still remain with high levels of inventory. Fortunately, it is nonperishable in nature, does not expire, and we expect to utilize this in the new financial year. Of course, the single most important aspect that consumed us 24 hours a day was the safety and well-being of our frontline staff, managing their well-being and the very real existential threat that they faced on a daily basis and the enormous anxiety and burnout that resulted from the workload, proved extremely challenging, and we have learned valuable lessons in this regard. And finally, we embarked on a cash preservation strategy to ensure we could support our health care workers and frontline staff and keep Netcare afloat during the pandemic. Keith will shortly elaborate in more detail regarding this. This slide demonstrates the risk-adjusted approach we assumed in tackling bed capacity for COVID-19, by dividing all of our hospitals into 3 separate zones: green for COVID-19-free patients, yellow for patients undergoing investigation for COVID-19 and red for confirmed COVID-19-positive patients. This was and continues to be digitally modeled and adjusted on a live basis per hospital to ensure adequate capacity planning at all times. During the height of the pandemic, we had over 80% of all of our beds dedicated to COVID-19. And as you can see from the middle of this graph, which demonstrates our adult critical care beds, over 90% of our ICU and high care capacity was dedicated to COVID-19, at the height of the pandemic. During the pandemic, we introduced digital screening via SMS, WhatsApp and web URL of all of our staff, doctors, patients and contractors to ensure no inadvertent spread of the virus and to ensure our facilities remained safe. As you can see from this live dashboard, to date since the 22nd of May, we have digitally screened over 5.5 million people and will continue to do so. Interestingly, the tables at the bottom indicates the number of individuals denied access and the reasons for it. The impact of COVID-19 on our frontline staff was significant, and this slide demonstrates the true cost of fighting the pandemic. 13% of our staff contracted COVID-19, either from a community-acquired source or hospital-acquired. The living conditions of many of our staff and their mode of transport often presented significant challenges in terms of safe social distancing. Tragically, 20 of our staff and 9 nurses and 9 of our doctors passed away as a result of COVID-19. We, again, pause here to remember and to honor our fallen heroes. So what can we and what have we learned from COVID-19? There are so many lessons emerging from our experiences during the pandemic. But I really want to highlight 4 fundamental ones, which bear mentioning. If there is one positive to take out of the pandemic, it is that the importance of worker and health care worker safety cannot be overemphasized. For South Africa as a whole, I believe the pandemic and the rapid nature of its spread have reminded all of us as to the importance of robust occupational health and safety standards and practices. Again, we have now fully digitized all of our training and occupational health and safety processes and records. COVID-19 threatened to dehumanize us all, and in particular, our health care workers. Patients and loved ones could not see each other. Caregivers were hidden in masks and spacesuits, and the level of anxiety this all created was often debilitated. It was a stark reminder to all of us to find different ways of communicating with patients and their loved ones and allowing digital face time on iPads or mobile calls to bridge the gap. Whilst we did not allow visitors, we certainly allowed family to visit for compassionate or end-of-life situations. Thirdly, COVID-19 emphasized the critical imperative of accelerating the digitization of as much as possible to allow real-time remote management in command and control. Despite putting many of our larger digital projects on hold during this period, we focused on digitizing key processes, as already mentioned, around bed management, oxygen capacity and demand, track and trace, occupational health and safety, virtual consultations, screening of health care visitors and others. And finally, COVID-19 exposed the real fault lines in our health care system. In a seminal editorial in The Lancet medical journal on the 25th of September this year, The Lancet quoted the work of Professor Merrill Singer, a medical anthropologist out of Connecticut, who coined the phrase syndemic in the 1990s. A syndemic or synergistic epidemic is the impact of 2 or more epidemics or disease clusters, which exacerbates the prognosis and burden of disease. In terms of COVID-19, we have all simply viewed the cause of this crisis as an infectious disease. And as a result, most of our interventions have been focused on stopping viral transmissions. However, the story is not so simple. And as I said, COVID-19 has exposed many fault lines. And there are, in fact, 2 categories of diseases interacting with specific populations. The first is infections with the SARS COVID-19 virus and an array of noncommunicable diseases, such as hypertension, diabetes, asthma, obesity and cardiovascular disease. And unfortunately, in addition, these are aggregating against the background of social and economic disparity that exacerbates the adverse effects. And this, ladies and gentlemen, is exactly what we experienced during the pandemic. The majority of our patients had existing comorbidities, often poorly controlled and managed, which exacerbated their condition and worsened their outcome. And the lesson for us all is clear. Unless we adequately control and improve our management of noncommunicable diseases, COVID-19 will not be the last pandemic or systemic -- syndemic, sorry, to attack our planet. In South Africa, prior to COVID-19, 57.8% of all deaths were attributable to noncommunicable diseases. Within Netcare, our strategy is perfectly aligned to addressing this very issue, and I will touch on this briefly later. I'm going to now hand over to Keith Gibson to unpack our financial results in more detail.

