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MDC
MDC
MDC - Medi-Clinic - Audited results of Medi-Clinic Corporation Limited and its
subsidiaries for the financial year ended 31 March 2009 and cash dividend
declaration
Medi-Clinic Corporation Limited
Incorporated in the Republic of South Africa
Reg. No. 1983/010725/06
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 2009 and cash dividend declaration
Commentary
This is the first set of annual results that reflects the full effect of the
Hirslanden acquisition of October 2007. The change in the Group`s operating
results, attributable income and headline earnings per share reflects the
quantum leap that the acquisition represented. A new international base
representing geographic diversification and enhanced income generation potential
has been created from which the consistent growth pattern, which the Group is
known for, should continue.
The global economic outlook
The current global economic crisis has culminated in the first global recession
since World War II. Although there are signs that we have reached the bottom of
the slowdown, the International Monetary Fund predicts that the recovery will be
slow and could take longer than expected, because of the fact that the recession
resulted from a financial crisis.
The Group had to consider its own position carefully in the light of the
economic crisis. Obligations and covenants in terms of the facility agreements
were evaluated and stress tested.
To date, the Group`s volumes have been unaffected by the economic crisis. In
fact, the Group experienced strong patient attendance towards the end of the
financial year and beyond at all three of its operating platforms. Early warning
systems comprising of the monitoring of macro-indicators such as employment as
well as micro-indicators at hospital level, are in place at all three platforms.
If required, immediate action will be taken.
Group overview
Hirslanden acquisition
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. 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 was fully underwritten by Barclays Bank plc
on a non-recourse basis to Medi-Clinic`s Southern African operations. The base
interest rate in respect of this facility was fixed for ten years at the time of
the transaction. 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 from the date of the transaction.
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 (`the
rights offer") and existing debt facilities within the Group. The rights offer
was for a total of 198 675 497 Medi-Clinic shares.
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.
IFRS and technical matters
Adjustment to prior year balance sheet
The adjustment of the prior year`s balance sheet was because of:
The finalisation of the provisional purchase price allocation ("PPA")in respect
of the Hirslanden acquisition. The adjustment was made in accordance with IFRS 3
- Business Combinations and had no income statement effect.
Previously, the Hirslanden pension plans disclosed a calculated surplus which
was not recognised on the balance sheet of the Group in terms of the limit set
by IAS 19 paragraph 58. During the finalisation of the provisional PPA, the
values of the pension plans were reassessed, which resulted in the recognition
of a pension liability at acquisition date, as well as at the prior year`s
balance sheet date. As a result of the recognition of the pension liability,
further actuarial losses were recognised in the statement of recognised income
and expense ("SoRIE") for the period ended 31 March 2008. See further comments
under Swiss pension liability below.
These adjustments had the following effect on the prior year balance sheet:
As previously Adjustments As
reported adjusted
Intangible assets R6 079m R22m R6 101m
Share capital and reserves R8 880m (R320m) R8 560m
Deferred income tax R5 187m (R99m) R5 088m
liabilities
Retirement benefit obligations R177m R462m R639m
Short-term interest-free R2 344m (R21m) R2 323m
borrowings
Fair value of Swiss liabilities
The Group manages its exposure to interest rates by entering into fixed interest
rate hedges from time to time. As mentioned above, the base interest rate in
respect of the Barclays facility of CHF2 450 million was fixed for ten years at
the time of the transaction. The facility has a fixed term of seven years with a
fixed interest rate of 5.62% for the entire period.
IAS 39 Financial Instruments requires derivative financial instruments to be
measured at fair value, which was determined by the Group through discounted
cash flow analyses, using prevailing and expected interest rates. On the other
hand, borrowings are also required to be recognised at fair value, being at
amortised cost which is effectively at face value.
The global financial crisis had, inter alia, two distinct consequences to the
cost of third party funding. Firstly, short term and long term interest rates
declined significantly because of the easing of monetary policies by central
banks. Secondly, the credit spreads of funding (or margins charged by third
party funders) increased dramatically due to the lack of liquidity and risk
averseness by third party funders.
Due to lower interest rates the hedge is recognised at its fair value being a
liability of 2 353 million (CHF283 million) included under "Derivative financial
instruments" in the Group`s balance sheet. However, the Barclays facility is
recognised at its amortised cost, being its face value, which does not recognise
the low total cost of funding of 5.62% available until October 2014. Current
market rates, if funding is available at all, would conservatively range between
8% and 9%.
