Netcare Limited (NTC) Earnings Call Transcript & Summary

Good morning, colleagues, and a very warm welcome to Netcare Limited's Annual Group Results Presentation for the year ended 30 September 2022. A warm welcome to the Chair of Netcare, Thevendrie Brewer; members of the Netcare Board, our Exco and our senior management teams. At the outset, let me express my very sincere thanks to our management teams and Netcare staff across all of our divisions for their hard work, collective efforts and commitment over the past year. And also our thanks go to our Board for their support and guidance. Now before I begin with our results, I'd like to draw your attention to various changes to our Board, which we have announced in today's SENS. Mr. David Kneale has indicated his intention to retire as a Non-Executive Director of the company with effect from the conclusion of the upcoming Annual General Meeting to be held on the 3rd of February next year. I want to personally thank David for his invaluable contribution during his tenure and wish him all of the very best in his future endeavors. I'm also pleased to announce the appointment of Mr. Ian Kirk and Ms. Louisa Stephens as independent Non-Executive Directors from the 1st of January 2023. Ian Kirk is a qualified chartered accountant with senior leadership and Board level experience in financial services and professional services. He has operated as executive chairperson and non-executive director for listed and nonlisted companies for over 25 years, including chairing industry associations. Louisa Stephens is both a chartered director and chartered accountant with over 15 years' experience in debt and equity financing and investment management and is also an independent financial trader dealing across industries both locally and abroad. She has served on various boards and board subcommittees and has listed business experience and very strong governance credentials. She will also be joining the Audit and Remuneration Committees. The Netcare Board welcomes the appointment of Mr. Kirk and Ms. Stephens and is very confident that the Board will benefit from their collective contributions. As announced in a previous SENS our Chair, Thevendrie Brewer, will be resigning on the 31st of December and we take this opportunity to sincerely thank her for her enormous contribution and stewardship of Netcare and wish her everything of the very best. We're very confident that the incoming Chair, Mr. Mark Bower, will ably assume the mantle and professionally lead the Board and company. Turning to today's presentation. I'm going to begin with an overview of our group's performance and the operational performance of our various divisions before handing over to our Chief Financial Officer, Keith Gibson, who will unpack our financial results in more detail. I will conclude by providing more detail on the progress we have made on certain key strategic areas and present our guidance for the remainder of the year. I'm going to briefly pause here to quickly demonstrate an overview of the comprehensive array of health care facilities and services we offer within the Netcare ecosystem and the sheer size and scale of each of them. We experienced an improving performance driven by recovery in activity and normalizing of our operating environment particularly in the second half of the year. Full group revenue is ahead of prepandemic financial year 2019 revenue. Our strategic projects are pleasingly on track with tangible benefits and savings realized. The rollout of electronic medical records or EMRs across all of our divisions is progressing well and in line with budgets and timelines. We've also achieved good progress in broadening access to affordable health care through additional product offerings. And as we announced earlier, we've opened our new flagship Netcare Alberton Hospital and Netcare Akeso Richards Bay mental health facility. This year we achieved very good cash generation with a pleasing cash conversion ratio of 113% and have declared a final dividend of ZAR 0.30 per share, which together with our interim dividend of ZAR 0.20 per share results in a total dividend of ZAR 0.50 for the year. This represents 60% of our adjusted headline earnings and is in line with our policy where we seek to return between 50% to 70% of adjusted headline earnings to shareholders. This is a busy slide, but demonstrates the improving recovery in financial performance across all of our key metrics as compared to the same period last year and particularly in the second half of this year. Focusing now on the top line of the slide. Revenue rose 3% to ZAR 21.6 billion and we achieved very good operating leverage as evidenced by the 9.5% increase in our EBITDA to ZAR 3.5 billion. Adjusted headline earnings per share rose by 23.4% to ZAR 0.832. And as mentioned in the previous slide, as a result of the improved performance, we're pleased to declare a final dividend of ZAR 0.30 per share raising the total dividend to ZAR 0.50 for the year, a 47% increase on last year. Our net debt-to-EBITDA ratio strengthened to 1.4x versus a ratio of 1.7x in the comparative period. Focusing now on the middle line. This demonstrates H1 