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MDC: Medi-Clinic Corporation Limited - Interim ...
Medi-Clinic Corporation Limited - Interim Report and cautionary announcement
Medi-Clinic Corporation Limited
Incorporated in the Republic of South Africa
Registration number: 1983/010725/06
Share Code: MDC
ISIN: ZAE000004370
Medi-Clinic Corporation Limited Interim Report.
Unaudited results of Medi-Clinic Corporation Limited and its subsidiaries for
the six months ended 30 September and cautionary announcement.
CONSOLIDATED INCOME STATEMENT
6 months to 6 months to Year to
30/09/03 Increase 30/09/02 31/03/03
R000 % R000 R000
Revenue 1 779 005 29 1 378 416 2 924 229
Cost of sales (1 011 498) (798 832) (1 694 980)
Administration and
other operating
expenses (420 511) (306 157) (658 744)
Operating income 346 996 27 273 427 570 505
Interest received 24 344 17 827 42 650
Income from
associates 8 298 9 092 18 678
Profit on sale
of equipment 293 194 314
Amortisation of
goodwill (1 816) (660) (1 997)
Depreciation (47 459) (34 490) (74 180)
Financing costs (14 853) (3 942) (16 034)
Net income before
taxation 315 803 261 448 539 936
Taxation 85 746 71 912 145 102
Net income after
taxation 230 057 189 536 394 834
Minority interests 18 027 15 513 30 963
Attributable
earnings 212 030 174 023 363 871
Headline earnings reconciliation:
Attributable
earnings 212 030 174 023 363 871
Amortisation of
goodwill 1 816 660 1 997
Profit on sale
of equipment (293) (194) (314)
Attributable
headline earnings 213 553 22 174 489 365 554
Headline earnings
per ordinary
share - cents 62,7 23 51,1 107,0
Earnings per
ordinary
share - cents 62,3 50,9 106,5
Capital
distribution
per ordinary
share - cents
Interim 11,9 23 9,7 9,7
Final - - 23,3
11,9 9,7 33,0
CONSOLIDATED BALANCE SHEET
30/09/03 30/09/02 31/03/03
R000 R000 R000
Assets
Non-current assets 1 953 686 1 470 377 1 805 067
Property, plant and
Equipment 1 750 602 1 376 318 1 610 597
Intangible assets 36 212 16 860 35 964
Investments - unlisted 94 849 19 790 92 505
Deferred taxation 72 023 57 409 66 001
Current assets 955 195 777 197 890 735
Inventories 140 876 104 838 139 462
Receivables and prepayments 503 707 377 373 524 143
Cash and cash equivalents 310 612 294 986 227 130
Total assets 2 908 881 2 247 574 2 695 802
Equity and liabilities
Share capital and reserves 2 051 402 1 771 328 1 917 276
Minority interests 174 460 79 741 172 010
Long-term interest-bearing
debt 155 603 12 582 112 083
Short-term interest-bearing
debt 82 064 26 433 66 618
Interest-free debt and
provisions 445 352 357 490 427 815
Total equity and liabilities 2 908 881 2 247 574 2 695 802
Number of ordinary
shares (000) 341 053 342 025 340 719
Weighted number of
ordinary shares (000) 340 496 341 569 341 627
Net asset value per
ordinary share - cents 601 518 563
Directors valuation of
unlisted investments 132 595 90 374 127 043
STATEMENT OF CHANGES IN EQUITY
30/09/03 30/09/02 31/03/03
R000 R000 R000
Opening balance 1 917 276 1 660 270 1 660 270
Distributed to shareholders (79 256) (66 586) (99 731)
Net income 212 030 174 023 363 871
Movement in shares held
in treasury 1 352 3 621 (7 134)
2 051 402 1 771 328 1 917 276
CONSOLIDATED CASH FLOW STATEMENT
30/09/03 30/09/02 31/03/03
R000 R000 R000
Cash flow from operating
Activities 202 567 158 226 284 759
Cash generated from
operations activities 423 579 310 601 519 633
Net finance income 9 491 13 885 26 616
Taxation paid (130 416) (89 194) (143 109)
Cash distributions to
minorities (20 831) (10 480) (18 650)
Capital distributions to
Shareholders (79 256) (66 586) (99 731)
Cash flow from investment
activities (179 403) (56 386) (275 676)
Cash flow from financing
Activities 60 318 (15 301) 9 600
Net movement in cash and cash
equivalents 83 482 86 539 18 683
Opening balance of cash and
cash equivalents 227 130 208 447 208 447
Closing balance of cash and
Cash equivalents 310 612 294 986 227 130
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 29% to
R1 779 million (2002: R1 378 million) for the six months under review. Operating
income before interest, taxation, depreciation and amortisation (EBITDA) was 27%
higher at R347 million (2002: R273 million). Headline earnings rose by 22% to
R214 million (2002: R174 million) resulting in an increase of 23% in headline
earnings per ordinary share to 62,7 cents (2002: 51,1 cents). The interim
capital distribution per ordinary share at 11,9 cents (2002: 9,7 cents) is 23%
higher.
Capacity increased during the period under review as a result of the acquisition
on 1 December 2002 of the Curamed Group comprising about 700 beds. The current
period results are, therefore, not directly comparable with those of the
previous period. Excluding the addition of Curamed, the groups turnover growth
amounted to 14%.
The groups EBITDA margin declined slightly from 19,8% to 19,5% mainly due to
the start-up costs of the new Curamed Kloof Hospital in Pretoria, which opened
in June 2003, as well as certain once-off costs relating to the Curamed
transaction.
