| Wed 11 May 2005, 10:40 | | Medi-Clinic - Profit announcement- Audited result |
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Medi-Clinic - Profit announcement- Audited results of Medi-Clinic and its
subsidiaries for the financial year ended 31 March 2005
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 2005
HIGHLIGHTS
- Growth in revenue 11%
- Headline earnings per share growth 13%
- Distribution per share up 13%
CONSOLIDATED INCOME STATEMENT
Year to Year to
2005 Increase 2004
R`000 % R`000
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Revenue 4 039 907 11 3 642 763
Cost of sales (2 236 117) (2 046 544)
Administration and other
operating expenses (981 088) (873 791)
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Operating Profit 822 702 14 722 428
Dividends 1 705 -
Interest received 57 051 45 618
Income from associates 24 776 17 331
Profit on sale of equipment 667 514
Consideration for the
termination of agreements 50 000 -
Goodwill (2 913) (2 969)
Depreciation (109 886) (101 018)
Finance cost (29 450) (31 349)
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Net profit before taxation 814 652 650 555
Taxation 210 673 174 008
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Net profit after taxation 603 979 476 547
Minority interests 64 903 37 507
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Attributable earnings 539 076 439 040
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Headline earnings
reconciliation:
Attributable earnings 539 076 439 040
Goodwill 2 913 2 969
Profit on sale of equipment (667) (514)
After tax consideration for
the termination of agreements (42 500) -
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Attributable headline earnings 498 822 13 441 495
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Headline earnings per
ordinary share - cents 145.7 13 129.5
Earnings per ordinary
share - cents 157.5 128.8
Distribution per ordinary
share - cents
Interim - capital distribution 13.3 11.9
Final 31.7 28.1
Capital distribution 12.9 28.1
Dividend 18.8 -
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45.0 13 40.0
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CONSOLIDATED BALANCE SHEET
2005 2004
R`000 R`000
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Assets
Non-current assets 2 203 879 2 082 900
Property, plant and equipment 1 935 843 1 846 126
Intangible assets 48 144 47 874
Investments - unlisted 113 856 102 631
Deferred taxation 106 036 86 269
Current assets 1 510 170 1 134 151
Inventories 136 434 137 846
Receivables and prepayments 525 211 545 237
Cash and cash equivalents 848 525 451 068
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----------- ----------
Total assets 3 714 049 3 217 051
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----------- ----------
Equity and liabilities
Share capital and reserves 2 654 753 2 245 832
Minority interests 230 592 199 700
Long-term interest-bearing debt 159 214 167 803
Short-term interest-bearing debt 80 362 74 317
Interest-free debt
and provisions 589 128 529 399
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Total equity and liabilities 3 714 049 3,217 051
--------- ---------
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Number of ordinary shares (`000) 343 618 341 715
Weighted number of ordinary
shares (`000) 342 368 340 840
Net asset value per
ordinary share - cents 773 657
Directors` valuation of
unlisted investments 153 332 144 844
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STATEMENT OF CHANGES IN EQUITY
2005 2004
R`000 R`000
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Opening balance 2 242 033 1 917 276
Prior year adjustment 3 799 3 799
Distributed to shareholders (141 594) (119 841)
Net Profit for the year 539 076 439 040
Movement in shares held in treasury 11 439 5 558
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2 654 753 2 245 832
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CONSOLIDATED CASH FLOW STATEMENT
2005 2004
R`000 R`000
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Cash flow from operating
activities 582 078 484 802
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Cash generated from operating
activities 920 827 818 903
Net finance income 27 601 14 269
Dividends received 1 705 -
Consideration for the termination
of agreements 50 000 -
Taxation paid (242 675) (196 543)
Cash distributions to minorities (33 786) (31 986)
Capital distributions
to shareholders (141 594) (119 841)
--------- ---------
Cash flow from investment
activities (176 408) (324 943)
Cash flow from financing
activities (8 213) 64 079
---------- ----------
Net movement in cash and
cash equivalents 397 457 223 938
Opening balance of cash and
cash equivalents 451 068 227 130
---------- ---------
Closing balance of cash and
cash equivalents 848 525 451 068
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--------- ---------
COMMENTARY
We are pleased that the group continued its consistent growth pattern in the
year under review.
Financial Performance
Revenue, which consists of hospital fees levied, increased by 11% to R4 040
million (2004: R3 643 million) for the year under review. Operating profit
before interest, taxation, depreciation and amortisation (EBITDA) was 14% higher
at R823 million (2004: R722 million). Headline earnings rose by 13% to R499
million (2004: R441 million) resulting in an increase of 13% in headline
earnings per ordinary share to 145,7 cents (2004: 129,5 cents). The total
distribution per ordinary share at 45,0 cents (2004: 40,0 cents) is 13% higher.
