| Wed 14 May 2008, 17:00 | | MDC- Audited results of Medi-Clinic Corporation Li |
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MDC
MDC
MDC- Audited results of Medi-Clinic Corporation Limited and its subsidiaries for
the financial year ended 31 March 2008 and cash dividend
MEDI-CLINIC CORPORATION LIMITED
Incorporated in the Republic of South Africa
(Registration Number: 1983/010752/06)
(Share code: MDC)
(ISIN-code: ZAE000074142)
("Medi-Clinic" or "the company")
AUDITED RESULTS OF MEDI-CLINIC CORPORATION LIMITED AND ITS SUBSIDIARIES FOR THE
FINANCIAL YEAR ENDED 31 MARCH 2008 AND CASH DIVIDEND
SALIENT FEATURES
Quantum leap into international arena
Stable performance in Southern Africa
Hirslanden integration on track
The City Hospital in Dubai to be commissioned
CONSOLIDATED ABRIDGED INCOME STATEMENT
for the year ended 31 March
2008 % 2007
R`m Change R`m
Revenue 9 579 79 5 364
Cost of sales (5 381) (2 928)
Administration and other (2 138) (1 285)
operating expenses
Operating profit before 2 060 79 1 151
depreciation (EBITDA)
Depreciation (341) (146)
Profit on sale of equipment 2 1
Operating profit 1 721 71 1 006
Income from associates - 1
Finance income 49 44
Finance cost (685) (88)
Profit before taxation 1 085 963
Taxation (364) (270)
Profit for the year 721 693
Attributable to:
Shareholders of the company 610 582
Minority interest 111 111
721 693
Earnings per ordinary share -
cents
Basic 144,9 (11) 162,5
Diluted 134,0 147,5
Headline earnings per ordinary
share - cents
Basic 144,5 (11) 162,2
Diluted 133,6 147,2
Earnings reconciliation:
Profit attributable to 610 582
shareholders
Profit on sale of equipment (2) (1)
Headline earnings 608 5 581
CONSOLIDATED ABRIDGED BALANCE SHEET
at 31 March
2008 2007
R`m R`m
Assets
Non-current assets 37 251 3 709
Property, equipment and 30 972 3 124
vehicles
Intangible assets 6 079 419
Investments - unlisted 34 46
Derivative financial 43 -
instruments
Deferred income tax assets 123 120
Current assets 4 326 1 780
Inventories 448 190
Trade and other receivables 3 077 874
Cash and cash equivalents 801 716
Total assets 41 577 5 489
Equity and liabilities
Total equity 9 687 2 820
Share capital and reserves 8 880 2 068
Minority interest 807 752
Total liabilities 31 890 2 669
Long-term interest-bearing 23 266 996
borrowings
Retirement benefit obligations 177 129
Provisions 190 -
Derivative financial 595 -
instruments
Deferred income tax liabilities 5 187 5
Short-term interest-bearing 131 628
borrowings
Short-term interest-free 2 344 911
borrowings
Total equity and liabilities 41 577 5 489
Number of ordinary shares 560 260 359 369
(`000)
Weighted number of ordinary 421 437 357 606
shares (`000)
Diluted number of ordinary 455 748 394 107
shares (`000)
Net asset value per ordinary 1 585 575
share - cents
Directors` valuation of 34 46
unlisted investments
Capital commitments
Approved not yet contracted 319 274
Incomplete capital expenditure 680 415
contracts
CONSOLIDATED ABRIDGED CASH FLOW STATEMENT
for the year ended 31 March
2008 2007
R`m R`m
Cash flow from operating 738 837
activities
Cash generated from operations 1 517 1 187
Net finance cost (419) (44)
Taxation paid (360) (306)
Cash flow from investment (16 898) (672)
activities
Cash flow from financing 16 461 43
activities
Proceeds from issuance of 4 500 _
ordinary shares
Distributions to shareholders (189) (178)
Distributions to minorities (41) (40)
Movement in borrowings 12 219 248
Share issue costs (28) -
Other - 13
Net movement in cash, cash 301 208
equivalents and bank overdrafts
Opening balance of cash, cash 357 149
equivalents and bank overdrafts
Exchange rate fluctuations on 129 -
foreign cash
Closing balance of cash, cash 787 357
equivalents and bank overdrafts
Cash and cash equivalents 801 716
Bank overdrafts (14) (359)
787 357
