| Thu 13 May 2004, 8:48 | | Results For The Financial Year Ended 31 March 2004 |
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Medi-clinic - Audited Results For The Financial Year Ended 31 March 2004
Release Date: 13/05/2004 07:00:05 Code(s): MDC
Medi-Clinic - Audited results for the financial year ended 31 March 2004
MEDI-CLINIC CORPORATION LIMITED
Reg. No. 1983/010725/06
("Medi-Clinic" - Incorporated in the Republic of South Africa)
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 2004
Audited results for the financial year ended 31 March 2004
- Facilitated broad-based black economic empowerment in the healthcare
industry through participation in Bidco"s acquisition of Afrox Healthcare
- Committed to providing sustainable and affordable healthcare
- Curamed hospital group successfully integrated
- Bed capacity significantly increased to about 6 200 beds - 12% of revenue
growth attributable to increased capacity
- Hospital revenues up 25% to R3,642 million (2003: R2,924 million)
- EBITDA up 27% to R722 million (2003: R571 million)
- HEPS up 21% to 129,5 cents (2003: 107,0 cents)
- Strong balance sheet with an increase in cash or cash equivalents to R451
million (2003: R227 million) after capital expenditure of R341 million
- Total capital distribution per ordinary share 21% higher at 40.0 cents
(2003: 33.0 cents)
Dr Edwin Hertzog, Chairman of Medi-Clinic said:
"We are pleased to report on another successful year of growth at Medi-Clinic
with satisfactory increases in revenues and earnings. We continue to invest in
our business to grow the capacity, notably in the areas of our core
competencies, and to focus on the needs of our customers to enhance the use of
our facilities. We remain confident about the future and continue to explore new
growth opportunities.
"With the need for economic transformation in the healthcare industry, we were
delighted to have helped facilitate the pioneering acquisition by Bidco of Afrox
Healthcare."
13 May 2004
Enquiries:
Medi-Clinic 021 809 6500
Dr Edwin Hertzog, Chairman
Louis Alberts, Managing Director
Gerhard Swiegers, Financial Director
College Hill 011 447 3030
Nicholas Williams 083 607 0761
Johannes van Niekerk 082 921 9110
HIGHLIGHTS
- Growth in hospital turnover: 25%
- Headline earnings per share growth: 21%
- Distribution per share up: 21%
CONSOLIDATED INCOME STATEMENT
Year to Year to
31/03/04 Increase 31/03/03
R"000 % R"000
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Revenue 3 642 763 25 2 924 229
Cost of sales (2 046 544) (1 694 980)
Administration
And other
operating
expenses (873 791) (658 744)
--------- ---------
Operating income 722 428 27 570 505
Interest received 45 618 42 650
Income from
Associates 17 331 18 678
Profit on sale
of equipment 514 314
Amortisation
of goodwill (2 969) (1 997)
Depreciation (101 018) (74 180)
Finance cost (31 349) (16 034)
----------- --------
Net income
before taxation 650 5555 39 936
Taxation 174 008 145 102
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Net income
after taxation 476 547 394 834
Minority interests 37 507 30 963
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Attributable
Earnings 439 040 363 871
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----------- ---------
Headline earnings
reconciliation:
Attributable earnings 439 040 363 871
Amortisation
of goodwill 2 969 1 997
Profit on sale
Of equipment ( 514) (314)
---------- --------
Attributable
headline earnings 441 495 21 365 554
--------- --------
--------- ---------
Headline earnings
per ordinary share
- cents 129,5 21 107,0
Earnings per ordinary
share - cents 128,8 106,5
Capital distribution
per ordinary share
- cents
Interim 11,9 9,7
Final 28,1 23,3
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40,0 21 33,0
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CONSOLIDATED BALANCE SHEET
31/03/04 31/03/03
R"000 R"000
------------------------------------------------------------------------------
Assets
Non-current assets 2 078 923 1 805 067
Property, plant and equipment 1 846 126 1 610 597
Intangible assets 47 874 35 964
Investments - unlisted 102 631 92 505
Deferred taxation 82 292 66 001
Current assets 1 134 151 890 735
Inventories 137 846 139 462
Receivables and prepayments 545 237 524 143
Cash and cash equivalents 451 068 227 130
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-------- --------
Total assets 3 213 074 2 695 802
----------- ----------
----------- ----------
Equity and liabilities
Share capital and reserves 2 242 033 1 917 276
Minority interests 199 522 172 010
Long-term interest-bearing debt 167 803 112 083
Short-term interest-bearing debt 74 317 66 618
Interest-free debt and provisions 529 399 427 815
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Total equity and liabilities 3 213 074 2 695 802
----------- -----------
----------- ------------
Number of ordinary shares ("000) 341 715 340 719
Weighted number of ordinary shares ("000) 340 840 341 627
Net asset value per ordinary share - cents 656 563
Directors" valuation of unlisted investments 144 844 127 043
-------- -------
-------- ------
STATEMENT OF CHANGES IN EQUITY
31/03/04 31/03/03
R"000 R"000
------------------------------------------------------------------------------
Opening balance 1 917 276 1 660 270
Distributed to shareholders (119 841) (99 731)