performance as compared to last year's first 6 months and shows a steady improvement. However, if we now focus and look at the bottom line of the slide, you can see the comparison between H2 and H1 of this year and the significant uplift in performance across all our key financial metrics as the business continued on its trajectory of recovery. Turning to more detailed overview of our operations. The graph here demonstrates the trajectory of total COVID-19 positive cases and the resultant patient days in Netcare from the onset of the pandemic in March 2020 as well as the trajectory of nonCOVID-19 patient days over the same period. COVID-19 associated cases are reflected in the gray line and nonCOVID-19 cases in the blue line. As you can see, there was a clear correlation between a rise in COVID-19 cases and a fall in nonCOVID-19 cases during the first 3 waves. However, during the fourth wave due to the Omicron variant and corresponding to H1 of 2022, there was a decoupling between the rates of COVID-19 cases in the community and hospital admissions and we experienced both a fall in COVID-19 cases as well as nonCOVID-19 admissions. In fact we had a 70% decline in COVID-19 patient days for this period versus H1 2021. In addition, of those cases admitted to a hospital, the vast majority were what we have termed incidental COVID-19 cases. In other words, admitted for other reasons and then discovered to be COVID-19 positive. As a result of all of these factors, trading in H1 of 2022 was very negatively affected by the Omicron variant or fourth wave. We also experienced a further fifth wave in H2 of this year, which was very mild and did not impact normal trading and this can be seen by the small rise in the gray line on the graph during H2. Recovery in demand for nonCOVID-19 medical and surgical procedures post the fourth wave drove a significant shift towards normalization of case mix and length of stay resulting in a strong improvement in operational and financial performance in the second half of this year. COVID-19 hospitalizations are currently at the lowest level since the onset of the pandemic and largely incorporated into daily activities. For the full year, our total patient days grew by 5.4% with a 4.8% increase in acute hospital patient days, an 11.5% growth in mental health patient days and a 4.3% increase in primary care visits. The growth in patient days was significantly more pronounced in the second half of the 2022 financial year as compared to the same period last year. Total patient days increased by 13.5% in this period, acute hospitals by 13.2% aided by no material disruption from a very mild fifth wave of COVID-19 and mental health patients rose by 16.1% as operations returned to normal. The graph here on the left hand side demonstrates the recovery in occupancy since the onset of COVID-19 in H2 of 2020 and compares this to our preCOVID-19 occupancy in H1 of 2020 as shown in the blue column on the left of the graph. Importantly, whilst overall occupancy in 2022 was 59.3%, average occupancy over the last 6 months has been 63% as demonstrated in the blue column on the right of this graph. Now the graph on the right hand side demonstrates the improvement in occupancies on a month-on-month basis where the occupancy in the month of September 2022 was in line with that of September 2019. Turning now to our Hospital and Emergency Services division. Revenue rose by 2.9% to ZAR 21 billion. This was impacted by a 1.6% decline in acute revenue per patient day as tariff increases were offset by a fall in higher acuity COVID-19 cases as well as a shift towards normalized case mix after 2 years of significantly higher nonCOVID-19 case mix. Acute length of stay also reduced to 4.3 days in this financial year versus 4.8 days in financial year 2021. The division demonstrated very good operating leverage with EBITDA rising by 8.6% to over ZAR 3.3 billion and operating profit rising by 11.7% to ZAR 2.2 billion. EBITDA margin expanded by 90 basis points to 15.9% as a result of increasing occupancy, stringent cost management and a reduction in COVID-19 costs. Finally, if we exclude strategic costs of ZAR 245 million this year versus ZAR 172 million last year, the underlying margin strengthened to 17% versus 15.9% last year on the same basis. Importantly, we were successful in granting a net 88 new specialists admitting privileges in our acute and mental health facilities. Turning to our Primary Care division. In our Primary care division, revenue rose by 6.6% as a result of a 4.3% increase in patient days. Very pleasingly, EBITDA rose by 31% to ZAR 163 million demonstrating the outstanding operating leverage achieved across the division. Operating profit rose a full 100% to ZAR 72 million from ZAR 36 million in the prior year. As a result of the increase in EBITDA and on the back of stringent cost management and staffing optimization, EBITDA margin strengthened by 490 basis points to 25.7%. Patient visits as demonstrated by the graphs on the bottom of the right of the slide continue to grow and are beginning to reach preCOVID-19 activity. I'll now hand over to Keith Norman Gibson to unpack our financial performance in more detail.

