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Mediclinic Intnl plc - Annual Financial Report

19/06/2020
RNS Number : 5510Q
Mediclinic International plc
19 June 2020
 

Mediclinic International plc
(Incorporated in England and Wales)
Company Number: 08338604
LSE Share Code: MDC

JSE Share Code: MEI
NSX Share Code: MEP
ISIN: GB00B8HX8Z88

LEI: 2138002S5BSBIZTD5I60
("Mediclinic", or the "Company", or the "Group")

 

19 June 2020

 

POSTING OF ANNUAL REPORT AND FINANCIAL STATEMENTS,
NOTICE OF ANNUAL GENERAL MEETING AND PROXY FORM

 

Mediclinic announces that its Annual Report and Financial Statements in respect of the financial year ended 31 March 2020 ("2020 Annual Report") is being posted to shareholders today, together with the notice of annual general meeting ("AGM") (the "Notice") and the Form of Proxy in relation to the Company's AGM to be held on Wednesday, 22 July 2020 at 14 Curzon Street, London, W1J 5HN at 16:30 (BST).

 

In accordance with Listing Rule 9.6.1, the above documents are being submitted to the National Storage Mechanism and will shortly be available to the public for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

 

The documents are also being made available on the Company's website at www.mediclinic.com during the course of today. In addition, the Group's 2020 Clinical Services Report and 2020 Sustainable Development Report is available at https://annualreport.mediclinic.com.

 

Shareholders should note that, as a result of the COVID-19 pandemic and the current United Kingdom government restrictions on travel and indoor public gatherings, shareholder attendance at the Company's AGM will not be possible this year. Shareholders are therefore encouraged to appoint the chair of the AGM as their proxy. Further instructions relating to the Form of Proxy are set out in the Notice.

 

The Board of Directors recognises the importance of the AGM to shareholders and is keen to ensure that each is able to exercise his/her right to participate by voting. Details on how to submit proxy votes by post, online or through CREST, are set out in the Notice.

 

Registered shareholders may submit their questions to the Board of Directors in advance of the AGM by sending an email to the Company Secretary at MediclinicInternational@linkgroup.co.uk and the Company will answer these in due course.

 

In accordance with DTR 6.3.5 of the FCA's Disclosure Guidance and Transparency Rules, additional information is set out in the appendices to this announcement. The information in the Appendix is extracted from the 2020 Annual Report and should be read in conjunction with the Company's preliminary results announcement issued on 2 June 2020 (RNS number 6029O). Together, these constitute the information required by DTR 6.3.5 to be communicated in full unedited text through a Regulatory Information Service. This material is not a substitute for reading the full 2020 Annual Report.

 

About Mediclinic International plc

 

Mediclinic is an international private healthcare services group, established in South Africa in 1983, with divisions in Switzerland, Southern Africa (South Africa and Namibia) and the United Arab Emirates ("UAE").

The Group's core purpose is to enhance the quality of life.

Its vision is to be the partner of choice that people trust for all their healthcare needs.

Mediclinic is focused on providing specialist-orientated, multi-disciplinary services across the continuum of care in such a way that the Group will be regarded as the most respected and trusted provider of healthcare services by patients, medical practitioners, funders and regulators of healthcare in each of its markets.

At 1 June 2020, Mediclinic comprised 76 hospitals, eight sub-acute and specialised hospitals, 15 day case clinics and 21 outpatient clinics. Hirslanden operated 17 hospitals, three day case clinics and three outpatient clinics in Switzerland with more than 1 800 inpatient beds; Mediclinic Southern Africa operations included 52 hospitals (three of which in Namibia), eight sub-acute and specialised hospitals and 10 day case clinics (four of which operated by Intercare) across South Africa, and more than 8 700 inpatient beds; and Mediclinic Middle East operated seven hospitals, two day case clinics and 18 outpatient clinics with more than 900 inpatient beds in the UAE.

The Company's primary listing is on the London Stock Exchange ("LSE") in the United Kingdom, with secondary listings on the JSE Ltd in South Africa and the Namibian Stock Exchange in Namibia.

Mediclinic also holds a 29.9% interest in Spire Healthcare Group plc, a leading private healthcare group based in the United Kingdom and listed on the LSE.

 

For further information, please contact:

 

Company Secretary, Link Company Matters Limited

Caroline Emmet

+44 (0)20 7954 9548

 

Investor Relations, Mediclinic International plc

James Arnold, Head of Investor Relations

ir@mediclinic.com 

+44 (0)20 3786 8181

 

Media queries

FTI Consulting

Ben Atwell/Ciara Martin - UK

+44 (0)20 3727 1000

Sherryn Schooling - South Africa

+27 (0)21 487 9000

 

Registered address: 6th Floor, 65 Gresham Street, London, EC2V 7NQ, United Kingdom

Website: www.mediclinic.com 

Corporate broker (United Kingdom): Morgan Stanley & Co International plc and UBS Investment Bank

JSE sponsor (South Africa): Rand Merchant Bank (A division of FirstRand Bank Limited)

NSX sponsor (Namibia): Simonis Storm Securities (Pty) Ltd

 

 

 

APPENDIX

 

 

 

PRINCIPAL RISKS AND UNCERTAINTIES

 

The Group's principal risks and uncertainties are detailed below, as extracted from pages 119-123 of the 2020 Annual Report. For further information, please refer to the 2020 Annual Report. 

