Adrian Fawcett Chief Executive Officer

Our business

Netcare owns a 50.1% stake in General Healthcare Group (GHG), the largest provider of private acute care in the United Kingdom (UK). Under the BMI hospitals brand, GHG operates a national network of 57 hospitals across the UK, comprising 2 894 registered beds, 152 theatres and 37 pharmacies. During the 2009 financial year, BMI hospitals admitted more than 260 000 patients and attended to over 1.1 million outpatients. Through Netcare UK, GHG is also an established independent service provider to the NHS, operating two surgical centres and a Commuter Walk-in Centre.

GHG has strengthened its position as the leading private healthcare provider in the UK by broadening its geographical coverage and improving its performance through various acquisitions. In October 2008, GHG acquired the Thornbury Radiosurgery Centre in Sheffield, City Medical in Central London and Woodlands Hospital in Darlington. Fitzroy Square Hospital (previously St Luke’s Hospital) in Central London was acquired in April 2009.

The Thornbury Radiosurgery Centre is a joint venture between GHG and the Centre’s consultants. It provides cutting edge non-invasive brain surgery for a range of conditions. City Medical is a consultation and general surgery centre serving as a satellite unit to GHG’s London hospitals. Woodlands Hospital is a 38-bed acute hospital and services a key geographical area within our hospital network. Fitzroy Square has 38 beds and eight consulting rooms as well as a major and minor operating centre. It will improve accessibility for consultants and patients who spend most of their time in London.

Almost 90% of the UK population now lives less than an hour from a BMI facility and we are beginning to see the real benefits of our national coverage and scale.

Review of the year

GHG has delivered strong results reflecting continued healthcare demand despite the economic uncertainty brought about by the global economic downturn.

Overall caseload grew 7.8% year-on-year, reflecting both organic growth and the acquisitions noted above. There was a shift in the case mix with good growth in NHS patients, offsetting some declines in the self-pay market. Private Medical Insurance (PMI) patients remained stable on a same-site basis. The NHS is expected to remain a key partner now that the national Choose and Book (C&B) programme has been introduced. This programme lets the public select private facilities for their NHS treatments, assisted by their general practitioners (GPs).

Netcare UK continues to successfully service existing Independent Sector Treatment Centre (ISTC) contracts. These include the Greater Manchester Surgical Centre (GMSC), the Commuter Walk-in Centre in Leeds (which treated over 30 000 patients during the year) and the surgical initiative with the Scottish NHS in Stracathro. The five-year ophthalmic contract to provide 44 000 cataract operations was successfully completed in April 2009. The surgical initiative with the Scottish NHS and the GMSC contact will end in January 2010 and May 2010 respectively.

Revenue increased 7.6% to £831.5 million (2008: £772.6 million).Due to the lower average ZAR:GPB exchange rate in the period, rand denominated revenue increased marginally to R11 400 million (2008: R11 350 million).

The EBITDA margin increased from 25.3% to 25.6%, translating into an 8.9% increase in EBITDA to £213.1 million (2008: £195.7 million). However, rand denominated EBITDA increased by 1.2% to R2 919 million (R2 885 million) due to exchange rate fluctuations. Ongoing efficiency initiatives during the year ensured that the shift in case mix did not adversely affect the EBITDA margin. The integration of the seven hospitals acquired from Nuffield in February 2008 and the contributions from the 2009 acquisitions allowed the business to achieve further cost efficiencies. Profit after tax was £16.0 million (R237 million), an increase of 44.1% year-on-year.

The change in case mix from self-pay (payment upfront) to NHS (payment over 100 days) required an additional investment in working capital, which negatively affected GHG’s closing cash position. During the year, working capital was further affected by catching up on payments to creditors to address the backlog built up during the introduction of the shared service centre in 2008.

GHG continued to improve the infrastructure of the business, with capital expenditure (including intangible assets) amounting to £46.5 million (R653 million) for the year. This included a major refurbishment of 25 hospital reception areas and 30 wards, the acquisition of industry-leading scanning and imaging equipment, and the implementation of business-enabling IT systems.

BMI is proud to be able to claim that we are “The Consultants Choice”, with more consultants choosing to work in BMI hospitals than any other independent provider. A primary care team has been established in BMI to build strong relationships with GPs who are pivotal in referring patients to BMI consultants. The team will focus on promoting BMI’s consultants and hospital services, and will engage with GPs and practice managers to actively increase patient referrals to BMI hospitals. The primary care team will also support consultants in networking with local GPs.

12 BMI hospitals were listed in the Nursing Times Top 100 and individual staff received a number of employment, leadership and management awards. The business has doubled its spend on staff training over the last three years and will continue to increase its investment in this critical area in the coming year.

During the year, GHG was one of the first independent operators to publish Quality Accounts to communicate publicly our excellent patient satisfaction levels, clinical outcomes and rigorous management of infection control in our facilities.

Prospects

Our focus for 2010 and beyond remains investment in our asset base and service provision, and on maintaining and further improving facilities.

In the short-term we anticipate that recessionary pressures will subdue the growth of PMI and self-pay spending on private healthcare, but this is likely to be largely offset by growth in NHS activity. However, the underlying fundamentals of the UK private healthcare sector remain intact, with NHS budgetary pressures likely to increase demand for private facilities. GHG is well positioned to make progress in the current market and increasingly well positioned to benefit from an economic upturn.

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UK hospitals Hospital Registered beds Scotland Region 203 Albyn Hospital 44 Fernbrae Hospital 20 Ross Hall Hospital 101 Woodlands 38 North West Region 368 The Alexandra Hospital 170 The Beardwood Hospital 31 The Beaumont Hospital 34 The Highfield Hospital 57 The Lancaster Hospital 27 The South Cheshire Private Hospital 32 Victoria Park Hospital 17 North Central Region 273 Chatsworth Suite1 16 The Duchy Hospital 27 The Huddersfield Hospital 29 The Lincoln Hospital 32 The Park Hospital 92 Thornbury Hospital 77 West Midlands Region 362 The Edgbaston Hospital 55 St Edmunds Hospital 40 The Droitwich Private Hospital2 46 The Foscote Hospital1 16 Meriden Hospital3 52 The Priory Hospital2 118 The Sandringham Hospital3 35 South Midlands Region 236 The Chiltern Hospital 66 The Manor Hospital 23 The Saxon Clinic 40 Three Shires Hospital1 54 Oxford Clinic 22 The Shelburne Hospital3 31 London Region 491 Bishops Wood Hospital3 42 Fitzroy Square Hospital 16 The Blackheath Hospital 69 The Clementine Churchill Hospital 141 The Garden Hospital 30 The London Independent Hospital 80 The Kings Oak Hospital3 52 The Cavell Hospital 45 The Sloane Hospital 32 South Central Region 287 The Hampshire Clinic 65 The Mount Alvernia Hospital 90 The Princess Margaret Hospital 80 The Runnymede Hospital3 52 South East Region 379 The Chaucer Hospital 60 Fawkham Manor Hospital 39 Chelsfield Park Hospital 50 The Esperance Private Hospital 50 Goring Hall Hospital 52 Mcindoe Surgical Centre1 30 Shirley Oaks Hospital 50 The Somerfield Hospital 48 South West Region 279 The Bath Clinic 75 The Harbour Hospital 40 The Ridgeway Hospital 50 Sarum Road Hospital 48 Werndale Private Hospital 28 The Winterbourne Hospital2 38 Total 2 878 1 Interest in joint venture. 2 Leased property. 3 Investment in associate.

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