Consequently, the Group`s borrowings in respect of the Barclays facility are
overstated at amortised cost compared to if the loan was properly valued. By
only valuing the hedge, only one portion of the Group`s borrowings is valued at
fair value, hence the Group`s total borrowings is overstated. This situation is
further exacerbated by the fact that the fair value liability recognised in
respect of the hedge is not a real liability for the Group being a going
concern, a fundamental premise on which the annual financial statements are
compiled. The liability will disappear with the efflux of time. In the interim,
the fair value will be influenced by relative interest rates which are not in
the Group`s control, precisely the reason why the hedge was taken out.
This obviously also applies to the Southern African borrowings of which interest
rates are hedged, but with a much less material impact.
Swiss pension liability
Hirslanden provides defined contribution pension plans in terms of Swiss law to
employees, the assets of which are held in separate trustee administered funds.
These plans are funded by payments from employees and Hirslanden, taking into
account the recommendations of independent qualified actuaries. Due to the
strict definition of defined contribution plans in IAS 19, these plans are
classified as defined benefit plans for IFRS purposes, since the funds take some
investment and longevity risk in terms of Swiss law.
Using the projected unit credit method prescribed for defined benefit plans, the
pension liability calculated in accordance with IAS 19 amounted to R765 million
(CHF92 million) (2008: R462 million (CHF57 million)) included under "Retirement
benefit obligations" in the Group`s balance sheet. However, under Swiss pension
law and the consequent accounting approach, the underfunding in the pension
funds amounted to R191 million (CHF24 million) at 31 March 2009. In addition,
and importantly, if a statutory deficit occurs, the trustees of the funds have
certain alternatives to address the deficit. They may, for example, reduce the
benefits credited to members albeit not below statutory required minimums. The
plans were 93% funded at 31 March 2009 and, in terms of Swiss practice, it is
acceptable for trustees not to take these measures at these levels. Therefore,
from an economic and legal point of view this underfunding does not lead to a
liability for Hirslanden at 31 March 2009. In this respect, the Group`s
liabilities are overstated by a further amount of R765 million.
The prior year adjustment of R462 million (CHF57 million) in respect of the
Swiss pension liability came about because Hirslanden changed its actuaries
during the year. The legal peculiarities of Swiss pension plans have the result
that such plans do not fit well to the inflexible prescribed methodology of IAS
19. The allocation of the liability to accrued and future service is one area
impacted by this. Swiss actuaries use different methodologies to allocate the
present value of future benefits to past and future service costs in order to
determine the defined benefit obligations of a particular plan. Using these
different actuarial methodologies may lead to significant different results. The
newly appointed actuary used a different methodology than the previous actuary,
which mainly explains the difference in the two valuations.
Segmental reporting
The Group has elected to early adopt IFRS 8 - Operating Segments in advance of
its effective date. IFRS 8 is a disclosure Standard and has no impact on the
reported results or financial position of the Group. Apart from the geographic
platforms, the business is segmented into the hospital services and property
segments consistent with the way in which the business as a whole is managed.
Group financial performance
Trading results
Due to the Hirslanden acquisition, the Group results are not directly comparable
with those of the previous period.
Group revenue increased by 71% to R16 351 million (2008: R9 579 million) for the
year under review. Operating income before interest, taxation, depreciation and
amortisation ("EBITDA") was 66% higher at R3 431 million (2008: R2 062 million).
Headline earnings rose by 3% to R624 million (2008: R608 million) after
incurring higher finance charges, mainly resulting from the Hirslanden
transaction. Basic headline earnings per ordinary share declined by 23% to 111.5
cents (2008: 144.5 cents) due to the higher finance charges and the 33% increase
in the weighted number of ordinary shares resulting from the rights offer. The
decline in the Group`s headline earnings per share was, therefore, mainly as a
result of the Hirslanden acquisition, as anticipated and communicated at the
time of the acquisition.
The total dividend per ordinary share at 68.6 cents (2008: 61.2 cents) is 12%
higher, in line with the Southern African group`s performance.
During the reporting period, the Group, through a wholly owned subsidiary,
acquired 3 009 622 of its own shares in the market for about R55 million to be
held as treasury shares. It utilised 1 271 889 of the treasury shares for the
Group`s executive share option scheme and management incentive scheme.