Net income for the year 439 040 363 871
Movement in shares held in treasury 5 558 (7 134)
--------- --------
2 242 033 1 917 276
---------- ---------
----------- ----------
CONSOLIDATED CASH FLOW STATEMENT
31/03/04 31/03/03
R"000 R"000
------------------------------------------------------------------------------
Cash flow from operating activities 484 802 284 759
-------- --------
Cash generated from operations
Activities 818 903 519 633
Net finance income 14 269 26 616
Taxation paid (196 543) (143 109)
Cash distributions to minorities (31 986) (18 650)
Capital distributions to shareholders (119 841) (99 731)
--------- --------
Cash flow from investment activities (324 943) (275 676)
Cash flow from financing activities 64 079 9 600
--------- ---------
Net movement in cash and cash
Equivalents 223 938 18 683
Opening balance of cash and cash
Equivalents 227 130 208 447
------------ ----------
Closing balance of cash and cash
Equivalents 451 068 227 130
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----------- ---------
COMMENTARY
We are pleased to report that the group has maintained its consistent growth
pattern.
Financial Performance
Turnover, which consists entirely of hospital fees levied, increased by 25% to
R3 643 million (2003: R2 924 million) for the year under review. Operating
income before interest, taxation, depreciation and amortisation (EBITDA) was 27%
higher at R722 million (2003: R571 million). The group"s EBITDA margin increased
from 19,5% to 19,8%. Headline earnings rose by 21% to R441 million (2003: R366
million) resulting in an increase of 21% in headline earnings per ordinary share
to 129,5 cents (2003: 107,0 cents). The total capital distribution per ordinary
share at 40,0 cents (2003: 33,0 cents) is 21% higher.
Business Performance
Bed capacity increased to about 6 200 beds during the year mainly as a result of
the acquisition on 1 December 2002 of the Curamed Group comprising about 550
beds. A number of other smaller but significant acquisitions were also made.
These include the merger of Drakenstein day clinic with Paarl Medi-Clinic on 1
July 2003 as well as the acquisitions of a one third interest in the Victoria
hospital (120 beds) in Tongaat, KwaZulu-Natal on 1 December 2003 and of the
Secunda Hospital (43 beds) on 1 January 2004. In addition, the Curamed Kloof
Hospital (142 beds), Howick Private Hospital (26 beds) and Tzaneen Private
Hospital (100 beds) were successfully commissioned in June, August and September
2003 respectively. The current year"s results are therefore not directly
comparable with those of the previous year. Excluding the increase in capacity,
the group"s turnover growth amounted to 13,2%.
The Curamed integration is complete and benefits are already being realised. The
new Curamed Kloof Hospital is exceeding expectations with occupancies well above
the initial budget. As envisaged and alluded to in the Interim Report, some of
the established hospitals in the Curamed Group have capacity to increase their
activity levels. We are pleased to report that efforts aimed at achieving this
are showing success and a number of new doctors have established their practices
at these hospitals.
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 George Medi-Clinic
(previously named Lamprecht 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.
The trading environment remained tight as the country as a whole experienced
limited economic growth and the medical scheme membership remained virtually
unchanged. The staff of the group deserve special mention for their dedicated
and energetic efforts which enabled the group to achieve the published results.
These results would also not have been possible without the loyal and competent
support of the doctors utilising the group"s facilities. Sincere thanks have to
be expressed to these vital role players.
Cash Flow
Cash flow continued to be strong during the period under review. Due to strong
working capital management, the group converted 113% (2003: 91%) of EBITDA into
cash generated from operating activities. Cash and cash equivalents increased to
R451 million from R227 million after financing investment activities of R325
million (2003: R276 million). Interest-bearing debt increased from R179 million
to R242 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 10%. The group"s strong cash flow continues to
underline the quality of its earnings.
Capital Expenditure and Capital Commitments
Capital expenditure for the period under review was R341 million (2003: R236
million). Capital commitments (including amounts approved but not yet contracted
for) amount to R399 million (2003: R510 million).
Black Economic Empowerment
As stated all along, the group wholeheartedly supports the need for economic
transformation in South Africa. To this end the group introduced meaningful and
real Black Economic Empowerment to the industry in November 2003 through the
facilitation of Bidco"s R3.1 bn acquisition of Afrox Healthcare. Bidco is
controlled by a BEE consortium led by Brimstone and Mvelaphanda Strategic
Investments. It furthermore includes broad-based national and regional doctor
and empowerment groupings. Collectively they own 75% of Bidco with Medi-
Clinic"s 25% share of Bidco being passive and non-controlling.
