Good morning, everyone, and a very warm welcome to Netcare Limited's interim group results presentation for the six months ended the March 31st, 2023. A warm welcome to the Chair of Netcare, Mark Bower, members of the Netcare board, our ExCo and senior management teams. Let me at the outset 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 six months in producing what is certainly our strongest performance since emerging from the COVID-19 pandemic. Thanks also go to our board for their support and guidance. Today, a year ago, Meyer Kahn, a former longstanding board member and chairman of Netcare, passed away. He was a doyen of South African business. These results are dedicated to his memory and the enormous contribution he made to Netcare.
I'm going to begin this morning 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 outlook and guidance for the remainder of the year. Just a very quick reminder of the extensive and growing array of facilities and services we provide within the Netcare ecosystem across 10 unique divisions. Looking at our overall operational performance, despite a very challenging and worsening macroeconomic and hyperinflationary environment, the past six months for Netcare have been characterized by a number of positive features. Firstly, an improving performance driven largely by the recovery in activity and a normalizing post-COVID-19 operating environment.
Group revenue now exceeding pre-pandemic revenue and total patient days now trending at 97% of pre-pandemic levels. Pleasingly, we've experienced strong operational leverage as occupancies recovered. In fact, this March's occupancy of 68.3% in our acute hospitals was at its highest level since the pandemic. We've also maintained our strong balance sheet and cash generation over the past six months. Our strategic projects remain on track with tangible benefits and savings realized. Our environmental sustainability strategy has continued to reduce our reliance on the national grid, as I will demonstrate later. Finally, the rollout of electronic medical records is progressing well across all divisions, both in line with budget and timelines, and is nearing completion, as you will see later. This solid operational performance translates into our financial metrics.
Turning to the numbers, the equally strong recovery in financial performance can be seen across all of our metrics as compared to the same period last year. Revenue rose 11.9% to ZAR 11.9 billion as we achieved excellent operating leverage, as evidenced by the 24% increase in EBITDA to just over ZAR 2 billion. Our EBITDA margin, excluding strategic costs and generator diesel costs, increased by 220 basis points to 19.1%. Adjusted Headline Earnings Per Share rose by 31.5% to ZAR 0.463. As a result of the improved performance, we are pleased to declare an interim dividend of ZAR 0.30 per share, 50% higher than last year's dividend and representing 65% of adjusted Headline Earnings Per Share.
Our net debt-to-EBITDA ratio strengthened to 1.2x versus a ratio of 1.7x in the comparative period. Let's unpack the operational performance of our respective divisions in more detail. Total patient days grew by 11.5%, which comprises an 11.3% increase in patient days across our acute hospitals and 13.5% growth in mental health. We saw a decline of 2.2% in primary care visits, which I will expand upon later. Average acute hospital occupancies have steadily improved, as you can see from this graph on the left-hand side of the slide, occupancies are now at the same levels as experienced prior to the COVID-19 pandemic. The graph on the right-hand side depicts monthly occupancies achieved.
In March of this year, we achieved our highest occupancy since the onset of the COVID-19 pandemic. The graph on the bottom of the slide demonstrates the mix between medical and surgical cases. The number of surgical cases continues to grow, but there has been a more significant growth in medical cases, which in turn has offset the admission ratio somewhat. However, surgical cases continue to contribute approximately 72% of revenue, compared to 73.5% in H1 of 2019. Let's take a closer look at our hospitals and emergency services in more detail. Revenue grew by 12.2% to ZAR 11.2 billion, and we achieved excellent operational leverage, resulting in an EBITDA growth of 24.6% to ZAR 1.9 billion.
Operating profit rose by 32.4% to ZAR 1.3 billion. Unpacking the elements that impacted revenue, acute revenue per patient day grew by 0.7%, importantly, reversing a negative trend seen over the past year as we recovered from the COVID-19 pandemic and higher acuity cases began to decline to pre-pandemic levels. Excluding prior period vaccine revenue, the underlying growth was 1%. Acute length of stay increased to 4.3 days from 4.2 days in the comparable period last year. EBITDA margin for the segment expanded by 180 basis points to 17.3% from 15.5% due to increasing occupancies, efficiencies, and stringent cost management in the face of challenging inflationary pressures.
