Netcare Ltd Unsp/Adr

Good morning, ladies and gentlemen, and a very warm welcome to NetCare Limited's group results presentation for the 12 months ended the 30th of September 2021. A warm welcome also to the chair of NetCare, Thavendri Brewer, members of the NetCare board, the EXCO, and our senior management teams. As we emerge from challenges of this past year, let me at the outset acknowledge and pay tribute to the extraordinary work done by our management teams and staff and all our healthcare workers, nurses, doctors, paramedics, pharmacists, allied health professionals, support staff, IT, technical and administration teams, on the frontline across South Africa for their absolutely remarkable efforts in caring for and treating our patients during this COVID-19 pandemic. We dedicate this presentation to the thousands of healthcare workers across South Africa in the public and private sector who've risked their lives in the fight against COVID-19, and especially to those who lost their lives in the process. Our thoughts and our prayers remain with all of those who have lost their loved ones. I also want to thank our Chair and the Board of Directors for their ongoing support and guidance provided throughout this difficult period. This is very much appreciated. And finally, on behalf of the NETCARE Board, I have pleasure in welcoming two new non-executive directors to the Board of NETCARE, Dr. Tabi Leoka and Dr. Rose Phillips. Dr. Leoka holds a PhD in economics and is a well-known and distinguished economist who has worked in various financial sector firms, both overseas and in South Africa. Dr. Phillips is a medical doctor and has over 25 years of business and management consulting experience across Africa, Europe, and the Middle East, and was most recently the head of human resources at a large financial institution. We look forward to working with Tabe and Rose and have no doubt that they will bring fresh perspectives and add tremendous value to NetCare. Turning now to our results, I will 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 Norman Gibson, who will unpack our financial results in more detail. I will conclude the presentation with a review of the progress we've made on our strategy and present our guidance for the year ahead. Turning to an overview of our performance of what has been a difficult year for us, our group's performance was significantly impacted by two severe waves of COVID-19, and in particular, the geographic concentration of these waves in certain provinces. We've treated over 125,000 COVID-19 patients, of which 55,000 were admitted into hospital. Over the past year, we have made significant strides in improving the quality of care we provide and patient safety. We've also managed to maintain momentum where possible on all our key strategic projects. And despite the devastating impact of the pandemic, pleasingly, we've experienced a strong sequential improvement in the last three reporting periods. And finally, we're now beginning to see the early signs of recovery in non-COVID activity. Looking broadly at our financial performance, you'll observe a stronger performance across all of our key financial metrics as compared to last year. Compared to 2020, revenue grew by 11.5% to 21 billion rands. EBITDA increased by 24.8% to 3.193 billion. And adjusted headline earnings per share rose by 107.4% to 67.4 cents. Our net debt to EBITDA ratio strengthened to 1.7 times versus a ratio of 2.5 times last year. We retain healthy cash reserves and committed facilities available to the group of 5.6 billion rands. And ladies and gentlemen, we have weathered a devastating storm over the past 18 months, and we are still not at our pre-COVID-19 levels of performance. However, as a result of the improved performance and a cautiously optimistic outlook for the year ahead, our board has declared a dividend of 34 cents. Let's take a look at a more detailed overview of operations. Keith will later detail the impact of COVID-19 on our financial performance. I will focus here on the operational aspects. This table demonstrates the COVID-19 patient load over the different reporting periods. As I mentioned, we've treated over 125,000 people for COVID-19 since the onset of the pandemic, of which 55,000 have required admission to hospital. Significantly, of these patients, approximately 25% were severely ill and required either high care or ICU treatment. Now, seen in perspective, this is an extraordinarily high ratio of patients requiring hospitalization and high care or ICU treatment. And what is evident from this table is that we experienced the highest numbers in the past six months corresponding to the third wave versus that of the second wave, which corresponded to half one of 2021, which in turn was more than that of the first wave corresponding to half two of 2020. Despite the significant increase in cases as the waves progressed, we were able to reduce our overall allocation of total beds for COVID-19 from 80% at the peak of the first wave to 60% in the second. and 52% at the peak of the third wave. This was largely as a result of our experience gleaned during the waves and the availability of rapid COVID-19 screening tests in the