CONSOLIDATED ABRIDGED STATEMENT OF RECOGNISED INCOME AND EXPENSE for the year
ended 31 March
2008 2007
R`m R`m
Currency translation 2 186 2
differences
Fair value adjustment to cash (254) -
flow hedges
Actuarial losses (21) -
Net income recognised directly 1 911 2
in equity
Profit for the year 721 693
Total recognised income for 2 632 695
the year
Attributable to:
Equity holders of the company 2 521 584
Minority interest 111 111
2 632 695
CONSOLIDATED ABRIDGED SEGMENTAL REPORT
for the year ended 31 March
2008 2007
R`m R`m
Revenue
Southern Africa 6 056 5 364
Middle East 482 -
Switzerland 3 041 -
EBITDA
Southern Africa 1 302 1 151
Middle East 50 -
Switzerland 708 -
Operating profit
Southern Africa 1 143 1 006
Middle East 22 -
Switzerland 556 -
Cash generated from operations
Southern Africa 1 226 1 187
Middle East 165 -
Switzerland 126 -
Assets
Southern Africa 4 545 3 951
Middle East 1 576 1 538
Switzerland 35 456 -
Liabilities
Southern Africa 4 643 2 212
Middle East 487 457
Switzerland 26 760 -
Capital commitments
Southern Africa
Approved not yet contracted 248 274
Incomplete capital expenditure 550 214
contracts
Middle East
Approved not yet contracted - -
Incomplete capital expenditure 98 201
contracts
Switzerland
Approved not yet contracted 71 -
Incomplete capital expenditure 32 -
contracts
Average Rand/CHF exchange rate 1CHF = R6.60
Closing Rand/CHF exchange rate 1CHF = R8.14
Average Rand/AED exchange rate 1AED = R1.94
Closing Rand/AED exchange rate 1AED = R2.20 (2007: R1.98)
COMMENTARY
With the acquisition of the Hirslanden group of hospitals in
Switzerland, the past financial year represents a watershed year
for Medi-Clinic. The acquisition represents the quantum leap
into the international arena which the Group had been
contemplating for many years. Although it required a significant
amount of capital, Hirslanden is a high quality company in a
financially stable country. It should be seen as the platform
from where the Group would like to expand further into Europe in
the future.
THE GROUP
Transactions that had a material impact on the Group results
United Arab Emirates ("UAE")
The Group obtained a controlling equity interest of 50% plus one
share (with board and management control) in Emirates Healthcare
for an amount of US$53.1 million (R384.2 million), effective 27
March 2007. General Electric Company, a member of the General
Electric Group, subscribed for a 6.59% equity interest. Mr Sunny
Varkey, the founder and chairman of Emirates Healthcare,
retained an equity interest of 43.41%. The Group also subscribed
for cumulative, variable rate, participating, redeemable,
convertible preference shares in Emirates Healthcare for an
amount of US$21,5 million (R155,2 million.
Emirates Healthcare owns and operates the 120-bed Welcare
Hospital, one of the largest private hospitals in Dubai, along
with one ambulatory surgery centre, three clinics and one
specialist eye clinic with a further clinic under construction.
It has also commenced with the construction of the first multi-
disciplinary hospital in Dubai Health Care City ("DHCC"), The
City Hospital with 210 beds, which is scheduled for
commissioning towards the third quarter of 2008. In addition,
Emirates Healthcare has the right to develop an additional 150-
bed hospital in DHCC. This will make Emirates Healthcare the
largest private healthcare provider in Dubai.
Switzerland
The Group acquired 100% of Hirslanden, the holding company of
the largest private hospital group in Switzerland, with effect
from 26 October 2007.
Hirslanden is the leading private hospital group in Switzerland,
comprising 13 private acute care facilities located in nine
cantons. It currently operates 1 301 beds, provides admitting
rights to some 1 400 specialists and employs over 3 800 staff
(full-time equivalents).