As indicated on this slide, generator diesel costs rose by an additional ZAR 55 million in this division to ZAR 65 million for the six months, versus ZAR 10 million in the first half of last year. Excluding strategic costs of ZAR 123 million and additional generator diesel costs of ZAR 65 million, margin expanded a further 160 basis points to 18.9%. I'm pleased to announce that Netcare Christiaan Barnard Memorial Hospital was awarded Level 1 trauma accreditation, one of only four hospitals in South Africa alongside Netcare Milpark, Alberton, and Netcare St Anne's hospitals. We've grown our specialist base by granting admitting privileges in acute and mental health facilities to additional net 61 specialists. Turning to our primary care division, revenue grew by 2.6% to ZAR 317 million.
On a like-for-like basis, medical and dental patient visits were 2.2% down on the comparative period when the Omicron variant drove increased GP visits. As a result of ongoing efficiency benefits, EBITDA increased by 9.9% to ZAR 78 million. Operating profit rose by 36% to ZAR 34 million. EBITDA margins improved by 160 basis points to 24.6%. EBITDA includes a ZAR 2 million capital profit on the sale of property. Excluding this, the EBITDA margin reduces to 24%. I'll now hand over to Keith to unpack our financial performance in more detail.
Thank you, Richard. Good morning, ladies and gentlemen. Let's now turn our attention to Netcare's financial performance for the six months ended March 31, 2023. During the first half of the 2023 financial year, Netcare enjoyed a sustained period of operation free from COVID-19 disruptions, which allowed the operating environment to gain further traction in its recovery towards normalization as far as COVID-19 is concerned. The trend of improving performance continued, resulting in improved financial outcomes for the period under review. Higher occupancy levels and a well-controlled cost base generated pleasing operational leverage. Netcare has maintained its healthy statement into financial position, and the business continues to generate robust cash flows, which assisted in further strengthening the net debt to EBITDA ratio to 1.2x from 1.7x at March 2022.
The last three years have required us to weather the COVID storm and then to build back to pre-COVID norms. As can be seen by the graphs on this slide, this has been a journey of progression with results improving half by half. While we generally not compare H1 performance against H2 due to seasonal differences in the form of the traditionally quieter summer holiday period over December and part of January, it is interesting to note that H1 2023 outperformed the second half of FY 2022 in terms of revenue, EBITDA and operating profit. This demonstrates the recovery and demand for healthcare services, as well as the operating leverage that higher activity levels yield.
Of course, a better comparison is to look at the performance for the first half of the current year against the same period in the prior year. Here the improvement in performance and operating leverage is clearly evident. The 11.9% increase in revenue has delivered growth in EBITDA of 24%, with a 32.5% improvement in operating profit. The last graph on this slide reveals how the sequential improvement in operational and financial performance translates into net debt. The group's net debt, exclusive of IFRS 16 lease liabilities, was ZAR 5.4 billion at March 2022 and decreased to just under ZAR 4.9 billion by September 2022.
It is usual in our business for net debt to increase between September and March, but for this reporting period, the increase was limited to ZAR 144 million, with net debt of ZAR 5 billion at March 2023, which is a 6.7% reduction from March 2022. Moving on to the group statement of profit or loss for the six months ended 31 March 2023. Revenue for the period amounted to ZAR 11.5 billion compared to ZAR 10.3 billion in the comparative period, representing an increase of 11.9%. This is also an increase of 9.7% in absolute terms against the revenue of ZAR 10.5 billion for the first half of the 2019 financial year, which was the last full financial year before the outbreak of COVID-19.
EBITDA for the half grew by 24% to ZAR 2 billion against ZAR 1.6 billion in 2022. This was aided by sustained higher occupancy levels as well as tight cost management, reduced COVID-19 PPE utilization, and nursing efficiencies. These efficiencies were offset by higher diesel generator costs of ZAR 67 million compared to ZAR 10 million in the comparative period, as well as strategic costs of ZAR 127 million against ZAR 112 million in H1 2022. The group EBITDA margin improved by 170 basis points from 15.8% to 17.5%. EBITDA margin has been influenced by a number of factors. I'll cover this in more detail in the next slide.
Operating profits increased by 32.5% to just under ZAR 1.4 billion compared to ZAR 1 billion in the prior period. Other net financial expenses of ZAR 223 million increased from ZAR 171 million in the prior period, which is due to higher interest rates, notwithstanding lower average net debt balances. The IFRS 16 interest charge attributable to lease liabilities of ZAR 220 million increased from ZAR 190 million in the prior period. Profit before tax increased by 36.4% to ZAR 934 million, and the group's tax charge amounted to ZAR 268 million at an effective rate of 28.7%.
Profit after tax amounted to ZAR 666 million, representing a 37.9% improvement from ZAR 483 million in the prior period. There were no exceptional items in the current period. There were exceptional items totaling ZAR 35 million in the comparative period relating to property impairments and a change in the statutory tax rate, and these further reduced the prior period's reported profit to ZAR 448 million. As mentioned on the previous slide, the group's reported EBITDA margin for the first half improved by 170 basis points from 15.8% to 17.5%.