form of the rapid antigen test. Unfortunately, as a consequence of the second wave, we were forced to suspend elective surgery except for medically necessary and time-sensitive surgery. And this occurred from December 2020 until February 2021. Elective surgery was again suspended during the third wave between June and August of this year. Tragically, 75 of our frontline heroes paid the highest price and sacrificed their lives in the battle against COVID-19. We continue to hold each one of them and their loved ones in our hearts. This graph demonstrates the significant difference in the distribution and concentration of COVID-19 hospital admissions in hospital in their care across the various provinces. Now, as can be seen in this graph, our KwaZulu-Natal and Gauteng hospitals were the most impacted by COVID-19 admissions across the first two waves, with our Gauteng region absorbing the brunt of the impact during the third wave. This pie chart on the right-hand side demonstrates our distribution of beds by province. And what immediately becomes evident is that 77% of our beds are concentrated in the Gauteng and KZN. As a result, the impact of the second and third waves was particularly severe for NetCare and significantly impacted our ability to continue elective surgery on non-COVID activity. Key activity drivers continue to improve across our major business units, both on a year-on-year basis, as well as specifically comparing this six-month performance to that of the comparative period last year. This table demonstrates this improvement in patient days across our acute hospitals, mental health and primary care facilities. The bar chart you see on the right-hand side demonstrates the sequential improvement in patient days since the start of the pandemic in H2 of 2020 and indicates that we are slowly recovering towards pre-COVID-19 levels experienced in H1 of 2020. As a result of the activity I've just described, occupancy levels in our hospital division also continue to recover towards pre-COVID-19 levels. The blue chart represents the occupancy over the past year and demonstrates the improvement over last year. The beige line represents our 2019 pre-COVID levels of occupancy. Now, having unpacked the impact of COVID-19 on this year's performance, let's now review the performance of our Hospitals and Emergency Services Division. Again, an excellent sequential improvement in performance, but lagging our pre-COVID-19 comparative period. Revenue improved by 11.9% to $20.4 billion as compared to last year, underpinned by a strong growth in patient days and a 5.4% increase in revenue per patient day. But this was unfortunately also impacted by the temporary suspension of elective surgery for five and a half months during the second and third waves. EBITDA improved by 24.5% to just over 3 billion and operating profit by 41.8% to 1.9 billion rands. An EBITDA margin of 15% was achieved, 150 basis points higher than last year. However, if we strip out the additional COVID-19 related costs of $521 million and our strategic investment costs of $172 million, the underlying margin improves to 18.4%. Let's take a look at primary care. The division returned a truly excellent set of results for this past year. Revenue was 2.6% lower at $595 million, with a 1.5% increase in like-for-like medical and dental consultations being offset by reduced revenue from occupational health contracts. Pleasingly, due to stringent cost management, EBITDA and operating profit improved substantially by 33% and 100% respectively. The overall EBITDA margin climbed by over 560 basis points to 20.8%. Medicross was recently placed first in the 2021 Ask Africa Orange Index Service Excellence Awards for its commitment to consistent quality of service across its national network of medical and dental centers. Now, despite the two waves of COVID-19, we continue to make meaningful improvement in safety and the quality of care delivered. Over the past year, we increased the number of quality care measures and clinical outcomes we are benchmarking and publicly reporting on across the group from 68 last year to 85 this year. We have also managed to improve the perception of care across a number of key areas. And here are just two examples in terms of the perception of nursing and doctor courtesy and respect shown to patients. To improve and strengthen the regulatory framework governing clinical practice, we've instituted a fully digitized safety health environment and quality management system. We've achieved the ISO 9001-2015 standard for a third consecutive year as verified by the British Standards Institute. And importantly, to look after the health and wellness of our workforce and be true to the philosophy of the quadruple aim, we have invested in compassion-based training, staff recognition, and enhanced occupational health and safety surveillance of our workforce. Our digitization strategy will enable the use of clinical data to inform clinical decision-making, further enhancing our ability to measure and improve on clinical outcomes and patient safety. And I will provide an example of this later. I'm now going to hand over to Keith to take us through the financial results in more detail.

