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MDC
MDC
MDC - Medi-Clinic Corporation - Audited results of Medi-Clinic Corporation
Limited and its subsidiaries for the financial year ended 31 March 2010 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 2010 AND CASH DIVIDEND DECLARATION
Strong defensive performance by the Group
All three operating platforms performed solidly
Core EBITDA increased by 9%
Core basic headline earnings per share increased by 36%
CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2010 Increase 2009
R`m % R`m
Revenue 17 141 5 16 351
Cost of sales (9 573) (9 262)
Administration and other operating expenses (3 832) (3 658)
Core operating profit before depreciation 3 736 9 3 431
(EBITDA)
Past service cost 97 -
Operating profit before depreciation (EBITDA) 3 833 3 431
Depreciation and amortisation (718) (684)
Operating profit 3 115 2 747
Gain on sale of interest in subsidiary 28 -
Income from associates 7 2
Finance income 41 67
Finance cost (1 524) (1 602)
Profit before taxation 1 667 1 214
Taxation (481) (502)
Core tax (560) (502)
Change in tax rates and taxation on past service 79 -
cost
Profit for the year 1 186 712
Core profit for the year 1 010 712
Profit for the year relating to past service 176 -
cost and tax rate changes
Attributable to:
Equity holders of the Company 1 058 636
Minority interest 128 76
1 186 712
Earnings per ordinary share - cents
- Basic 188.4 66 113.7
- Diluted 179.0 107.6
Headline earnings per ordinary share - cents
- Basic 183.1 64 111.5
- Diluted 173.9 105.6
Earnings reconciliation:
Profit attributable to shareholders 1 058 636
Profit on sale of property, equipment and (2) (12)
vehicles
Gain on sale of interest in subsidiary (28) -
Headline earnings 1 028 65 624
Core headline earnings 852 37 624
Past service cost after taxation 76 -
Tax rate changes 100 -
Headline earnings 1 028 624
Core basic headline earnings per share - cents 151.8 36 111.5
Headline earnings per share relating to past 31.3 -
service cost and tax rate changes - cents
Basic headline earnings per share - cents 183.1 111.5
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2010 2009
R`m R`m
Profit for the year 1 186 712
Other comprehensive income
Currency translation differences (1 401) 339
Fair value adjustment to cash flow hedges (net of (183) (1 766)
tax)
Actuarial gains and losses 331 (245)
Other comprehensive loss, net of tax (1 253) (1 672)
Total comprehensive loss for the year (67) (960)
Attributable to:
Equity holders of the Company (88) (1 108)
Minority interest 21 148
(67) (960)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2010 2009
R`m R`m
ASSETS
Non-current assets 33 535 38 982
Property, equipment and vehicles 28 046 32 479
Intangible assets 5 243 6 293
Investments - unlisted 26 32
Deferred income tax assets 220 178
Current assets 4 829 4 892
Inventories 481 496
Trade and other receivables 3 211 3 371
Cash and cash equivalents 1 120 994
Current income tax assets 17 31
Total assets 38 364 43 874
EQUITY AND LIABILITIES
Total equity 7 616 7 989
Share capital and reserves 6 650 7 091
Minority interest 966 898
Total liabilities 30 748 35 885
Long-term interest-bearing borrowings 20 667 24 349
Retirement benefit obligations 346 997
Provisions 185 229
Derivative financial instruments 2 331 2 512
Deferred income tax liabilities 4 399 5 162
Short-term interest-bearing borrowings 398 241
Short-term interest-free borrowings 2 422 2 395
Total equity and liabilities 38 364 43 874
Number of ordinary shares (`000) 562 869 560 316
Weighted number of ordinary shares (`000) 561 648 559 336
Diluted number of ordinary shares (`000) 591 221 590 999
Net asset value per ordinary share - cents 1 181 1 266
Directors` valuation of unlisted investments (R`m) 26 32
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2010 2009
R`m R`m
Opening balance 7 989 9 367
Movement in shares held in treasury 15 (29)
Movement in share-based payment reserve 7 7
Minority interest acquired by the group (6) (3)
Total comprehensive loss for the year (67) (960)
Distributed to shareholders (374) (339)
Change in shareholding of subsidiaries 108 -
Cost of subsidiary rights issue (1) -
Distributed to minorities (55) (54)
