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MDC - Mediclinic International Limited - Audited results of Mediclinic
International Limited and its subsidiaries for the financial year ended 31 March
2012 and declaration of cash dividend
Mediclinic International Limited
Incorporated in the Republic of South Africa
Reg. no. 1983/010725/06
Income tax no: 9950122714
Share code: MDC
ISIN code: ZAE000074142
("Mediclinic" or "the Company")
AUDITED RESULTS OF MEDICLINIC INTERNATIONAL LIMITED
AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 31 MARCH 2012 AND DECLARATION
OF CASH DIVIDEND
- Strong performance in Southern Africa and an excellent performance in
the UAE
- Solid performance by most of the Swiss hospitals offset by challenges
in the Berne hospitals
- Normalised headline earnings increased by 12%
- Normalised headline earnings per share increased by 7%
- Strong cash generation
- Final dividend per ordinary share increased to 55.0 cents (2011: 50.0
cents)
CONSOLIDATED INCOME STATEMENT
for the year ended 31 March
2012 Increase 2011
R`m % R`m
Revenue 21 986 18% 18 625
Cost of sales (12 314) (10 327)
Administration and other operating expenses (5 003) (4 112)
Operating profit before depreciation 4 669 12% 4 186
(EBITDA)
Depreciation and amortisation (910) (738)
Operating profit 3 759 3 448
Other gains and losses (26) 13
Income from associates 1 4
Finance income 85 61
Finance cost (1 642) (1 491)
Profit before tax 2 177 2 035
Income tax expense (693) (654)
Profit for the year 1 484 1 381
Attributable to:
Equity holders of the Company 1 221 1 177
Non-controlling interests 263 204
1 484 1 381
Earnings per ordinary share - cents
- Basic 194.7 0% 195.3
- Diluted 187.3 186.9
Headline earnings per ordinary share - cents
- Basic 194.9 6% 184.2
- Diluted 187.5 176.3
Normalised headline earnings per ordinary
share - cents
- Basic 193.0 7% 179.6
- Diluted 185.7 171.9
EBITDA reconciliation:
Operating profit before depreciation 4 669 4 186
(EBITDA)
Adjusted for:
Past service cost (14) (33)
Impairment of property and equipment 4 34
Insurance proceeds - (84)
Normalised EBITDA 4 659 14% 4 103
Earnings reconciliation:
Profit attributable to shareholders 1 221 1 177
Re-measurements for headline earnings 1 (77)
Profit on sale of property, equipment and (1) (4)
vehicles
Gain on rights sold - (2)
Gain on purchase of business acquisition - (21)
Impairment of property and equipment 2 34
Insurance proceeds - (84)
Income tax effects - 10
Headline earnings 1 222 10% 1 110
Re-measurements for normalised headline
earnings
Past service cost (14) (33)
Income tax effects 3 5
Normalised headline earnings 1 211 12% 1 082
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March
2012 2011
R`m R`m
Profit for the year 1 484 1 381
Other comprehensive income
Currency translation differences 1 405 488
Fair value adjustment to cash flow hedges (net of tax) (1 126) 246
Actuarial gains and losses (net of tax) (403) (73)
Other comprehensive income/(loss), net of tax (124) 661
Total comprehensive income for the year 1 360 2 042
Attributable to:
Equity holders of the Company 1 035 1 877
Non-controlling interests 325 165
1 360 2 042
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March
2012 2011
R`m R`m
Assets
Non-current assets 42 033 36 929
Property, equipment and vehicles 34 808 30 409
Intangible assets 6 350 5 565
Investments in associates 1 4
Other investments and loans 662 708
Derivative financial instruments - 33
Deferred income tax assets 212 210
Current assets 8 162 6 608
Inventories 582 522
Trade and other receivables 4 815 3 796
Current income tax assets 4 -
Derivative financial instruments 24 -
Other investments and loans 128 -
Investment in money market funds 510 723
Cash and cash equivalents 2 099 1 567
Total assets 50 195 43 537
Equity and liabilities
Total equity 11 404 10 560
Share capital and reserves 10 116 9 489
Non-controlling interests 1 288 1 071
Liabilities
Non-current liabilities 32 969 27 922
Borrowings 22 864 20 414
Deferred income tax liabilities 5 303 4 773