Thank you, Richard, and good morning, ladies and gentlemen. So following on from the overview of our operational performance, we're now going to turn our attention to the group's financial results for the year ended 30 September 2021. NetCare delivered an improving financial performance for the 2021 financial year, despite the continued presence of COVID-19 throughout the full 12-month period, and the business has maintained its solid balance sheets and generated strong cash flows. While we've not yet recovered to pre-pandemic activity levels, the group has delivered a steadily improving performance over the last three reporting periods, achieving robust year-on-year growth. NetCare's statement of financial position remains strong, and this has allowed us to continue investing in key capital projects that will deliver our strategic objectives for the business. A pleasing cash conversion of 118.8% was achieved for the year. And at the year end, Netcare's debt was lower than the levels reported at both September 2020 and March 2021. And cash on hand and committed undrawn banking facilities of 5.6 billion rands were available to the group. As has already been highlighted, COVID-19 had a significant impact on Netcare's financial performance. Now, it's difficult, if not impossible, to definitively quantify COVID's full financial impact on the business. And to do so requires certain estimations and assumptions to be made in order to paint a picture of what might have been if COVID-19 had never happened. And of course, the longer the pandemic endures, the more challenging it becomes to reliably measure its effects. However, we have broadly estimated that the negative impact on EBITDA was in the order of 1.5 billion rands from 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 521 million rands, and this was mostly spent on personal protective equipment, screening, training, and sanitizing. In addition to these extra costs, our income also reduced by 53 million rands in the form of lower rentals received from doctors' rooms, imaging and diagnostics, coffee shops and retail pharmacies. And of course, less patients and restrictions on visitors also led to reduced parking income. We invested 80 million rands in additional COVID-19 related CapEx, which is mostly directed towards upgrading our onsite oxygen infrastructure and our bulk storage capacity, as well as telemetry management systems for measuring oxygen consumption. In the earlier review of our key activity drivers, Richard mentioned that although activity and occupancy still lag our pre-pandemic levels, there has been a strong sequential improvement in the second half of the 2021 financial year when compared to the first half, which in turn improved significantly from the previous six-month period of H2 2020. And the graphs on this slide reveal how this sequential improvement translates into RANs at the revenue, EBITDA, and operating profit level. And you can clearly see the strong recovery over the past three halves. Revenue increased by 24% in H1 2021, and then by a further 8.4% into H2. EBITDA strengthened by 654%, and then by a further 13.9% thereafter, while operating profit grew by 332.2%, followed by 21.3% in the most recent half. However, the recovery still falls short of where we were before COVID-19 emerged. The fourth graph sets out the group's net debt levels, which have reduced from 6.4 billion rands at September 2020 to 6.1 billion rands at March 2021, and have dropped even further to 5.3 billion rands by September 2021, which compares favorably to the pre-pandemic debt levels of 6.2 billion rands at March 2020. Turning to the group statement of profitable loss for the year ended 30 September 2021. I remind you that the comparative period was largely free of the impacts of COVID for the first six months and was affected by the first wave of COVID-19 in the second six months. The current year's results were impacted by two severe waves of COVID-19 with the second wave falling into the first half of 2021. And the third wave, and most severe to date, falling in H2 of 2021. Therefore, there are inconsistencies between the periods which detract from the ability to make a like-for-like comparison. Looking at the numbers, revenue for the year amounted to R21 billion compared to R18.8 billion in the prior year, representing an increase of 11.5%. 2021 revenue was 2.7% below that of the 2019 financial year, being our last full reported year before the outbreak of COVID. EBITDA for the year amounted to R3.2 billion and grew by 24.8% from R2.6 billion in 2020. Included in EBITDA for the current year, a strategic project costs of R172 million. The group EBITDA margin improved by 160 basis points from 13.6% to 15.2%, primarily due to improved trading conditions and increasing occupancy levels. Operating profit increased by 45.4% to 2 billion rands, recovering well from 1.4 billion rands in 2020. Other net financial expenses of R412 million decreased notably against the R522 million charge in 2020, reflecting the benefit of a lower average cost of debt applied to lower average net debt balances. The IFRS 16 interest