Thank you, Richard, and good morning, ladies and gentlemen. Let's now see how our operational performance translated into the group's financial results for the year ended 30 September 2022. Since the Omicron driven fourth wave subsided in January 2022, Netcare has enjoyed a sustained period of operation free from COVID-19 disruptions, which has allowed the recovery towards normalization to gain traction. The trend of improving performance continued through the second half resulting in an improved financial performance for the 2022 financial year. Improving occupancy levels and cost efficiencies generated pleasing operational leverage. The business maintained its healthy statement of financial position and generated strong cash flows. At the same time, we've continued investing in our facilities and key strategic projects. And at the financial year-end, Netcare's net debt-to-EBITDA ratio strengthened further to 1.4x with excellent cash conversion of 113%. The 2022 financial year is a story of 2 halves. The first half's results were impacted by the fourth wave of COVID-19 during December and January driven by the Omicron variant and this fourth wave saw a decoupling of the correlation between the rate of community transmission and the rate of hospitalization. And as a result, exceptionally low occupancies were experienced in the months of December '21 and January '22 creating a notable dent in the overall performance for the first half. However, after the fourth wave subsided, demand for private health care services began to strengthen and occupancy levels steadily improved across the remainder of the year and this caused the case mix to shift towards more normalized levels with approximately 80% fewer COVID-19 patient days compared to FY 2021 resulting in a reducing length of stay and a fall in net revenue per patient day. Looking at the sequential performance of the business by half over the past 2 years, a steady progression towards normalization is evident. The graphs on this slide reveal how the sequential improvement translates into rands at a revenue, EBITDA and operating profit level and how in turn this performance then translates into net debt. Revenue in the second half of 2022 grew by 9.8% from the first half and by 3.7% against the second half of 2021. EBITDA in the second half of 2022 strengthened by 15.1% against the first half and grew 10% when compared to the second half of 2021. Operating profit grew by 19.8% in the second half of 2022 when compared to the first half and improved by 12.6% against the comparative half of 2021. The group's net debt was ZAR 5.3 billion at September 2021 and increased marginally to just under ZAR 5.4 billion by March 2022, but showed a pleasing reduction to just under ZAR 4.9 billion by 30 September 2022, which is a year-on-year reduction of 8.6%. Turning to the group statement of profit or loss for the year ended 30 September 2022. Revenue for the year amounted to ZAR 21.6 billion compared to ZAR 21 billion in the comparative year representing an increase of 3%. Revenue for FY 2019, which was the last full financial year before the outbreak of COVID, also amounted to ZAR 21.6 billion, which is in line with the current year's revenue in absolute terms. Tighter cost -- tight cost management reduced PPE utilization and nursing efficiencies from improving occupancies resulted in pleasing operational leverage with EBITDA for the year growing by 9.5% to ZAR 3.5 billion against ZAR 3.2 billion in 2021. Included in EBITDA for the current year are strategic costs of ZAR 249 million against ZAR 172 million incurred in the prior year. The group EBITDA margin improved by 100 basis points from 15.2% to 16.2%. However, excluding the spend on strategic projects, the underlying EBITDA margin improved by 130 basis points from 16% to 17.3%. Operating profit increased by 13.2% to just under ZAR 2.3 billion compared to ZAR 2 billion in the prior year. Other net financial expenses of ZAR 358 million decreased against the ZAR 412 million charge in the prior year reflecting the benefits of lower average net debt balances, but offset by a higher average cost of debt. The IFRS 16 interest charge attributable to lease liabilities of ZAR 411 million has increased from ZAR 374 million in the prior year. Profit before tax increased by 20.3% to ZAR 1.5 billion. The group's tax charge amounted to ZAR 460 million at an effective rate of 29.8%. And profit after tax amounted to almost ZAR 1.1 billion representing a 20% improvement from the ZAR 904 million in the prior year. There