| Wed 14 May 2003, 15:57 | | Profit Announcement |
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Medi-Clinic Corporation Limited -
Audited results of Medi-Clinic Corporation Limited and its subsidiaries for the
financial year ended 31 March 2003.
MEDI-CLINIC
CORPORATION LIMITED
Reg. No. 1983/010725/06
Share code: MDC
ISIN-code: ZAE000004370
PROFIT ANNOUNCEMENT Audited results of Medi-Clinic Corporation Limited and its
subsidiaries for the financial year ended 31 March 2003
HIGHLIGHTS
- Growth in hospital revenue: 20%
- Headline earnings per share growth: 21%
- Distribution per share up: 21%
CONSOLIDATED INCOME STATEMENT
Year to Year to
31/03/03 Increase 31/03/02
R"000 % R"000
Revenue 2 924 229 20 2 437 938
Operating income 570 505 13 505 944
Dividend received - 5 060
Interest received 42 650 19 929
Income from associates 18 678 18 129
Profit on sale of equipment 314 329
Amortisation of goodwill (1 997) (1 089)
Depreciation (74 180) (70 849)
Finance cost (16 034) (17 121)
Net income before taxation 539 936 460 332
Taxation 145 102 126 230
Net income after taxation 394 834 334 102
Minority interests 30 963 25 612
Attributable earnings 363 871 308 490
Headline earnings reconciliation:
Attributable earnings 363 871 308 490
Amortisation of goodwill 1 997 1 089
Profit on sale of equipment (314) (329)
Attributable headline earnings 365 554 18 309 250
Headline earnings per
ordinary share - cents 107,0 21 88,7
Earnings per ordinary share - cents 106,5 88,5
Capital distribution per ordinary
share - cents
Interim 9,7 7,8
Final 23,3 19,5
33,0 21 27,3
CONSOLIDATED BALANCE SHEET
31/03/03 31/03/02
R"000 R"000
Assets
Non-current assets 1 805 067 1 432 792
Property, plant and equipment 1 610 597 1 346 681
Intangible assets 35 964 17 835
Investments - unlisted 92 505 18 245
Deferred taxation 66 001 50 031
Current assets 890 735 714 794
Inventories 139 462 97 381
Receivables and prepayments 524 143 408 966
Cash and cash equivalents 227 130 208 447
Total assets 2 695 802 2 147 586
Equity and liabilities
Share capital and reserves 1 917 276 1 660 270
Minority interests 172 010 74 708
Long-term interest-bearing debt 112 083 27 437
Short-term interest-bearing debt 66 618 30 500
Interest-free debt and provisions 427 815 354 671
Total equity and liabilities 2 695 802 2 147 586
Number of ordinary shares (`000) 340 719 341 466
Weighted number of ordinary shares
(`000) 341 627 348 761
Net asset value per ordinary share
- cents 563 486
Directors" valuation of unlisted
investments 127 043 105 856
STATEMENT OF CHANGES IN EQUITY
31/03/03 31/03/02
R"000 R"000
Opening balance 1 660 270 1 488 117
Shares issued - 1 437
Distributed to shareholders (99 731) (80 387)
Net income for the year 363 871 308 490
Movement in shares held in treasury (7 134) (57 387)
1 917 276 1 660 270
CONSOLIDATED CASH FLOW STATEMENT
31/03/03 31/03/02
R"000 R"000
Cash flow from operating activities 284 759 353 004
Cash flow from operations 519 633 540 707
Net interest received 26 616 2 808
Dividends received - 28 512
Taxation paid (143 109) (123 056)
Cash distributions to minorities (18 650) (15 580)
Capital distributions to shareholders (99 731) (80 387)
Cash flow from investment activities (275 676) (95 861)
Cash flow from financing activities 9 600 (128 667)
Net movement in cash and cash
equivalents 18 683 128 476
Opening balance of cash and cash
equivalents 208 447 79 971
Closing balance of cash and cash
equivalents 227 130 208 447
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 20% to
R2 924 million (2002: R2 438 million) for the year under review. Operating
income before interest, taxation, depreciation and amortisation (EBITDA) was 13%
higher at R571 million (2002: R506 million). Headline earnings rose by 18% to
R366 million (2002: R309 million) resulting in an increase of 21% in headline
earnings per ordinary share to 107,0 cents (2002: 88,7 cents). The total capital
distribution per ordinary share at 33,0 cents (2002: 27,3 cents) is 21% higher.
Capacity increased during the year as a result of the acquisition on 1 December
2002 of the Curamed Group comprising about 700 beds with about 150 under
construction. The current year results are, therefore, not directly comparable
with those of the previous year. Unless stated to the contrary, further
comparisons will be made without the effect of the inclusion of Curamed in the
results. Excluding the acquisition of Curamed the group"s turnover growth
amounted to 15%.
The group"s EBITDA margin declined from 20,8% to 19,5%. This was alluded to in
the Interim Report where mention was made that the decline resulted mainly 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. These expenses had a similar
effect for the full year under review. In addition, the group"s margin declined
further due to the inclusion of Curamed"s business, which at this stage operates
at lower margins. The integration of Curamed is in process and on schedule with
some synergy benefits already being unlocked.
In addition to the 9 million shares acquired during the previous financial year,
the group acquired a further 2 036 900 of its own shares during the period under
review. These shares will be held in treasury and a total of 1 689 600 shares
have already been utilised in terms of the group"s share option scheme. The net
repurchase of shares has impacted positively on the headline earnings per share
as is evidenced by its growth of 21% compared with the increase in the headline
earnings of 18%.