charge attributable to lease liabilities of R374 million remained consistent across both periods. Profit before tax increased by 130.9% to just under 1.3 billion rands. The group's tax charge amounted to 380 million rands at an effective rate of 29.6%. And profit after tax amounted to 904 million rands, representing a significant improvement from 313 million rands in the prior year. There were two exceptional items in the current year. The first represents pre-tax losses of 35 million rands, which have been recognized following the early termination of the Lesotho public-private partnership in light of uncertainty with regard to the resolution of matters currently under dispute. And the second exceptional item is related to the impairment of properties of 73 million rands. And the bulk of this relates to the Union and Clinton Hospital buildings, which will be vacated on the opening of the new 427-bed NetCare Elberton facility in 2022. In the prior year, there were also two exceptional items, being a once-off non-cash share-based payment expense of R348 million arising on our BBBE transaction and a R522 million pre-tax profit arising from the disposal of our investment in GHG PropCo2 following the sale of their UK properties. After taking these exceptional items into account, profit for the year amounted to 760 million rands against 439 million rands in the prior year. Next, we move on to headline earnings per share. As usual, we've presented the standard HEPs metric. 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 61.5 cents for the year, which is significantly improved on the loss of 3.6 cents in 2020. And adjusted HEPs for 2021 amounted to 67.4 cents, increasing by 107.4% from the prior year's 32.5 cents. Our cash preservation measures have proved necessary and successful over the past 18 months. And although COVID-19 and its effects will remain with us for the foreseeable future, We feel past experience positions us to better manage its impacts and consequently I'm pleased to confirm that the Board has approved the resumption of dividend payments and a final dividend of 34 cents per share has been declared. Moving on to the group statement to financial position, I remind you that NetCare's capital management policy is to maintain a strong balance sheet and to retain an investment grade credit rating while reducing the cost of capital with a safe level of debt. And this policy remains intact. And in fact, the underlying strength of the balance sheet has been key in ensuring that the business was able to continue investing in its strategic projects throughout the pandemic to date. As at 30 September 2021, total assets amounted to 25.6 billion rands, decreasing slightly from the 25.9 billion rands at September 2020. The decrease is mainly due to lower current assets, where we achieved a 566 million rand reduction in inventory holdings year on year, as we consumed most of the higher price PPE and drugs procured during the first wave. CapEx spent during the year amounted to 1.1 billion rands, of which 460 million rands relates to expansionary projects, and the balance of 684 million rands relates to replacement CapEx. Total shareholders' equity increased from 9.8 billion rands to 10.6 billion rands, largely due to an improved operating performance in 2021. And finally, on this slide, the group has a conservative debt-to-equity ratio of 0.5 times. Next, we'll take a more in-depth look at our debt position. Gross debt amounted to 6.8 billion rands at 30 September 2021, offset by cash balances of approximately 1.5 billion rands, and therefore net debt totaled 5.3 billion rands at the year end, decreasing by 1.1 billion rands in September 2020, reflecting solid cash generation and the benefits of our cash preservation measures. The stronger performance in 2021 is reflected in the net debt to annualized EBITDA metric, which strengthened to 1.7 times coverage at September 2021 from 2.5 times at September 2020. This metric is calculated in annualized EBITDA measured after the adoption of IFRS 16. In line with our policy, earlier this year, we retained our GCR credit rating of AA minus for long-term and A1 plus for short-term. And the cost of debt has decreased by 50 basis points from 6.4% at September 2020 to 5.9% at September 2021 as a result of reductions in borrowing rates during the year. Currently, approximately 50% of the group's debt is at fixed interest rates, which is achieved with the aid of interest rate swaps. NetCare is compliant with its banking covenants, which firstly require the net debt to EBITDA ratio to be below 2.75 times, where EBITDA is measured excluding the impact of IFRS 16 on a 12-month backward-looking basis. And the second covenant metric is that EBITDA to net interest cover must be greater than four times, 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 just under 1.5 billion rands on hand, as well as committed but undrawn debt facilities of 4.2 billion rands at its disposal. And we therefore have access to resources of 5.6 billion rands in the aggregates from which to fund our future needs. Our debt tenure reflects a manageable and appropriately staggered debt profile. and the business is therefore well-placed to withstand the uncertainties of the year ahead. And finally, just a quick word of recognition and gratitude for our finance staff across the group, who has always displayed great dedication in preparing the results and the related materials. And I'll now hand you back to Richard, who will update you on the progress of our key strategic projects.