Finance cost
Included in the finance cost is an amount of R81 million (2008: R16 million),
being the current year`s amortisation in respect of raising fees paid on the
Group`s local and offshore debt. These amounts are amortised over the terms of
the relevant loans in line with future cash payments as prescribed in IAS 39.
The margin applicable to the Barclays facility remained subject to a market flex
to facilitate the syndication process. Barclays has now settled the margin
finally, which brings the total interest rate payable on the Barclays facility
to 5.62%, effective from 1 August 2008. Prior to 1 August 2008, a total interest
rate of 5.27% was charged. Barclays communicated the increase in its margin to
the Group on 14 October 2008.
Foreign exchange rates
The Rand displayed some volatility during the reporting period against the Swiss
Franc and the United States Dollar (against which the UAE Dirham is pegged at
AED3.675 to the US Dollar). The spot rate of the CHF moved from R8.14 at 31
March 2008 to R8.32 at year end, with an average rate of R8.01 for the year
(R6.60 for the period from 26 October 2007 to 31 March 2008). The spot rate of
the AED moved from R2.20 at 31 March 2008 to R2.58 at year end, with an average
rate of R2.41 (2008: R1.94) for the year. In terms of accounting convention, the
offshore balance sheets are converted at spot rate, while the trading results in
the offshore income statements are converted at the average rate. The 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 R267 million (2008: R2
326 million) and was credited to the Statement of Recognised Income and Expense.
Cash flow
The Group`s cash flow continued to be strong mainly due to efficient working
capital management. The Group converted 98% of EBITDA into cash generated from
operations. Cash and cash equivalents increased from R801 million at 31 March
2008 to R994 million at year end.
Interest-bearing borrowings
Interest-bearing borrowings ("debt") increased from R23 397 million at 31 March
2008 to R24 590 million. It is important to note that the foreign debt in
Switzerland and Dubai, amounting R20 723 million, is matched with foreign assets
in the same currencies. The foreign debt also has no recourse to the Southern
African operations` assets, as stipulated by the South African Reserve Bank as
well as applicable financing arrangements.
Operations in Southern Africa
Medi-clinic Southern Africa group
Financial performance
The Southern African group revenue increased by 12% to R6 792 million (2008: R6
056 million) for the year under review. EBITDA was 12% higher at R1 458 million
(2008: R1 302 million).
After incurring depreciation charges of R177 million (2008: R159 million), net
finance charges of R328 million (2008: R231 million), taxation of R284 million
(2008: R278 million) and deducting the interest of minority shareholders in the
attributable income of the Southern African group amounting to R117 million
(2008: R109 million), the Southern African operations contributed R553 million
(2008: R527 million) to the attributable income of the Group.
Business performance
The 12% revenue growth was achieved through a 3.3% increase in bed-days sold and
an 8.6% increase in the average income per bed-day, while the profile of
patients treated remained stable. The increase in utilisation was evident in
both surgical and medical cases. The number of patients admitted increased by
2.5%, while the average length of stay increased by almost 1%.
The Southern African group operations maintained its EBITDA margin at 21.5%
despite inflationary pressure during the last six months of the 2008 calendar
year.
During the reporting period the Southern African operations spent R381 million
(2008: R195 million) on capital projects and new equipment to enhance its
business as well as R184 million (2008: R161 million) on the replacement of
existing equipment. In addition, R185 million (2008: R173 million) was spent on
the repair and maintenance of property and equipment, charged through the income
statement. For the next financial year, R308 million is budgeted for capital
projects and new equipment to enhance its business, while R197 million is
budgeted for the replacement of existing equipment. Incremental EBITDA resulting
from capital projects in progress or approved should amount to R8 million and
R47 million in 2010 and 2011, respectively.
The number of hospital beds increased from 6 776 to 6 855 during the year under
review.
The construction of the new 140 bed Cape Gate Medi-Clinic in the Western Cape is
expected to be completed during March 2010. Extensive upgrade projects are in
progress at Panorama Medi-Clinic, Constantiaberg Medi-Clinic and Hermanus Medi-
Clinic, the latter of which includes the addition of 25 beds. Other significant
projects that are planned to commence during the next financial year are the
addition of 20 beds at Nelspruit Medi-Clinic and the addition of at least 30
beds at Limpopo Medi-Clinic. Both projects are only due for commissioning in the
2012 financial year.
The number of beds is expected to increase from 6 855 to 7 024 during the next
financial year.