Closing balance 7 616 7 989
Comprising
Share capital 59 59
Share premium 4 741 4 741
Treasury shares (311) (326)
Share-based payment reserve 123 116
Foreign currency translation reserve 1 301 2 595
Hedge reserve (2 343) (2 160)
Retained earnings 3 080 2 066
Shareholders` equity 6 650 7 091
Minority interest 966 898
Total equity 7 616 7 989
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2010 2009
R`m R`m
Cash flow from operating activities 1 960 1 386
Cash generated from operations 3 800 3 346
Net finance cost (1 396) (1 438)
Taxation paid (444) (522)
Cash flow from investment activities (1 271) (1 380)
Cash flow from financing activities (542) 125
Distributions to shareholders (374) (339)
Distributions to minorities (55) (54)
Movement in borrowings (155) 547
Treasury shares purchased - (55)
Treasury shares utilised 15 26
Contributions by minority shareholders 27 -
Net movement in cash, cash equivalents and bank 147 131
overdrafts
Opening balance of cash, cash equivalents and bank 941 787
overdrafts
Exchange rate fluctuations on foreign cash (121) 23
Closing balance of cash, cash equivalents and bank 967 941
overdrafts
Cash and cash equivalents 1 120 994
Bank overdrafts (153) (53)
967 941
CONSOLIDATED SEGMENTAL REPORT
for the year ended 31 March 2010 2010 2010 2010
R`m R`m R`m R`m
Hospital Hospital Adjustments Total
Services Properties and
eliminations
Revenue
Southern Africa 7 680 687 (687) 7 680
Middle East 1 126 62 (62) 1 126
Switzerland 8 335 1 330 (1 330) 8 335
EBITDA
Southern Africa 985 666 1 651
Middle East 71 61 132
Switzerland 806 1 244 2 050
Operating profit
Southern Africa 779 666 1 445
Middle East (4) 61 57
Switzerland 499 1 114 1 613
Assets
Southern Africa 4 495 6 048 (4 785) 5 758
Middle East 942 786 1 728
Switzerland 8 323 22 555 30 878
Liabilities
Southern Africa 2 287 3 962 (931) 5 318
Middle East 468 312 780
Switzerland 2 361 22 289 24 650
for the year ended 31 March 2009 2009 2009 2009
R`m R`m R`m R`m
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
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 liabilities of R211m which eliminate on group
consolidation
OTHER FINANCIAL INFORMATION
2010 2009
R`m R`m
Capital commitments
Southern Africa 867 786
Middle East 10 14
Switzerland 216 226
Exchange rates R R
Average Swiss franc (ZAR/CHF) 7.35 8.01
Closing Swiss franc (ZAR/CHF) 6.93 8.32
Average UAE dirham (ZAR/AED) 2.13 2.41
Closing UAE dirham (ZAR/AED) 2.00 2.58
COMMENTARY
We are pleased to report that the Group has continued to maintain its consistent
growth pattern.
GROUP OVERVIEW
Group financial performance
In order to provide clear and consistent reporting to shareholders, reference
will also be made to the concept of core headline earnings and core headline
earnings per share. Core headline earnings and core headline earnings per share
are defined as reportable headline earnings and headline earnings per share in
terms of accounting standards, excluding one-off items.
Trading results
Group revenue increased by 5% to R17 141 million (2009: R16 351 million) for the
year under review. Core operating income before interest, taxation, depreciation
and amortisation ("EBITDA") was 9% higher at R3 736 million (2009: R3 431
million). Core headline earnings rose by 37% to R852 million (2009: R624
million). Core basic headline earnings per ordinary share increased by 36% to
151.8 cents (2009: 111.5 cents).
The Group results benefited from two one-off items not included in the figures
above:
- An adjustment to the Hirslanden pension funds` payout ratio, resulting in a
past service cost credit, calculated in terms of IAS 19, to the income statement
of R97 million (CHF13.2 million) and R76 million (CHF10.4 million) after
provisioning for taxation.
- The tax rates in two cantons in Switzerland were decreased, resulting in a
release of R100 million (CHF13.6 million) from the deferred tax account as a
credit to the taxation charge in the income statement.
Taking into account these two one-off items, EBITDA was 12% higher at R3 833
million (2009: R3 431 million). Headline earnings rose by 65% to R1 028 million
(2009: R624 million). Basic headline earnings per ordinary share increased by
64% to 183.1 cents (2009: 111.5 cents).