Thank you, Keith. I would like to share with you now the progress we are making towards delivering on our strategy of redesigning Netcare's healthcare delivery model. In doing so, it's probably and perhaps helpful to remind all of our stakeholders of what it is we are trying to achieve and the rationale underpinning it all. Our strategy is predicated on solving healthcare challenges that beset both the private and public sectors globally, nationally in South Africa, and within our own private sector. On a global scale, healthcare delivery is largely fragmented and episodic, often without the real participation of patients in their own treatment plans. It's not individualized and considered very costly versus the outcomes achieved. There are, however, globally leading providers who, in our view, have developed solutions to these challenges. In doing so, they're adopting an integrated, non-siloed, multidisciplinary healthcare approach across the continuum of care. They've embraced a participatory and person-centered approach with a focus on wellness. At a national level, the degree of inequity between public and private healthcare delivery is stark, and access to quality healthcare is not a given for many South Africans. We face challenging societal issues and significant healthcare worker resource constraints. It's well recognized that universal access to healthcare is critical to achieve in South Africa, but challenges remain regarding the affordability and the capacity to do so. Recommendations from the Healthcare Market Inquiry have made constructive recommendations to improve transparency and competitiveness within the private sector. We firmly believe that corporate South Africa must play a leading role in the transformation of our society, helping address societal challenges, be a force for good, and also develop innovative ways of improving access and affordability to quality healthcare. And whilst within our private sector we're able to provide world-class clinical care, patients' experience across healthcare providers is often variable and disjointed. Whilst all players within the hospital sector proudly speak to unique elements of their delivery model, there is, in our humble view, limited significant differentiation. And thus, for NetCare, our strategy is to embrace what some leading global healthcare providers have managed to successfully achieve in terms of integrated models of delivery and care and create a substantially differentiated business offering. In so doing, a sustainable competitive advantage. Ladies and gentlemen, we call this the NetCare moat. In creating this competitive sustainable advantage, or MOTE, we are fundamentally redesigning our healthcare delivery ecosystem to provide person-centered, digitally enabled, and data-driven health and care. This is a three to five year journey we began in 2018, but has been delayed over the last 18 months due to the COVID-19 pandemic. Nonetheless, we have made substantial progress. In delivering a person-centered approach which encourage ownership and participation by patients of their health and care, the digitization of our entire ecosystem across all service offerings is absolutely critical. For us, digitization is not just about developing a few apps to assist with various things. It's a fundamental redesign. The introduction of medical records across all of our divisions is a huge undertaking. But ladies and gentlemen, this development is not an end in itself. It's a means to enabling clinicians access to real-time accurate information at any time and any place. It's a means also of enabling patients to gain access to their records and results and to genuinely be able to participate in their healthcare and make informed decisions. And digitization gives us access to rich clinical data to better inform treatment pathways and outcomes, and most importantly, improves the safety of care. All of this allows us to gain a better view of the patient, a 360 degree view, if you will, to better engage and allow for a more personalized and tailored approach to their health and care. Within our different divisions, digitization will also allow us to re-engineer our internal systems and processes to allow for more efficient clinical and business operations. We believe this strategy will allow us to meet what we call the NetCare litmus test, achieve growth above market, the delivery of a substantially differentiated service offering, and achieve enhanced returns for shareholders. And so, what will all of this ultimately look like? Patients will ultimately have access to information on any interaction in the NetCare ecosystem in the palm of their hand. Some of these elements will