The purchase consideration for the total issued share capital of
Hirslanden was CHF2 556 million, which represented an enterprise
value of CHF3 364 million.
CHF2 450 million of new debt was arranged by Barclays Capital,
the investment banking division of Barclays Bank plc. This is
fully underwritten by Barclays Bank plc on a non-recourse basis
to Medi-Clinic`s Southern African operations. The debt was used
to repay Hirslanden`s existing debt and to pay part of the
purchase consideration. The interest rates in respect of these
facilities have been fixed. The interest payable on debt of CHF1
610 million, raised to finance the purchase consideration, will
not be tax deductible for a period of five years.
The remainder of the purchase consideration, together with
expenses, interest accrued on the purchase price and other
costs, amounted to CHF1 114 million and was funded by Medi-
Clinic by way of a rights offer of R4 500 million (see below)
and existing debt facilities within the Group.
The acquisition of Hirslanden was unanimously approved in a
general meeting held on 10 September 2007 by shareholders
representing 91.2% of all the company`s ordinary shares in
issue.
For more information about the transaction, see the company
announcement of 2 August 2007, the detailed acquisition circular
by Medi-Clinic to shareholders dated 17 August 2007 ("the
circular"), the company announcements of 10 September 2007 and
26 October 2007 as well as the company announcement relating to
the rights offer of 26 October 2007. All these documents are
available on the company`s website, www.mediclinic.co.za.
The rights offer
The company raised approximately R4 500 million through a rights
offer that closed on 7 December 2007. Approximately R4 000
million of the proceeds was applied towards the equity
contribution for the acquisition of Hirslanden and the balance
will be used to fund expansion opportunities in Medi-Clinic`s
Southern African operations.
The rights offer was for a total of 198 675 497 Medi-Clinic
shares ("rights offer shares") at a subscription price of 2 265
cents per rights offer share in the ratio of 50.38197 rights
offer shares for every 100 Medi-Clinic shares held at the close
of trade on Friday, 16 November 2007.
The rights offer was oversubscribed and no allocation was made
to the underwriters.
The company now has 593 013 946 ordinary shares in issue and had
a market capitalisation of R11.7 billion at year-end.
GROUP FINANCIAL PERFORMANCE
Trading results
Due to the above transactions, the Group results are not
directly comparable with those of the previous period.
Group revenue increased by 79% to R9 579 million (2007: R5 364
million) for the year under review. Operating income before
interest, taxation, depreciation and amortisation ("EBITDA") was
79% higher at R2 060 million (2007: R1 151 million). Headline
earnings rose by 5% to R608 million (2007: R581 million) after
incurring higher finance charges, mainly resulting from the
Hirslanden transaction. Basic headline earnings per ordinary
share declined by 11% to 144.5 cents (2007: 162.2 cents) due to
the higher finance charges and the increased weighted number of
ordinary shares resulting from the rights offer. The total
dividend per ordinary share at 61.2 cents (2007: 54.1 cents) is
13% higher, in line with the Southern African performance as
indicated in the circular and in the commentary to the interim
results.
The decline in the Group`s headline earnings per share was
mainly as a result of the Hirslanden transaction, as anticipated
at the time. This decline was adequately compensated for by the
fact that the Group`s blended weighted average cost of capital
("WACC") decreased from about 12% to about 8% at the time of the
transaction, due to the lower cost of capital in Switzerland.
Comparing the Group financial results with the underlying
assumptions used in the Circular, depreciation amounting to
R54.8 million (CHF8.3 million) provided for in the Group
financial results was not provided for in the Circular. This
depreciation relates to installations in the hospitals, as
opposed to equipment, which was assumed to be part of hospital
buildings at the time of preparing the Circular.
Finance cost
Included in the finance cost of R685 million is an amount of
R53.7 million that represents interest paid on the bridge
finance from the closing of the Hirslanden transaction at 26
October 2007 until the proceeds of the rights issue were
received on 10 December 2007. This interest is not tax
deductible and will not recur in the future.
Also included in the finance cost is an amount of R15.9 million,
being the current year`s amortisation in respect of raising fees
paid on the local and offshore debt. These amounts are amortised
over the terms of the relevant loans in line with future cash
payments as prescribed in IAS39.