This is after absorbing operational costs related to the implementation of various strategic projects, the bulk of which complete towards the end of this year and early 2024. If excluded, lift the underlying EBITDA margin by 1.1% to 18.6% as compared to a similarly adjusted EBITDA margin of 16.8% in the comparative period. Given the large increase in diesel costs brought about by the need to run generators when the national grid is load -shed, it's also appropriate to unpack this impact on margins.
The ZAR 67 million of diesel costs incurred in the current period have had a detrimental impact on EBITDA margin of 50 basis points and if also excluded, increase the underlying EBITDA margin for H1 2023 to 19.1%, which is a 220 basis point improvement on the prior period. Next, we move on to headline earnings per share. 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 0.448 for the half, which is a 40.4% improvement on the ZAR 0.319 in H1 2022.
Adjusted HEPS for the first half of the 2023 financial year amounted to ZAR 0.463, increasing by 31.5% from the prior period's ZAR 0.352. The board has resolved to declare an interim dividend of ZAR 0.30 per share, which represents an increase of 50% against last year's interim dividend of ZAR 0.20 per share. Our dividend policy is to distribute between 50%-70% of adjusted earnings to shareholders in the form of ordinary dividends. The interim dividend of ZAR 0.30 is at the higher end of this range, representing 64.8% of adjusted HEPS, compared to a distribution ratio of 56.8% in the prior period.
Moving on to the group statement of financial position, I 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 the March 31st, 2023, total assets amounted to ZAR 26.8 billion, increasing from ZAR 26.3 billion at September 2022. CapEx spent during the period amounted to ZAR 430 million, of which ZAR 81 million relates to expansionary projects, and the balance of ZAR 349 million relates to replacement CapEx. Working capital remains well managed.
Total shareholders' equity has increased to ZAR 11.1 billion, which is largely due to an improved operating performance, offset by total dividend distributions of ZAR 455 million made during the period. Finally, ROIC reached 10.6% at March 2023, displaying ongoing improvements from 8.1% one year earlier. Next, we'll take a more in-depth look at our debt position. Gross debt amounted to ZAR 6.6 billion at March 31, 2023, offset by cash balances of ZAR 1.6 billion. Net debt totaled ZAR 5 billion at the half year end, increasing by ZAR 144 million from September 2022.
Net debt to annualized EBITDA strengthened to 1.2x coverage at March 2023 from 1.4x at September 2022 and 1.7x at March 2022. This metric is calculated on EBITDA measured after the adoption of IFRS 16 against bank debt only. Inclusive of the IFRS 16 lease liabilities, net debt to EBITDA coverage is 2.4x, improving from 2.7x at September 2022 and 2.9x at March 2022. 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 March 2023.
The cost of debt has increased by 90 basis points from 7.7% at September 2022 to 8.6% at March 2023 as a result of the rising interest rate environment. 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 x, where EBITDA is measured excluding the impact of IFRS 16 on a 12-month backward-looking basis. The second covenant metric is EBITDA to net interest cover, which must be greater than 4 x. Both of these covenants have been met with ample headroom. Moving on to our debt facilities.
We see at the half year end, Netcare had cash balances of ZAR 1.6 billion on hand. In addition, we have committed but undrawn debt facilities of ZAR 2 billion. We therefore have access to resources of ZAR 3.6 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 requirements. Finally, I'd just like to express my appreciation to our finance staff across the group for their invaluable efforts in preparing the results and the related materials. I'll now hand back to Richard.
Thanks very much, Keith. Let's now take a closer look at progress across some of our key strategic initiatives. What I'd like to cover in this section is a brief recap of Netcare's strategy, an overview of the principles underpinning our allocation of capital, progress on the digitization of our ecosystem, the upcoming launch of the next phase of this strategy, and also updates on NetcarePlus, Netcare Diagnostics, progress on our transformation journey, further progress on our environmental sustainability initiatives, and finally unpack the impact of load shedding. Just a very quick recap of Netcare's strategy. Our strategy responds decisively to the three global healthcare mega trends of customer centricity, digitization, and data, and leverages off our unique ecosystem of assets and services, such that Netcare's service offering delivers person-centered health and care that is digitally enabled and data-driven.