 

KEY

 

REFERENCE

RISK CATEGORY

BUSINESS PROCESSES

A

Strategic and business environment

·  Strategy formulation and implementation

·  Strategic investments and projects

B

Financial and reporting

·  Revenue cycle

·  Procure-to-pay cycle

·  Financial management and control

·  Treasury

·  Health information (including coding)

C

Operational

·  Infrastructure

  • Marketing and corporate communication operations    

D

Information technology

·  ICT and related projects

E

Regulatory compliance

·  Legal and secretarial

·  Governance, risk and compliance

·  Environmental management

F

Clinical

·  Clinical

·  Nursing

·  Pharmacy

·  Coding

G

People

·  Human resources

·  Payroll cycle

 

 

PRINCIPAL

RISK

MOVEMENT IN

FY20

RISK DESCRIPTION 

RISK MITIGATION

1. Pandemics and infectious diseases

 

A F

Increased

 

The increasing risk relates to the COVID-19 pandemic.

 

An epidemic occurs when an infectious disease infects many people rapidly; a pandemic occurs when it spreads to multiple countries and continents.

 

These risks refer to the Group's ability to respond effectively to the potential adverse clinical, operational

and business effects caused by a pandemic or infectious disease.

·    Effective triage system

·    Hospital and business incident response planning

·    Central coordination of task teams and clinical governance

·    Incident monitoring

·    Financial scenario planning

·    Communication strategy

2. Economic and business environment

 

A

Increased

 

The global economic environment and outlook deteriorated.

These risks relate to the downturn in the general economic and business environments impacting on the affordability of healthcare for funders and self-paying patients.

 

The business environment risks include the power of funders and the potential negative impact on tariffs and fees resulting from the shift of the relative negotiating power away from healthcare service providers towards funders.

·    Systems to monitor developments and trends in the economic and business environments and early warning indicators

·    Proactive monitoring and negotiation by the Group's Funder Relations functions

·    Focus on quality and continuum of care to reinforce the Group's market position

3. Regulatory and compliance

 

E

Increased

 

The increasing risk relates to the continued healthcare reform and the introduction of new regulations.

 

These risks relate to adverse changes in legislation and regulations impacting on the Group or where the failure to comply with legislation and regulations may result in losses, fines, penalties or damage to reputation. The Group is also exposed to an increasing compliance monitoring cost.

 

The risks include healthcare reform by regulators aimed at reducing the cost of healthcare; broadening the access to quality healthcare; and increasing the monitoring of quality standards by regulators.

 

·    Proactive engagement with stakeholders

·    Health policy units created to conduct research and to provide strategic input into reform processes

·    Active industry participation across all divisions

·    Company Secretarial, Legal and Compliance functions support operational management; monitor regulatory developments; and, where necessary, obtain expert legal advice for the effective implementation of compliance initiatives

·    Compliance risks identified and assessed as part of compliance management processes

4. Competition

 

A

No change

 

Providers in the healthcare market remain competitive.

These risks relate to the uncertainty created by the existing and/ or emerging competitors with strong strategies.

 

The risks include the outmigration of care (partly driven by further technological developments) and the development of alternative care models.

·    Proactive monitoring

·    Strategic planning processes

·    Quality and value of care processes

5. Information systems security and cyberattacks

 

D

 

 

Increased

 

The increased risk relates to the continued external threats arising from cyberattacks and breaches.

Information systems security risk and cyber risk relate to the unauthorised access to information systems through external or internal attack or unauthorised breaches resulting in the unavailability of systems, failure of data integrity and loss of confidential data.

·    Comprehensive information systems identity access management, change and physical access controls

·    Regular security reviews

·    Disaster recovery planning

·    Group information security and data privacy policies

·    Group ICT security committee

6. Disruptive innovation and digitalisation

 

D

Increased

 

The increased

risk relates to increased

demand from clients and

stakeholders

for adoption of

digital solutions

and innovation.

Disruptive innovation and digitalisation risks include the disintermediation and erosion of the Mediclinic business model due to the impact of technological development. It refers to the extent and speed that new technologies (and combinations thereof) change and transform industries, and to what extent an organisation can exploit these opportunities by being responsive and innovative, while managing associated risks.