were 2 exceptional items in the current year. The first represents impairments of properties of ZAR 11 million, and the second relates to the impending change in the corporate tax rate from 28% to 27% reducing the benefit of the group's net deferred tax assets. After taking these exceptional items into account, profit for the year amounted to ZAR 1 billion against ZAR 760 million in the prior year. Next we move on to headline earnings per share and as usual, we've presented the standard HEPS metric and we also present an adjusted HEPS figure in which we strip out exceptional and unsustainable items noting that this is the primary measure used by management to assess performance. HEPS amounted to ZAR 0.74 for the year, which is a 20.3% improvement on the ZAR 0.615 in 2021 and adjusted HEPS for the 2022 financial year amounted to ZAR 0.832 increasing by 23.4% from the prior year's ZAR 0.674. The Board has resolved to continue dividend distributions, which were resumed in the prior year, and consequently I'm pleased to confirm that a final dividend of ZAR 0.30 per share has been declared, which along with the ZAR 0.20 declared as an interim dividend takes the total dividend for the year up to ZAR 0.50, equating to approximately 60% of adjusted HEPS. Moving on to the group statement of financial position. Firstly, I'll remind you that Netcare's capital management policy is to maintain a strong statement of financial position and to retain an investment grade credit rating while reducing the cost of capital with a safe level of debt. As at 30 September 2022, total assets amounted to ZAR 26.3 billion increasing from ZAR 25.6 billion at September 2021. CapEx spent during the year amounted to ZAR 1.4 billion, which is in line with guidance and of which ZAR 369 million relates to expansionary projects and the balance of just over ZAR 1 billion relates to replacement CapEx. Working capital remains well managed. Inventory holdings of ZAR 562 million have largely normalized reducing from ZAR 640 million in the prior year. Total shareholders' equity increased to ZAR 10.9 billion largely due to an improved operating performance offset by dividend distributions of ZAR 728 million made during the year. And finally, the group has a conservative debt-to-equity ratio of 0.4x. Next we'll take a more in-depth look at our debt position. Gross debt amounted to just under ZAR 6.4 billion at 30 September 2022 offset by cash balances of approximately ZAR 1.5 billion. Therefore, net debt totaled ZAR 4.9 billion at the year-end decreasing by ZAR 456 million from September 2021. Net debt to annualized EBITDA strengthened to 1.4x coverage at September 2022 from 1.7x at September 2021. This metric is calculated on EBITDA measured after the adoption of IFRS 16 against bank debt only. Inclusive of lease liabilities recognized under IFRS 16, net debt-to-EBITDA coverage is 2.7x improving from 3x at September 2021. In line with our policy, we retained our credit rating of AA- for long term and A1+ for short term as published by GCR in February of 2022. The cost of debt has increased by 180 basis points from 5.9% at September 2021 to 7.7% at September 2022 as a result of the rising interest rate environment. Netcare is compliant with its banking covenants, which firstly require the net debt-to-EBITDA ratio to be below 2.75x where EBITDA is measured excluding the impact of IFRS 16 on a 12-month backward-looking basis. And the second metric is EBITDA to net interest cover, which must be greater than 4x. And both of these covenants have been met with ample headroom. Moving on to our debt facilities. At the year-end Netcare had cash balances of ZAR 1.5 billion on hand. And in light of the increasing certainty of the impact of COVID-19 on our funding requirements, the group elected to reduce its committed facilities by ZAR 2.1 billion earlier in the year. However, we have retained committed but undrawn debt facilities of ZAR 2 billion and we, therefore, have access to resources of ZAR 3.5 billion of cash on hand and committed debt facilities from which to fund our future needs. Our debt tenure reflects a manageable and appropriately staggered maturity profile and the group, therefore, has sufficient capacity to manage its future capital needs. And finally, just a quick word of recognition and appreciation to our finance staff across the group for their considerable efforts in preparing the results and the related materials. I'll now hand you back to Richard, who will update you on the progress on our key strategic projects.