The Competition Commission has recommended the conditional approval of the
transaction to the Competition Tribunal. The ruling of the Tribunal is expected
towards the end of July 2004.
Corporate Sustainability
Medi-Clinic believes in providing cost-effective quality healthcare on a
sustainable basis. Key to achieving this objective are the following business
practices and policies:
The group"s efforts to attract and retain competent employees to satisfy the
staffing needs of the company are supported by comprehensive training
programmes. As a result Medi-Clinic has for instance become much more self-
reliant regarding all its nursing requirements.
Medi-Clinic provides and maintains high quality and convenient facilities for
doctors and patients. It honours the professional autonomy and independence of
clinical decision making by the doctors supporting its hospitals. In terms of
innovative, affordable fee structures it can be regarded as the market leader.
The group continually strives to be a responsible corporate citizen by inter
alia supporting broad-based economic transformation, managing the environmental
impact of operations and contributing to the general well-being of the
community. The group is committed to ethical business practices and efficient
risk management.
Affordability of Healthcare
Affordability remains a critical issue in the healthcare industry.
In an attempt to address ever increasing pharmaceutical prices, the group
negotiated an unique alternative reimbursement tariff with Discovery Health
during 2002. A structure was implemented in January 2003 which moved the trade
discount received from pharmaceutical suppliers to theatre and ward tariffs.
Discovery is charged the net acquisition price for all pharmaceutical products
(both ethical drugs and surgical consumables). This structure created a
transparent pricing system and lessened the inflationary effect experienced on
pharmaceutical products.
The structure furthermore enabled Medi-Clinic to enter into positive dialogue
with our supporting doctors with a view to use the most affordable
pharmaceutical product in the appropriate circumstances while still respecting
the doctor"s professional clinical decision. The benefit to Discovery and its
members was significant considering that some 50% of a typical private hospital
bill consists of pharmaceutical items.
The group is currently engaging with other medical schemes to make use of
similar structures.
Further enhancements to this structure led to a new product launched by
Discovery in January 2004, the Medi-Clinic Priority Plus option. This quality
product is expected to contribute to revenue growth for the group.
The group participates in a research project for the new Single Restricted
Membership Scheme for Public Service Employees which will, if implemented,
enable an additional 400 000 public services employees (who currently do not
belong to a medical scheme) to belong to this fund. The research entails, inter
alia, the affordability of such a scheme.
Regulation
The Regulations to the Medicines and Related Substances Act were recently
promulgated. The group supports the transparent pricing of medicines and drugs.
Though the final impact and effects of the Regulations are still unclear, it is
expected to affect the whole supply chain in healthcare delivery. It is
regrettable that the Government did not acknowledge the group"s submission that
the act of dispensing in a private hospital is vastly different from that of a
retail pharmacy. The State also remained excluded from these Regulations
creating uneven playing fields in the competitive environment.
PROSPECTS
Medi-Clinic expects to continue its consistent growth pattern.
The group"s focus will remain on meeting the needs of the market, thereby
increasing the utilisation of facilities. The expansion of facilities and
services in the group"s core competencies, and in particular acute care, are
constantly evaluated.
Medi-Clinic remains committed to exploring attractive overseas growth
opportunities in addition to pursuing opportunities in the local market.
The group has, with effect from 1 April 2004, acquired the Cottage Private
Hospital (70 beds) in Swakopmund, Namibia.
Initiatives by government aimed at broadening the membership base of medical aid
funds are followed with interest, and should have a positive impact on growth in
the industry.
Recent downward pressure on the inflation of pharmaceutical prices is expected
to continue. However, the group remains optimistic about its prospects for the
next year, given that current trading conditions continue to prevail.
ACCOUNTING POLICIES
The financial results comply with South African Statements of Generally Accepted
Accounting Practice. The accounting policies, with the exception of the
implementation of AC 133: Financial Instruments - Recognition and Measurement,
are consistent with those of the previous year. The change in the accounting
policy had no material effect on the results.
PricewaterhouseCoopers Inc. has audited the results. 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 28,1 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, 18 June 2004
First date of trading ex capital distribution Monday, 21 June 2004
Record date Friday, 25 June 2004
Payment date Monday, 28 June 2004
Share certificates may not be dematerialised/rematerialised from Monday, 21 June
2004 to Friday, 25 June 2004, both days inclusive.
Signed on behalf of the board of directors:
E DE LA H HERTZOG LJ ALBERTS
Chairman Managing Director
Stellenbosch, 12 May 2004