Retirement benefit obligations 823 383
Provisions 240 182
Derivative financial instruments 3 739 2 170
Current liabilities 5 822 5 055
Trade and other payables 3 460 2 938
Borrowings 1 930 1 834
Provisions 121 89
Derivative financial instruments - 48
Current income tax liabilities 311 146
Total liabilities 38 791 32 977
Total equity and liabilities 50 195 43 537
Net asset value per ordinary share cents 1 609.4 1 516.7
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March
2012 2011
R`m R`m
Cash flow from operating activities 2 216 2 316
Cash generated from operations 4 266 4 179
Net finance cost (1 525) (1 368)
Taxation paid (525) (495)
Cash flow from investment activities (1 055) (2 563)
Investment to maintain operations (731) (645)
Investment to expand operations (742) (778)
Proceeds on disposal of property, equipment and vehicles 23 24
Proceeds from derivative financial instruments 24 -
Insurance proceeds 27 57
Proceeds from other investments and loans 5 120
Purchases of FVTPL financial assets (144) (688)
Proceeds from FVTPL financial assets 134 -
Proceeds from money market funds 823 -
Purchases of money market funds (507) (672)
Interest received 33 19
Cash flow from financing activities (735) 688
Distributions to shareholders (436) (398)
Distributions to non-controlling interests (111) (59)
Proceeds from shares issued - 1 364
Share issue costs - (33)
Movement in borrowings (214) (208)
Proceeds from disposal of treasury shares 28 23
Treasury shares purchased (9) -
Contributions by non-controlling interests 7 -
Acquisition of non-controlling interests - (1)
Net movement in cash, cash equivalents and bank 426 441
overdrafts
Opening balance of cash, cash equivalents and bank 1 447 967
overdrafts
Exchange rate fluctuations on foreign cash 108 39
Closing balance of cash, cash equivalents and bank 1 981 1 447
overdrafts
Cash and cash equivalents 2 099 1 567
Bank overdrafts (118) (120)
1 981 1 447
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March
2012 2011
R`m R`m
Opening balance 10 560 7 616
Shares issued - 6
Premium on shares issued - 1 358
Share issue costs - (33)
Movement in shares held in treasury 19 23
Movement in share-based payment reserve 6 6
Capital contributed by non-controlling interests 3 -
Non-controlling interests acquired by the Group - (1)
Total comprehensive income for the year 1 360 2 042
Transactions with non-controlling shareholders 3 -
Distributed to shareholders (436) (398)
Distributed to non-controlling interests (111) (59)
Closing balance 11 404 10 560
Comprising
Share capital 65 65
Share premium 6 066 6 066
Treasury shares (269) (288)
Share-based payment reserve 135 129
Foreign currency translation reserve 3 171 1 828
Hedge reserve (3 223) (2 097)
Retained earnings 4 171 3 786
Shareholders` equity 10 116 9 489
Non-controlling interests 1 288 1 071
Total equity 11 404 10 560
SEGMENTAL REPORT
for the year ended 31 March
2012 2012 2012 2012
R`m R`m R`m R`m
R`m R`m R`m R`m
Hospital Hospital Adjustments Total
Services Properties and
eliminations
Revenue
- Southern Africa 9 423 826 (826) 9 423
- Middle East 1 831 59 (59) 1 831
- Switzerland 10 732 1 596 (1 596) 10 732
EBITDA
- Southern Africa 1 156 801 1 957
- Middle East 289 59 348
- Switzerland 887 1 477 2 364
Operating profit
- Southern Africa 900 801 1 701
- Middle East 191 59 250
- Switzerland 488 1 320 1 808
Assets
- Southern Africa 5 266 7 468 (6 118) 6 616
- Middle East 1 322 817 2 139
- Switzerland 11 538 28 231 39 769
- Corporate 1 671
Liabilities
- Southern Africa 2 358 4 062 (1 100) 5 320
- Middle East 613 267 880
- Switzerland 3 846 28 929 32 775
- Corporate -
- Intersegmental liabilities (184)
2011 2011 2011 2011
R`m R`m R`m R`m
Hospital Hospital Adjustments Total
Services Properties and
eliminations
Revenue R`m R`m R`m R`m
- Southern Africa 8 632 760 (760) 8 632
- Middle East 1 334 57 (57) 1 334
- Switzerland 8 659 1 326 (1 326) 8 659
EBITDA
- Southern Africa 1 150 737 1 887
- Middle East 183 57 240
- Switzerland 834 1 225 2 059
Operating profit
- Southern Africa 921 737 1 658