As indicated in the 2009 Annual Report, the Group is moving towards a targeted
dividend cover of 3 times based on Group headline earnings. Therefore, the total
dividend per share at 73 cents (2009: 68.6 cents) reflects a 6.4 increase which
is lower than the increase in core basic headline earnings per share.
The strong Group results were achieved despite the global recession and tough
economic conditions. The leveraging effect of the capital structure of the Group
is clearly visible through the significant increase in core headline earnings
and headline earnings over core EBITDA and EBITDA.
Fluctuations in exchange rates had a negative effect on the trading results on a
comparative basis. At constant exchange rates core EBITDA, core headline
earnings and core basic headline earnings per share would have been R4 099
million, R870 million and 154.8 cents per share, respectively 10%, 2% and 2%
higher than reported.
The Group`s major co-shareholder in Emirates Healthcare, Varkey Group Limited,
exercised its option to purchase 50% less 1 share of the cumulative, variable
rate, participating, redeemable, convertible preference shares ("the preference
shares") issued by Emirates Healthcare to the Group on 27 March 2007,
demonstrating its confidence in the business. The purchase consideration,
determined by an independent investment bank, was R106 million (USD14.5 million)
resulting in a gain on the sale of the shares of R28 million (USD3.8 million)
which is excluded from headline earnings. These preference shares represent 8%
in the fully diluted equity capital of Emirates Healthcare. All the preference
shares issued by Emirates Healthcare converted to ordinary equity capital on 28
March 2010.
Finance cost
Included in the finance cost is an amount of R75 million (2009: R81 million),
being the current period`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
Financial Instruments.
Cash flow
The Group`s cash flow continued to be strong mainly because of efficient working
capital management. The Group converted 102% (2009: 98%) of core EBITDA into
cash generated from operations. Cash and cash equivalents increased from R994
million at 31 March 2009 to R1 120 million at 31 March 2010.
Interest-bearing borrowings
Interest-bearing borrowings ("debt") decreased from R24 590 million at 31 March
2009 to R21 065 million at year end, mainly because of the strengthening of the
rand against the Swiss franc during the reporting period, as alluded to below.
It is important to note that the foreign debt in Switzerland and the United Arab
Emirates, amounting to R17 194 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.
IFRS and technical matters
Accounting for the Hirslanden pension funds
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. Because of the
strict definition of defined contribution plans in IAS 19, in terms of IFRS,
these plans are classified as defined benefit plans, since the funds are obliged
to take some investment and longevity risk in terms of Swiss law.
The IAS 19 pension liability was valued by the actuaries at the end of the year
and amounted to R64 million (CHF9.3 million) (2009: R765 million (CHF92
million)) included under "Retirement benefit obligations" in the Group`s
statement of financial position. However, the pension funds were, for Swiss
statutory purposes, estimated to be 106.5% (2009: 93%) funded at 31 March 2010.
From an economic and legal point of view this amount as calculated in terms of
IAS 19, does not lead to a liability for Hirslanden at 31 March 2010.
The lower pension liability resulted in an amount of R331 million (CHF47.8
million) being credited (2009: a debit of R233 million (CHF28 million)) to the
consolidated statement of comprehensive income for the year. An amount of R63
million (CHF8.6 million) (2009: R6 million (CHF0.7 million)) representing the
employer contributions exceeding the current service cost was credited to the
consolidated income statement. In addition, a one-off adjustment to the Swiss
pension funds` payout ratio was made, resulting in a further decrease in the
pension liabilities of R97 million (CHF13.2 million) in respect of past services
and was also credited to the consolidated income statement.
OPERATIONS IN SOUTHERN AFRICA
Medi-Clinic Southern Africa
Financial performance
The revenue of Medi-Clinic Southern Africa increased by 13% to R7 680 million
(2009: R6 792 million) for the year under review. EBITDA was 13% higher at R1
651 million (2009: R1 458 million).
After incurring depreciation charges of R206 million (2009: R177 million), net
finance charges of R334 million (2009: R328 million), taxation of R326 million
(2009: R284 million) and deducting the interest of minority shareholders in the
attributable income of the Southern African group amounting to R126 million
(2009: R117 million), the core contribution of the Southern African operations
was R659 million (2009: R553 million) to the attributable income of the Group.