Thank you, Keith. Let's now take a closer look at our strategy and our progress in this regard. As we have alluded to on many occasions, since 2018 we've embarked on a CapEx light strategy. As a reminder, Netcare's strategy responds decisively to 3 global health care megatrends of customer centricity, digitization and data and leverages off our unique ecosystem of assets and services to create a sustainable competitive advantage what we have termed person centered health and care that is digitally enabled and data driven. Netcare remains prudent in managing its capital resources and this remains a fundamental underpin of all of our strategic endeavors. Our investment strategy focuses on identifying opportunities linked to our group strategy. All of these opportunities must meet one or more criteria of what we have termed the Netcare litmus test. These 3 criteria are listed here at the bottom of the slide namely drive growth above market, differentiate our patient experience and lastly, grow margins and improve returns. We apply strict financial discipline when allocating capital and the return on capital must safely exceed the cost of capital. Currently, our strategic investments are focused on expanding our businesses, digitizing our entire ecosystem and maintaining and upgrading our operations. Strong balance sheet metrics and cash generation underpin our deployments of capital and we target a cash conversion of 100%. As mentioned previously, we look to pay a sustainable dividend to shareholders of between 50% to 70% of adjusted headline earnings and excess capital beyond our strategic requirements will be returned to shareholders. This table serves as an update of our various investments in strategic projects both from a CapEx and OpEx point of view. CapEx and OpEx spent over the past 12 months under review is in line with budget. And as you will notice, the majority of the CapEx spent to-date is largely focused on our environmental sustainability program, which I will shortly unpack in more detail. Financial year 2023 really represents the last major expenditure of CapEx and OpEx in terms of implementing the digitization and data elements of our strategy and we're forecasting to spend ZAR 185 million in CapEx and ZAR 275 million in OpEx. Let's take a look at the progress of our digital transformation in more detail. The digital transformation of Netcare's ecosystem is progressing well, it's on budget and is also within acceptable time frames. This is a transformational project of unprecedented scale and complexity across the African continent. Just to give you a quick update on progress. We've now fully implemented our electronic medical record system or EMRs at 21 hospitals representing 4,828 beds. A further 17 hospitals representing 3,817 beds will be implemented by the end of 2023 and the rollout of the remaining hospitals representing 943 beds will be completed by April 2024. The rollout of our electronic health records or EMRs to all Medicross GP and dental practices will complete by December of this year with the EMR for occupational health largely completed. Across our Akeso mental health facilities, full implementation of EMRs will also complete by December of this year. And in our Cancer Care division, our radiotherapy EMR is complete and our chemotherapy module is still under development. We've completed the full implementation of EMRs across both Netcare 911 and NRC. Now let's take a deeper dive into the largest and most complex element of our digital strategy, our rollout of EMRs across our hospitals. This, as mentioned, is within budget and thus far, we've had very good and pleasing adoption by health care workers across our hospitals. The digitization of our hospitals and real-time mobile-enabled clinical records integrates every aspect of health care delivery, involving all of our multidisciplinary clinical teams, all of our hospital infrastructure and equipment, all of our clinical units including pharmacy, radiology and pathology. And just to give you a sense of the sheer size and scale of this massive project. As mentioned already, we fully digitized 21 hospitals to-date. In doing so, we've connected over 7,000 medical devices to the electronic medical record. We have over 5,800 iPads now in use and there are almost 14,000 active users across our multidisciplinary team of health care professionals. To-date we've dispensed over 1.1 million electronic scripts and issued over 900,000 drug-to-drug alerts. In addition, we've digitally received and processed approximately 1 million pathology and radiology results. And an incredible statistic at any one time in our hospital, we have over 1,900 concurrent users of the EMR receiving live clinical data. The clinical data we produce and make available to our clinical teams is growing by a staggering 8 gigabytes per day. And most importantly, colleagues, the benefits to patient safety, improved clinical outcomes and patient engagement are rapidly emerging and I will talk to this by way of 1 or 2 examples towards the end of the presentation. Now besides the benefits of improved patient safety and improved clinical outcomes, there are significant efficiencies that digitization brings and we