·    Strategic planning processes

·    Proactive monitoring

·    Systems to monitor developments and trends in the economic and business environments and early warning indicators

7. Availability, recruitment and retention of skilled resources and medical practitioners

 

G

No change

 

Vacancies and turnover ratios in respect of skilled resources and medical practitioners are expected to remain at similar levels to the prior reporting period.

There is a shortage of skilled labour, particularly a shortage of qualified and experienced nursing employees in Southern Africa.

 

The availability and support of

admitting medical practitioners,

whether independent or employed, are critical to the Group's services.

 

·    Systems to monitor satisfaction, movement and profiles of medical practitioners

·    Details on the relationship and engagement with medical practitioners provided in the 2020 Sustainable Development Report

·    Employment, recruitment and retention strategies explained in the 2020 Sustainable Development Report

·    Extensive training and skills development programme and foreign recruitment programme, explained in the 2020 Sustainable Development Report

8. Business projects

 

A, D

Reduced

 

The risk decreased during the year under review.

The Group plans to adapt to the evolving operational and regulatory environment and healthcare market. These risks refer to issues or occurrences that could interfere with successful completion of projects, including timelines, cost and quality.

·    Effective project governance practices, methodologies and reporting

·    Experienced project management teams

·    Proactive monitoring and oversight

9. Clinical

 

F

No change

 

Clinical processes across all divisions remained a key focus area for the Group.

Risk exposure remained at a comparable level to the prior reporting period.

These risks relate to all clinical risks associated with the provision of clinical care resulting in undesirable clinical outcomes.

 

Clinical risks are managed daily at all facilities. High-priority clinical risk areas include patient safety culture, adverse obstetric outcomes, medication errors, surgical and procedural adverse events and multidrug resistant organisms.

Such risks may also result in damage to Mediclinic's reputation and impact on brand equity1.

·    Refer to the 2020 Clinical Services Report for a detailed analysis of the strategies to manage and monitor clinical risks

·    A Group-wide clinical risk register implemented per division

·    Accreditation processes

·    Clinical governance processes

·    Monitoring of clinical performance indicators

·    Focus on quality management processes

·    Stakeholder engagement and disclosure strategies

·    Clinical audits

10. Availability and cost of capital

(Including financing and liquidity risks)

 

B

No change

 

Interest rates are expected to remain at comparable levels during 2020. Long-term financing arrangements are in place.

These risks relate to the cost, terms and availability of capital to finance strategic expansion opportunities and/or the refinancing or restructuring of existing debt affected by prevailing capital market conditions.

 

All three divisions have recently

refinanced their debt and, therefore, maturities are relatively long dated. The nearest term material maturity is a Swiss bond due in February 2021. An unutilised bank facility is in place to fully repay the bond.

·    Long-term planning of capital requirements and cash-flow forecasting

·    Scrutiny of cash-generating capacity within the Group

·    Proactive and long-term agreements with banks and other funders relating to funding facilities

·    Systems to monitor compliance with requirements of debt covenants

·    Further details on capital risk management and the Group's borrowings contained in the Group financial statements

11. Operations and credit

 

B, C

No change

 

The operational and credit risks did not change significantly and remained stable.

Operational risks refer to diverse types of operational events with a potential for financial loss, operational interruptions or reputational damage.

 

Credit risks relate to possible loss due to a funder's inability to pay the outstanding balance owing; default by banks and/or other deposit-taking

institutions; or the inability to recover outstanding amounts due from patients.

 

Credit risk with respect to trade

receivables consists mainly of

medical schemes and insurance companies which are required to maintain minimum reserve levels. In Switzerland and the UAE a large part

of trade receivables are owed by cantonal or government-funded programmes that support healthcare providers with early release of payments due to them during COVID-19 business disruptions.

·    Preservation of a sound internal financial control environment

·    Effective operational risk management processes

·    Effective monitoring and oversight of operations

·    Regulated minimum solvency requirements for funders

·    Monitoring of approved funders

·    Group Treasury Policy

12. Quality of service and operational stability

 

C

No change

 

These risks did not change significantly and remained stable.

These risks refer to the quality of service and the stability of the operations, including:

 

·      incidents of poor service or where operational management fails to respond effectively to complaints;

·      operational interruptions which refer to any disruption of the facility and may include the threat of disrupted electricity or water supply; and

·      fire and allied perils causing damage or business interruption.

·    Patient satisfaction surveys (both internal and external)

·    Complaints monitoring

·    Training programmes and supervision of service levels

·    Emergency backup electricity generation

·    Emergency and disaster planning

·    Extensive fire-fighting and detection systems, including comprehensive maintenance processes

·    Comprehensive insurance cover for financial impact of potential disasters

13. Business investment and acquisitions

 

A, B

Reduced

 

The investment and governance processes were strengthened during the year under review.

These risks relate to increased financial exposure due to major strategic business investments and acquisitions.