Business performance
The 13% revenue growth was achieved through a 2.1% increase in bed-days sold and
a 10.3% increase in the average income per bed-day. The increase in utilisation
was more evident in medical than surgical cases. The change in the profile of
patients treated was responsible for an increase of 0.6% in revenue in this
reporting period. The number of patients admitted increased by 1.4%, while the
average length of stay increased by 0.7%.
The Southern African operations maintained its EBITDA margin at 21.5%.
During the reporting period the Southern African operation spent R315 million
(2009: R381 million) on capital projects and new equipment to enhance its
business as well as R194 million (2009: R184 million) on the replacement of
existing equipment. In addition, R210 million (2009: R185 million) was spent on
the repairs and maintenance of property and equipment, charged through the
income statement.
For the next financial year, R402 million is budgeted for capital projects and
new equipment to enhance its business, R213 million for the replacement of
existing equipment and R236 million for repairs and maintenance. Incremental
EBITDA resulting from capital projects recently commissioned, in progress or
approved should amount to R32 million and R90 million in 2011 and 2012,
respectively. The capital expenditure will be funded from operational cash flow.
The number of licensed hospital beds increased from 6 855 to 7 035 during the
year under review.
The new 140-bed Cape Gate Medi-Clinic in the Western Cape was successfully
commissioned as planned in February 2010. Occupancies are above budget.
Extensive upgrade projects are in progress at Panorama Medi-Clinic and
Constantiaberg Medi-Clinic, to be completed by November 2010 and May 2010,
respectively. The upgrade project at Hermanus Medi-Clinic, which included the
addition of 25 beds, was completed during March 2010. Other significant projects
that have commenced are the addition of 74 beds at Nelspruit Medi-Clinic, 30
beds at Limpopo Medi-Clinic and 28 beds at Tzaneen Medi-Clinic. The project at
Tzaneen Medi-Clinic is to be completed by June 2010, while the projects at
Nelspruit Medi-Clinic and Limpopo Medi-Clinic are due for commissioning in the
2012 financial year.
A project, comprising of an additional 57 beds, 12 additional obstetric beds
with 3 labour rooms and 4 neonatal ICU beds, has been approved for Muelmed Medi-
Clinic in Pretoria. The expected completion date is September 2011. Approved
projects include: Paarl Medi-Clinic with 1 additional theatre and 4 ICU beds and
Cottage Medi-Clinic in Swakopmund for an upgrade and 14 additional hospital
beds. The expected completion dates are November 2010 and July 2011
respectively. Stellenbosch Medi-Clinic and Kimberley Medi-Clinic have approval
for 10 and 9 additional beds. Both are also approved for a hospital upgrade and
1 additional theatre, due for completion in December 2010 and December 2011
respectively. Wits Donald Gordon Medical Centre has approval for an upgrade of a
28-bed ward which is expected to be completed in December 2010.
The number of beds is expected to increase from 7 035 to 7 077 during the next
financial year.
The Southern African operations` cash flow continued to be strong during the
period under review. It converted 102% (2009: 104%) of EBITDA into cash
generated from operations. Cash and cash equivalents increased from R368 million
at 31 March 2009 to R486 million at 31 March 2010.
Interest-bearing borrowings increased from R3 867 million at 31 March 2009 to R3
871 million at 31 March 2010.
Medi-Clinic has always been supportive of the government`s policy objectives to
increase access to quality healthcare for all citizens. The process to develop a
National Health Insurance system for South Africa is ongoing and we welcome the
initiative taken by the Minister of Health to establish a multi-stakeholder
Ministerial Advisory Committee to assist with the process. The release of an
official policy document in this regard is still being awaited. In the meantime,
Medi-Clinic is conducting in-depth research on the matter and is looking forward
to sharing ideas in the process of developing solutions for South Africa.
As previously reported, 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 and the National Department of Health
("the Department") have been unsuccessful in reaching agreement on the
methodology. This has given rise to a legal dispute between the Hospital
Association of South Africa and the Department. The matter appeared before court
on 22 and 23 February 2010. Judgement has been reserved. In the interim, the
Department is prohibited from publishing the RPL for 2010.