Intentionally, through all of this, to ultimately create a sustainable competitive advantage for the group. Today, colleagues, you will hopefully gain a clear understanding of the first part of our strategy, which is nearing completion, and which is enabling us to embark on the second and very exciting phase. Fundamentally underpinning our strategy are our principles determining our allocation of capital, and Netcare remains prudent in managing its capital resources. We apply strict financial discipline when allocating capital, and the return of capital must comfortably exceed the cost of capital. Our investment strategy focuses on identifying opportunities linked to our group strategy. All opportunities must meet at least one or more criteria of our internal Netcare litmus test, which requires growth above the market and/or differentiating the services or care experience we provide and/or growing our margins and improving returns.
Currently, our strategic investments are focused on expanding our businesses, digitizing the entire business, and maintaining and upgrading our facilities. Examples of this include phase I of our environmental strategy, which has been successfully completed and delivering an IRR of greater than 35%. Digitization of the business. Our CareOn program will be accretive from H2 2024 and will generate an IRR comfortably in excess of our WACC. Investing in business enablers, catch-up CapEx in this financial year to maintain and upgrade facilities, and an Akeso pipeline of approximately 200 new mental health beds. Strong cash generation and balance sheet metrics underpin this, and we target annual cash conversion of 100%. In terms of capital distribution, we aim to pay a sustainable dividend to shareholders of between 50%-70% of adjusted headline earnings.
In the absence of investment opportunities within the business, excess capital will be returned to shareholders. Let's unpack our key strategic projects and timeframes. Importantly, the vast majority of CapEx and OpEx spend draws to a close at the end of this financial year, as most projects near completion. There will be a relatively small amount of OpEx for H1 2024 as we complete the CareOn rollout. Also, budgeted OpEx costs this year will be ZAR 18 million lower than guided to, due to savings in rolling out CareOn. Initially, we had forecast ZAR 275 million, and this has now been reduced to ZAR 257 million. This table serves to update our investment in strategic projects, both from an OpEx and CapEx point of view. Pleasingly, as you can see, they all remain within budget and are on track.
As you'll notice, the majority of the specific CapEx spend to date has largely focused on our environmental sustainability program, which I'll unpack in more detail shortly. As I said, we are forecasting to spend ZAR 181 million in CapEx versus our budget of ZAR 185 million, and also, as mentioned, ZAR 257 million in OpEx, which is ZAR 18 million lower than our budget of ZAR 275 million due to lower costs on the CareOn rollout. The digital transformation of the Netcare ecosystem is progressing well on budget and within acceptable timeframes. This is a transformational project of unprecedented scale and complexity across the African continent. Significantly for us, completing this digital foundation enables our next strategic phase, which will drive ongoing person-centered engagement and data analytics. Just a quick update on our progress.
We've now implemented our electronic medical records system at 30 hospitals, representing 70% of our beds, or 6,722 beds. A further eight hospitals will be implemented by the end of 2023, and the rollout across the remaining hospitals, seven hospitals, will be completed by April 2024. Rollout of our electronic health records to all participating Medicross GP and dental practices is complete, and our EMRs for occupational health will be rolled out to all designated service providers and clients by September 2023. CareOn has now been implemented across our 14 Akeso mental health facilities. Across our renal network, National Renal Care, the EMR has been implemented and 47% of our dialysis patients are now actively engaging with our mobile app in terms of their results, treatment, and wellness goals.
In our cancer division, our radiotherapy EMR is complete, and our chemotherapy module will be completed together with our CareOn rollout in April 2024. As I've mentioned before, Netcare 911 completed its EMR in 2022. Let's focus for a moment on our hospital EMR, which is the largest and most complex element of our strategy. The digitization of our hospitals and real-time mobile-enabled clinical records integrates all aspects of healthcare delivery. Very significantly for us, we've achieved a ZAR 50 million saving in efficiencies across various cost segments in the past six months versus our original budgeted ZAR 24 million for H1 2023. Most importantly, the benefits to patient safety, improved clinical outcomes, and patient engagement are rapidly emerging.
Just to give you a sense of our progress since last year and the size and the enormous scale of this project, you can see we've fully digitized 30 hospitals across 6,722 beds versus 21 hospitals last year. In doing so, we've connected over 9,500 medical devices to the EMR. Over 7,900 iPads are now in use, and there are more than 19,000 active users across our doctors, nurses, pharmacists, allied health professionals, and admin personnel. In fact, we are today Apple's largest customer for iPads in the Southern Hemisphere. At any one time in our hospitals, we have over 2,600 concurrent users of the EMR receiving live clinical data. To date, we've dispensed over 2.1 million electronic scripts and issued over 2 million drug-to-drug alerts.