Thank you, Richard, and good morning, ladies and gentlemen. So following on from the overview of the business landscape and our operational performance, let's now turn our attention to the group financial results for the 2020 financial year. 2020 has been one of the most extraordinary periods in Netcare's 23-year history. The emergence of the coronavirus or COVID-19 in South Africa in March of this year resulted in FY 2020 being a year of 2 halves. For the first 5 months of the first half, it was largely business as usual. However, the theme of the second half was weathering the COVID-19 storm. The additional costs of operating in pandemic circumstances more than offset the cost savings achieved in the first half. And this, in combination with declining activity, resulted in negative operating leverage, with the reduction in EBITDA exceeding the decline in revenue because of components of fixed costs in the base. However, Netcare's statement to financial position remained strong, and debt levels are manageable largely due to the success of our cash preservation measures, and also aided by the receipt of ZAR 778 million of proceeds from the sale of the U.K. properties owned by GHG PropCo 2. And at the financial year-end, Netcare had cash and committed undrawn banking facilities of ZAR 5.6 billion available to the group. And then in a year of great change, we also adopted IFRS 16 in FY 2020. And we applied the modified approach, meaning that there's been no restatement to the prior year's results. And we've, therefore, provided additional disclosure to aid comparability and year-on-year performance, which I'll come to shortly. As has already been highlighted, COVID-19 had a devastating financial impact on Netcare. And it's difficult, if not impossible, to definitively quantify COVID's full financial impact on the business. And to do so, it does require certain estimations and assumptions to be made in order to paint a picture of what might have been if COVID-19 never happened. However, we have broadly estimated that the negative impact on revenue is in the order of ZAR 3.7 billion, with a negative knock-on effect of ZAR 2.3 billion to EBITDA. Within this, most of which is attributable to the loss of regular activity within our facilities. The cost of keeping patients, nurses, doctors, contractors and staff members safe during the pandemic amounted to approximately ZAR 300 million, and this was mostly spent on personal protective equipment, staff costs, screening, training and sanitizing. In addition to these extra costs, our income also reduced in the form of lower rentals received from doctors rooms, imaging and diagnostics, coffee shops and retail pharmacies. Less patients and restrictions on visitors also led to reduced parking income. We invested ZAR 156 million in additional COVID-19-related CapEx to enhance the readiness of our ICU and high care facilities in the form of additional ventilators, specialized air filters, ultraviolet light disinfection robots and oxygen capacity, amongst others. And our working capital was affected by approximately ZAR 700 million, mainly attributed to the need to build up adequate PPE drugs and consumables to withstand the demands of the pandemic, bearing in mind that we had to do so in a time of constrained global supply and uncertain lead times. Turning to the group's statement of profit and loss for the year ended 30 September 2020. And I remind you that the FY 2020 results are reported on an IFRS 16 basis, while the FY 2019 numbers have not been restated. Revenue amounted to ZAR 18.8 billion compared to ZAR 21.6 billion for the prior year and decreased by 12.7%. EBITDA for the year amounted to almost ZAR 2.6 billion and declined by 41.7%. Now this variance is flattened by the exclusion of rental charges in FY 2020 under IFRS 16 accounting. And also included in EBITDA for the current year are CareOn costs of ZAR 15 million, data enablement costs of ZAR 22 million and new business development costs of ZAR 63 million. Group EBITDA margin dropped by 670 basis points from 20.3% to 13.6%, with the negative impact of COVID-19 more than offsetting the benefits of no-longer-reflecting rental charges under IFRS 16. Operating profit decreased by 61.7% to almost ZAR 1.4 billion. Other net financial expenses increased from ZAR 486 million to ZAR 522 million as a result of higher average debt levels, albeit at a lower average cost of debt. We then have the introduction of a new cost being the interest charge recognized on our lease liabilities introduced by IFRS 16, which amounted to ZAR 371 million for the year. Consequently, profit before tax reduced by 82.8% to ZAR 556 million. The group's tax charge amounted to ZAR 243 million. And profit after tax before exceptional items amounted to ZAR 313 million, significantly down on usual levels of profitability. We have 2 exceptional items in the current year. Firstly, we recognized a profit