Foreign exchange rates
The Rand proved to be quite volatile against the Swiss Franc and
the United States Dollar (against which the UAE Dirham is pegged
at AED3.675 to the US Dollar) during the year under review. The
spot rate of the CHF moved from R6.11, being the exchange rate
at which the Group acquired Hirslanden, to R8.14 at year-end,
with an average rate of R6.60 for the reporting period from 26
October 2007. The spot rate of the AED moved from R1.98 at 31
March 2007 to R2.20 at year-end, with an average rate of R1.94
for the year. In terms of accounting convention, the offshore
balance sheets are converted at the spot rate, while the trading
results in the offshore income statements are converted at the
average rate. The large difference between the spot rate and the
average foreign exchange rate results in a distortion when
ratios between the balance sheet and the income statement are
calculated in Rand. Therefore, the spot rate should also be used
for translating EBITDA to achieve the actual ratio.
The resulting currency translation difference, being the amount
by which the Group`s interest in the equity of the two foreign
platforms increased merely as a result of the movement in the
spot rate, amounted to R2 186 million and was credited to the
Statement of Recognised Income and Expense.
Interest-bearing borrowings increased from R1 624 million at 31
March 2007 to R23 397 million, mainly as a result of the
Hirslanden transaction. It is important to note that the
offshore debt amounting to R19 698 million is matched with
foreign assets in the same currency. The foreign debt also has
no recourse to South African assets, as stipulated by the South
African Reserve Bank as well as applicable financing
arrangements.
SOUTHERN AFRICA
Financial performance
The Southern African revenue increased by 13% to R6 056 million
(2007: R5 364 million) for the year under review. EBITDA was 13%
higher at R1 302 million (2007: R1 151 million).
Business performance
The Southern African operations acquired a 51% interest in the
200-bed Protector hospitals effective from 8 November 2006. It
also acquired from Phodiso Holdings ("Phodiso") its 49% interest
in Tshwane Private Hospitals ("Tshwane"), which in turn holds a
63% interest in Curamed Holdings, as well as its 49% interest in
Phodiclinics effective from 1 April 2007. Curamed Holdings owns
all the group`s hospitals in Pretoria with 738 beds while
Phodiclinics owns the 200-bed Protector hospitals as well as the
licence to the 140-bed Cape Gate Medi-Clinic in the northern
suburbs of the Cape Metropole. The acquisition of Phodiso`s
interests in Tshwane and Phodiclinics decreases the amount
attributable to minorities in the Group`s income statement.
Due to the above transactions, the current period`s results are
not directly comparable with those of the previous period.
Excluding the increase in capacity due to the acquisition of the
Protector hospitals, the Southern African operations` revenue
growth amounted to 12%. This revenue growth was achieved through
a 3% increase in bed-days sold, a 6% increase in the average
income per bed-day and a 3% change in the profile of patients
treated. The increase in utilisation was evident in both
surgical and medical cases. The number of patients admitted
increased by 3% while the average length of stay remained the
same. Volumes in the second half of the year were negatively
influenced by the Easter holidays during the last two weeks of
March 2008.
The Southern African operations managed to maintain its EBITDA
margin at 21.5%.
In line with international best practices, the Southern African
business activities were reorganised during the year into
operational and hospital property groups. The property group
raised R2 750 million to finance the acquisition of the hospital
properties.
The Southern African operations` cash flow continued to be
strong during the period under review. It converted 96% (2007:
103%) of EBITDA into cash generated from operations, despite
lower cash receipts from medical schemes at year-end due to the
Easter holidays during the last two weeks in March 2008. Cash
and cash equivalents increased to R361 million from R211 million
at 31 March 2007 after financing capital expenditure and
investments.
Interest bearing debt increased from R1 316 million at 31 March
2007 to R3 699 million at year end mainly as a result of the
increased debt due to the formation of the hospital property
group referred to above.
Industry matters
The current differences between the Department of Health and
private healthcare providers over cost issues affecting private
healthcare are unfortunate and reflect the lack of proper
communication and co-operation between the Department of Health
and the private sector providers. The draft National Health
Amendment Bill published on 18 April 2008 proposes to give the
Minister of Health unprecedented powers to intervene into the
business activities of the private sector. Medi-Clinic believes
that the draft amendments to the National Health Act are based
on misinformation and that it reflects the wrong diagnosis of
the real issues in the delivery of private healthcare services
in South Africa.