- Middle East 107 57 164
- Switzerland 527 1 099 1 626
Assets
- Southern Africa 4 937 6 872 (5 609) 6 200
- Middle East 1 005 727 1 732
- Switzerland 9 812 24 338 34 150
- Corporate 1 455
Liabilities
- Southern Africa 2 381 3 973 (1 059) 5 295
- Middle East 473 263 736
- Switzerland 3 176 23 923 27 099
- Corporate 4
- Intersegmental liabilities (157)
ADDITIONAL INFORMATION
2012 2011
R`m R`m
Capital commitments
- Southern Africa 1 427 1 490
- Middle East 31 9
- Switzerland 703 894
Exchange rates R R
Average Swiss franc (ZAR/CHF) 8.45 7.11
Closing Swiss franc (ZAR/CHF) 8.50 7.42
Average UAE dirham (ZAR/AED) 2.03 1.96
Closing UAE dirham (ZAR/AED) 2.09 1.85
Shares Number Number
`000 `000
Number of ordinary shares in issue 652 315 652 315
Number of ordinary shares held in treasury (23 758) (26 664)
Number of ordinary shares in issue net of treasury 628 557 625 651
shares
Weighted average number of ordinary shares in issue 627 280 602 467
Diluted weighted average number of ordinary shares in 651 921 629 488
issue
In determining basic earnings per share and basic headline earnings per share,
the weighted average number of ordinary shares in issue were taken into account.
COMMENTARY
We are pleased to report that the Mediclinic Group ("the Group") has maintained
its consistent growth pattern.
GROUP OVERVIEW
Group financial performance
The Group uses normalised EBITDA, normalised headline earnings and normalised
headline earnings per share as non-IFRS measures in evaluating performance and
as a method to provide shareholders with clear and consistent reporting. These
non-IFRS measures are defined as reportable EBITDA, headline earnings and
headline earnings per share in terms of accounting standards, excluding one-off
items. The term `normalised` used herein has replaced the term `core` used in
previous reports.
Trading results
Group revenue increased by 18% to R21 986m (2011: R18 625m) for the year under
review. Normalised operating income before interest, tax, depreciation and
amortisation ("normalised EBITDA") was 14% higher at R4 659m (2011: R4 103m).
Normalised headline earnings rose by 12% to R1 211m (2011: R1 082m). Normalised
headline earnings per ordinary share increased by 7% to 193.0 cents (2011: 179.6
cents).
These results were achieved despite the continuing tough global economic
conditions. The lower normalised headline earnings per share growth of 7%
compared to the normalised headline earnings growth of 12% was due to the
increased weighted average number of ordinary shares in issue which resulted
from the rights offer during the previous reporting period.
The average rand/Swiss franc (CHF) exchange rate was R8.45 compared to R7.11 for
the comparative period, which had a positive effect on the reported results, as
detailed under Hirslanden`s financial performance section.
Finance cost
Included in the finance cost is an amount of R81m (2011: R78m), which is the
current period`s amortisation in respect of raising fees paid on the Group`s
local and offshore debt. These amounts are amortised over the terms of the
relevant loans in line with future cash payments as prescribed in IAS 39
Financial Instruments.
Cash flow
The Group`s cash flow continued to be strong. The Group converted 92% (2011:
102%) of normalised EBITDA into cash generated from operations. Cash and cash
equivalents increased from R1 567m at 31 March 2011 to R2 099m at year end.
Interest-bearing borrowings
Interest-bearing borrowings ("debt") increased from R22 248m at 31 March 2011 to
R24 794m at year end, mainly as a result of the change in the closing rand/CHF
exchange rate. The closing rand/CHF exchange rate moved from R7.42 at 31 March
2011 to R8.50 at year end. It is important to note that the foreign debt of the
Group`s Swiss and Middle Eastern operations, amounting to R21 162m, is matched
with foreign assets in the same currencies. The foreign debt also has no
recourse to the Southern African operations` assets, as stipulated by the South
African Reserve Bank as well as applicable financing arrangements.