In addition, we have digitally received approximately 21 million pathology and radiology results. The clinical data we now produce and make available to our clinical teams is approximately 19 GB per day, up from the 8 GB we produced last year. Now, as this digital foundation of our ecosystem nears completion, we are now embarking on the next phase of person-centered engagement that will be fully digitally enabled and data-driven, providing improved access, ease of use, and engagement across our ecosystem. We are intentionally moving away from a siloed and episodic-based model of care towards an engaged and retention-led model of care over a person's lifetime. Mobile phones are rapidly transforming their primary function from that of a telephone into that of a data device, upon which in the next few years, all of our data containing everything about us will be stored.
The race to own the real estate on mobile devices is already underway. As Netcare, we too are embarking on that journey. To this end, I'm delighted to inform you colleagues that we'll be launching the new Netcare app next month. Here is a quick preview. As a recap of the features you've just seen, South Africans will now be able to readily access Netcare 911 emergency services at the touch of a button. Our research from the more than 2.2 million emergency calls that we have managed in Netcare 911 is that being able to rapidly locate someone in an emergency is a critical factor because, colleagues, time saves lives. By downloading the app, Netcare 911 will instantly be able to geolocate a patient in an emergency.
Also, patients and their loved ones will be able to track the ambulance to show its estimated time of arrival. Finding a doctor or specialist and all doctor or specialist appointment bookings and virtual consultations can now be made on the app and facilitated through our appointment center. Instead of waiting in a queue at reception at any one of our hospitals, patients can seamlessly and conveniently complete their pre-admission details online to ensure a paperless experience in the hospital. Shown here is an example of a patient's digital pre-admission card. As part of empowering our patients with their own records. A summary of care reports or discharge summary will be made available to patients across all of our services. Initially, we will be launching with Netcare 911.
We are also expanding our digital channels to allow South Africans to purchase our NetcarePlus products via the app, commencing with GapCare and emergency care products. Turning our attention to NetcarePlus, a quick update on the progress made this year. The graphic here on the left-hand side demonstrates the products we are offering in terms of market affordability and richness of benefits. For an employed but uninsured market, we are essentially offering emergency cover, day-to-day healthcare products, and prepaid in-hospital procedures. For the insured market, we offer GapCare, particularly for those on limited benefit efficiency or network options. Here on the right-hand side, in terms of sales, we are slowly gaining traction in a highly competitive and challenged market segment. This graphic demonstrates the growth trajectory for our accident cover and GapCare products.
A quick refresh of Netcare Diagnostics as elucidated in previous presentations and as part of our enterprise supply development strategy, we've partnered with a Black female-owned pathology practice to provide the highest quality point of care at site, as well as laboratory-based pathology tests. Netcare provides the equipment and infrastructure, logistics, administration, finance, and operational support. 193 point- of- care devices have now been installed in Netcare hospitals' specialized units, we commenced a pilot at our first primary care center in May of this year. To date, we've conducted more than 350,000 tests. As I've said before, the benefits of this offering include fully integrated and digitized pathology services and quality assured results with improved turnaround times. Pleasingly, we are now seeing a growing positive contribution to EBITDA.
Turning to the progress on transformation in Netcare, we currently hold a Level 3 BBBEE rating. It's important to know that we would have achieved a Level 1 had the South African Nursing Council not imposed severe restrictions on nurse training. We began our transformation journey in 2007, and whilst we recognize that there is still much to achieve, this slide demonstrates a few examples of our progress over the past 15 years across various pillars. In terms of preferential procurement, 51% of total procurement, or ZAR 5.9 billion, is spent with Black-owned suppliers versus the 0.04% or ZAR 2 million in 2007. The current DTIC target is 50%. Of this, ZAR 3.7 billion is spent with Black women-owned suppliers, representing 33% of measurable spend versus a DTIC target of 12%.
In 2007, colleagues, our spend in this category was nil. From an employee diversity perspective, 4% or 809 of our employees are persons with disabilities versus 60 people in 2007, or 0.3% of our staff. This is double the Department of Employment and Labour target of 2%. At a senior management level, 50% of our managers are now Black versus 60% in 2007. Besides the massive contribution we have historically made to the training of nurses, we funded scholarships for 23 Black medical doctors to pursue PhD studies. The multiplication effect of this initiative can be seen by what these scholars have, in turn, been able to train and produce, as can be seen here on this slide.
In terms of clinician diversity, we've more than doubled the number of Black clinicians practicing in Netcare from 24% when we started measuring this in 2011 to 52% today. Finally, the 15 SMMEs on our enterprise supply development support program have created 422 jobs. We also have 94 SMMEs on early payment terms within 15 days to assist their cash flow. As a result of this and so many other of the initiatives within our transformation journey, we have been awarded 16 national awards for transformation and CSI initiatives since 2007.