already be available from next year. Patients will ultimately experience continuity of care, reduced duplication of diagnostic tests and procedures, and importantly, experience a more seamless engagement between healthcare professionals in the NetCare ecosystem. They will also experience better quality and safety of care, as healthcare professionals will have a full view of their patient anywhere and at any place. And patients will be able to truly participate in their health and focus on their full healthcare journey, including wellness. To achieve this, as you'll see from the bottom of this slide, we are partnering with global IT giants such as SAP, Deutsche Telekom, Apple, Capsule, and IBM Watson Healthcare. In 2022, we will complete the rollout of detailed patient electronic records for national renal care. The solution will function across 68 dialysis clinics, including 1,100 dialysis machines or stations. It will provide an array of features to patients and clinicians, including information on admission, transfer and discharge, real-time clinical observations, quality and safety interventions. It will integrate all of the blood tests and give a lot of detail on patient activity and their achievements. All of the information from the electronic health record will be uploaded onto NRC's patient app to allow them to engage, participate, and manage their dialysis treatment and progress. Also next year, we'll begin providing patients in our digitized hospitals and a KESO with their own discharge summaries, prescriptions, and care notes. And for patients of NetCare 911, they too will receive an electronic record of their care. In addition to the improved communication and engagement with patients, digitization will have a profound impact on enhancing patient safety. And by way of example, up to 60% of all medication areas in hospital arise from the misinterpretation of a doctor's written script. The provision of electronic scripting can eliminate errors of legibility or misinterpretation. Our digital e-scripting solution was approved by the South African Pharmacy Council in 2020. It's the first, ladies and gentlemen, in South Africa and has established the industry standard for e-scripting. Together now, with the introduction of IBM Watson Health's Micromedex, all drug dosages, interactions, potential drug duplications and allergies are now electronically checked. And so digitization will help eliminate up to 60% of potential medication errors in over 1.8 million in-hospital scripts per year in NetCare. There are a number of strategic projects that underpin the operationalization of our strategy. In terms of updating you on the rollout of these projects, I'd like to focus on five major areas of digitization, data analytics, patient engagement, driving increased access to private healthcare, and environmental sustainability. In terms of our electronic patient records, we have already completed the rollout of these records in NetCare 911 and occupational health, and we'll complete national renal care, KESA, and primary care in 2022. Hospitals will complete in 2023. We've had to substantially upgrade our Wi-Fi infrastructure, and this also completes next year. All of our patient-facing engagement platforms complete in 2023, and to cater for our data analytics needs, we have subscribed and uploaded our data on the Microsoft Azure Cloud. In order to significantly improve access and affordability to quality healthcare, we've launched NetCare Plus, and I'll shortly cover this in more detail. And lastly, we've driven a very strong ESG agenda for the past nine years and will continue doing so. To that end, we've committed to bold targets to 2030. Now let's unpack the scale of investment we've made and will be making to achieve the various elements of our strategy. This table demonstrates our investment in digital data and patient engagement platforms to date, both in terms of the OPEX and CAPEX, as well as the trajectory of future spend in 2022 and 2023 until rollout is complete. On the left-hand side of the table, you will see demonstrated the capex spend up to 2020 and thereafter per year until 2023 when we complete the rollout. Total capex for these elements will amount to R447 million. Similarly, on the right-hand side of the table are the operational costs incurred to date and the profile of costs over the next two years. We expect to incur further 394 million of operational costs over the same period. Our digital strategy is expected to meet our investment hurdles and achieve an IRR of at least 12 to 15% over the project lifecycle. In terms of patient engagement and data analytics, we believe there are significant business enabler benefits which will manifest and be quantified over time. As many of you are aware in tackling the lack of access to private healthcare, particularly for those who are employed but uninsured, we've launched a division called NetCare Plus in mid 2020. This division is tasked with developing innovative and affordable ways for this particular segment of the market to access NetCare's ecosystem. Capital investment has been minimal to date and