of ZAR 474 million after tax, arising from the disposal of our investment in GHG PropCo 2 following the sale of their U.K. properties; and Netcare's related share of the disposal proceeds of ZAR 778 million was received shortly before the year-end. Secondly, and unchanged from our half year reporting, there is a once-off noncash share-based payment expense or IFRS 2 charge relating to our B-BBEE ownership transaction of ZAR 348 million. The B-BBEE transaction was implemented in October 2019 and it benefits over 20,000 Netcare employees, of whom 80% are black, and 65% are black women. And this results in a bottom line profit for the year of ZAR 439 million. In order to assist with the obstacles to direct year-on-year comparability that IFRS 16 has introduced, in this slide, we set out a reconciliation, in which we strip out the accounting effects of IFRS 16 arriving at an underlying result, which provides a better understanding of the real performance of the group. As you can see, the EBITDA line benefits from ZAR 470 million of rental expense, which is no longer recognized under IFRS 16 accounting. And this is offset by additional depreciation charges of ZAR 380 million on the right-of-use asset recognized under IFRS 16, resulting in a net benefit of ZAR 90 million at the operating profit line. We then recognize an interest charge of ZAR 371 million on the lease liability. And all of the above results in a negative impact from adopting IFRS 16 on the group's results of ZAR 281 million before tax and ZAR 202 million on an after-tax basis. Therefore, the group results presented on an underlying basis reflect the following: a revenue decline of 12.7% to ZAR 18.8 billion; a reduction in EBITDA of 52.4% to just under ZAR 2.1 billion; an operating profit decrease of 64.2% to ZAR 1.3 billion; a profit after tax before exceptional items of ZAR 515 million; and the final bottom line, profit of ZAR 641 million. Next, we move on to headline earnings per share. HEPS has decreased from ZAR 1.659 per share in the prior year to a current year loss per share of ZAR 0.036. The bulk of the reduction is attributable to the impact of COVID-19 on trading across the last 7 months of the year. Other notable factors influencing the decline of the once-off noncash share-based payment expense, now B-BBEE transaction, which reduced HEPS by ZAR 0.26; and the adoption of IFRS 16, which reduced HEPS by ZAR 0.151. Now we also present an adjusted HEPS figure in which we strip out exceptional and unsustainable items as this is the primary measure used by management to assess performance. And group adjusted HEPS amounted to ZAR 0.325 and has decreased by 81% against 2019. However, this is not directly comparable as the current year results are reported on an IFRS 16 basis, and the comparative numbers have not been restated. So excluding the impact of IFRS 16, adjusted HEPS equates to ZAR 0.476 for 2020, reflecting a slightly lower decline of 72.2% against the prior year. Moving on to the group statement of financial position. We see the total assets as at 30 September 2020 amounted to ZAR 25.9 billion, increasing from ZAR 21.4 billion at September 2019. Of the increase, ZAR 3.8 billion is attributable to the recognition of a right-of-use asset on our leases raised under IFRS 16 accounting, and this was offset by the corresponding recognition of lease liabilities with a carrying balance of ZAR 4 billion at 30 September 2020. CapEx spent during the year amounted to ZAR 1 billion, of which ZAR 193 million related to expansionary projects and ZAR 34 million was invested in our CareOn digitization project. In order to preserve cash, we elected to defer uncommitted and new capital projects totaling approximately ZAR 800 million. And as I've already mentioned, we also invested ZAR 156 million of CapEx in preparing our facilities for COVID-19. Working capital has been well managed, although we are carrying higher levels of inventory at the year-end as a result of the need to prioritize the procurement of additional inventory reserves and especially personal protective equipment, drugs and consumables at the time of scarce global supply. Total shareholders' equity decreased from ZAR 10.2 to ZAR 9.8 billion. The reduction is a consequence of lower profits, and it also includes our share buyback program, whereby we bought back and canceled 12.7 million Netcare shares with ZAR 251 million in November and December 2019. As we usually do, let's take a more in-depth look at our debt position. Gross debt amounted to ZAR 7.9 billion at 30 September 2020, offset by cash balances of almost ZAR 1.5 billion. Therefore, net debt totaled ZAR 6.4 billion at the year-end, increasing by ZAR 1.3 billion since September 2019 as lower activity levels resulted in less cash generation. The leverage of the business increased, with net debt-to-EBITDA coverage moving up to 3.1x on a pre-IFRS 16 basis. This is above our banking