| Wed 13 Nov 2002, 17:06 | | Mediclinic Corporation Limited - Interim Report |
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MEDICLINIC CORPORATION LIMITED - INTERIM REPORT
MEDICLINIC CORPORATION LIMITED
Reg. No. 1983/010725/06
Share code: MDC
ISIN-code: ZAE000004370
HIGHLIGHTS
* Growth in hospital turnover: 19%
* Headline earnings per share growth: 25%
* Distribution per share up: 24%
CONSOLIDATED INCOME STATEMENT
6 months to 6 months to Year to
30/09/2002 Increase 30/09/2001 31/03/2002
R`000 % R`000 R`000
Revenue 1 378 416 19 1 161 443 2 437 938
Operating income 273 427 16 236 426 505 944
Dividend received - 4 327 5 060
Interest received 17 827 8 343 19 929
Income from associates 9 092 9 196 18 129
Profit on sale of
equipment 194 - 329
Amortisation of
goodwill (660) (203) (1 089)
Depreciation (34 490) (36 924) (70 849)
Interest paid (3 942) (10 708) (17 121)
Minority interests (17 228) (12 731) (27 976)
Net income before
taxation 244 220 197 726 432 356
Taxation 70 197 55 512 123 866
Attributable earnings 174 023 142 214 308 490
Headline earnings reconciliation:
Attributable earnings 174 023 142 214 308 490
Amortisation of
goodwill 660 203 1 089
Profit on sale of
equipment (194) - (329)
Attributable headline
earnings 174 489 23 142 417 309 250
Headline earnings
per ordinary share
- cents 51,1 25 40,8 88,7
Earnings per ordinary
share - cents 50,9 40,7 88,5
Capital distribution
per ordinary share - cents
Interim 9,7 24 7,8 7,8
Final - - 19,5
9,7 7,8 27,3
CONSOLIDATED BALANCE SHEET
30/09/2002 30/09/2001 31/03/2002
R`000 R`000 R`000
Assets
Non-current assets 1 470 377 1 501 095 1 432 792
Property, plant and
equipment 1 376 318 1 347 551 1 346 681
Intangible assets 16 860 9 910 17 835
Investments - unlisted 19 790 95 171 18 245
Deferred taxation 57 409 48 463 50 031
Current assets `777 197 578 360 714 794
Cash and cash equivalents 294 986 132 788 208 447
Other current assets 482 211 445 572 506 347
Total assets 2 247 574 2 079 455 2 147 586
Equity and liabilities
Share capital and reserves 1 771 328 1 578 220 1 660 270
Minority interests 79 741 75 558 74 708
Interest-bearing debt 39 015 119 210 57 937
Interest-free debt 357 490 306 467 354 671
Total equity and liabilities 2 247 574 2 079 455 2 147 586
Number of ordinary
shares (`000) 342 025 349 846 341 466
Weighted number of
ordinary shares (`000) 341 569 349 431 348 761
Net asset value
per ordinary share - cents 518 451 486
Directors` valuation
of unlisted investments 90 374 95 171 105 856
STATEMENT OF CHANGES IN EQUITY
30/09/2002 30/09/2001 31/03/2002
R`000 R`000 R`000
Opening balance 1 660 270 1 488 117 1 488 117
Shares issued - 988 1 437
Distributed to shareholders (66 586) (53 099) (80 387)
Net income for the period 174 023 142 214 308 490
Movement in shares held
in treasury 3 621 - (57 387)
1 771 328 1 578 220 1 660 270
CONSOLIDATED CASH FLOW STATEMENT
30/09/2002 30/09/2001 31/03/2002
R`000 R`000 R`000
Cash flow from operating
activities 158 226 166 479 353 004
Cash flow from operations 308 878 296 959 537 801
Net interest
received/(paid) 13 885 (2 365) 2 808
Dividends received - - 28 512
Taxation paid (89 194) (66 077) (123 056)
Cash distributions to
minorities (8 757) (8 939) (12 674)
Capital distributions to
shareholders (66 586) (53 099) (80 387)
Cash flow from investment
activities (56 386) (99 267) (95 861)
Cash flow from financing
activities (15 301) (14 395) (128 667)
Net movement in
cash and cash equivalents 86 539 52 817 128 476
Opening balance of
cash and cash _equivalents 208 447 79 971 79 971
Closing balance of
cash and cash _equivalents 294 986 132 788 208 447
COMMENTARY
We are pleased to report that the group has maintained its consistent growth
pattern.
Turnover, which consists entirely of hospital fees levied, increased by 19% to
R1 378 million (2001: _R1 161 million) for the six months under review.
Operating income before interest, taxation, depreciation and amortisation
(EBITDA) was 16% higher at R273 million (2001: R236 million*). Headline
earnings rose by 23% to R174 million (2001: R142 million*) resulting in an
increase of 25% in headline earnings per ordinary share to 51,1 cents (2001:
40,8 cents*). The proposed interim capital distribution per ordinary share at
9,7 cents (2001: 7,8 cents) is 24% higher.
The group`s EBITDA margin declined from 20,4% to 19,8% due to three items, each
of which should enhance shareholder value over the long term. Firstly, the group
initiated a unique retention bonus for nursing staff to reward loyal employees
who select Medi-Clinic as their employer of choice. Against the background of a
national and international nursing shortage, the group is confident that this
scheme will have significant long-term benefits. Secondly, in line with a more
focused strategy, the operational and capital budgets of the ER24 pre-hospital
services increased materially compared with the previous review period. This
revised strategy should provide an attractive return on investment in the near
future. Thirdly, due to the fact that staff share options are now funded through
the group`s treasury stock of its own shares, the true cost of the scheme is
charged against the income statement instead of the mere dilution of the
earnings per share as in the past. This will avoid further dilution of
shareholder value. Had these expenses, of which the retention bonus is the most
significant, not been incurred, the EBITDA margin would have been 20,9%.