Assets
Property, equipment and vehicles increased from R30 409m at 31 March 2011 to R34
808m at year end and intangible assets increased from R5 565m at 31 March 2011
to R6 350m at year end. These increases are mainly a result of the change in the
closing rand/CHF exchange rate, as mentioned above.
Dividend
As indicated previously, the Group is moving towards a targeted dividend cover
of three times based on Group headline earnings over time. The final dividend
per share is 55.0 cents (2011: 50.0 cents). The total dividend per share for the
period under review is 78.0 cents (2011: 73.0 cents).
OPERATIONS IN SOUTHERN AFRICA
MEDICLINIC SOUTHERN AFRICA
Financial performance
The Southern African group revenue increased by 9% to R9 423m (2011: R8 632m)
for the year under review. Normalised EBITDA was 7% higher at R1 957m (2011: R1
837m).
After incurring depreciation charges of R256m (2011: R229m), net finance charges
of R328m (2011: R348m), taxation of R434m (2011: R388m) and deducting the
interest of minority shareholders in the attributable income of the Southern
African group amounting to R152m (2011: R141m), the Southern African operations
contributed R787m (2011: R731m) to the normalised attributable income of the
Group.
Business performance
The 9% revenue growth was achieved through a 3.3% increase in bed-days sold, a
5.1% increase in the average income per bed-day and 0.6% increase in other
revenue. Medical cases increased at a higher rate than surgical cases. The
number of patients admitted increased by 2.4%, while the average length of stay
increased by 0.9%.
The Southern African operations` EBITDA margin decreased slightly from 21.3% to
20.8%. The margin was negatively affected by 0.2% because of the straight-lining
of a major lease renewal; furthermore, the margin was negatively affected by a
non-recurring 0.3% which resulted from the launch of the new Mediclinic brand.
The Southern African operations` cash flow continued to be strong despite some
major medical schemes payments being received a few days after the financial
year end, since 31 March 2012 was not a business day (Saturday). The Southern
African operations converted 97% (2011: 111%) of EBITDA into cash generated from
operations.
Cash and cash equivalents increased from R755m at 31 March 2011 to R821m at year
end.
Interest-bearing borrowings decreased from R3 757m at 31 March 2011 to R3 631m
at year end.
Projects and capital expenditure
During the reporting period the Southern African operations spent R293m (2011:
R222m) on capital projects and new equipment to enhance its business, as well as
R230m (2011: R224m) on the replacement of existing equipment. In addition, R274m
(2011: R236m) was spent on the repair and maintenance of property and equipment,
charged through the income statement. For the next financial year, R727m is
budgeted for capital projects and new equipment to enhance its business, R250m
for the replacement of existing equipment and R274m for repairs and maintenance.
Incremental EBITDA resulting from capital projects in progress or approved is
budgeted to amount to R64m and R65m in 2013 and 2014 respectively.
The number of licensed hospital beds increased from 7 103 to 7 378 during the
year under review.
During the past year building projects were completed at:
- Mediclinic Stellenbosch (10 additional beds),
- Mediclinic Paarl (2 additional beds and 1 theatre),
- Mediclinic Cape Town (new doctors consulting block),
- Mediclinic Kimberley (12 additional beds),
- Mediclinic Kloof (32 additional beds),
- Mediclinic Welkom (36 additional beds and upgrade),
- Mediclinic Potchefstroom (13 additional beds),
- Mediclinic Highveld (27 additional beds),
- Mediclinic George (7 additional beds),
- Mediclinic Bloemfontein (6 additional beds), and
- Wits Donald Gordon Medical Centre (7 additional beds).
In addition, building projects at Mediclinic Nelspruit (78 additional beds) and
Mediclinic Limpopo (45 additional beds) were partially completed.