Business Performance
In comparing the results with the previous financial year, the increase in bed
capacity by approximately 500 beds to about 6400 beds due to the commissioning
and acquisition of new hospitals reported on previously should be taken into
account. The current period`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 9%.
On a comparable basis the group experienced an increase in admissions and bed-
days sold of 1,2% and 3,2% respectively mainly as a result of an increase in
medical cases. The group was successful in its efforts to enhance the
affordability of healthcare costs, elaborated on later in this commentary. These
efforts, in close collaboration with supporting doctors, resulted in a
significant slowdown in pharmaceutical price inflation and in some instances a
lowering of cost in the pharmaceutical usage mix. This trend is expected to
continue.
The group`s EBITDA margin increased from 19,8% to 20,4% mainly as a result of
benefits realised from the integration and turnaround of the Curamed Group in
Pretoria. We are pleased to report that the plans and actions taken to restore
the attractiveness and profitability of these city hospitals are showing
success.A number of new doctors have established their practices at these
hospitals. Our empowerment partners have played an important role in the
turnaround of Curamed. The higher figure of R64,9 million (2004: R37,5 million)
allocated to minority interests is mainly attributable to the improved
performance of the Curamed Group. With the support of the doctors and staff,
the Curamed hospitals were successfully rebranded during the year as Medi-Clinic
hospitals.
Cash flow continued to be strong during the period under review, mainly due to
more efficient working capital management. The group converted 112% (2004:
113%) of EBITDA into cash generated from operating activities. Cash and cash
equivalents increased to R849 million from R451 million after financing net
capital expenditure of R176 million. Interest-bearing debt decreased from R242
million to R240 million resulting in a strengthening of the debt: equity ratio
from 10% to 8%. The group`s strong cash flow continues to underline the quality
of its earnings. Capital expenditure for the period under review was R200
million (2004: R341 million). Capital commitments (including amounts approved
but not yet contracted for) amounted to R526 million (2004: R399 million).
Commitment to the Future of Private and Public Healthcare in South Africa
Medi-Clinic has again illustrated its firm commitment to the future of
healthcare in South Africa with a planned investment of R60 million in the
Witwatersrand University Donald Gordon Medical Centre (WDGMC) with a further R5
million conditional on projected occupancy being achieved. In return Medi-Clinic
will obtain a 49.9% share in this hospital. In addition to contributing capital,
Medi-Clinic will have a management contract to efficiently manage all day-to-day
operational and financial aspects of the WDGMC. The finalisation of contractual
detail depends on the outcome of the due diligence currently conducted and
approval by the regulatory authorities.
This development enhances the ability of the Witwatersrand University to support
the public sector health services without requiring any government subsidy.
This significant partnership with the public sector is designed to support the
training of specialists and super specialists for both public and private
sectors, and to make the best clinical staff available to the Johannesburg
academic hospitals.
The group is keen to support the training of specialists, on whom the future of
both public and private hospitals sector depends, and will reinvest a portion of
its share of any profits generated in the academic activities of the WDGMC. This
step also brings greater representation of the Medi-Clinic network in
Johannesburg. The group will have the opportunity to participate in academic
activities such as the implementation of evidence-based treatment protocols
developed by clinical experts in particular specialty fields.
Black Economic Empowerment
The group has stated consistently that it supports the need for economic
transformation in South Africa and regards Broad Based Black Economic
Empowerment (`BBBEE`) as a strategic opportunity to strengthen the economic base
of our country. A key success factor of the strategy is evident in the capital
accumulation at all levels of society involving human, social, intellectual and
physical capital. Medi-Clinic`s commitment to sustainable growth and prosperity
in a democratic South Africa and the location of its hospitals across the
country implies that BBBEE strategies can be supported and encouraged across a
broad spectrum of opportunities.
Phodiso Holdings successfully acquired Mvelaphanda Strategic Investments`
interest in the Curamed Group. Phodiso Holdings, together with our longer term
partner Nozala Investments, have added notable value to this venture,
particularly in relationship building, transformation and at operational level.
Their capital accumulation increased rapidly at the same time and we are
optimistic about their future positive contribution.
In a further transaction, Phodiclinics (Pty) Ltd, a joint venture company owned
51% by Medi-Clinic and 49% by Phodiso, made an offer to acquire the four
hospitals with about 200 beds of the Protector group (in liquidation). The
group consists of the Medivaal-Medical Centre (Vanderbijlpark), Kathu Private
Hospital (Kathu), Maropong Hospital (Lepalale) and the Kingsley Hospital
(Pretoria). The offer was accepted by the liquidator in December 2004 subject to
certain conditions precedent, inter alia the approval of the regulatory
authorities. The conditions precedent are in the process of being fulfilled.