covenants, which require this metric to be below 2.75x. But this has been addressed by proactively obtaining a waiver of the September 2020 covenant test. And as a precaution, we've also secured a waiver of the March 2021 covenant test. The cost of debt has decreased by 220 basis points from 8.6% to 6.4% as a result of reductions in borrowing rates during the year. Currently, approximately 40% of the group's debt has fixed interest rates, which is achieved with the aid of interest rate swaps. Net interest paid increased slightly to ZAR 504 million from ZAR 484 million in 2019. However, total interest paid increases by a further ZAR 371 million in the current year after including the interest of lease liabilities introduced by IFRS 16. Interest cover has dropped to 2.6x as a result of our lower trading performance. And finally, a reminder that in March 2020, GCR reaffirmed Netcare's long-term credit rating of AA- and our short-term rating of A1+. Moving on to our debt facilities. And given the pressures introduced by COVID-19 and the need to secure access to liquidity, I'm going to focus on committed banking facilities. At the year-end, Netcare had cash balances of almost ZAR 1.5 billion on hand as well as committed but undrawn debt facilities of ZAR 4.2 billion at its disposal. And we, therefore, have access to resources of ZAR 5.6 billion in the aggregate from which to fund our future needs. In addition to the securing of additional facilities, we are maintaining a prudent approach to liquidity management by continuing with a number of cash preservation initiatives, which include the tight control of costs, managing CapEx spend in terms of our asset-light strategy and the decision not to pay an interim or final dividend. Our debt maturity profile is appropriately staggered, with only ZAR 391 million maturing in H1 and ZAR 715 million maturing in H2 of 2021. The business is, therefore, well placed to withstand the uncertainties of the year ahead. Next, I'd like to talk you through our disciplined approach to the allocation and distribution of capital. Now within Netcare, our ambition is to allocate and distribute capital according to world-class disciplines, while maintaining an optimal capital structure. And this is not something new. It's a framework that we've implemented over the last number of years, and we continue to refine and embed it into our culture. The advent of COVID-19 has driven a need to make decisions more quickly, and having this framework in place has proved beneficial. Now we apply decision analysis to capital investments and distribution scenarios, with outcomes being based on the expected net present value and the ability to increase future economic profits. We recognize the weakness of single-point forecasts. And we, therefore, quantify risks and opportunities by performing robust sensitivity analysis of key performance drivers, which are guided by both rich statistical evidence from operating a large network of hospitals and health care facilities over a long period of time, and the expert opinions of management and, where appropriate, outside specialists. So let's step through Netcare's approach to managing the capital cycle, and beginning with strategy. Strategy involves the search for new business opportunities and the consideration of alternatives that are always aligned to the broader group strategy. And by way of example, this would include the identification and selection of our group-wide digital strategy as well as new business lines and services being added to the Netcare ecosystem. Decision models assist us in evaluating and selecting strategies and investments with the highest expected NPV, and this would apply to decisions to invest in capacity, such as new hospital builds as well as decisions to disinvest, where returns don't meet our hurdles, such as the disposal of underperforming facilities. And in past years, we've demonstrated that we are prepared to take the difficult decisions and exit or dispose of underperforming assets. If we make sound capital investment decisions, then our economic profit should grow. And we measure our performance by monitoring return on invested capital and economic profit, recognizing that the only way to increase Netcare's intrinsic value is to grow economic profits, which will result in attractive long-term cash flows. And so in this regard, we've implemented ROIC and economic profit at hospital level to ensure that our facilities are appropriately focused on driving behaviors that will ultimately increase long-term cash generation. And finally, we use decision analysis to help determine the optimal capital structure and payout policies. If we don't have sufficient positive NPV investments within the business, we distribute surplus cash back to shareholders. And we demonstrated our commitment to this policy in 2018 and 2019. And the overarching principle is that we adopt a conservative