The Southern African operations` cash flow continued to be strong during the
period under review. It converted 104% (2008: 96%) of EBITDA into cash generated
from operations. Cash and cash equivalents increased from R360 million at 31
March 2008 to R368 million at year end.
Debt increased from R3 699 million at 31 March 2008 to R3 867 million at year
end primarily to finance the capital expenditure referred to above.
The process to develop a National Health Insurance ("NHI") system for South
Africa was reaffirmed at the ANC congress in Polokwane during December 2007 and
has gained much momentum since then. Medi-Clinic is well positioned to take part
in the process that lies ahead and will endeavour to make a meaningful
contribution towards finding sustainable solutions for the South African
challenges.
The Reference Price List ("RPL") process, by which a methodology and framework
to calculate benchmark tariffs will be established, is ongoing. The private
hospital industry started its process of engagement with the National Department
of Health, in terms of the current regulations, to determine a RPL for the 2010
calendar year. Two international independent accounting firms have been
appointed by the Hospital Association of Southern Africa to provide their
independent opinion on the methodology of the benchmark tariffs. The National
Department of Health also appointed an international independent accounting firm
as its consultant. 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.
Medi-Clinic Southern Africa undertakes to support the newly appointed Minister
of Health, Dr. Aaron Motsoaledi. It is looking forward to a constructive
relationship between the public and private sectors where cooperation between
the sectors can lead to innovative solutions in addressing access to quality
healthcare. It would also like to thank the outgoing Minister of Health, Ms.
Barbara Hogan, for the positive contribution that she has made towards uniting
healthcare stakeholders during her relatively short period in office. Her vision
and dynamic leadership were sincerely appreciated.
Operations in Switzerland
Hirslanden
The Group consolidated Hirslanden`s results from the effective date of its
acquisition, 26 October 2007. During the previous reporting period, Hirslanden`s
revenue was R3 041 million (CHF461 million) and EBITDA was R710 million (CHF107
million).
Although not included in the Group`s results for the comparative year under
review, the comparative figures and statements below are provided for a pro
forma full year to give shareholders a better understanding of the underlying
trends in the businesses.
Financial performance
Hirslanden`s revenue increased by 41% (9% at constant foreign exchange rates) to
R8 737 million (CHF1 091 million) (2008: R6 186 (CHF1 001 million)) for the year
under review. EBITDA was 43% (10% at constant foreign exchange rates) higher at
R1 961 million (CHF245 million) (2008: R1 372 million (CHF222 million)).
After incurring depreciation charges of R454 million (CHF57 million) (2008: R154
million (CHF23 million)), net finance charges of R1 166 million (CHF146 million)
(2008: R387 million (CHF59 million)) and taxation of R218 million (CHF27
million) (2008: R86 million (CHF13 million)), Hirslanden contributed R124
million (CHF16 million) (2008: R83 million (CHF13 million)) to the attributable
income of the Group. (Comparative amounts are for the period from the effective
date of the Hirslanden acquisition, 26 October 2007, in this paragraph only and
not for a pro forma full year.)
Business performance
Inpatient admissions increased by 5% while day surgery admissions improved by
8%. The average length of stay remained fairly constant.
The EBITDA margin of the group increased from 22.2% to 22.5%.
During the reporting period, Hirslanden spent R227 million (CHF28 million) on
capital projects and new equipment to enhance its business as well as R359
million (CHF45 million) on the replacement of existing equipment. In addition,
R231 million (CHF29 million) was spent on the repair and maintenance of property
and equipment, charged through the income statement. For the next financial
year, CHF42 million is budgeted for capital projects and new equipment to
enhance its business, while CHF58 million is budgeted for the replacement of
existing equipment. Included in the budgeted amount for capital projects is an
amount of CHF25 million for capital projects which was transferred to the 2010
financial year due to delays in approvals, which have now all been received.
Incremental EBITDA resulting from capital projects in progress or approved
should amount to CHF11 million and CHF21 million in 2010 and 2011, respectively.