OPERATIONS IN SWITZERLAND
Hirslanden
Financial performance
Hirslanden`s revenue decreased by 5% (increased by 4% at constant foreign
exchange rates) to R8 335 million (CHF1 134 million) (2009: R8 737 million (CHF1
091 million)) for the year under review. Core EBITDA was 0.4% lower (9% higher
at constant foreign exchange rates) at R1 953 million (CHF266 million) (2009: R1
961 million (CHF245 million)). The decrease in the average rate during the year
in the rand/Swiss franc exchange rate from R8.01 to R7.35 resulted in the
decline in the rand equivalent of the financial numbers above.
After incurring depreciation charges of R437 million (CHF59 million) (2009: R454
million (CHF57 million), net finance charges of R1 096 million (CHF149 million)
(2009: R1 166 million (CHF146 million)), taxation of R234 million (CHF32
million) (2009: R218 million (CHF27 million)) and income from associates of R7
million (CHF1 million) (2009: R1 million (CHF0.1 million), the core contribution
of Hirslanden was R193 million (CHF27 million) (2009: R124 million (CHF15
million)) to the attributable income of the Group.
Hirslanden`s results benefited from two one-off items not included in the
figures described above under the Group`s trading results.
Taking into account these two one-off items, EBITDA was 4.5% higher at R2 050
million (CHF279 million) (2009: R1 961 million (CHF245 million)), while
Hirslanden contributed R369 million (CHF50 million) (2009: R124 million (CHF15
million)) to the attributable income of the Group.
Hirslanden`s results were very positive considering the economic recession and
tough economic conditions in Switzerland and Europe. With negative inflation
during the reporting period, Hirslanden showed growth of approximately 6% in
real terms.
Business performance
Inpatient admissions were virtually the same as the previous reporting period.
During the second half of the financial year, inpatient admissions increased by
2% relative to the comparative period. The average length of stay remained
fairly constant. The trend experienced in admissions was that lower acuity cases
declined, while higher acuity cases increased. This led to an increase in the
average revenue per admission. The conclusion drawn is that Swiss patients
deferred smaller elective surgery in the uncertain economic times, a trend which
continued throughout the year.
The core EBITDA margin of the group increased from 22.5% to 23.4% excluding the
one-off adjustment relating to past service cost to the pension fund referred to
above.
Hirslanden took a strategic decision to provide a more seamless and integrated
approach to hospital care by employing certain disciplines of doctors supporting
the care of patients. These include anaesthetists, many who mainly work in
intensive care units, internal physicians, working as hospitalists, and doctors
working in emergency rooms. This decision will further enhance the quality of
care in Hirslanden hospitals and enable more high-end surgery. From a financial
perspective, this may have an effect of a lower margin, although additional
EBITDA is created.
During the reporting period, Hirslanden spent R318 million (CHF43 million)
(2009: R227 million (CHF28 million)) on capital projects and new equipment to
enhance its business as well as R424 million (CHF58 million) (2009: R358 million
(CHF45 million)) on the replacement of existing equipment. In addition, R222
million (CHF30 million) (2009: R231 million (CHF29 million)) was spent on the
repairs and maintenance of property and equipment, charged through the income
statement.
For the next financial year, CHF54 million is budgeted for capital projects and
new equipment to enhance its business, CHF51 million for the replacement of
existing equipment and CHF32 million for repairs and maintenance. Incremental
EBITDA resulting from capital projects recently commissioned, in progress or
approved should amount to CHF7 million and CHF11 million in 2011 and 2012
respectively.
The expanded urology centre at Klinik Hirslanden was commissioned on 1 November
2009 and a neurology centre during April 2010. A vascular centre will be
established at Klinik Hirslanden with effect from June 2010. Planned investment
in new technology which provides for new treatment options and increased case
load includes a 3.0 tesla MRI 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 inpatient beds increased from 1 334 to 1 365
during the year under review.
The project at Klinik Im Park (2 ICU beds, 4 intermediate care beds) and the new
ward at Klinik Aarau (28 inpatient beds) were successfully commissioned during
January 2010 and February 2010 respectively. In addition, the 7 new private
rooms at Klinik St. Anna have been commissioned at the beginning of April 2010.
Klinik Beau-Site in Berne will be expanded by 23 beds to 116 beds, with 19 beds
to be commissioned in 2011 and the balance in 2012. In addition, the hospital
will receive an extensive upgrade and consulting rooms will be added.