approach. In prior years when financial market participants wanted Netcare to gear up, we did so responsibly. We ran scenarios incorporating past volatility and profitability, and we decided on a capital structure that could withstand economic shocks. And this policy placed us in good stead during the pandemic. We can note from this next slide, depicting cash flow return on investment, that the general trend over the past 5 years for the CFROI of health care facilities, both globally and in South Africa, has been downward. And this is also largely true for Netcare, where the environment has been challenging due to downward pressure on tariffs, along with the emergence of low-cost networks, while cost pressures such as the shortage of nurses and the rapidly rising electricity and utility costs place further pressure on margins. Now we actively seek to mitigate these pressures. And by way of example, our sustainability strategy has led us to invest in substantial solar fleet to [ counter the ] rising costs of electricity as well as reducing our dependence on its unreliable supply. And despite the declining sector trend, Netcare has generated impressive CFROI that exceeds the cost of capital to the extent that we had categorized as a best-in-class top quartile performer globally, also delivering returns well above our South African counterparts. And 2020 has obviously been a very difficult year because of COVID-19, and capital discipline and operational excellence are critical to restoring and maintaining profitability. Now within the business, we use CFROI, ROIC and economic profit to measure performance. ROIC is our preferred metric because it's less complicated to calculate. It requires fewer adjustments, and it's easier to communicate, both internally to our managers and to external shareholders. It's also a key driver of economic profit, which ultimately results in economic value creation. We do understand how ROIC can be distorted, especially when comparing old hospitals against new ones, or by failing to invest in assets over time. And we manage our business for the long term and our targets are set for the medium-term. And therefore, failing to invest in maintaining our facilities would negatively impact our ability to compete effectively as a trusted health care provider and, ultimately, would be detrimental to ROIC. And therefore, we continuously strive to find the right balance. CFROI, of course, removes this distortion and some others because it's based on gross assets and it's inflation-adjusted. And for these reasons, it's ideal for benchmarking and it acts as an assurance metric, and also many fund managers use it. We monitor it at the executive level, but we use ROIC for managing our business on a daily basis. The measures are very highly correlated, and therefore, we have confidence that driving ROIC and economic profit will result in value creation. Now comparing Netcare's ROIC to the aggregates of the SA health care sector, our returns are at the top of the range. Once again, FY 2020 has been an anomaly, but the graph on the right-hand side demonstrates the factors accounting for this. And from a low reported ROIC of 5.6%, if we exclude the impacts of IFRS 16, ROIC improves by 1.1%. The estimated impact of COVID-19 has brought ROIC down by a large 12.4%. And then if we also adjust to the central costs relating to CareOn, data enablement and new business development, ROIC reconciles to respectable 19.6%. Turning to major CapEx plan for fiscal year 2021. We've been deliberate in curtailing CapEx to high-growth areas and the continued development of our IT platform. We've set out on this slide a few projects that will receive CapEx investments in fiscal year 2021. The largest project of ZAR 400 million is the ongoing construction of our new Alberton Hospital. This facility is a replacement of our current Netcare Union and Clinton hospitals, and it will have 427 beds and scheduled for opening in February 2022. The new Akeso Richards Bay facility with 36 beds is due for completion by the end of FY 2021, and it will utilize ZAR 30 million of CapEx. Akeso is also developing a new 72-bed facility in Port Elizabeth, on which we will spend ZAR 40 million in FY 2021, and the facility scheduled to open in September of 2022. And we'll also progress our IT focused strategy, with further ZAR 30 million earmarked for the CareOn digitization project. And ZAR 70 million has been allocated to a full upgrade of our in-hospital WiFi and firewalls. And finally, I'd just like to extend my thanks and gratitude to our finance staff across the group, who've adapted very quickly and efficiently to different ways of working in order to ensure ongoing quality reporting. And they've done so without disruption or delay to our timetables, which is no small feat. And I'll now hand you back to Richard, who will take us through what lies ahead for Netcare in FY 2021 and beyond.