The trading environment remained tight as the country as a whole experienced
limited economic growth and the medical scheme membership remained virtually
unchanged. The group is, therefore, grateful to have experienced an increase in
theatre hours sold as well as a favourable patient mix change. This occurred on
the back of a steady rate of admissions and a slight decline in bed days sold
due to a commensurate decline in the length of stay.
Cash flow continued to be strong during the period under review. As in the past,
the group managed to limit the increase in inventories and receivables to
considerably less than the growth rate in turnover. As a result the group earned
net finance income of R26,6 million compared with R2,8 million previously.
Interest-bearing debt increased from R58 million to R179 million due the
inclusion of debt on the Curamed balance sheet, which resulted in a weakening of
the debt: equity ratio from 3% to 9%. Cash and cash equivalents increased to
R227 million from R208 million. The group"s strong cash flow continues to
underline the quality of its earnings.
The group financed its Black Economic Empowerment partners in the Curamed
transaction on commercial terms to the amount of R49 million pending external
finance being granted.
Capital expenditure for the period under review was R234 million (2002: R148
million). Capital commitments (including amounts approved but not yet contracted
for) amounted to R510 million (2002: R158 million).
PROSPECTS
The group expects to continue its consistent growth pattern.
The acquisition of the Curamed Group, in conjunction with Nozala, Mvelaphanda
and Utlwanang (a consortium of black medical professionals) on 1 December 2002,
is of great strategic importance to the group. Curamed is a group of six
Pretoria-based specialist hospitals comprising about 700 beds of which about 150
will be commissioned in early June 2003. 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. On an operational level, it is expected that full synergy
benefits will be derived subsequent to the integration process.
The group has been included in the hospital network of the Key Health product of
Discovery Health, designed as a low cost product to provide affordable
healthcare to the employed but uninsured. This is the first meaningful
initiative to enlarge the current medical scheme membership.
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. The group remains
committed to exploring attractive overseas opportunities in various formats.
It is likely that operating margins will remain under pressure. In addition to
the items already mentioned above, the current inflationary and nurse shortage
environment fuel expectations of higher salaries. Although the net tariff
increase for 2003 negotiated with funders on an individual basis was
satisfactory, these salary expectations may warrant interim tariff adjustments.
Furthermore, your group is embarking on certain strategic initiatives to
position and strengthen itself for the future. These initiatives will require
manpower and resources that will impact on the margin in the short term. A
similar situation arises with the three new hospitals (264 beds) that will be
commissioned during the 2004 financial year, namely Curamed Kloof in Pretoria,
Howick and Tzaneen.
Apart from the commissioning of these new hospitals, other hospital projects
have also commenced. The most significant are the expansions at Durbanville Medi
Clinic, Nelspruit Medi-Clinic (which includes a cardiac unit) and
Pietermaritzburg Medi-Clinic. These projects will result in increased service
capacity and benefits will flow through towards the latter half of the 2004
financial year. Major upgrades at Morningside Medi-Clinic and Sandton Medi-
Clinic are also in progress. It is envisaged that the total expenditure on these
projects over the next two years will amount to about R350 million.
In the light of the acute shortage of skilled nursing staff the group has
increased the amount spent on the training of nursing staff (and certain other
staff categories) to nearly 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 realistically foreseen trading conditions, the group remains optimistic
about its prospects for the next year.
ACCOUNTING POLICIES
The accounting policies adopted for the purposes of this report comply with
South African Statements of Generally Accepted Accounting Practice. These
accounting policies are also consistent with those of the previous year.
Where necessary, comparative figures have been adjusted to conform with changes
in presentation in the current year.
The results have been audited by PricewaterhouseCoopers Inc. A copy of their
unqualified report is available for inspection at the company"s registered
office.
CAPITAL DISTRIBUTION TO SHAREHOLDERS
The Board of directors has declared a capital distribution of 23,3 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, 20 June 2003
First date of trading ex capital distribution Monday, 23 June 2003
Record date Friday, 27 June 2003
Payment date Monday, 30 June 2003
Share certificates may not be dematerialised/rematerialised from Monday, 23 June
2003 to Friday, 27 June 2003, both days inclusive.
Signed on behalf of the board of directors:
E DE LA H HERTZOG LJ ALBERTS
Chairman Managing Director
Stellenbosch, 13 May 2003
DIRECTORS: E de la H Hertzog (Chairman), L J Alberts (Managing), W E Bhrmann, W
P Esterhuyse, S D Hlongwane, J du T Marais, A R Martin, D P Meintjes, P J A
Mphafudi, A A Raath, J G Swiegers, C I Tingle, W L van der Merwe
SECRETARY: G C Hattingh REGISTERED ADDRESS: Medi-Clinic Offices, Strand Road,
Stellenbosch 7600, P O Box 456, Stellenbosch 7599, Fax (021) 886-4037, Tel (021)
809-6500
INTERNET: http://www.mediclinic.co.za E-MAIL: medimail@mediclinic.co.za
SPONSOR: Rand Merchant Bank Corporate Finance
TRANSFER SECRETARIES: Computershare Investor Services Limited, 70 Marshall
Street, Johannesburg 2001, P O Box 61051, Marshalltown 2107, Fax (011) 688-7716,
Tel (011) 370-7700
Date: 14/05/2003 03:39:36 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