The following building projects in progress should be completed during the next
financial year:
- Mediclinic Limpopo (15 additional beds and upgrade),
- Mediclinic Nelspruit (2 theatres and upgrade),
- Mediclinic Cottage (upgrade and 14 additional beds),
- Mediclinic Louis Leipoldt (upgrade),
- Mediclinic Hoogland (4 additional beds, new doctors consulting block and
upgrade),
- Mediclinic Otjiwarongo (2 additional beds), and
- Mediclinic Muelmed (30 additional beds).
The following building projects in progress should be completed during the 2014
financial year:
- Mediclinic Pietermaritzburg (new cardiology unit, 80 additional beds,
consulting rooms and upgrade),
- Mediclinic Windhoek (27 additional beds and consulting rooms),
- Mediclinic Stellenbosch (upgrade),
- Mediclinic Milnerton (10 additional beds),
- Mediclinic Legae (new emergency centre), and
- Wits Donald Gordon Medical Centre (upgrade).
Furthermore, projects were also approved for:
- A new hospital in Centurion (174 beds),
- Mediclinic Howick (22 additional beds and upgrade),
- Mediclinic Kloof (additional consulting rooms),
- Marapong Private Hospital (relocating hospital),
- Mediclinic Newcastle (10 additional beds), and
- Mediclinic Victoria (14 additional beds and consulting rooms).
These projects will start during the next 12 months.
The number of licensed beds is expected to increase from 7 378 to 7 483 during
the next financial year.
Regulatory environment
The Department of Health remains committed to achieving universal coverage
through the proposed National Health Insurance (NHI) scheme. Mediclinic and HASA
(Hospital Association of South Africa) have submitted comprehensive comments on
the NHI Green Paper by the end of December 2011 and continue with their efforts
to engage with the Government and various stakeholders on the most appropriate
mechanisms for achieving universal coverage and promoting access to affordable
high-quality healthcare. We expect a White Paper on NHI to be released in the
near future.
In the meantime, the Minister of Health has started to implement some of the
pillars that would be needed for the implementation of the NHI scheme, such as
introducing a Bill in Parliament to establish the Office of Health Standards
Compliance, and announcing the first 10 NHI pilot sites for the Primary Health
Care project. The Department of Health also plans to address the severe shortage
of all professional categories of staff, the lack of sufficient management
capacity in public hospitals and the lack of capacity to train much needed human
resources.
Adequate access to quality healthcare in the public sector to achieve universal
healthcare through the NHI requires addressing the major systemic issues in the
public sector and a significant increase in human resource capacity. These
factors can be properly addressed only over the longer term. The Minister of
Health acknowledges these constraints and has identified them as critical
challenges that have to be addressed as a priority in order for the NHI to be
successful. Initiatives such as reopening nursing colleges, increasing the
capacity of medical schools and better management of hospitals are planned by
the Department of Health.
Mediclinic is of the opinion that the NHI and indeed these initial activities to
institute an NHI will not have any significant effect on the medical schemes
market or the private sector industry in the immediate future. In addition, the
Minister of Finance recently changed the tax-subsidy system to a tax credit
system, which will make private healthcare more affordable for lower-income
members. This creates a more enabling environment for an increase in the number
of medical scheme members in the future.
We do not expect any significant impact on our financial or business performance
due to the proposed amendments to Labour Legislation. Our remuneration policies
are already in line with the proposed amendments. However, the availability of
sufficient skilled medical resources in South Africa remains a challenge and we
continue to make substantial investments in the training of our staff.
OPERATIONS IN SWITZERLAND
HIRSLANDEN
Financial performance
Hirslanden`s revenue increased by 24% (4% at constant foreign exchange rates) to
R10 732m (CHF1 270m) (2011: R8 659m (CHF1 218m)) for the year under review.
Normalised EBITDA was 16% higher (2% lower at constant foreign exchange rates)
at R2 350m (CHF278m) (2011: R2 026m (CHF285m)).
After incurring depreciation charges of R556m (CHF66m) (2011: R433m (CHF61m)),
net finance charges of R1 239m (CHF147m) (2011: R1 060m (CHF149m)) and tax of
R260m (CHF31m) (2011: R251m (CHF35m)), and income from associates of R1m
(CHF0.1m) (2011: R4m (CHF1m)), Hirslanden contributed R296m (CHF34m) (2011:
R286m (CHF41m)) to the attributable income of the Group.