A second linear accelerating oncology machine and a Cyberknife (a state of the
art non-invasive stereo tactic radiation device for the treatment of tumours and
metastases, the first of its kind in Switzerland) were successfully commissioned
at Klinik Hirslanden during June 2008 and March 2009, respectively. A state of
the art centre for neurology, neurosurgery and neuroradiology (with the
neurology component still under development) and an international centre for
laparoscopic neuro-functional pelvic surgery with two renowned surgeons, were
both opened at Klinik Hirslanden on 1 October 2008. The very successful Urology
Centre at Klinik Hirslanden is being expanded by three renowned urologists in
addition to the current two urologists. This expanded new Urology Centre will be
commissioned on 1 November 2009. Planned investment in new technology, which
provides for new treatment options and increased case load, includes a 3.0 tesla
MR machine at Klinik Im Park as well as a dual source CT scanner and a
catheterisation laboratory at Klinik Beau-Site.
The number of fully operational beds increased from 1 301 to 1 334 (based on the
average number of beds for the year), with the addition of 27 (average) beds at
Klinik Hirslanden and nine (average) beds at Klinik St. Anna and a temporary
reduction of three beds (average) at Klinik Cecil.
In addition, projects for the increase of capacity at Klinik Aarau (28 beds),
Klinik Im Park (two additional ICU beds, four additional intermediate care beds
and an additional operating theatre) and Klinik St. Anna (seven new private
rooms) were approved to be commissioned towards the end of 2009 and early in
2010 respectively. During the next financial year the total average number of
beds is expected to increase slightly to 1 349 (Klinik St. Anna three; Klinik
Aarau nine; Klinik Cecil three). Feasibility studies will be performed in the
next financial year on the extensions of Klinik Hirslanden (approximately 50
beds), Klinik Beau-Site (approximately 23 beds) and Klinik St. Anna
(approximately 50 beds).
Hirslanden produced strong cash flow during the period under review. It
converted 99% (2008: 90%), after adjusting for the seasonality of cash flows and
accrued transaction costs, both relating to the Hirslanden acquisition in the
comparative period) of EBITDA into cash generated from operations. Cash and cash
equivalents increased to R504 million (CHF61 million) (2008: R400 million (CHF49
million)) after financing capital expenditure.
Interest bearing debt increased from R19 481 million (CHF 2 393 million) at 31
March 2008 to R19 949 million (CHF 2 398 million) at year end net of capitalised
debt transaction fees because of foreign exchange rate fluctuations.
The Swiss Federal Government approved a partial revision of the mandatory health
insurance relating to hospital planning and financing, effective from 1 January
2009. The new legislation will have to be implemented by each canton commencing
on 1 January 2012 with all elements aimed to be in place by 1 January 2015. Due
to the complexity and diversity of the implementation at cantonal level,
management, in consultation with an expert panel, is in the process of an in
depth analysis of the potential impact of the proposed changes on Hirslanden`s
business.
Operations in United Arab Emirates
Financial performance
Revenue increased by 71% (37% at constant foreign exchange rates) to R822
million (AED341 million) (2008: R482 million (AED249 million) for the year under
review. EBITDA declined by 76% (81% at constant exchange rates) to R12 million
(AED5 million) (2008: R50 million (AED26 million)) mainly due to start-up losses
at The City Hospital as expected and alluded to in earlier reports. The EBITDA
includes a once-off profit on sale of property of R19 million (AED8 million).
As a result, the EBITDA margin declined from 10.3% to 1.5%. After incurring
depreciation charges of R53 million (AED22 million) (2008: R28 million (AED14
million)), net finance charges of R41 million (AED17 million) (2008: R18 million
(AED9 million)) and the sharing of minority shareholders in the attributable
loss of Emirates Healthcare amounting to R41 million (AED17 million) (2008:
sharing in the attributable income of R2 million (AED1 million)), Emirates
Healthcare made a negative contribution of R41 million (AED17 million) (2008: a
positive contribution of R2 million (AED2 million)) to the attributable income
of the Group.
Business performance
Revenue of the units in full operation, being the Welcare Hospital, the Emirates
Diagnostic Clinic, the Welcare Ambulatory Care Centre and the Welcare Eye
Clinic, increased by 50% (21% at constant foreign exchange rates) to R718
million (AED298 million) (2008: R478 million (AED246 million)) and EBITDA by 77%
(43% at constant foreign exchange rates) to R145 million (AED60 million) (2008:
R82 million (AED42 million)).
The start up operations, namely The City Hospital, EHL Management Services,
Welcare Qusais Clinic and Welcare Mirdiff Clinic generated revenue of R104
million (AED43 million) (2008: R4 million (AED2 million)), but generated start
up operating losses at EBITDA level of R133 million (AED55 million) (2008: R32
million (AED16 million)). Except for The City Hospital, all the other units are
now fully operational and will generate positive EBITDA during the next
reporting period.