thought it may be helpful to unpack them or some of these in more detail. Firstly, managing of records consumes a large part of nursing duties. The EMR removes duplication and repetitive tasks and automatically records clinical data from monitors in ICU and high care. Digitizing the records allows our nurses now to spend more time managing patients rather than records. And as we progress, the EMR will also become a valuable operational management tool. And so as you can see, in many ways digitization structurally changes the way we nurse. We spend approximately ZAR 12 million per annum on the storage of files and we have conservatively forecast a cumulative reduction of at least 50% over 10 years recognizing that we will eventually eliminate the need for physical storage altogether. In terms of financial efficiency, as we automate the back-end processes and integrate clinical aspects of the record, we will introduce fully digitized billing which will eliminate the current manual and labor-intensive processes. Already robotic processes have eliminated manual processing in our Central Payments division. We spent approximately ZAR 60 million per year prior to the rollout of CareOn on printing and stationery and as we move to a virtually paper-free environment, we've again conservatively forecast a cumulative reduction of at least 20% over 10 years. To-date we have already achieved a saving of 15% of these costs. The entire health care sector has experienced a significant increase in medical malpractice premiums since 2012. As has been the experience internationally with the introduction of EMRs, we also expect to arrest this increase and achieve approximately a 50% reduction in overall medical legal costs. And in terms of efficiencies to date, we've achieved savings of ZAR 37 million in this financial year and expect this to increase between ZAR 55 million to ZAR 65 million in the new financial year 2023. And finally, colleagues, the graph on the right of the slide demonstrates the planned benefits and the ramp-up thereof post completion of the implementation phase. We expect the project to be operationally accretive from H2 of 2024 net of operating expenses. As we complete the digital backbone of our strategy, we are turning more and more of our attention to engaging directly with our patients and ensuring that we make their journey within our ecosystem more convenient, easier to navigate and provide them with real clinical information that empowers their health care choices. For example via Netcare Appointmed, the broader public can access an appropriate medical professional and book appointments online. And as can be seen from the graph below, we're now making almost 4,000 appointments per month on behalf of patients. To improve the admission process into our hospitals for nonurgent and nonemergency cases, we provide a digital online preadmission process which avoids paperwork and having to queue at reception. As this graph below demonstrates, we're now admitting 35% of our patients through this process. Our engagement with patients will extend this coming year through a number of important features including receiving patient feedback digitally and most importantly being able to provide all our patients with a digital clinical record of their stay with us as well as electronic prescriptions where applicable. As we have flagged in the past -- over the past 10 years, Netcare has invested in our continent's largest health care environmental sustainability program. We have substantially outperformed the targets we originally set ourselves and are ahead of our own schedule. By way of example, we've achieved a 35% reduction in energy intensity per bed, surpassing our 10-year target set in 2013 of between 22% and 25% per bed. We've also achieved a 23% reduction in water utilization per bed. We've set ambitious targets to reduce Scope 2 emissions to 0, reduce Scope 1 and 2 emissions by a combined 84% by 2030 and aim to achieve 100% renewable energy, 0 waste to landfill and a 20% reduction in our water utilization by 2030. As you can see from the verbiage here on the right of the slide and at the bottom of the slide, we've been awarded 23 global and national awards for environmental sustainability over the past 10 years. And as of last year, remuneration is now linked to environmental performance. The previous slide demonstrated the reductions in energy or intensity as well as water, but what have been the financial implications for Netcare. In short: we've invested ZAR 585 million in CapEx, achieved operational savings of just over ZAR 1 billion to the end of this financial year and the program has yielded an IRR of greater than 25%. The left hand side of the table demonstrates the areas of capital expenditure and the resultant operational savings. Our focus to-date has been predominantly on energy and electricity. And over the last -- or over the past 3 years, we have more recently begun to focus our attention on water and waste. The right hand side of this table demonstrates the actual cash savings and the savings attributed to cost avoidance. These 3 graphs below demonstrate the reduction in energy intensity or electricity utilization per bed over the 