Thank you, Keith. Let's now focus on the year ahead. Just a quick recap of our strategy, the fundamental aim of our strategy is to create a competitive, sustainable advantage for Netcare. Our strategy builds on 3 global health care megatrends, of customer centricity, digitization and data, and combines and leverages of our unique and evolving ecosystem of assets and services. This allows us to ultimately provide person-centered health and care that is digitally-enabled and data-driven across our ecosystem. We believe this will result in optimizing seamless and integrated care across the full continuum of health and care. And as I mentioned earlier in the presentation, when introducing the concept of a syndemic, we require an aligned and joined-up approach to tackling and preventing illness and not the current siloed and isolated episodic approach. Our strategy will also allow us to achieve a person-centered approach to the redesign of health and care delivery. It will also allow us to empower patients with their digital records for life, allowing them to assume co-responsibility for their health and care. And be able to better inform and improve clinical decisions and outcomes through rich data analytics. We firmly believe that our strategy will, over time, deliver above-market growth, enhanced returns, and as you've just seen, a very well differentiated care offering. And importantly, all of the projects and investments, which underpin this and allow us to operationalize the strategy, will have to pass our own internal Netcare litmus test of having to meet at least one of these criteria of being able to grow -- allow us to grow above market, enhance our returns or assist in differentiating our care offering. Our digitization drive and enhancing data analytic capabilities are a critical element of this strategy. And the next few slides provide an update of where we are in this journey. All digitization programs across Netcare were put on hold in March during the COVID-19 pandemic. But fortunately, no penalties were incurred. As discussed and demonstrated previously, if anything, COVID-19 has confirmed the relevance of our strategy. All of our projects across the divisions remain within budget. The total capital cost across Netcare for the entire program over 10 years is ZAR 602 million. And we have spent ZAR 120 million to date, with a further ZAR 335 million planned over the next 2 years. Looking at our rollout of Netcare electronic records in more detail in terms of our hospital digitization or CareOn program. This is probably one of the most enormous and transformational undertakings we have ever carried out in the history of Netcare. The rollout was moved from Gauteng to the Western Cape due to its earlier recovery from COVID-19. It's been successfully rolled out to general wards in 3 Western Cape hospitals. We expect the full rollout in all of our hospitals to be completed -- sorry, the rollout in these 3 hospitals to be completed by April 2021. And we will resume in the Gauteng in April 2021. We expect the full rollout of our hospitals to be completed by the end of 2022. In terms of our primary care digitization program, the rollout of HealthOne electronic records was completed in 9 clinics prior to the pandemic, and the remainder of clinics will be completed in June of 2022. Akeso's electronic health care record rollout will be completed in April of 2022. And finally, for National Renal Care, the rollout will be completed by September 2021. Since the design and development of CareOn in 2018, we've introduced a number of features, which are firsts in the South African market and, indeed, on the continent. Digital or electronic e-scripting was approved by the South African Pharmacy Council in August of this year. It's a first for South Africa and establishes the new industry standard for e-scripting. We've also achieved the highest level of medication safety in South Africa. All prescriptions are now checked against IBM Watson Health's Micromedex for any interactions between medication, duplicate medication and medication allergies that patients may have. We have enabled a voice-to-text note dictation and handwriting recognition. Using Siri on any iPad, users can dictate all of their notes. The iPads also offer handwriting recognition. All orders and investigations are now requested electronically through something we call computerized physician order entry. All results are also automatically and electronically returned via CareOn. And this is a critical feature that allows seamless integration between all health care workers. The picture on the right is a very recent one taken last week in one of our wards in the Western Cape. As a result of COVID-19, a training of doctors and nurses now takes place online through Netcare's e-learning platform, Insight. This allows nurses and clinicians the ability to complete training from the comfort of their homes. We've also now achieved a fully paperless environment, including all nursing, doctors and clinician documentation and patient information. The solution is fully mobile and able to run off an iPad with remote access. This is the capability, ladies and gentlemen, offered only by literally a handful of hospitals in the world. The picture on the right-hand side is one of our doctors from N1 City Hospital in the Cape, checking on her patients in the early hours of the morning from the comfort of her home. Despite the disruptions of COVID-19, we've been hard at work at enhancing our ecosystem through a number of new strategic initiatives, some of which we are able to announce today. Netcare's innovative health care solutions business, which now operates under the NetcarePlus brand, is a newly established division which has been set up to enhance access to affordable private health care, particularly for those that are employed but uninsured. Even though South Africa has approximately 8.9 million people who belong to a medical scheme, there's a large part of South Africa that is currently employed but do not have adequate health care cover in their household. This market is typically described as the middle-income segment of South Africa. According to the Bureau of Market Research, this segment represents 1/3 of South African households and accounts for as much as half of the total household expenditure in South Africa. NetcarePlus was specifically created to provide affordable health care solutions that will help this market segment access private health care. We've partnered with FNB and developed primary health care vouchers for GP consults and virtual care, which are available both on the eBucks platform as well as our own website, netcare.co.za. The vouchers can be redeemed at over 1,000 GPs across the country using the Netcare ecosystem and the NetcarePlus trusted partner network. The vouchers have been priced to maximize affordability and to allow employers to purchase care on behalf of their workforce. And we plan to expand our offering to optometry and dentistry solutions in the coming year. We've also launched a selection of prepaid procedures, a product that for a single price includes all costs related to the procedure, including specialist