we've incurred 68 million in operational costs with an expected 108 million to be expensed over the next two years. This will drive incremental business within the NetCare ecosystem and across our different platforms. As a brief update, the slide demonstrates the various products and solutions launched over the past 18 months. At a primary care level, we've launched prepaid GP vouchers and optometry vouchers, and more recently, dentistry vouchers as well. We've developed an accident and trauma insurance product underwritten by Hollard, and Hollard are also now partnering with us in introducing an innovative Gap Care product, which will be available in January of next year. Our environmental sustainability strategy began in 2013. Since the implementation of the strategy, we've invested 550 million of capex to date and plan to invest a further 407 million until 2030. Operational costs incurred amounted to 76 million and we expect to incur a further 216 million until 2030. our environmental projects have on average returned an IRR in excess of 20%. Over the past nine years, we've achieved a 28% reduction in energy intensity per bed, surpassing the 10-year target we set in 2013. We've also managed to reduce our absolute Scope 1 and Scope 2 emissions by 8%, with a 28% reduction in the intensity of Scope 2 emissions per bed. And as a result of all of this, we've achieved total savings and cost avoidance of 821 million rands to date, comprising of 723 million in energy cost avoidance, 58 million in water, and 40 million in cost avoidance in waste. We've set even bolder targets for 2030 with a primary target to reduce scope two emissions to zero by 2030 and reduce scope one and two emissions by a combined reduction of 84% by 2030. And as part of our strategy, we aim to purchase 100% of our energy from renewable sources and achieve zero waste to landfill and reduction of our water utilization by 20% by 2030. And so in summary and in answer to some of the key issues we face in healthcare, globally, nationally, and within our sector, We're undergoing a radical and fundamental redesign of our healthcare delivery model in order to deliver a person-centered health and care model that is digitally enabled and data-driven. This, we believe, will allow us to create a competitive sustainable advantage. We call this our NetCare moat. In order to achieve this, we have demonstrated the various projects we are undertaking, their timeframes and investments, and importantly, both the qualitative and quantitative benefits. The qualitative benefits include enhanced patient safety, better clinical outcomes, and personalized and participatory health care. The quantitative benefits include business process efficiencies, cost avoidance and savings, including reduction in printing and paper, reduction in medical legal costs, automated billing and case management, and efficiencies in the deployment of staff and administration. Most of these projects will complete by 2023 with the exception of our sustainability projects and NetCare Plus, which is ongoing. And finally, if our strategy is to be successful, we must deliver on our own internal NetCare litmus test of achieving growth above market, improved returns, and a sustainably differentiated service and product offering. Ladies and gentlemen, that concludes the update on our strategy, and I'm now finally going to turn to our guidance for the 2022 financial year. Much of our guidance for next year largely depends on the evolution of the COVID-19 pandemic and the potential scenarios emanating from it. The possibility of further waves of COVID-19 still exists. In the absence of new, highly transmissible and virulent strains of the virus, we expect a reduction in the severity of such potential waves. This is due to increasing levels of immunity from natural infection and vaccination, which will continue to influence our ability to operate in an unrestrained environment. If South Africa is able to move from a pandemic to an endemic state in which outbreaks are not overly disruptive and largely controlled by significant and frequent vaccination, recovery and activity over time to pre-COVID-19 levels will be possible. We expect EBITDA margins in the underlying operating divisions to strengthen. However, the group margin is expected to remain unchanged due to planned operating costs of 273 million versus 172 million last year associated with the implementation of our strategy. We expect to spend $1.4 billion on CAPEX, including the investment of $227 million in strategic projects, $160 million on completion of the NetCare Alberton Hospital, and $80 million on the new 72-bed ACESO facility, which will be completed in financial year 2023. The strength of our balance sheets and our underlying businesses are expected to support continuation of dividends. And finally, recovery of our businesses together with an enhanced pipeline of new initiatives is expected to enable us to return to pre-COVID-19 growth and profitability over the medium term. Ladies and gentlemen, that concludes the formal presentation for today, and we're now happy to take any questions.