10-year period. The trajectory of cumulative benefit and importantly, the delta between what our electricity costs would have been today for this past financial year some ZAR 594 million versus that actually incurred of ZAR 386 million. And colleagues, we are tackling our digital rollout with the same rigor and focus and are confident that it will similarly exceed our 10-year hurdles both operationally and financially. Now I want to spend some time briefly updating you on 2 of our new business divisions and the progress we've made in each. The first is NetcarePlus. As you can see from this timeline, we've launched several new products over the years such as Dental Vouchers in October of 2021, GapCare in January of this year, prepaid ear, nose and throat procedures in March and finally, EmergencyCare and enhanced GapCare in September. Importantly, the GapCare product covers any Netcare hospital excluded from a network. We've successfully partnered with Checkers and Mr. Price as our retail distributors and launched virtual care or telemedicine through FNB. NetcarePlus is now registered as a financial services provider and we have a number of new products and enhancements in the pipeline. Demand for NetcarePlus products has begun to increase steadily both from our insurance -- for our insurance offerings and the vouchers at a primary care level. This is demonstrated by the growth trajectory seen for both of these offerings over the past 2 years. The second business is Netcare Diagnostics. As a reminder, this is our most significant enterprise supply development project ever undertaken in Netcare and we are very proud to have partnered with a black female-owned pathology practice. Netcare under the name Netcare Diagnostics provides equipment and infrastructure, logistics, administration, finance and operational support for the pathology practice of Dr. Esihle Nomlomo Inc. To-date we have successfully installed 130 blood gas analyzers in our hospitals' ICU and high care units. And the pathology practice has conducted in excess of 250,000 tests over the past 9 months, which have yielded significant benefits such as a high level of accuracy, availability of point-of-care testing and a reduced cost of pathology. The business unit has importantly also made a positive contribution to EBITDA. Now when all is said and done, driving continual improvement in best and safest patient care remains the foundation of all we strive for. This year in particular we've been focused on driving compassion through the group, one of Netcare's core values. We are committed as Netcare to listening with empathy and responding with action because at its core, we define compassion as empathy with action. To this end, we've trained over 23,000 personnel across 49 hospitals including all third-party contractors. Given the trauma of COVID-19, this has been so critical in restoring resilience, emotional and mental health in our workforce. As a direct result of this, we have also seen a sustained improvement in nurse compassion scores as evaluated by our patients. In terms of improving our quality of care, we continue to improve and enhance our public reporting of outcomes, which are now available across 6 divisions and were updated last night. We're developing artificial intelligence or AI clinical prediction models based on the significant clinical data we now have access to as well as focused interventions to improve safety and quality of care. For example, we're using artificial intelligence algorithms to predict the risk of mortality and readmission of hospitalized patients. CareOn enables us to harness rich clinical data collected at patients' bedside during their admission to enhance the performance of these models. These models enable us to identify sites with exceptional results and also alert us to those requiring attention and focused improvement initiatives. In addition, based on our clinical data, we're about to launch an AI-driven program which predicts the onset of sepsis or infection in a patient's body at least 10 hours before it is clinically apparent with prediction accuracy of over 80%. And finally, I'm pleased to announce that we've achieved ISO 9001:2015 accreditation for the fifth consecutive year. Now turning finally to our guidance for the new financial year. In the absence of further severe waves of COVID-19 and assuming we have now entered an endemic phase of the disease, we are guiding towards patient day growth of between 6.5% to 7.5% and revenue growth of between 9% to 12% versus the past year. We expect to spend ZAR 275 million of implementation OpEx and ZAR 185 million of CapEx on strategic projects and this, as I've said before, signals the last major phase of our strategic spend. In terms of EBITDA margins, we expect underlying margins to strengthen in line with improving occupancies. And finally, colleagues, we anticipate spending ZAR 1.6 billion on CapEx in the new financial year largely as a result of the underspend in the 2 previous years and a catch-up required on the refurbishment of a number of our facilities. And that, colleagues, concludes the formal presentation of our results and we're now happy to open the webcast to questions. Thank you.