The City Hospital was commissioned successfully on 15 October 2008, after
passing rigorous international accreditation requirements. Agreements with
insurance companies are concluded on a calendar year basis and most agreements
could therefore only be finalised from January 2009. Since then, it is pleasing
to report that month on month increases in the number of admissions exceeded
expectations. However, it is expected that The City Hospital will still incur
start up losses for the next financial year, with break even at an EBITDA level
expected to be reached by about November 2009. During March 2009, The City
Hospital already generated revenue of more than AED10 million. The operations of
the Welcare Eye Clinic were merged with The City Hospital in October 2008.
During the reporting period Emirates Healthcare spent R251 million (AED104
million) (2008: R337 million (AED174 million)) to complete and equip The City
Hospital and R33 million (AED14 million) (2008: R30 million (AED16 million)) on
the replacement of existing equipment. In addition, R24 million (AED10 million)
(2008: R13 million (AED7 million)) was spent on the repair and maintenance of
property and equipment, charged through the income statement.
In line with the start up losses referred to above, Emirates Healthcare had a
negative cash flow from operating activities before working capital changes of
R7 million (AED3 million) (2008: positive cash flow of R51 million (AED26
million)), while the investment in working capital (mainly working capital for
The City Hospital) required a further R108 million (AED45 million) (2008: a
reduction in working capital of R114 million (AED59 million)). This resulted in
a cash outflow from operations of R115 million (AED48 million) (2008: cash
generated from operations of R165 million (AED85 million)).
After funding the capital expenditure and the cash outflow from operations, the
bank facilities of Emirates Healthcare are now fully drawn in the amount of R774
million (AED300 million) (2008: R217 million (AED98 million)). Cash and cash
equivalents amounted to R122 million (AED47 million) (2008: R40 million (AED18
million)).
Prospects
Three well defined platforms for growth have been established successfully
within the Group. 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. In Switzerland, Hirslanden is the leading
provider of acute private hospital care in an economically stable country. It
has an excellent reputation with high quality facilities enabling it to attract
top medical specialists. Hirslanden provides a solid platform for future Swiss
and European expansion. The investment in Emirates Healthcare, which is more
green fields by nature, offers a platform for incremental growth in the Middle
East where a growing need for cost-effective quality private healthcare
continues to exist.
In Dubai, with The City Hospital successfully commissioned, admissions are
increasing steadily.
The Group continues to invest significant resources across its three platforms.
Regulatory issues are part and parcel of the healthcare environment. The Group,
particularly in Switzerland and Southern Africa, is constantly monitoring the
regulatory environment with a view to pro-actively play a role in decision
making or adjust to a potential new environment. Health monitoring units have
been established at the platforms with this purpose in mind.
Without the benefit of clear foresight on how the global financial crisis will
finally play out, the Group remains optimistic about its operational prospects
for the next year. Shareholders should also note that the dilutionary effect of
the additional shares issued in terms of the rights issue at the time of the
Hirslanden transaction on the Group`s headline earnings per share will not recur
in the next financial year.
In terms of the Group`s current dividend policy, the dividend per share is
derived from the performance of the Southern African operations. Although the
Group`s ability to pay dividends will be dictated by the cash flow of the
Southern African operations, the Group will in future target a dividend cover of
three times based on Group headline earnings which is more in line with levels
prior to the Hirslanden transaction. This does not imply a reduction in dividend
per share, only an indicative target which the Board would seek to achieve over
time.
Changes to the board of directors
As previously reported in the commentary to the Group`s interim results, the
following changes to the board of directors occurred during the year.
Mr J du T Marais, who served as an executive director (technical) of Medi-Clinic
since 1985, has retired and did not offer himself for re-election at the annual
general meeting of the company on 30 July 2008. Ms S Dakile-Hlongwane, who
served as a non-executive director for more than 8 years, also did not offer
herself for re-election at the annual general meeting. Dr V E Msibi, who served
as a non-executive director since 2005 representing Phodiso Holdings, one of the
Group`s strategic black partners, tragically passed away on 12 July 2008. Dr R H
Bider, who served as an executive director of Medi-Clinic since 2007 (in his
capacity as the Chief Executive Officer of Hirslanden) also retired and resigned
from the Board of Medi-Clinic with effect from 5 November 2008. The valuable
inputs of all of these past members of the Board are greatly appreciated and
will be long remembered.