Turning to our progress on in our environmental sustainability strategy. We've successfully completed the first phase of our environmental sustainability strategy with significant savings of ZAR 1.2 billion and a 35% reduction in energy intensity per bed, surpassing our 10-year target set in 2013. We've now commenced with phase II of our strategy, where we will be targeting to reduce Scope 2 emissions to zero and reduce Scope 1 and 2 emissions by a combined 84% by 2030. Our strategy is aligned with the Just Energy Transition Plan developed by the Presidential Climate Commission. We aim to achieve 100% renewable energy, zero waste to landfill, and a 20% reduction in water utilization by 2030. Since 2022, performance remuneration is linked to environmental sustainability achievements.
Over the past six months, we've been awarded two additional awards, bringing to 31 the national and international awards our program has received since 2013. Some of which are listed here on the right-hand side. Finally, colleagues, no investor presentation in the current environment would be complete without discussing the impact of load shedding across our ecosystem. Private sector hospitals are not exempt from load shedding. However, the majority of our hospitals have full island capacity, allowing them to run 24/7 completely independent of the grid. This is facilitated by uninterrupted power supply systems and 200 backup diesel generators. Since the implementation of our environmental sustainability strategy in 2013, to date, we've invested ZAR 589 million in CapEx on 204 projects.
As a result, we have a sizable solar power base across 72 sites, capable of generating between 18 and 20 gigawatt hours per annum. In terms of the impact, electricity equates to approximately 5% of overhead expenses. Unfortunately, the cost of running generators is about three and a half times more than the cost of utilizing electricity from the grid. Generator diesel fuel amounted to ZAR 67 million in H1 2023 versus ZAR 9 million in H1 2022, and ZAR 37 million for the full year in 2022. We've experienced an average of Stage 3.5 load shedding across our facilities in H1 2023, deteriorating to an average of Stage 3.9 in Q2 of 2023. This average is illustrated in the bar chart down here at the bottom of the slide.
Each stage of incremental load shedding costs Netcare an additional ZAR 3 million on average per month. Turning to our outlook and guidance for the remainder of the financial year. We are guiding towards patient day growth of between 6.5%-7.5% and revenue growth of between 9%-12% versus the previous financial year. In terms of our strategic projects, we're expecting to spend ZAR 257 million of OpEx and ZAR 181 million of CapEx, this signals the last phase of our strategic spend. We estimate that generator diesel fuel cost for the full financial year will be around ZAR 165 million. In terms of EBITDA margin, underlying margins are expected to strengthen year-on-year in line with improving occupancies.
In line with normal seasonality of higher activity in the second half, revenue, EBITDA, and earnings for H2 2023 are expected to exceed H1 2023. Finally, we expect to spend ZAR 1.6 billion on CapEx in 2023, largely as a result of the underspend in the two previous years and a resulting catch-up on the refurbishment of a number of our facilities. As such, ZAR 600 million is attributable to refurbishment and ZAR 111 million for the expansion of our Akeso facilities. That, colleagues, concludes the formal presentation of our results, and we are now happy to open the webcast to questions. Thank you.
Thank you, Richard. We have our first question from Taylor. Why do you believe medical admissions have increased while surgical admissions have decreased?
Good morning, ladies and gentlemen, Jacques du Plessis. I would rather describe the imbalance in terms of the ratio as higher incidence of medical admissions, that skews that ratio, and a reduction of certain s urgical admissions like scopes, for example, we see a dramatic reduction. It's also evident from information from the schemes. Maternity deliveries are also classified under surgical admissions, and over the last eight years, we've seen a drop of about 24% in deliveries. The Netcare experience is still better than what the industry has experienced. Certainly the dropping of all the non-pharmaceutical measures that we had in COVID-19. You remember them all in terms of distance, social distancing, masking, and working from home. We've now seen that pneumonias, for example, are on the same levels as we experienced in 2019. RSV in children is actually the highest since 2018.
This is all medical cases that we've seen. The medical length of stay is also a little bit higher. We also need to remember, still see COVID cases. 0.7% of all those medical admissions are actually still COVID, or a total of close to 14,000 patient days. Importantly, as Richard mentioned, that our revenue, 72% of that is from surgical admissions, still. We do see that our case severity has increased across the board, though. This ratio is really in line with what the funder market has given us. It is our view that cash-strapped S.A. has less money to spend for prosthesis, typically that you see in surgical cases, and that might also have an influence. Thank you.