We have a question from [ Anuja ] from Standard Bank. Thank you for the presentation. Three questions from my side. What is your latest October, November acute occupancy? Number two, you have guided for 9% to 12% revenue growth in the absence of a severe COVID-19 wave in FY 2023. What sort of EBITDA margin do you anticipate in FY 2023? And the third question, your revenue is slightly ahead of prepandemic levels. Your September 2022 occupancy was also slightly ahead in line with these levels. When do you anticipate your EBITDA to be higher than FY '19 levels?

I think we can ask Jacques to answer the first question. And on group EBITDA, Keith, and also return to FY '19 EBITDA levels.

Thank you, Anuja, for those questions. Certainly our occupation for October -- occupancy for October and November has also increased and on the same level as September sitting at 66% for full week. And we also see that our new Alberton is doing exceptionally well with 85% occupancy full week. I'll hand over to Keith on the EBITDA.

I think with respect to EBITDA and EBITDA margins, as a business we remain very keenly focused on recovering our margins and we see this as a journey of improvement rather than an immediate step change. We believe our strategy is aligned to achieving higher margins aiding Netcare to grow above markets, differentiating our services and patient experience and becoming more efficient through digitization, environmental sustainability and managing our cost base. We also can't escape the fact that the current global and national environments present challenges such as load shedding, global supply chain constraints and inflationary pressures. And this in turn creates more pressure on disposable income and medical scheme membership. We are doing our best to navigate this terrain and we're cautiously optimistic in our ability to improve on the current year's margins in 2023 and to continue recovering the business to more normalized prepandemic levels thereafter.

We have 2 further questions, which are quite similar so I'm just going to bulk them into one. Can you please talk about the availability or supply of nurses? Will you be able to service the 6% to 7.5% PPD growth of the same nursing complement? Are there any challenges towards recruiting nurses? And can you pass through these costs? I think some of that was partially answered, but more on the nursing side.

Certainly the one thing that keeps us awake at night is the amount of nurses that are being trained. You would recall that through our nursing colleges we used to train about 3,500 nurses. Unfortunately, at the latest intake and what we're allowed to train is only about 10% of that. Certainly we do have a big pool of agency nurses. But again we do have the occupancy available to treat more patients as we indicated in our forecast and also there is sufficient room to also maneuver in terms of nursing utilization. As Richard indicated, in terms of our EMR, certainly administration tasks are taken out of the nurses duties and therefore they do have more time to spend with patients.

We have a further follow-up question. Total patient days are expected to grow between 6.5% and 7.5%. How does this tie up with some medical schemes preferring patients to recover outside of a hospital?

Thank you for that question. I think in short taking into account a multitude of factors including, as you referenced, the home hospital, this would be our best estimate of the forecast for next year. At this stage the guidance we've had on home hospitals, which were particularly launched at the beginning of this year, remain quite small figures but relevant notwithstanding.

Thank you. There are no further questions. I think we'll just give it a minute or 2 to see if there's anything further coming through.

As there are no further questions, colleagues, we will be closing this presentation and thank you so much for giving of your time to attend. And as always, we remain available to answer any potential queries or clarifications you may require. Thank you very, very much.