Further discussions to enhance the principles of BBBEE within Medi-Clinic, are
currently taking place and will be finalised towards the end of the year. Medi-
Clinic supports the principle of a Healthcare Charter and is actively
participating with the Private Healthcare Forum and the Hospital Association of
South Africa to establish the charter.
Medi-Clinic is proud to have been instrumental in the formation of Bidco that
has successfully acquired a controlling stake in Afrox Health. The decision to
withdraw was taken when outside funding for the transaction became available.
This put Brimstone and Mvelaphanda in a position to continue with the
transaction on their own. Bidco paid Medi-Clinic R50 million as consideration
for relinquishing its rights to participate in the deal.
Affordability of Healthcare
Affordability remains a critical issue in the healthcare industry.
The group supports the Department of Health in their efforts to create
transparency in the pricing of medicines and scheduled drugs. As alluded to in
previous reports, the group has had a fully transparent pricing system in place
with Discovery Health since January 2003, almost 18 months prior to the new
pharmacy pricing regulations becoming operative. Its scope went beyond medicines
and scheduled drugs and included surgical consumables, which are the larger part
of the total pharmaceutical portion of a typical private hospital account. This
enabled the group to focus on pharmaceutical products as cost items and not
income contributors with major savings to medical schemes in the long-term and
should be regarded as beneficial to the group since it improves the
affordability of healthcare.
This totally transparent pricing system was offered to all medical schemes.
Although it proved to be challenging, we were successful in negotiating a cost-
neutral change with nearly all the schemes.
Changes to the Board of Directors
Dr P J A Mphafudi resigned as non-executive director with effect from 9 December
2004.
Dr M A Ramphele has been appointed as non-executive director with effect from 17
March 2005. Dr Ramphele has been vice-chancellor of the University of Cape Town,
a managing director of the World Bank and currently serves as chair of Circle
Capital Ventures. It is foreseen that apart from her directorship, she will also
render certain consultancy services to the company.
PROSPECTS
The group plans to continue its track record of consistent growth based on
meeting the needs of the market, increasing the use and expansion of facilities
and services in its core competencies, together with efficiency improvements.
Apart from these internally driven growth focus areas, initiatives by government
aimed at broadening the membership base of medical schemes should have a
positive impact on growth in the industry in the longer term. It is, however,
still too early to predict the likely outcome of these initiatives. Other focus
areas will be to implement our BBBEE strategy, to intensify our investigation
into meaningful opportunities in other countries and to explore alternatives
aimed at optimising the capital structure of the group in the short to medium
term.
With effect from 1 April 2005, ER24 became a wholly-owned subsidiary of the
group, thereby enhancing its emergency service offering to the communities it
serves.
Major upgrades at Morningside Medi-Clinic and Sandton Medi-Clinic each involving
about R100 million are in progress so as to ensure their competitiveness in this
particularly high income area. Expansions at Durbanville Medi-Clinic and
Pietermaritzburg Medi-Clinic are also taking place while a project at Nelspruit
Medi-Clinic consisting of additional consulting rooms and the upgrade of the
original hospital, is underway. Routine upgrades continue at various hospitals,
while strategic upgrades at the Pretoria hospitals are in the planning phase.
The group remains optimistic about its prospects for the next financial year.
ACCOUNTING POLICIES
The annual results are prepared in accordance with South African Statements of
Generally Accepted Accounting Practice, the requirements of the South African
Companies Act and the Listing Requirements of the JSE Securities Exchange South
Africa. The accounting policies are consistent with those of the previous
financial period, except for the implementation of the South African Statements
of Generally Accepted Accounting Practice, AC 140: Business Combinations and AC
501: Secondary Tax on Companies (STC), which has now been applied.
REVIEW BY INDEPENDENT AUDITORS
The results have been audited by the company`s auditors, PricewaterhouseCoopers
Inc., Stellenbosch and a copy of their unqualified report is available for
inspection at the registered office of the company.
DISTRIBUTIONS TO SHAREHOLDERS
The board of directors has declared a capital distribution of 12,9 cents per
ordinary share, which will be paid out of share premium as well as a dividend of
18,8 cents per ordinary share resulting in an aggregate final distribution of
31,7 cents per ordinary share. In compliance with the requirements of STRATE,
the following dates are applicable:
Last date to trade cum distributions Friday, 17 June 2005
First date of trading ex distributions Monday, 20 June 2005
Record date Friday, 24 June 2005
Payment date Monday, 27 June 2005
Share certificates may not be dematerialised / re-materialised from Monday, 20
June 2005 to Friday, 24 June 2005, both days inclusive.
Signed on behalf of the board of directors:
E DE LA H HERTZOG L J ALBERTS
Chairman Managing Director
Stellenbosch, 11 May 2005
Date: 11/05/2005 04:00:45 PM
Produced by the JSE SENS Department