Thank you, Jacques. The second question for Richard. With FY 2023 being the final year of major OpEx expenditure on strategic projects, could you provide some guidance on the earnings delta we should expect to see in FY 2024? Will the ZAR 257 million OpEx costs being incurred completely fall away, and will there be any additional synergies to expect?
Yes. Thank you very, very much for that question. Yes, the majority of the OpEx costs will completely fall away in 2024. Remembering that H1 2024 will still have OpEx costs due to the rollout of the remaining hospitals on CareOn. As we've indicated, the CareOn project itself will become accretive from H2 2024. As we've indicated, we are already seeing operational efficiencies coming through on CareOn. We had initially budgeted for ZAR 24 million of savings in this first half and probably savings of between ZAR 50 million-ZAR 55 million for the year. We've already achieved ZAR 50 million in the first half, and that should give you some indication that efficiencies are expected to continue and as I said, be completely accretive from H2 2024.
We don't give guidance on 2024 earnings at the interims in 2023. If you'll bear with us, we'll certainly be giving those at our year-end results in November. Thank you.
Thank you, Richard. We have another question. At which point would you prefer offshore M&As relative to dividends? Where do you see net debt in the next 18 months? Can you sustainably expand EBIT margin from here? What sort of ROIs are achieving in the digitization projects?
Thanks. Couple of questions there. I'll kick off with the first couple, and then I think Richard is going to answer the last one. Apologies. Sorry, I just lost the question. The offshore M&As. Yeah. Look, I think the policy, we've been pretty clear on that. We'd like to pay a sustainable ordinary dividend to shareholders, and we believe that we can distribute between 50%-70% of our adjusted HEPS as an ordinary dividend on an ongoing basis. Certainly within the business, this year we've allocated ZAR 600 million to catch up on refurbishment of facilities which were deferred during the COVID crisis.
We've been very focused in terms of our strategic rollout on CareOn and that has consumed a lot of our bandwidth and, you know, we'll continue to do so through into 2024. I think M&A opportunities offshore is something that we're not is not necessarily foremost on our radar screen at the moment whilst we focus on rolling out our strategy. Where do I see net debt in the next 18 months? I think, you know, we have indicated before we are operating a CapEx-light strategy. Aside from the catch up in terms of the refurb that we are completing this year and potential opportunities we have in the mental health environment to further roll out our facilities.
We believe we've got a sufficient installed bed base in our acute hospitals, and so we're not looking to necessarily expand those. Therefore, I think that CapEx-light strategy does bode well in terms of the cash that the business is able to generate, which potentially can allow further de-gearing. Richard, would you like to talk to the IRRs and the digitization?
Thank you very, very much. We don't disclose the exact IRR that we are targeting, but I can tell you that it is comfortably in excess of our cost of capital. Given the recent performance is now widening, we also hold a very significant contingency within our model that we've held in case of additional CapEx that we might have required. It's become very clear to us that that's not going to be required, which will improve the IRR even further. I think in the due course of time, once the program has broken even, we may be willing to share, as we have on our sustainability projects, the kind of IRR that we're achieving. We're very comfortable and very pleased with the efficiencies we're now beginning to see at scale from our digitization.
As I said, they begin to grow quite substantially in the second half of 2024.
Thank you, Richard. Our next question for Teshlin. What is the percentage contribution of vouchers to revenue?
Good morning, and thank you for the question. Vouchers contribute currently very little to revenue, given its small price point, revenue both to NetcarePlus and the Netcare ecosystem as a whole. It is a necessary product to complete the offering in the market that we're targeting. You'd see that we actually reported on GapCare as well as accident trauma sales, predominantly because that's the biggest contributor to our ecosystem currently. Thank you.
Thank you, Teshlin. We have another question on load shedding. Your average state of load shedding across your hospitals is still lower than the Stage 6 being experienced overall. Please can you explain this dynamic as to why you are able to experience lower levels of load shedding versus that which is implemented by Eskom?
Yeah. Thank you very, very much for that question. Just to give you some context, our entire monitoring of our electricity and energy demand across Netcare is digitally measured on a real-time basis. The reason why our load shedding is slightly lower is that we do have hospitals in certain areas which have been spared from some of the load shedding. Nine hospitals in particular. If you look at the eThekwini area, for instance, because of the state of disaster that was issued and that comes to an end in May, they are exempt from load shedding up to Level 5, and we have a handful of hospitals that are tied into grids that exempt public hospitals.