They include the sensitivity of the assumptions made when capital is allocated and the effective implementation of major investment decisions.

·    Strategic planning processes

·    Due diligence processes

·    Investment mandates

·    Board oversight

·    Post-acquisition management processes

 

1 Brand equity refers to the commercial value derived from the consumer perception of the Group's brand names rather than the services provided under those brand names. 

 

Key

Increased - Risk exposure has increased due to change in business environment; increased investments; increased dependency of operations on IT; information sensitivity; and associated cost.

 

Reduced - Proactive and continuous monitoring; favourable results of negotiations; effective treasury; and risk management processes have resulted in lowering of risk exposure.

 

No change - Risk exposure has remained largely unchanged as the operating and regulatory environments have remained stable, and enhanced risk mitigation measures have kept the risk at same level.

 

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

The Statement of Directors' Responsibilities In Respect of the Financial Statements below is extracted from page 221 of the 2020 Annual Report. This statement relates solely to the 2020 Annual Report and is not connected to the information presented in this announcement or the preliminary results announcement released on 2 June 2020. 

 

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable legislation and regulations.

 

The Act requires the directors to prepare financial statements for each financial year. Under the United Kingdom Companies Act 2006 (the "Act"), the directors have prepared the Group financial statements and the Company financial statements in accordance with IFRS as adopted by the EU. Under the Act, the directors must not approve the financial statements unless they are satisfied that these give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for the reporting period. In preparing the financial statements, the directors are required to:

 

·      select suitable accounting policies and then apply them consistently;

·      state whether applicable IFRS as adopted by the EU have been followed for the Group financial statements and for the Company financial statements, subject to any material departures disclosed and explained in the financial statements;

·      make judgements and accounting estimates that are reasonable and prudent; and

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business.

 

The directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements and the Remuneration Committee Report comply with the Act and the Group financial statements with Article 4 of the IAS Regulation.

 

The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

Directors' Confirmations

The directors consider that this Annual Report, and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company's position and performance, business model and strategy.

 

Each of the directors, whose names and functions are listed from page 130 of this Annual Report, confirm that, to the best of their knowledge:

 

·      the Company financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and loss of the Company;

·      the Group financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and loss of the Group; and

·      the Directors' Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that these entities face.

 

In the case of each director in office at the date the Directors' Report is approved:

 

·      so far as the directors is aware, there is no relevant audit information of which the Group and Company's auditors are unaware; and

·      they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Group and Company's auditors are aware of that information.

 

 

CA van der Merwe                      

PJ Myburgh

Group Chief Executive Officer              

Group Chief Financial Officer

1 June 2020                                  

1 June 2020

 

 

 

RELATED PARTY TRANSACTIONS

 

The following description of related party transactions involving the Company and is subsidiaries during the financial year ended 31 March 2020 is extracted from page 314 of the 2020 Annual Report.

 

36.

RELATED PARTY TRANSACTIONS

 

Remgro Ltd owns, through various subsidiaries (Remgro Healthcare (Pty) Ltd, Remgro Health Ltd and Remgro Jersey GBP Ltd) 44.56% (2019: 44.56%) of the Company's issued share capital.

 

 

The following transactions were carried out with related parties:

 

 

 

2020

£'m

2019

£'m

 

 

 

 

 

 

 

i)

Transactions with shareholders

 

Remgro Management Services Ltd (subsidiary of Remgro Ltd)

 

 

  Managerial and administration fees

0.3

 

  Internal audit services

0.2

 

 

 

 

V&R Management Services AG (subsidiary of Remgro Ltd)

 

 

  Administration fees1

-

 

 

 

ii)

Key management compensation

 

 

Key management includes the directors (executive and non-executive) and members of the Group Executive Committee.

 

 

Salaries and other short-term benefits

 

 

  Short-term benefits

6

 

 

 

iii)

Transactions with associates and joint ventures

 

 

Zentrallabor Zürich

 

 

  Fees earned

(2)

 

  Purchases

9

 

 

 

 

Spire Healthcare Group plc

 

 

  Non-executive director fee2                                               

-

 

 

 

 

Wits University Donald Gordon Medical Centre (Pty) Ltd

 

 

  Fees paid

 

1 In the prior year the amount was less than £0.1m. No administration fees were paid in the current year.

2 Amount is less than £0.1m. 

 

 

Terms and conditions

Managerial and administration fees were bought on a cost-plus basis. All other transactions were made on normal commercial terms and conditions and at market rates.

 

2

 

 

 

NOTE 2.1 TO THE CONSOLIDATED FINANCIAL STATEMENTS

For clarification purposes, consistent with the Chief Financial Officer's Report in the 2020 Annual Report and the Group's preliminary results announcement published on 2 June 2020, the cash and available facilities at the end of May 2020 was around £490m.


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