Hirslanden`s operations continue to run at high occupancy levels. Feasibility
studies and approvals, including investigating the most appropriate funding
alternatives, on the extensions of Klinik Hirslanden (approximately 71 beds) and
Klinik St. Anna (approximately 30 beds) as well as the creation of a skeletal
radiology and a radiotherapy centre at Klinik Bois Cerf are far advanced. Once
the extensions at Klinik Beau-Site, Klinik Hirslanden and Klinik St. Anna are
completed, Hirslanden`s total inpatient bed capacity will have increased by 9%.
It is desirable to proceed with these expansion projects since they will provide
attractive returns and place the Swiss operations on a new level for long term
growth and continued excellence in quality acute hospital care.
During the next financial year, the total number of inpatient beds is expected
to increase from 1 365 to 1 372.
Hirslanden produced strong cash flow during the period under review. It
converted 101% (2009: 99%) of core EBITDA into cash generated from operations.
Cash and cash equivalents increased from R504 million (CHF61 million) at 31
March 2009 to R526 million (CHF76 million) at 31 March 2010.
Interest-bearing debt decreased from R19 949 million (CHF2 398 million) at 31
March 2009 to R16 673 million (CHF2 406 million) at 31 March 2010, net of
capitalised debt transaction fees, in rand terms because of the decrease in the
spot rand/Swiss franc exchange rate.
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.
Swiss DRGs (diagnostic related groupings), a payment mechanism based on a flat
rate per case, will also be introduced by not later than 1 January 2012 for all
mandatory health insurance reimbursements. Because of the complexity and
diversity of the implementation process at cantonal level, management, in
consultation with an expert panel, are conducting an in-depth analysis of the
potential impact the proposed changes present to Hirslanden`s business. They are
also sensitising decision makers on opportunities and threats. Although much
work has been done, the uncertainty of the full possible impact on the business
of Hirslanden will exist until final clarity is obtained on how each canton will
implement the legislation. Hirslanden and its doctors are known for quality and
cost effective treatment and it is believed that they are well placed for the
implementation of the new legislation.
OPERATIONS IN UNITED ARAB EMIRATES
Emirates healthcare
Financial performance
Revenue increased by 37% (55% at constant foreign exchange rates) to R1 126
million (AED529 million) (2009: R822 million (AED341 million)) for the year
under review. EBITDA increased by 1 000% (1 140% at constant exchange rates) to
R132 million (AED62 million) (2009: R12 million (AED5 million)).
The EBITDA margin increased from 1.5% to 11.8%.
After incurring depreciation charges of R75 million (AED35 million) (2009: R53
million (AED22 million)), net finance charges of R53 million (AED25 million)
(2009: R41 million (AED16 million)) and the interest of minority shareholders in
the attributable income of Emirates Healthcare amounting to R2 million (AED1
million) (2009: share in attributable loss: R41 million (AED17 million)),
Emirates Healthcare made a contribution of R2 million (AED1 million) (2009: a
negative contribution of R41 million (AED16 million)) to the attributable income
of the Group.
Business performance
During the year inpatient admissions in the hospitals increased by 41% (2009:
24%), while hospital outpatient consultations and visits to the emergency units
increased by 16% (2009: 19%). Clinic outpatient consultations increased by 33%
(2009: 12%).
The City Hospital was successfully commissioned on 15 October 2008. It is
pleasing to report that since then every month`s patient attendance and revenue
have exceeded the previous month`s. The patient attendance after the summer
holidays and Ramadan were particularly gratifying. The hospital reached break-
even at EBITDA level during September 2009, earlier than expected.
A project to upgrade the Welcare Hospital started during September 2009.
Additional capacity was created in the day care and neonatal units and the total
number of beds in the hospital increased from 111 to 126 beds. The project also
addressed several bottlenecks in the hospital. Welcare Hospital continued its
solid performance despite the relocation of the cardiac surgery and cardiology
unit as well as the transfer of two other key doctors to The City Hospital.
Furthermore a number of doctors retired and there was a loss of a few
established doctors to a newly opened opposition consulting facility. These
posts have already been filled and the new doctors are successfully building new
practices.
The development of a new clinic, Welcare Ibn Battuta Clinic, was approved at a
cost of AED10.3 million and will be commissioned in November 2010. It will add
to the group`s footprint of reference clinics in Dubai.