A lot also has to do with the fact that we've also reduced our energy intensity by 35% over the last 10 years due to our sustainability program that we began in 2013. Over this winter period, we are forecasting a substantially higher level of load shedding that we'll experience probably between the order of Level 5 and Level 6. Thank you.
Thank you, Richard. We have some questions on the nursing shortages, so I'm gonna just combine these. Can you please talk through the nurse shortage and the operational impact currently, or is this concern more longer term? Where do occupancy levels need to get for a nurse shortage to become a concern? Given the significant demand for diesel during load shedding across the market, can you talk through your security of this diesel and whether you've seen any strain in the diesel supply chain? Two parts to that.
Okay. Nursing. Let me deal with the diesel issue first. We have put plans in place over the last eight to 10 years around diesel. We have significant diesel storage capacity at all of our facilities. We also have contracts in place with major diesel suppliers. We don't foresee a problem in terms of diesel supply even reaching the higher levels of load shedding. I think touching on the nursing issue probably represents the biggest single threat to the provision of healthcare in South Africa, both in terms of the public sector and the private sector. We estimate that there is, according to data that's been verified by the Department of Health and right across the sector, anywhere between 26,000 and 62,000 nurses short in South Africa.
If you think that there are so many people desperate to acquire skills, that unemployment is at an all-time high, one would think that government would be hard pressed to encourage the private sector to train as many nurses as possible. Unfortunately, that is not the case. The South African Nursing Council has imposed a number of what we consider artificial and unnecessary restrictions on the training of nurses. We have an enormous opportunity as South Africans to increase the number of nurses. I know I speak on behalf of the entire private sector that our doors are open to train. We used to train 3,500 nurses on an annual basis. We've now been reduced to 300 nurses a year, and in fact, the private sector is only training 800 a year. This represents a real crisis.
It's a real crisis because by 2030, independent studies have indicated that the vast majority of nurses will have reached retirement age. You can see that this problem is akin to what we're dealing with in Eskom of power stations reaching the end of their life. I would suggest that we have the next 18 months only to address this critical shortage. To your point as to whether it's impacting current operations, the answer is no. We're certainly making provision for it, but I think the position is becoming more and more strained. You will have read right across the public sector, very significant shortages in nursing, that is impacting their service levels. Fortunately, we've been able to counter that somewhat within the private sector.
As I've said, we really need to urgently address this across the country at a national level.
Thank you, Richard. We have a question from Anusha. Netcare acute occupancy was 68% in March, 60% in April and 67% projected for May. Where does management expect annual occupancy to normalize, and when do you think this will be achieved?
Anusha, we always said that, we believe in the latter part of this year we will get back to pre-pandemic occupancies. The second half certainly bodes well, and we will get to that 66%-67% occupancy. If you talk about the full year, it will be slightly lower as a result of the fact that we had December still at the 50% and January was under 60%. Certainly we will be back at the pre-pandemic occupancies.
Thank you. I think we have another question, some of which has been answered, so I'm just gonna jump to the part that hasn't been answered. Can you unpack any pricing pressures experienced in network plan negotiations?
Good morning. It's Melanie da Costa here. You know, what I'm reading into this question is really the performance of revenue per patient day. I think what's important to stress here is the lower growth in revenue per patient day is primarily a function of case mix and the fall in COVID cases. Aligned to that is the fall in the price of institutional pharmacy in particular. Pre-network trends pricing was very much in line with historic reality and guidance. Networks do remain highly contested, they were not the primary cause of the performance on revenue per patient day. Thank you.
We have a question on margins. Do you expect EBITDA margins to get back to the 2018 and 2019 levels?
Yeah, thanks for the question. I think, yeah, there's a lot of focus on this. As I highlighted in the presentation, the margin recovery has been a progression, and we've gotten incrementally better half on half. We do remain very focused on trying to get back to pre-COVID margins in the short term. Certainly I think it's fair to say that we're not going to get there simply by cost cutting, and we need to be growing the top line in terms of growing our revenues and gaining market shares.
Thank you, Keith. I think that concludes the Q&A session. I'll just hand back to Richard for some concluding remarks.
Thank you very, very much, colleagues, for attending this morning's presentation. As you can see, these are the strongest set of results we have produced since the COVID-19 pandemic. We remain confident of further recovery within Netcare and our various divisions and our strategic projects coming to an end. I said earlier, the only impediment to future growth and sustainability remains being able to find adequately trained nursing staff. I want to give you an assurance that the sector as a whole, through the Hospital Association of South Africa, is hard at work at addressing this issue. We remain available to take any of your questions, either in the one-on-ones or via email, or any of the other meetings that have been arranged for our shareholders or analysts. Thank you very, very much for your attendance.