Business performance
Inpatient admissions increased by 4% during the reporting period, while the
average length of stay decreased slightly and the average income per bed-day
increased by 2%.
The normalised EBITDA margin of the group decreased from 23.4% to 21.9%.
The margin was affected by the following factors:
- The implementation of a revised labour law during the year and the additional
staff required in the fields of medical coding and controlling as a result of
the introduction of the new Swiss Diagnosis Related Grouping (DRG) added R46m
(CHF5.5m) to personnel expenses. Management is focusing on overall personnel
costs to mitigate the impact of these developments.
- The trend of a gradually increasing percentage of generally insured patients
is continuing. The fact that private and semi-private insurance premiums have
not increased in 2012 is a positive development to counter this trend.
- The Berne hospitals faced a number of challenges:
* Administrative challenges in first implementing the All Patient DRG (APDRG)
system in 2010 and then the Swiss DRG system in 2012 were substantial. This led
to increases in staff costs and trade debtors.
* Cost structures were furthermore increased as a result of the capacity
creation at Klinik Beau Site without achieving the budgeted initial revenue
increases.
* Moderate tariff declines have been experienced since the implementation of
APDRGs in 2010 and Swiss DRGs in 2012.
* Berne is a competitive market where the numerous uncertainties regarding the
hospital list status created general recruitment and retention challenges with
doctors.
These challenges have become a top priority for management. Along with greater
clarity regarding the new regulatory dispensation, this should lead to a more
normalised situation in the next financial year.
Hirslanden converted 84% (2011: 94%) of normalised EBITDA into cash generated
from operations. An expected temporary increase in trade debtors as a result of
the implementation of the new DRG system had a negative effect on the cash
conversion. Furthermore, an IAS 19 pension fund adjustment of R114m (CHF13.5m)
(2011: R102m (CHF14.3m)), which is the employer`s contribution exceeding the
current service cost, was credited to the consolidated income statement. If the
IAS 19 non-cash-flow pension fund credit is excluded, the Hirslanden group would
have converted 88% EBITDA into cash from operations.
Cash and cash equivalents decreased from R699m (CHF94m) at 31 March 2011 to
R588m (CHF69m) at year end.
Interest-bearing borrowings increased from R18 083m (CHF2 437m) at 31 March 2011
to R20 722m (CHF2 438m) at year end, mainly because of the increase in the
closing rate of the rand/CHF exchange rate.
Projects and capital expenditure
During the reporting period Hirslanden spent R456m (CHF54m) (2011: R312m
(CHF44m)) on capital projects and new equipment to enhance its business, as well
as R413m (CHF49m) (2011: R323m (CHF45m)) on the replacement of existing
equipment. In addition, R292m (CHF35m) (2011: R232m (CHF33m)) was spent on the
repair and maintenance of property and equipment, charged through the income
statement. For the next financial year CHF73m is budgeted for capital projects
and new equipment, CHF52m for the replacement of existing equipment and CHF34m
for repairs and maintenance. Incremental EBITDA resulting from capital projects
in progress or approved is budgeted to amount to CHF6m and CHF12m in 2013 and
2014 respectively.
The number of fully operational inpatient beds increased from 1 457 to 1 479
during the period under review.
The major new building at Klinik Hirslanden has been under construction in
Zurich since November 2010. During the reporting period the building project was
running according to plan and without incident. It is expected that the
commissioning of the new building (with an additional 72 inpatient beds and 8
ICU beds) will take place in 2013 during the European Spring.
Regulatory environment
As of 1 January 2012 the following major elements of the revised Swiss Health
Insurance Act (KVG) were implemented in Switzerland: (i) the introduction of
fixed fees for inpatient services based on DRGs; (ii) a new hospital financing
system which redefines the funding proportions of the cantons versus the health
insurance companies; and (iii) the revision of the hospital planning that led to
new hospital lists, defining those hospitals that are eligible to treat
generally insured patients.
The introduction of this new planning and financing system was certainly the
major challenge in this financial year. These changes go along with increased
regulatory constraints that will affect future business development to a certain
extent.