costs. This enables people not in a medical aid an affordable way to receive necessary care for elective surgery. Our first procedure was launched with ophthalmologists for the removal of cataracts. We plan to launch prepaid procedures for urology, ENT and orthopedics. And in addition to this, we have found that affordability is still a barrier to people receiving the necessary treatment in this market. And as such, we will be packaging these procedures with a credit facility over time so that people can receive treatment as and when they need it. Many of our patients have indicated that it's often difficult to access the appropriate doctor or specialist. And so earlier this month, after a 2-year pilot, we launched Netcare appointmed, aimed at providing a convenience and free national service to access health care professionals. It provides access to extensive network of health care professionals at Netcare hospitals, Medicross medical and dental centers and Akeso mental health facilities. There are no membership or fees, and it provides also, on request, access to doctors who charge scheme contracted rates, and thus avoid any excess charges or extra fees. Employee wellness is extremely important to us and forms a critical and comprehensive occupational health and safety service. We are absolutely delighted to have acquired a 40% stake in ICAS, South Africa's leading provider of employer wellness solutions, effective March 2020. ICAS provides a comprehensive range of employee health and wellness programs as well as absence, incapacity and disability management. It's the leading provider in South Africa with over 600 clients, covering over 700,000 lives, and importantly, is a level 1 B-BBEE provider. A key pillar of our strategy is accelerating transformation in Netcare and our broader society and driving sustainability of our environment. Despite the challenging year we've had, we continued to make significant progress across accelerating transformation, both within Netcare and society as a whole. And this is evidenced by the improved results in each of the pillars of our transformation strategy. The racial and gender profile of our workforce is becoming more aligned with the national, economically active population. Our workforce profile has become more diverse particularly at the leadership level. And we met and exceeded our numerical objectives set out in the Netcare employment equity plan for the past 5 years. Because we had met the numerical objectives set out in our employment equity plan, we set ourselves stretched targets, most of which have been achieved. Given the prevailing high youth unemployment in our country, we have continued to invest in skills development and employment creation for youth through the Youth Employment Services or YES program. We have 865 youths currently enrolled on various internships and learnerships, with a 97% permanent employment conversion rate for those who have successfully completed training. We also have another 516 youths who will be commencing training in 2021. Thus, we've met and exceeded our commitment of training 1,000 youths over a 5-year period ending in 2023. The procurement statistics on this slide show our continued focus on supporting inclusive economic growth, with evident improvements in our procurement spend on B-BBEE-compliant suppliers and sustained growth in procurement spend on black-owned and black woman suppliers. Year-on-year, our growth in enterprise and supply development also reaffirms our commitment to supporting entrepreneurship and employment creation by supporting the inclusion and development of small businesses in our supply chain. In line with our strategy, we also aim to become a global health care leader in sustainability. And we set ourselves a -- set out to achieve a 30% decrease in energy intensity over 10 years. We're on track and have achieved a 21% decrease after 7 years. We're currently updating our targets in line with our new 10-year strategy. And the results that have been achieved through a number of initiatives outlined below in terms of energy, waste and water demonstrate the enormous transformational process we have been through during the past 7 years. And as can be seen from this, we have rolled out one of the largest sustainability programs on the African continent and have received, as a result, several local and international awards. Also, a key pillar of our strategy is providing consistency of care and ensuring we can benchmark that care against both local and international standards and parameters. In 2019, we published 37 clinical measures on our website, and we'll publish an additional 35 in December of this year, bringing the total to 72 total clinical measures across 6 divisions. They are all available on the URL indicated here, and I urge you, ladies and gentlemen, to peruse these outcomes and measures. They are divided into the noted 3 categories of person-centered health and care, best practice and safest care, and cover all 6 of the divisions listed and the outcomes listed here on the right-hand side. Finally, let's turn our attention to our guidance for the 2021 financial year. I'd like to make some important introductory comments. Firstly, I think we all recognize that COVID-19 will remain a threat to our society until an effective vaccine is available. And the current surge in the Eastern Cape is a very sober reminder of the potential of a second wave. And so the importance of maintaining nonpharmaceutical measures and avoiding COVID-19 fatigue remains critical. We are very confident that our digital systems, policies and procedures and the changes in ways of working should allow us to continue normal operations through a potential second wave. In addition, the reduced length of stay and reduction of those requiring hospitalization should not place capacity under pressure. All of the 6 critical areas I referred to earlier in the presentation are well-controlled. And we have safely and sustainably been able to recommence other services and elective surgery. And so in terms of our guidance, notwithstanding the short-term vicissitudes we have experienced, our strategy to deliver a sustainable, competitive advantage is firmly back on track. Our performance may, however, be tempered by a weak macroeconomic outlook and the threat of a second wave. But as we have hopefully demonstrated, we are better placed to deal with the potential second wave. We are expecting volumes to recover into the second half or H2 of the new financial year. And importantly, given the massive loss of employment in South Africa, and particularly what our staff have sacrificed over the past 7 months, we are embarking on a job preservation strategy. Clearly, it will go hand-in-hand with extremely tight cost control and a very strong commitment to maintaining and driving efficiencies. We do expect our margins to improve off a low base. And we estimate our capital expenditure for the new year to be in the order of ZAR 1.2 billion. And finally, ladies and gentlemen, we reaffirm our commitment to drive our capital management metrics. Ladies and gentlemen, that concludes our presentation, and we welcome any questions. Thank you.