All these differences occurred while the private sector was
engaging in various follow-up initiatives to respond to concerns
raised at the Private Healthcare Indaba which took place during
September 2007. For instance, the private hospital sector
through the Hospital Association of South Africa (HASA), engaged
with the Department of Health on the National Health Reference
Price List (NHRPL) process of determining benchmark tariff
guidelines. HASA also prepared a detailed document responding
comprehensively to the issues raised at the Private Healthcare
Indaba. Unfortunately, the Minister of Health has still not
granted the industry an opportunity to discuss the document and
has cancelled all meetings set up for this purpose. Important
proposals to increase access to, and affordability of,
healthcare are, inter alia, contained in the document.
The NHRPL process by which a methodology and framework to
calculate benchmark tariffs will be established, is ongoing. Two
international independent accounting firms have been appointed
at great expense by HASA to provide their autonomous opinion on
the methodology of the benchmark tariffs. It is expected that
their reports will be conveyed to the Department of Health
before the end of May 2008. Based on its own experience and
tariff calculations, the Group is convinced that the result of
the exercise will show that current tariffs charged by the Group
are in actual fact lower than the benchmark tariff if
scientifically calculated according to internationally accepted
costing principles.
Affordability will always remain a critical issue in the
healthcare industry internationally, especially so in developing
countries.
Throughout the world, increased healthcare costs are driven by
increased utilisation resulting from factors such as the ageing
population, new technology, patient expectations and the
increased burden of disease. The situation is exacerbated by an
international shortage of skilled nursing staff. This leads to,
and will for the foreseeable future continue to lead to,
sustained pressure for higher nursing salaries.
Along with the private healthcare sector, Medi-Clinic will
continue its endeavours to engage with the Department of Health
to develop a process of real consultation and engagement to find
joint solutions that will address the challenges facing the
whole healthcare sector in South Africa. The private hospital
industry is a national asset and an important pillar on which
the country`s future economic growth is based. It plays a
pivotal role in addressing the healthcare burden of the
country`s population.
SWITZERLAND
Financial performance
The Group consolidated Hirslanden`s results from the effective
date of its acquisition, 26 October 2007. During this period,
Hirslanden`s revenue was R3 041 million (CHF461 million) and
EBITDA was R708 million (CHF107 million).
Although not included in the Group`s results, the figures below
are provided to give shareholders a better understanding of the
results for a full year as well as the seasonal flow of revenue
and EBITDA at Hirslanden. It should be noted that the winter
period over November until January has a stronger patient flow
than in summer.
Hirslanden`s revenue for the six months ended 31 March 2008
amounted to CHF532 million, which was 9.0% higher than the same
period last year. EBITDA for the same period was CHF124 million
which was 5.7% higher than the same period last year. Revenue
for the twelve months ended 31 March 2008 amounted to CHF1 001
million, which was respectively 3.4% and 8.3% higher than
budgeted revenue and the same period last year. EBITDA for the
same period was CHF222 million, which was respectively 2.1% and
6.0% higher than budgeted EBITDA and the same period last year.
Business performance
Based on a full financial year, Hirslanden`s inpatient
admissions increased by 4.0% while day surgery admissions
improved by 7.3%. The average length of stay remained fairly
constant.
The EBITDA margin declined slightly on a full-year basis from
22.7% to 22.2%, mainly as a result of the start-up costs
associated with the opening of new wings at Klinik Hirslanden,
Klinik St Anna and Klinik Birshof. The new wings are doing
better than expected and the results should be evident in the
following financial year.
The number of fully operational beds are budgeted to increase to
about 1 341 beds (based on the average number of beds for the
year), with the addition of 35 at Klinik Hirslanden, 7 at Klinik
Im Park and 13 at Klinik St Anna.