The Curamed integration is complete and benefits are already being realised. The
new Curamed Kloof Hospital has exceeded all expectations with occupancies well
above the initial budget. As envisaged, some of the more established hospitals
in the Curamed group currently have capacity to increase their activity levels
and efforts aimed at achieving this have been initiated. The Howick Private
Hospital (26 beds) and Tzaneen Private Hospital (100 beds) were successfully
commissioned in August and September 2003 respectively. The expansion at
Nelspruit Medi-Clinic which includes a cardiac unit, has been commissioned while
expansions at Durbanville Medi-Clinic and Pietermaritzburg Medi-Clinic are in
progress. The extensive upgrade of the Lamprecht Clinic, recently renamed George
Medi-Clinic, has been successfully completed. The upgrade of Potchefstroom Medi-
Clinic is nearing completion while major upgrades at Morningside Medi-Clinic and
Sandton Medi-Clinic have commenced.
A transaction was concluded whereby an interest of one-third will be acquired in
the Victoria Hospital (120 beds) in Tongaat, KwaZulu-Natal coupled with a
limited, but significant, management agreement. An aspect of this transaction
that needs special mentioning is the good working relationship that was built up
with the shareholders during the negotiations which should benefit both parties
over the long-term. The Victoria Hospital also increases the Medi-Clinic network
in KwaZulu-Natal.
On 1 July 2003 the Drakenstein day clinic was merged with the nearby Paarl Medi-
Clinic in a unique transaction involving the supporting doctors of both
hospitals. The outcome of this model will be closely monitored as it may be a
blueprint for further transactions at other hospitals in the group.
The new environment whereby tariff negotiations are conducted on an individual
basis with funders of healthcare created meaningful changes in the industry.
Medi-Clinic took the lead by negotiating a unique and transparent tariff
structure with Discovery Health. Further enhancements to this structure led to a
brand new product launched by Discovery Health in partnership with Medi-Clinic,
called Medi-Clinic Priority Plus. This is a comprehensive, quality product with
contributions priced at 70% of comparable products in the Discovery stable.
Further discussions with stakeholders are in progress to refine the product.
The trading environment is challenging as the country as a whole experienced
limited economic growth and the medical scheme membership remained virtually
unchanged. The group is therefore pleased to have experienced a 1,1% increase in
beddays sold as well as a favourable patient mix change over the previous period
on a comparable basis.
Cash flow continued to be strong during the period under review. The group
converted 122% (2002: 114%) of EBITDA into cash generated from operating
activities. Cash and cash equivalents increased to R311 million from R227
million at 31 March 2003 after financing net capital expenditure of R179
million. Interest-bearing debt increased from R179 million at 31 March 2003 to
R238 million mainly as a result of debt incurred by the Curamed Group in
completing the Curamed Kloof Hospital which resulted in a weakening of the
debt:equity ratio from 9% to 11%. The groups strong cash flow continues to
underline the quality of its earnings.
Capital expenditure for the period under review was R188 million (2002: R64
million). Capital commitments (including amounts approved but not yet contracted
for) amounted to R339 million (2002: R272 million).
PROSPECTS
The group expects to continue its consistent growth pattern.
Focus will remain on adapting to the needs of the market, thereby increasing the
utilisation of facilities. Risk sharing models in addition to alternative
reimbursement models are being investigated together with various role-players.
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 and are continuously
considered in forward planning.
The group has established a good knowledge of selected overseas markets and has
also broadened its knowledge about potential markets in Africa. It remains
committed to exploring attractive opportunities that may arise.
The local regulatory environment is virtually in a constant state of flux and is
being closely monitored. The private hospital industry has always been strictly
regulated. Coupled with the business approach and the values of the group, no
major threat to the business of the group is foreseen. New laws and regulations
pertaining to sub-sectors of the industry such as private practitioners,
pharmacies and medical schemes are in the pipeline that may in the longer run
influence the industry. Over the shorter term their financial impact is,
however, not expected to be significant.
New projects amounting to about R340 million have recently been commissioned or
are in progress. The most significant are the expansions at Durbanville Medi-
Clinic and Pietermaritzburg Medi-Clinic as well as the major upgrades at
Morningside Medi-Clinic and Sandton Medic-Clinic which were mentioned in the
commentary above. It is envisaged that the total expenditure on projects over
the next two years will amount to about R400 million. These investments
demonstrate the groups confidence in and commitment to the private hospital
industry in South Africa.
ACCOUNTING POLICIES
The interim financial statements comply with South African Statements of
Generally Accepted Accounting Practice and are in accordance with accounting
standard AC127. The accounting policies are consistent with those for the year
ended 31 March 2003, except for the application of AC133, which has now been
adopted. The effect of the change in the accounting policy had no material
effect on the results.
CAPITAL DISTRIBUTION TO SHAREHOLDERS
The board of directors has declared a capital distribution of 11,9 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, 5 December 2003
First date of trading ex capital distribution Monday, 8 December 2003
Record date Friday, 12 December 2003
Payment date Monday, 15 December 2003
Share certificates may not be dematerialised/rematerialised from Monday, 8
December 2003 to Friday, 12 December 2003, both days inclusive.
CAUTIONARY ANNOUNCEMENT
Shareholders are advised that Medi-Clinic has entered into discussions which may
12/11/2003 Source: JSE NEWS SERVICE