During the reporting period Emirates Healthcare spent R13 million (AED6 million)
(2009: R251 million (AED104 million)) on capital projects and new equipment to
enhance its business (mainly to complete and equip The City Hospital and the
project at the Welcare Hospital) as well as R36 million (AED17 million) (2009:
R33 million (AED14 million)) on the replacement of existing equipment. In
addition, R28 million (AED13 million) (2009: R24 million (AED10 million)) was
spent on the repairs and maintenance of property and equipment, charged through
the income statement.
For the next financial year, AED10 million is budgeted for capital projects and
new equipment to enhance its business, AED30 million for the replacement of
existing equipment and AED10 million for repairs and maintenance. Incremental
EBITDA resulting from capital projects in progress or approved should amount to
a start up loss of AED3 million at Welcare Ibn Battuta Clinic and AED1 million
in 2011 and 2012, respectively.
Emirates Healthcare produced strong cash flow during the period under review. It
converted 105% of EBITDA into cash generated from operations. Cash and cash
equivalents decreased from R122 million (AED47 million) at 31 March 2009 to R108
million (AED54 million) at 31 March 2010.
Interest-bearing borrowings decreased from R774 million (AED300 million) at 31
March 2009 to R521 million (AED261 million) at 31 March 2010.
PROSPECTS
The Group is uniquely positioned across three diverse global operating
platforms. It will continue to focus on its core business of acute care,
specialist-orientated hospital services to fulfil its vision of being regarded
as the most trusted and respected provider of such services by patients, doctors
and funders of healthcare. The Group is consolidating its collective
intellectual capital and strengths, with the goal to establish a global hospital
group where verifiable cost-effective quality care will distinguish it from its
competitors.
Significant resources continue to be invested across the three operating
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 proactively playing a role in decision
making or adjusting to a potential new environment. Health policy monitoring
units exist at the platforms with this purpose in mind.
So far the Group has weathered the global recession quite well. Although it
seems that the worst is over, it still remains to be seen how the economic
recovery will play out. Without the benefit of clear foresight, the Group
continues to be optimistic about its operational prospects for the next year.
CHANGES TO THE BOARD OF DIRECTORS
Mr Louis Alberts retired as the Group`s Chief Executive Officer on 31 March
2010, as previously reported. He has been succeeded by Mr Danie Meintjes who has
been with the Group since 1985 and was previously the Chief Executive Officer of
Emirates Healthcare, the Group`s operations in the United Arab Emirates.
During the year Mr Chris van den Heever, an investment manager at Remgro was
appointed to the Board as a non-executive director with effect from 5 February
2010.
Mr Desmond Smith, an independent non-executive director of Medi-Clinic since
March 2008 and chairman of Medi-Clinic`s Audit and Risk Committee since May
2008, was appointed as the lead independent director in compliance with section
3.84(c) of the JSE Listings Requirements and the recommendations of the King
Report on Governance for South Africa 2009 (King III).
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
These 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 revised IAS 1
Presentation of Financial Statements, which became effective for the first time
on 1 April 2009. The application of this amendment to IFRS did not impact on the
Group`s financial results, but has introduced some changes to the presentation
of the financial results.
DIVIDEND TO SHAREHOLDERS
The board of directors declared a final dividend of 50 cents per ordinary share.
In compliance with the requirements of STRATE, the following dates are
applicable:
Last date to trade cum dividend Friday, 18 June 2010
First date of trading ex dividend Monday, 21 June 2010
Record date Friday, 25 June 2010
Payment date Monday, 28 June 2010
Share certificates may not be dematerialised/rematerialised from Monday, 21 June
2010 to Friday, 25 June 2010, both days inclusive.
Signed on behalf of the board of directors:
E DE LA H HERTZOG JG SWIEGERS
Chairman Chief Financial Officer
Stellenbosch, 26 May 2010
Directors:
Dr E de la H Hertzog (Chairman), DP Meintjes (Chief Executive Officer), JC Cohen
(British), Dr MK Makaba, ZP Manase, AR Martin, KHS Pretorius, AA Raath, Dr MA
Ramphele, DK Smith, JG Swiegers, CM van den Heever, Prof WL van der Merwe, MH
Visser, TO Wiesinger (German)
Secretary: GC 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: 26/05/2010 14:31:01 Produced by the JSE SENS Department.
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