Hirslanden`s strategy is to obtain listing status for all its hospitals in
Switzerland, since management believes that in the long term this can ensure the
required number of patients. All hospitals with the exception of Klinik Im Park
in Zurich (subject to a legal appeal) and the Lausanne hospitals (only limited
service mandates with fixed amount of general insured cases) are on the hospital
lists. In some hospitals there are certain exceptions regarding the service
mandates (e.g. limitation on highly specialised treatments) that are currently
being debated and also legally challenged.
With the introduction of DRGs new insurance contracts had to be negotiated, the
whole invoicing process remodelled, and new documentation and coding processes
installed. Ongoing discussions with insurance companies and cantons had to be
undertaken and, based on these, short notice system adjustments made.
Hirslanden`s hospitals were the first in Switzerland to invoice under the Swiss
DRGs. Nevertheless, there was still an invoicing backlog as at financial year
end. On the revenue side the change meant that the revenue allocation and in-
house calculation had to be adjusted and, for example, new revenue splits
between the hospital and the doctors were implemented. In addition, the
hospitals had to fulfil the requirements of the cantons as an important new
debtor in the financing system.
The current price level (base rate in the DRG system) is as expected in most
cantons, but these prices are provisional and therefore can be subject to
review. Taking into account all these significant and complex changes in the
last couple of months, the current situation is in line with expectations except
for Berne as described above.
Despite the fact that the new system is operational, there are still a number of
areas that have not been finalised and remain uncertain:
- the applicable base rate per canton of the DRG pricing;
- hospital lists in some cantons are still under debate or legally challenged;
- restrictions in cantonal legislation could impact on the business;
- highly specialised medicine developments can impact on the future patient
profile of some hospitals; and
- cantons subsidising public hospitals.
OPERATIONS IN UNITED ARAB EMIRATES
EMIRATES HEALTHCARE
Financial performance
Revenue increased by 37% (32% at constant foreign exchange rates) to R1 831m
(AED902m) (2011: R1 334m (AED681m)) for the year under review. Normalised EBITDA
increased by 47% (43% at constant exchange rates) to R352m (AED174m) (2011:
R240m (AED122m)) and the EBITDA margin increased from 18.0% to 19.2%.
After incurring depreciation charges of R98m (AED48m) (2011: R76m (AED38m)), net
finance charges of R27m (AED14m) (2011: R38m (AED19m)) and the sharing of
minority shareholders in the attributable income of Emirates Healthcare
amounting to R113m (AED56m) (2011: R63m (AED32m)), Emirates Healthcare
contributed R114m (AED56m) (2011: R63m (AED33m)) to the attributable income of
the Group.
Business performance
During the reporting period excellent growth was achieved by all business units.
Inpatient hospital admissions increased by 23% (2011: 23%), while hospital
outpatient consultations and visits to the emergency units increased by 13%
(2011: 10%). Clinic outpatient consultations increased by 65% (2011: 21%) as a
result of the acquisition of the Emaar clinics.
The number of licensed hospital beds remained constant at 334 beds during the
period under review.
Emirates Healthcare converted 119% (2011: 100%) of EBITDA into cash generated
from operations. Cash and cash equivalents increased from R114m (AED61m) at 31
March 2011 to R325m (AED155m) at year end.
Interest-bearing borrowings increased from R408m (AED221m) at 31 March 2011 to
R439m (AED210m) at year end mainly as a result of the change in the closing
rand/AED exchange rate.
Projects and capital expenditure
During the reporting period Emirates Healthcare spent R26m (AED13m) (2011: R26m
(AED13m)) on capital projects and new equipment to enhance its business as well
as R25m (AED12m) (2011: R20m (AED10m)) on the replacement of existing equipment.
In addition, R35m (AED17m) (2011: R31m (AED16m)) was spent on the repair and
maintenance of property and equipment, charged through the income statement. For
the next financial year, AED14m is budgeted for capital projects and new
equipment to enhance its business, AED33m for the replacement of existing
equipment and AED18m for repairs and maintenance.
CHANGES TO THE BOARD OF DIRECTORS
There were no changes to the Board of Mediclinic during the period under review.
Mr Thys Visser, who served as a non-executive director since 2005 representing
Remgro Limited, tragically passed away on 26 April 2012. Mr Visser was an
exceptional leader and businessman. He will be long remembered, both for his
significant contribution to the Group and as a person.