Okay. We have a few questions. The first one is from Victoria Lambert from Bank of America. The question is, "Could you please provide an update and info on recent network discussions with medical aids, such as what tariffs have been secured? Any notable changes we should be aware of?"

Thank you very much. I'm going to ask our Head of Strategy and Health Policy, Melanie Da Costa, to take that question.

Good morning. There are a couple of changes in networks for 2021. But primarily on the positive all-in-all for Netcare, the most significant of which is the Polmed network that was instituted 2 years ago. That will now be opened up to any willing provider for 2021. Just a reminder that the marine option that was applicable here, the Polmed marine option was about 375,000 lives. That is about 3.8% of medical scheme membership. And hence, it has got quite a bit of an impact on Netcare. If we consider the fall in patient days in 2019 versus 2018, a recovery of 70% of that means that we could expect an additional 25,000 patient days on the Polmed network. Other than that, there's some small changes to the discovery networks. They haven't been signed in sealed, so rather not get into specific details. But we would expect to have some greater participation in the delta network, in particular. We've also had some increased participation across the Momentum Group networks.

Okay. So the next question is also from Victoria Lambert from Bank of America. The question is, "Are there any Netcare hospitals that are currently closed in the Eastern Cape?"

I'll take that question. Thank you very, very much. Both our hospitals in the Eastern Cape are fully operational, and we are increasing capacity to be able to treat COVID-19 patients. We have well over 150 COVID-19-positive patients at the moment. We have also deployed further staff down to, and nurses and paramedics down to, the Eastern Cape to assist. But the hospitals are fully operational and none of them are closed.

Okay. So the next question is from [ Howard ]. His question is, "What is management's view regarding the growth of health care providers within South Africa? Any offshore investments being considered?"

I'll take that as well. We remain absolutely focused on the South African market. As you can see, we have a very well-developed strategy that we believe will deliver a competitive advantage that will allow us to grow above market, enhance our returns and deliver a very significantly differentiated product. We have absolutely no aspirations, plans or plans to look at anything outside of the South African borders at this stage and for the foreseeable future.

The next question is from Tinyiko Mabunda from Aeon Investment Management. His question is, "With regards to the electronic medical records and digitization projects, what initiatives has Netcare implemented or is planning to implement to protect patient data and reduce private or security risks?"

Yes, thank you. I think that's a very pertinent and excellent question. And I want to assure all of our shareholders and those listening that we absolutely comply to the POPIA regulations and as well, the entire platform is GDPR-compliant, and that is -- meets the very high standards of the European Union. One could almost call that POPIA on steroids. So we're extremely careful and cautious in terms of adhering to all of the available legislation and regulations and ensuring that patient data is always protected.

The next question is from Jacques Haasbroek from Centaur Asset Management. He asks, "Could you please give us some color on the expected profile for working capital normalization?"

I'll hand that over to Keith.

Thanks very much. I think really that's a question, which relates to our inventory consumption. We would certainly expect to consume our surplus inventory over the course of the next year. That is something which will be determined by how COVID behaves during FY 2021, where we to -- go into a surge or a situation similar to what we experienced in June or July of this year, we will utilize that stock very quickly because our consumption rates will increase. However, in an environment similar to what we're currently experiencing, we would expect to utilize that fully within the 2021 year.

Okay. This next question is from Asief Mohamed from Aeon Investment Management. "Richard and team, thanks for the well delivered presentation. Can you give us an indication of the total CareOn digitization cost or investment?"

Yes. The total CareOn digitization costs, in other words, for the hospital division per se, ZAR 369 million over a 10-year period.