Thank you. We have a question from Anusha from APSA. Hi all, thanks for the presentation. Three questions from our side. Number one, NetCare has resumed dividends this year. Could you please touch on NetCare's latest dividend policy? Have you updated the policy or does it remain the same? Previously, it was a dividend payout ratio of up to 70% of earnings. Number two, could you please tell us Netcare's latest November occupancy? And number three, in the outlook statement, Netcare expects to return to pre-COVID profitability over the medium term. Could you please indicate by which year, if possible?

Thanks, Marcel. Keith, if you'll take that question. The first one, and I think Jacques, the one on occupancy in November. and return to profitability, if I can take that one.

Happy, all right, so I'll begin. Anuj, our dividend policy has not been amended. We stated that our dividend policy is such that we believe that we will be able to return between 50 to 70% of our adjusted HEPs to shareholders. And this dividend starts us off in that range. So there is no change to the policy.

As far as the occupancy is concerned for the month of November, for the full week, month to date, it's just under 60%. And pleasingly, for the last five working days, we are in the early 60% of occupancy.

Good morning Anuja and thank you for your question about return to pre-COVID-19 growth and profitability over the medium term. I think one of the largest or the biggest lessons that we've learnt out of COVID is not to be dogmatic about future waves and what is going to happen and to be very cautious about that because in many instances we have all forecast incorrectly. And as I said in the overview, much of our guidance for next year largely depends on the evolution of COVID-19 and the potential scenarios emanating. We still believe that we will see a fourth wave and possibly a fifth wave in this new financial year. And so we are being cautiously optimistic about this return. to profitability and growth over the next two to three years.

Thank you. We have a question from Flo at Investec. Can you please comment on the uptake of the new insurance products to date? And what are the company's targets in the short to medium term?

Good morning, and thank you for the question. We're currently busy rolling out our different distribution strategies to actually penetrate this market, and it's actually focused on two broad spectrums. One is the employer market, because employers out there are willing to fund these products for the employees. And the second part is the retail market, in which we implemented a few call centers in the last few weeks to actually get into the market. It's still quite early days, but the positive feedback that we've gotten both from intermediaries as well as the the retail market is actually showing us on the right side, and the sales are actually picking up as we speak. It's told we have a long way to go, so we're going to have to just test the market and understand the uptake of these products. From a target perspective, we're targeting a certain penetration of this market over time, and this market has rapidly changed as a result of medical scheme penetration. We think the opportunity is quite massive, and we can target a penetration of between 5% and 10% over the medium to long term in terms of penetration into this market.

Okay, we don't seem to have any further questions. I'm going to hand back to Richard for some closing comments.

Thank you very, very much, Marcel. And ladies and gentlemen, thank you very much for your attendance here this morning. And we remain available over this week and the coming weeks to answer any questions or clarifications you may have. Thank you very, very much for your attendance.