Ms Z P Manase was co-opted as an independent non-executive director with effect
from 16 September 2008. Dr M K Makaba was also co-opted as a non-executive
director with effect from 16 September 2008 representing Phodiso Holdings. The
Board of Medi-Clinic approved the co-option of
Dr T O Wiesinger, the new Chief Executive Officer of Hirslanden, as an executive
director with effect from 6 November 2008.
Reports of the independent auditor
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.
These financial results incorporate accounting policies that are consistent with
those adopted in prior years, with the exception of the early adoption of IFRS 8
- Operating Segments. Refer to the section on segmental reporting.
Dividend to shareholders
The board of directors declared a final dividend of 47.0 cents per ordinary
share.
In compliance with the requirements of STRATE, the following dates are
applicable:
Last date to trade cum dividend Friday, 19 June 2009
First date of trading ex dividend Monday, 22 June 2009
Record date Friday, 26 June 2009
Payment date Monday, 29 June 2009
Share certificates may not be dematerialised/rematerialised from Monday, 22 June
2009 to Friday, 26 June 2009, both days inclusive.
Signed on behalf of the board of directors:
E DE LA H HERTZOG LJ ALBERTS
Chairman Chief Executive Officer
Stellenbosch, 19 May 2009
Consolidated abridged balance sheet
as at 31 March
2009 2008
R`m R`m
ASSETS
Non-current assets 38 982 37 273
Property, equipment and vehicles 32 479 30 972
Intangible assets 6 293 6 101
Investments - unlisted 32 34
Derivative financial instruments - 43
Deferred income tax assets 178 123
Current assets 4 892 4 326
Inventories 496 448
Trade and other receivables 3 371 3 077
Cash and cash equivalents 994 801
Current income tax assets 31 -
Total assets 43 874 41 599
Equity and liabilities
Total equity 7 989 9 367
Share capital and reserves 7 091 8 560
Minority interest 898 807
Total liabilities 35 885 32 232
Long-term interest-bearing borrowings 24 349 23 266
Retirement benefit obligations 997 639
Provisions 229 190
Derivative financial instruments 2512 595
Deferred income tax liabilities 5 162 5 088
Short-term interest-bearing borrowings 241 131
Short-term interest-free borrowings 2 395 2 323
Total equity and liabilities 43 874 41 599
Number of ordinary shares (`000) 560 316 560 260
Weighted number of ordinary shares (`000) 559 336 421 437
Diluted number of ordinary shares (`000) 590 999 455 748
Net asset value per ordinary share - cents 1 266 1 585
Directors` valuation of unlisted investments 32 34
Consolidated abridged income statement
for the year ended 31 March
2009 Change 2008
R`m % R`m
Revenue 16 351 71 9 579
Cost of sales (9 262) (5 381)
Administration and other operating (3 658) (2 136)
expenses
Operating profit before depreciation 3 431 66 2 062
(EBITDA)
Depreciation (684) (341)
Operating profit 2 747 60 1 721
Income from associates 2 -
Finance income 67 49
Finance cost (1 602) (685)
Profit before taxation 1 214 1 085
Taxation (502) (364)
Profit for the year 712 721
Attributable to:
Shareholders of the company 636 610
Minority interest 76 111
712 721
Earnings per ordinary share - cents
Basic 113.7 (22) 144.9
Diluted 107.6 134.0
Headline earnings per ordinary share -
cents
Basic 111.5 (23) 144.5
Diluted 105.6 133.6
Earnings reconciliation:
Profit attributable to shareholders 636 610
Profit on sale of property, equipment (12) (2)
and vehicles
Headline earnings 624 3 608
Other financial information
2009 2008
R`m R`m
Capital commitments
Southern Africa 786 798
Middle East 14 98
Switzerland 226 103
Exchange rates R R
Average Swiss Franc (ZAR/CHF) 8.01 6.60
Closing Swiss Franc (ZAR/CHF) 8.32 8.14
Average UAE Dirham (ZAR/AED) 2.41 1.94
Closing UAE Dirham (ZAR/AED) 2.58 2.20
Consolidated abridged statement of recognised income and expense
for the year ended 31 March
2009 2008
R`m R`m