The positive impact of the acquisition of 9 million of the group`s own shares
towards the end of the previous financial year is now evident when comparing the
23% increase in headline earnings with the 25% increase in headline earnings per
share. These shares are held in treasury and, subsequent to the 399 700 shares
which were previously utilised, 558 900 shares were utilised during the review
period in terms of the group`s share option scheme.
The trading environment remained tight as the country as a whole experienced
limited economic growth and the medical scheme membership remained virtually
unchanged. The current high inflationary environment may further impact on the
medical scheme membership. The group is grateful to have experienced an increase
in bed days and theatre hours sold as well as a favourable mix change towards
more acute cases.
Cash flow continued to be strong during the period under review. As in the past,
the group managed to limit the growth rate in working capital to considerably
less than the growth rate in turnover. As a result the group earned net finance
income of R13,9 million compared with a net charge of R2,4 million previously.
Interest-bearing debt was reduced from R58 million to R39 million resulting in
an improved debt:equity ratio from 3% to 2%. Cash and cash equivalents increased
to R295 million from R208 million. The group`s strong cash flow underlines the
quality of its earnings.
Capital expenditure for the period under review was R64 million (2001: R55
million). Capital commitments (including amounts approved but not yet contracted
for) amounted to R272 million (2001: R135 million).
PROSPECTS
The group expects to continue its consistent growth pattern.
The recently announced acquisition of the Curamed Group, in conjunction with
Nozala, Mvelaphanda and Utlwanang (a consortium of black medical professionals),
is of great strategic importance to the group. Curamed is a group of six
Pretoria-based specialist hospitals comprising 706 beds. This transaction will
not only enhance the Medi-Clinic stable, but the meaningful advent of black
economic empowerment as part of the transaction, will provide a significant
platform for joint growth into the future. The transaction is still subject to
the approval of the Competition Authorities.
Focus will remain on adapting to the needs of the market, thereby increasing the
utilisation of facilities. The group will also endeavour to continue expanding
its facilities and services within its core competencies. Forces such as
changing technology, consumerism and affordability will shape the hospital of
the future. The group remains committed to exploring attractive overseas
opportunities.
New projects amounting to R179 million have recently been approved. The most
significant are the expansions at Durbanville Medi-Clinic, Nelspruit Medi-Clinic
(which includes a cardiac unit) and Pietermaritzburg Medi-Clinic. Major upgrades
at Morningside Medi-Clinic and Sandton Medic-Clinic will also commence soon. It
is envisaged that the total expenditure on projects over the next two years will
amount to about R400 million. Your group has, by invitation, commenced building
private hospitals in Howick, KwaZulu-Natal (26 beds) and Tzaneen (60 beds) in
partnership with the respective local communities. A 25-bed sub-acute unit in
Plettenberg Bay, Medsac Private Health Centre, was also acquired subject to
certain suspensive conditions. Together with the Curamed transaction, these
investments demonstrate the group`s confidence in and commitment to the private
hospital industry in South Africa.
Following the 4% increase in theatre and ward tariffs proposed by the Board of
Healthcare Funders for 2003, your group is now negotiating directly with various
funders. We are confident that a realistic increase will be granted.
Furthermore, these negotiations should create the opportunity of establishing
sound long-term relationships with individual strategic players in the funding
environment.
The acute shortage of skilled nursing staff is regarded as a serious threat to
all hospitals in the country. The group has increased the amount spent on the
training of nursing staff and certain other staff categories to 4% of its
payroll cost in the current budget. Nursing staff of the group who have received
training have to date achieved excellent results in the SA Nursing Council`s
registered examinations. The group is confident that such training, coupled with
the referred to retention bonus for nursing staff, will help to alleviate the
acute shortage.
Given acceptable economic growth in the country, the group remains optimistic
about its prospects for the next six months.
*ACCOUNTING POLICIES
The results have been prepared in accordance with South African Statements of
Generally Accepted Accounting Practice.
During the previous financial year the group changed its accounting policy in
respect of post-retirement medical benefits to comply with the revised AC116,
which resulted in a provision being raised in the balance sheet for post-
retirement medical benefits. Accordingly, the operating profit, taxation charge,
interest-free debt and attributable income of the previous review period have
been restated to incorporate the changed accounting policy. The restated
headline earnings per share for the six months ended _30 September 2001
decreased by 0,6 cents from 41,4 cents to 40,8 cents. With the exception of post
retirement medical benefits, the accounting policies used are consistent with
those applied in the previous review period.
CAPITAL DISTRIBUTION TO SHAREHOLDERS
The board of directors has declared a capital distribution of 9,7 cents per
ordinary share, which will be paid out of share premium.
In compliance with the requirements of STRATE, the following dates are
applicable:
Last date to trade cum capital distribution Friday, 6 December 2002
First date of trading ex capital distribution Monday, 9 December 2002
Record date Friday, 13 December 2002
Payment date Tuesday, 17 December 2002
Share certificates may not be dematerialised/rematerialised from Monday, 9
December 2002 to Friday, 13 December 2002, both days inclusive.
Signed on behalf of the board of directors:
E DE LA H HERTZOG LJ ALBERTS
Chairman Managing Director
Stellenbosch, 11 November 2002
Date: 13/11/2002 04:10:52 PM Produced by the JSE SENS Department