In addition, a second LINAC oncology machine as well as a
CyberKnife will be commissioned at Klinik Hirslanden during the
middle of the year. The CyberKnife is a state-of-the-art non-
invasive stereotactic radiation device for the treatment of
tumours and metastases. It is the first of its kind in
Switzerland and it ensures that, in comparison with conventional
radiotherapy, fewer treatment sessions are required. A state-of-
the-art centre for neurology, neurosurgery and neuroradiology
will also be opened at Klinik Hirslanden during May 2008. An
international centre for laparoscopic neurofunctional pelvic
surgery with two renowned surgeons will furthermore open at
Klinik Hirslanden during October 2008.
The Hirslanden group converted only 18% of EBITDA into cash
generated from operations. The reasons are twofold. The cash
inflows in respect of trade and other receivables are cyclical
in nature with October (the time of the opening balance sheet)
normally lower while it peaks in March. The negative effect of
this seasonal movement was approximately R231 million (CHF35
million). Secondly, certain transaction costs of about R350
million (CHF53 million) were accrued in trade and other payables
in the opening balance sheet of which most were paid
subsequently. If these two amounts are excluded the conversion
rate would have been above 90%. At year-end cash and cash
equivalents amounted to R400 million (CHF49 million) while
interest-bearing debt was R19 481 million (CHF 2 393 million)
net of capitalised debt transaction fees.
The solid macro-economic qualities of Switzerland with its
benign inflation, low unemployment, low cost of capital and
solid growth rate, have recently been proved again when the
Swiss economy remained virtually unscathed by the international
credit crisis and economic uncertainty that impacted on most of
the other Western economies. The reality is that Switzerland, as
has become the custom, benefited from the flight to a high-
quality and stable environment, which resulted in its macro-
economic indicators and property prices remaining intact.
Integration of the Hirslanden group
The financial integration of Hirslanden has been completed
successfully. The opening balance sheet and the IFRS purchase
price allocation is complete and the accounting systems have
been configured to accommodate the new group structure following
the capital and financial restructuring. This proved to be an
immense task.
Between the effective date and year-end, management, together
with members of the Hirslanden Board where appropriate,
undertook a strategy review which included an analysis of
measures to extract value from synergies between Medi-Clinic and
Hirslanden. The result was an eight-point plan which will be
implemented in the new financial year to extract value from
immediate synergies. Over the longer term, further detailed
benchmarking will be done between the two groups so as to create
an integrated international platform running according to best
practices and defined by common definitions (as far as it is
possible) across borders. Activities in the UAE form part of
this process.
UNITED ARAB EMIRATES
Financial performance
The UAE revenue amounted to R482 million (AED249 million) for
the year under review. EBITDA was R50 million (AED26 million).
After incurring depreciation charges of R28 million (AED14
million) and net finance costs of R2 million (AED1 million),
Emirates Healthcare contributed R18 million (AED9 million) to
the Group after deducting for minority interests.
The units in full operation, being the Welcare Hospital, the
Emirates Diagnostic Clinic ("EDC"), the Welcare Ambulatory Care
Centre ("WACC") and the Welcare Eye Clinic ("WEC"), produced
revenue of R478 million (AED246 million) and EBITDA of R82
million (AED42 million). The Welcare Clinic Al Qusais, which
opened for business on 7 July 2007, and Welcare World Health
Systems ("WWHS") had a turnover of R4 million (AED2 million),
but generated start-up operating losses at EBITDA level of R18
million (AED9 million). The City Hospital and the Welcare Clinic
Mirdiff, both still to be commissioned, incurred start-up losses
of R14 million (AED7 million).
Business performance
The Welcare Hospital increased its revenue (R401 million: AED207
million) and EBITDA (R64 million: AED33 million) by 15.5% and
17.2%, respectively, against the same period last year. It
increased its EBITDA margin from 15.7% to 15.9%.
The three clinics in full operation, namely EDC, WACC and WEC,
maintained an EBITDA margin of 23.4%.
Due to extensions of the project scope such as the creation of a
maternity unit, the fitting out of shell floors, and the
addition of an operating theatre, together with certain other
functional improvements, the commissioning of The City Hospital
has been postponed to the third quarter of 2008. The recruitment
of staff, specifically also doctors and nurses, is progressing
satisfactorily. Careful planning is required regarding the
timing of the commissioning and staffing of the hospital. The
timing of all the aspects of the commissioning and opening of
the hospital holds a substantial financial risk which may impact
on the earnings of the Group, particularly in the first six
months.