Currency translation differences 267 2 326
Fair value adjustment to cash flow hedges (net of (1 766) (394)
tax)
Actuarial losses (245) (341)
Net (loss)/income recognised directly in equity (1 744) 1 591
Profit for the year 712 721
Total recognised (loss)/income for the year (1 032) 2 312
Attributable to:
Equity holders of the Company (1 108) 2 201
Minority interest 76 111
(1 032) 2 312
Consolidated abridged cash flow statement
for the year ended 31 March
2009 2008
R`m R`m
Cash flow from operating activities 1 386 738
Cash generated from operations 3 346 1 517
Net finance cost (1 438) (419)
Taxation paid (522) (360)
Cash flow from investment activities (1 380) (16 898)
Cash flow from financing activities 125 16 461
Proceeds from issuance of ordinary shares - 4 500
Distributions to shareholders (339) (189)
Distributions to minorities (54) (41)
Movement in borrowings 547 12 219
Treasury shares purchased (29) -
Share issue costs - (28)
Net movement in cash, cash equivalents and bank 131 301
overdrafts
Opening balance of cash, cash equivalents and bank 787 357
overdrafts
Exchange rate fluctuations on foreign cash 23 129
Closing balance of cash, cash equivalents and bank 941 787
overdrafts
Cash and cash equivalents 994 801
Bank overdrafts (53) (14)
941 787
Consolidated abridged segmental report
for the year ended 31 March
2009 2009 2009 2009
R`m R`m R`m R`m
Hospital Hospital Adjustments Total
Services Properties and
eliminations
Revenue
Southern Africa 6 792 611 (611) 6 792
Middle East 822 29 (29) 822
Switzerland 8 737 1 408 (1 408) 8 737
EBITDA
Southern Africa 865 593 1 458
Middle East (17) 29 12
Switzerland 646 1 315 1 961
EBITDA margin
Southern Africa 12.7% 21.5%
Middle East (2.1%) 1.5%
Switzerland 7.4% 22.5%
Operating profit
Southern Africa 688 593 1 281
Middle East (70) 29 (41)
Switzerland 333 1 174 1 507
Assets
Southern Africa* 4 150 5 484 (4 328) 5 306
Middle East 1 217 1 013 2 230
Switzerland 9 720 26 835 36 555
Liabilities
Southern Africa 2 366 3 463 (700) 5 129
Middle East** 827 457 1 284
Switzerland 2 747 26 936 29 683
* Includes intersegmental assets of R217m which eliminate on group
consolidation
** Includes intersegmental liabilites of R211m which elimininate on
group consolidation
Consolidated abridged segmental report (continued)
for the year ended 31 March
2008 2008 2008 2008
R`m R`m R`m R`m
Hospital Hospital Adjustments Total
Services Properties and
eliminations
Revenue
Southern Africa 6 056 546 (546) 6 056
Middle East 482 - 482
Switzerland 3 041 483 (483) 3 041
EBITDA
Southern Africa 772 530 1 302
Middle East 50 - 50
Switzerland 259 451 710
EBITDA margin
Southern Africa 12.7% 21.5%
Middle East 10.3% 10.3%
Switzerland 8.5% 23.3%
Operating profit
Southern Africa 613 530 1 143
Middle East 22 - 22
Switzerland 154 402 556
Assets
Southern Africa* 3 699 5 250 (4 216) 4 733
Middle East 769 804 1 573
Switzerland 9 418 26 059 35 477
Liabilities
Southern Africa 1 880 3 463 (700) 4 643
Middle East** 413 287 700
Switzerland 2 780 24 297 27 077
* Includes intersegmental assets of R184m which eliminate on group
consolidation
** Includes intersegmental liabilites of R188m which elimininate on
group consolidation
Directors: E de la H Hertzog (Chairman), L J Alberts (Chief Executive Officer),
J C Cohen, M K Makaba, Z P Manase, A R Martin, D P Meintjes, K H S Pretorius, A
A Raath, M A Ramphele, D K Smith, J G Swiegers, W L van der Merwe, M H Visser, T
O Wiesinger
Secretary: G C Hattingh
Registered Address: Medi-Clinic Offices, Strand Road, Stellenbosch 7600 PO Box
456, Stellenbosch 7599 Tel 021 809 6500 Fax 021 886 4037
Transfer Secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg 2001 PO Box 61051, Marshalltown 2107 Tel 011 370 5000 Fax
011 688 7716
Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)
Date: 19/05/2009 17:00:01 Produced by the JSE SENS Department.
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