Ms Zodwa Manase and Prof. Wynand van der Merwe (both independent non-executive
directors), as well as Dr Mamphela Ramphele (non-executive director) will retire
on 26 July 2012. We are thankful to them for the significant contribution they
have made over a long period to the Group.
The filling of these vacancies is receiving the attention of the Board.
Dr Edwin Hertzog will retire as an executive director in August 2012, but will
remain on the Board as a non-executive chairman. A further announcement will be
made in due course confirming the exact date.
PROSPECTS
The Group is uniquely positioned across three diverse international operating
platforms with stable and experienced management teams in place. It continues to
focus on its core business to fulfil its vision of being respected
internationally and preferred locally. The Group continues to consolidate its
collective intellectual capital and strengths with the goal of establishing a
respected international hospital group with a very specific focus on providing
comprehensive high-quality hospital services on a cost effective basis.
Although regulatory issues create uncertainties (at the moment especially in
Switzerland), we are optimistic about the future of our businesses in all three
platforms. This is supported by our continued substantial investments in
capacity building in all the platforms.
On the whole the Group remains positive about its operational prospects for the
next year.
REPORTS OF THE INDEPENDENT AUDITOR
The annual financial statements have been audited by PricewaterhouseCoopers Inc.
and their unqualified audit reports on the comprehensive annual financial
statements and the abridged annual financial statements are available for
inspection at the registered office of the Company.
BASIS OF PREPARATION
The accounting policies applied in the preparation of these abridged annual
financial statements, which are based on reasonable judgements and estimates,
are in accordance with International Financial Reporting Standards (IFRS) and
are consistent with those applied in the prior year. The abridged annual
financial statements have been prepared in terms of IAS 34 Interim Financial
Reporting as well as in compliance with the Companies Act, 71 of 2008, as
amended and the Listings Requirements of the JSE Limited. The preparation of the
abridged annual financial statements was supervised by the Chief Financial
Officer, Mr CI Tingle (CA(SA)).
DIVIDEND TO SHAREHOLDERS
Notice is hereby given that the directors have declared a final gross cash
dividend of 55.0 cents (46.75 cents net of dividend withholding tax) per
ordinary share. The dividend has been declared from income reserves and no
secondary tax on companies credits have been utilised. A dividend withholding
tax of 15% will be applicable to all shareholders who are not exempt therefrom.
The issued share capital at the declaration date is 652 315 341 ordinary shares.
The salient dates for the dividend will be as follows:
Last date to trade cum dividend Friday, 15 June 2012
First date of trading ex dividend Monday, 18 June 2012
Record date Friday, 22 June 2012
Payment date Monday, 25 June 2012
Share certificates may not be dematerialised or rematerialised from Monday, 18
June 2012 to Friday, 22 June 2012, both days inclusive.
Signed on behalf of the board of directors:
E de la H Hertzog
Chairman
DP Meintjes
Chief Executive Officer
Stellenbosch
22 May 2012
Directors:
Dr E de la H Hertzog (Chairman), DP Meintjes (Chief Executive Officer),
CI Tingle (Chief Financial Officer), JC Cohen (British), Prof Dr RE Leu (Swiss),
Dr MK Makaba, ZP Manase, KHS Pretorius, AA Raath, Dr MA Ramphele, DK Smith, CM
van den Heever, Dr CA van der Merwe, Prof WL van der Merwe,
Dr TO Wiesinger (German)
Secretary:
GC Hattingh
Registered address:
Mediclinic Offices, Strand Road, Stellenbosch 7600, South Africa
PO Box 456, Stellenbosch 7599, South Africa
Tel +27 21 809 6500
Fax +27 21 886 4037
Ethics line: 0800 005 316
Website: www.mediclinic.com
Transfer secretaries:
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg 2001, South Africa
PO Box 61051, Marshalltown 2107, South Africa
Tel +27 11 370 5000
Fax +27 11 688 7716
Sponsor:
Rand Merchant Bank (A division of FirstRand Bank Limited)
Date: 22/05/2012 14:30:01 Supplied by www.sharenet.co.za
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