Emirates Healthcare, through a subsidiary, WWHS, is currently
making a significant investment in infrastructure, mainly in
systems and human capital, to ensure a solid platform from which
to take advantage of the many growth opportunities in the
region.
Emirates Healthcare converted 331% of EBITDA into cash generated
from operations. This figure is distorted due to high creditors
at year-end mainly due to retentions on The City Hospital
project. If this effect is excluded, the conversion rate would
be about 108%. Cash and cash equivalents decreased to R40
million (AED18 million) from R505 million (AED255 million) at 31
March 2007, while interest-bearing debt decreased from R307
million (AED155 million) at 31 March 2007 to R217 million (AED98
million). The cash flow from a net cash position of R198 million
(AED100 million) at 31 March 2007 to a net debt position at year-
end of R177 million (AED80 million) was utilised to finance
capital expenditure, mainly the construction of The City
Hospital.
PROSPECTS
The Group has managed to transform itself into a truly
international, acute care hospital business. During the next
financial year, more than half of its revenue and EBITDA will be
derived from sources outside South Africa.
Three platforms for growth have been established. The South
African private hospital industry is one of the most developed
and mature in the world. It offers a great deal to the
international world, specifically in terms of best practices
relating to cost effectiveness and quality of care. The
Hirslanden group should act as a solid platform for future Swiss
and European expansion of the Group. The investment in Emirates
Healthcare, which is more greenfield by nature, offers a
platform for incremental growth in the Middle East where a
growing need for cost-effective, quality private healthcare
exists.
The Group has invested in skills and infrastructure over many
years to enable it to better measure the quality and outcomes of
its care. This growing knowledge will now be applied on an
international level to gain market share and to fulfil the
Group`s vision of being regarded as the most respected and
trusted provider of hospital services by patients, doctors and
funders of healthcare.
Management has identified certain high-level synergies between
its Swiss and Southern African operations. These synergies
should have a positive effect on the EBITDA of the Group. Some
of these synergies will also have a positive effect on both the
Southern African and UAE operations. In addition, management
will embark on in-depth benchmarking exercises to identify best
practices with a view to implement such best practices
throughout the combined Group. The aim is to create an
integrated international platform capable of seamlessly
integrating and transferring its skills and know-how across
borders. This has been achieved on a geographically smaller
scale within the Southern African group as part of the various
acquisitions that took place in Southern Africa over many years.
It should be kept in mind that the start-up costs of The City
Hospital in Dubai will have an impact on the earnings of the
Group, particularly in the first six months. Overall, the Group
remains optimistic about its operational prospects for the next
year.
CHANGES TO THE BOARD OF DIRECTORS
Dr R H Bider and Mr J C Cohen were co-opted as directors on 1
February 2008, while Mr D K Smith was co-opted on 31 March 2008.
REPORTS OF THE INDEPENDENT AUDITORS
The annual financial statements have been audited by
PricewaterhouseCoopers Inc. and their unqualified audit reports
on the comprehensive annual financial statements and the
abridged financial statements are available for inspection at
the registered office of the company.
BASIS OF PREPARATION
The financial results have been prepared in accordance with the
recognition and measurement requirements of IFRS and the
disclosure requirements of IAS 34. Accounting policies are
consistent with those adopted in prior years.
DIVIDEND TO SHAREHOLDERS
The board of directors declared a final dividend of 41.9 cents per ordinary
share.
In compliance with the requirements of STRATE, the following dates are
applicable:
Last date to trade cum dividend Thursday, 12 June 2008
First date of trading ex dividend Friday, 13 June 2008
Record date Friday, 20 June 2008
Payment date Monday, 23 June 2008
Share certificates may not be dematerialised/rematerialised from Friday, 13 June
2008, to Friday, 20 June 2008, both days inclusive.
Signed on behalf of the board of directors:
E DE LA H HERTZOG L J ALBERTS
Chairman Chief Executive Officer
Stellenbosch, 14 May 2008
Date: 14/05/2008 17:00:00 Produced by the JSE SENS Department.
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